SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-KSB/A
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Act of 1934 (fee required)
For the fiscal year ended December 31, 1996, or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
For the transition period from ____________ to ______________.
Commission File No. 0-12575
ARIZONA INSTRUMENT CORPORATION
- --------------------------------------------------------------------------------
(Name of small business issuer as specified in its charter)
Delaware 86-0410138
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4114 East Wood Street, Phoenix, AZ 85040
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602) 470-1414
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
As of April 25, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $12,824,150. The aggregate market value is
computed with reference to the average bid and asked price of $2.00 as reported
on the Nasdaq SmallCap Market for April 25, 1997. Shares of Common Stock held by
each officer and director and by each person who owns 10% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily
conclusive.
[ ] Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-KSB.
<PAGE>
As of April 25, 1997, 6,710,894 shares of Common Stock ($.01 par value) were
outstanding.
<PAGE>
Arizona Instrument Corporation (the "Company") hereby amends its Report
on Form 10-KSB for the year ended December 31, 1996 by adding thereto Items 9,
10, 11, and 12, as set forth below, and by amending Item 13 thereto.
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The names of the directors and certain executive officers of the
Company, and certain information about them, are set forth below.
<TABLE>
<CAPTION>
Name Age Principal Occupation
- ---- --- --------------------
<S> <C> <C>
Walfred R. Raisanen 62 Chairman of the Board, Vice President-Research and
Development, and Treasurer of the Company
S. Thomas Emerson 56 Chairman of Xantel Corporation
John P. Hudnall 46 President and Chief Executive Officer of the Company
Quinn Johnson 52 President of Timberline Engineering and Testing, Inc.
Richard Long 68 Marketing and Management Consultant
Patricia Onderdonk 46 Marketing Consultant
Stanley H. Weiss 54 Director and President of Terrell, Weiss & Sugar, Ltd.
Steven G. Zylstra 43 Director of Business Development, Simula Technologies,
Inc.
George G. Hays 41 Vice President of Finance, Chief Financial Officer, and
Vice President of Manufacturing of the Company
Susan Berry 48 Secretary of the Company
Michael Grant 47 Vice President of Services of the Company
Allen D. Porter 39 Vice President of Marketing of the Company
</TABLE>
Walfred R. Raisanen has been the Chairman of the Board of Directors
since the Company's inception in January 1981. From 1981 until 1986 he was the
President and Treasurer of the Company. Mr. Raisanen was re-elected Treasurer in
1991 and also serves as Vice President of Research and Development. From June
1976 until January 1981 he was President and a Director of Motorola Process
Control, Inc., the predecessor to the Company.
S. Thomas Emerson, Ph.D. has been a Director since 1989. He has been
Chairman of Xantel Corporation, a private company engaged in computer
communications, since August 1992. Dr. Emerson was Chief Executive Officer of
Syntellect Incorporated, a manufacturer of voice response systems, from 1984 to
April 1992. Prior to founding Syntellect in 1984, Dr. Emerson was a founder of
Periphonics Corporation of Bohemia, New York where he served for 14 years in
various executive capacities.
John P. Hudnall came to the Company in 1985 as Chief Financial Officer.
He became President and Chief Executive Officer in 1986 and has been a Director
since 1988. Mr. Hudnall's background spans 22 years in industry, with positions
in production, sales, finance and systems, including a position as Chief
Financial Officer for Inter-Tel, Inc., an independent telephone company.
<PAGE>
Quinn Johnson has been a Director since 1992. Mr. Johnson became
President of Horizon Engineering & Testing, Inc., a wholly-owned subsidiary of
the Company ("Horizon"), in September 1992 upon the acquisition by the Company
of Horizon's predecessor. Mr. Johnson resigned from his position as President of
Horizon in September 1996 and still serves as a director of the Company. He has
been President of Timberline Engineering and Testing, Inc., a civil engineering
firm in Mesa, Arizona, since September 1996. Mr. Johnson founded Horizon's
predecessor in 1990. Prior to forming Horizon's predecessor, Mr. Johnson founded
and served since 1983 as president of a company engaged in general construction,
paving and civil engineering. Previously, Mr. Johnson was a construction manager
for Northern Industries of Eagar, Arizona; a project manager for the U.S. Forest
Service; and a structural engineer for Fluor Corp. of Los Angeles, California.
Richard Long has been a Director since 1987. He has been involved in
the private sector of the telecommunications industry for over 20 years. Mr.
Long is currently a marketing and management consultant. He has been both
President and Chairman of the trade association representing suppliers,
contractors and manufacturers in the private sector and has acted as a spokesman
before Congress and regulatory bodies during that time.
Patricia Onderdonk has been a Director since 1992. Ms. Onderdonk is
currently a marketing consultant. From mid-1994 to May 1996, she was the Vice
President of Marketing for Optical Disc Corporation of Santa Fe Springs,
California, a company engaged in developing and manufacturing high-density CD
ROMs. Previously, she co-founded Onderdonk & Haynes, Inc. in 1986 and had become
President of the marketing and communication consulting firm focused on
technology-based customers. Ms. Onderdonk's background spans 19 years of
marketing and communications experience with positions in account and general
management, including the position of Vice President and General Manager for
Regis McKenna, Inc., a high-technology marketing and public relations firm.
Stanley H. Weiss has been a Director since 1993. He has been President
and Director of Terrell, Weiss & Sugar, Ltd., an accounting firm in Chicago,
Illinois, since September 1990. Mr. Weiss served as the firm's
secretary-treasurer from October 1981 until September 1990 and has been a
principal of the firm since December 1978. As a practicing certified public
accountant since 1974, Mr. Weiss has been actively involved in consulting with
entrepreneurs and managers in the areas of income taxes, business planning,
financial controls and employee incentives.
Steven G. Zylstra has been a Director since 1996. He has been the
Director of Business Development for Simula Technologies, Inc., (as new
subsidiary, formerly a division of Simula Government Products, Inc.) of Phoenix,
Arizona, since 1995. The company specializes in the development and production
of high-tech transportation seating and safety systems, composite technologies,
and ballistic armor systems. From 1984 to 1995, Mr. Zylstra served as General
Manager of General Pneumatics Corporation, Western Research Center, of
Scottsdale, Arizona. He is a Co-Founder and Member of the Governor's Arizona
Science and Technology Council, Co-Founder and Director of the Arizona
Innovation Network and Director of the Arizona Technology Incubator, among other
outside activities.
George G. Hays joined the Company in March 1997 as Vice President of
Finance, Chief Financial Officer, and Vice President of Manufacturing. Prior to
his position with the Company, Mr. Hays was president and founder of Hays
Financial Group, Inc., an investment banking firm, since 1986.
Susan Berry was named Secretary of the Company in 1989. She has served
as Human Resources Manager for the Company since 1985. Prior to her position
with the Company, Ms. Berry was in corporate administration for Inter-Tel, Inc.
Michael Grant became Vice President of Services in 1996. Prior to that,
he was Vice President of Manufacturing since 1993. He started with the Company
in 1988, first serving as National Service Manager, then as Director of Customer
Service, and as Director of Operations. Mr. Grant has over 25 years of
experience in manufacturing.
-4-
<PAGE>
Allen D. Porter was named Vice President of Marketing in 1996. Mr.
Porter has been with the Company since 1985, working in sales, sales management
and product management. Prior to his position with the Company, he was program
director for an Arizona-based behavioral health agency.
Compliance With Section 16(a) Reporting Requirements
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than 10% of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose any failure to file by
these dates. All of these filing requirements were satisfied during the year
ended December 31, 1996, except: (i) John P. Hudnall reported on a Form 5 dated
February 10, 1997 a November 1996 option exercise; (ii) Stanley H. Weiss
reported on a Form 5 dated February 10, 1997 two November 1996 option exercises;
and (iii) Michael Grant reported on a Form 5 dated February 10, 1997 a December
1996 option exercise.
Additionally, the Company has not received copies of ownership reports due from
Bridge Capital Investors II, which formerly beneficially owned greater than 10%
of the Company's outstanding Common Stock, and thus has no information regarding
whether such reports have been filed or filed on a timely basis with the
Commission. In making these disclosures, the Company has relied solely on
written representations of its directors and executive officers and copies of
the reports that they have filed with the Commission.
Item 10. Executive Compensation
SUMMARY COMPENSATION TABLE
The following table sets forth, with respect to the years ended December 31,
1994, 1995 and 1996, compensation awarded to, earned by or paid to the Company's
Chief Executive Officer and each of the Company's other executive officers who
were serving as an executive officer at December 31, 1996 and whose salary and
bonus aggregated at least $100,000 for services rendered to the Company during
fiscal 1996.
-5-
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------- ----------------------------------
Pay-
----
Awards outs
-------------------------- ----
Other Re- Securities
Annual stricted Underlying LTIP
Compen- Stock Options/ Pay- All Other
sation Awards SARs outs Compen-
Name and Principal Position Year Salary($) Bonus ($) (#) (#)(2) ($) sation($)
- --------------------------- ---- --------- ----- ------------ ------------ -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. Hudnall, Chief 1996 161,666 56,000 5,400(1) 0 0 0 1,603(4)
Executive Officer 1995 154,400 0 5,400(1) 0 120,000(3) 0 1,518(4)
1994 153,226 0 5,400(1) 0 0 0 1,425(4)
Walfred R. Raisanen, 1996 153,622 42,000 0 0 0 0 4,309(4)
Chairman 1995 147,262 0 0 0 100,000(3) 0 3,771(4)
1994 135,009 26,460 0 0 0 0 3,329(4)
Scott M. Carter, Chief 1996 110,484 25,000 0 0 0 0 431(4)
Financial Officer (5) 1995 89,897 0 0 0 75,000(3) 0 405(4)
1994 91,855 0 0 0 0 0 390(4)
Michael Grant, Vice 1996 122,039 20,000 0 0 0 0 625(4)
President of Services 1995 94,989 0 0 0 75,000 0 584(4)
1994 96,708 0 0 0 0 0 549(4)
Allen D. Porter 1996 105,762 0 0 0 55,000 0 0
Vice President of 1995 87,040 0 0 0 15,000 0 0
Marketing 1994 72,365 0 0 0 0 0 0
</TABLE>
(1) Automobile allowance.
(2) Consists entirely of stock options.
(3) Represents 24,520, 52,760 and 48,520 new option grants to Messrs.
Hudnall, Raisanen and Johnson, respectively, in 1995. All remaining
options shown in this table as granted in 1995 represent repricing of
options granted in prior years.
(4) Life insurance premium payments.
(5) Mr. Carter terminated his employment with the Company on March 21,
1997.
-6-
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants
during the last fiscal year to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------------
Number of % of Total
Securities Option/SARs
Underlying Granted
Options/SARs to Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Pricing ($/Sh) Date
- ------------- ------------ ----------- ----------------- ----------
<S> <C> <C> <C> <C>
John P. Hudnall 0 0% 0 0
Walfred R. Raisanen 0 0% 0 0
Scott M. Carter (4) 0 0% 0 0
Michael Grant 0 0% 0 0
Allen D. Porter 30,000(2) 37% $2.62 4/16/2006
25,000(3) 31% $2.60 11/1/2006
</TABLE>
(1) Consists entirely of stock options.
(2) Vest in 5 equal annual installments beginning April 16, 1996.
(3) Vest in 5 equal annual installments beginning November 1, 1996.
(4) Mr. Carter terminated his employment with the Company on March 21,
1997.
-7-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning option
exercises during 1996 and the number and value of options outstanding at the end
of the last fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in-the-
Options/SARs at FY-End Money Options/SARs at
----------------------------- FY End ($)(3)
(#)(1) ------------------------------
------
Shares Exercisable Unexercisable Exercisable Unexercisable
Acquired Value ----------- ------------- ----------- -------------
on Realized
Name Exercise (2)
- ------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John P. Hudnall 24,000 $37,920 0 96,000 0 $139,680
Walfred R. Raisanen 0 0 20,000 80,000 $29,100 $116,400
Scott M. Carter (4) 0 0 15,000 60,000 $21,825 $ 87,300
Michael Grant 15,000 $21,825 0 60,000 0 $ 87,300
Allen D. Porter 0 0 3,000 55,000 $ 4,365 $ 0
</TABLE>
(1) No SARs are outstanding.
(2) Calculated based on the closing price as reported on the Nasdaq
SmallCap Market for the date of exercise minus the exercise price,
multiplied by the number of shares acquired on exercise.
(3) Value as of December 31, 1996 is based upon the average bid and asked
price of $2.375 as reported on the Nasdaq SmallCap Market for December
31, 1996, minus the exercise price, multiplied by the number of shares
underlying the options.
(4) Mr. Carter terminated his employment with the Company on March 21,
1997.
Employment/Change of Control Arrangements
Effective November 5, 1992, the Company entered into a five-year
employment agreement with Walfred R. Raisanen pursuant to which Mr. Raisanen
agreed to serve as Vice President of Research and Development for a base annual
salary of $120,000, which is to be adjusted annually for cost-of-living
increases. Mr. Raisanen is also entitled to participate in any benefit
arrangements available to executive officers of the Company. Upon termination of
the employment agreement by the Company without cause, Mr. Raisanen is entitled
to receive a cash payment equal to the compensation due him over the balance of
the term of the employment agreement, and to participate in applicable benefit
programs for the balance of the term of the employment agreement.
Effective June 3, 1996, the Company entered into a three-year
employment agreement with its President and Chief Executive Officer, John P.
Hudnall. The agreement provides for a base annual salary of $165,542, which is
to be adjusted annually for cost-of-living increases. Mr. Hudnall is also
entitled to participate in any benefit arrangements available to executive
officers of the Company. Upon termination of the employment agreement by the
Company without cause, Mr. Hudnall is entitled to receive an amount equal to the
compensation due him over
-8-
<PAGE>
the balance of the term of the employment agreement, and to participate in
applicable benefit programs for the balance of the term of the employment
agreement.
The Company's 1991 Option Plan provides that options granted to any
executive officer or director of the Company will become immediately exercisable
and vested in full upon the occurrence, before the expiration or termination of
such option, of (a) delivery of written notice of a stockholders' meeting at
which the stockholders will consider a proposed merger, sale of assets or other
reorganization of the Company, (b) the acquisition by any person of securities
representing 25% or more of the total number of votes entitled to be case for
the election of directors of the Company, (c) commencement of a tender offer for
the stock of the Company, or (d) failure, at any annual or special meeting of
stockholders following an election contest, of any of the persons nominated by
the Company to win election seats on the board of directors.
The Company's 1991 Option Plan further provides that subject to the
above provisions, in the event a merger or similar reorganization that the
Company does not survive, a sale of all or substantially all of the assets of
the Company, or the dissolution and liquidation of the Company, shall cause
every option outstanding under the 1991 Option Plan to terminate, to the extent
not then exercised, except to the extent that any surviving entity agrees to
assume the 1991 Option Plan and/or the obligations under any such option.
Compensation of Directors
Outside directors are currently paid $1,000 plus expenses per Board or
committee meeting attended. Pursuant to the 1991 Stock Option Plan, non-employee
directors are automatically granted options exercisable for 2,500 shares at the
market price on the date of grant upon joining the Board and on each January 1
thereafter. The options become exercisable six months after grant and expire two
years after termination of Board service. Directors who are employees are only
paid their expenses (if any) for attendance at meetings.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock at April 25, 1997 with respect to (i)
each director and director nominee of the Company, (ii) each executive officer
named in the Summary Compensation Table set forth herein, (iii) all directors
and executive officers as a group, and (iv) each person known by the Company to
be the beneficial owner of more than 5% of the outstanding shares of the
Company's Common Stock:
Shares of Common Stock Beneficially Owned
-----------------------------------------
Number Percent
Name and Address (1) of Shares of Total
- -------------------- --------- --------
Walfred R. Raisanen (2) 196,400 2.9%
S. Thomas Emerson (2) 35,000 (3)
John P. Hudnall (2) 27,521 (3)
Quinn Johnson (2) 50,001 (3)
Richard Long (2) 32,000 (3)
Patricia Onderdonk (2) 16,000 (3)
Stanley H. Weiss (2) 35,000 (3)
Steven G. Zylstra (2) 3,100 (3)
Scott M. Carter (2)(5) 17,000 (3)
Michael Grant (2) 17,100 (3)
Allen D. Porter (2) 21,671 (3)
-9-
<PAGE>
All directors and executive 478,819 7.1%
officers as a group (2) (4)
(12 persons)
- ----------------------------------------
(1) Unless otherwise indicated, the beneficial owner's address is:
c/o the Company, 4114 East Wood Street, Phoenix, Arizona 85040.
(2) Includes shares issuable upon exercise of options which are currently
exercisable or become exercisable within 60 days of April 25, 1997 as
applicable for each of the following individuals:
Raisanen 40,000 shares
Emerson 15,000 shares
Hudnall 24,000 shares
Long 15,000 shares
Onderdonk 12,500 shares
Weiss 5,000 shares
Zylstra 2,500 shares
Carter 15,000 shares
Grant 15,000 shares
Porter 12,000 shares
(3) Less than one percent.
(4) Includes 24,000 shares issuable upon exercise of options (in addition
to shares issuable upon exercise of options indicated in note 2).
(5) Mr. Carter terminated his employment with the Company on March 21,
1997.
Item 12. Certain Relationships and Related Transactions
Bridge Agreements. On July 6, 1989, the Company entered into an
agreement (the "Note Agreement") with Bridge Capital Investors II ("Bridge II"),
a former owner of greater than 5% of the Company's Common Stock. Pursuant to the
Note Agreement as amended through September 2, 1992, Bridge II held 12%
convertible subordinated notes in the principal amount of $3,000,000 with a
maturity date of June 30, 1996 and a warrant to purchase up to 115,000 shares of
the Company's Common Stock at an exercise price of $1.00 per share. As a result
of common stock issued in conjunction with the acquisition of Horizon on
September 30, 1992 and related financing and other transactions, the notes
became convertible into 847,937 shares of common stock at $3.54 per share. The
Note Agreement further provided that the Company would have the right to prepay
the notes at any time if prepayment were accompanied by the issuance of warrants
to purchase Common Stock at the rate of 200,000 warrants for each $1,000,000 of
principal which is prepaid.
In November 1995, the Company prepaid the remaining principal balance
of the notes payable to Bridge II. In connection with the prepayment, Bridge II
waived all rights to receive any additional warrants under its loan agreement
with the Company. The Company had also made a scheduled principal payment of
$375,000 on April 30, 1995 and a $616,667 principal payment on October 31, 1995.
Merger Agreement. On September 30, 1992, Horizon Engineering and
Testing, Inc. was merged (the "Merger") into a wholly-owned subsidiary of the
Company pursuant to an Agreement of Merger (the "Merger Agreement").
Shareholders of Horizon received cash consideration of $190,000 and shares of
the Company's Common Stock. Quinn Johnson held 90% of the outstanding stock of
Horizon at the time of the Merger and received 529,328 shares of Common Stock in
connection with the Merger. The Company agreed to register the shares of the
Company's Common Stock issued pursuant to the Merger Agreement under applicable
federal and state
-10-
<PAGE>
securities laws at any time after April 1, 1993 upon the request of holders of
25% of such shares and to keep such registration effective through September 30,
1995. Mr. Johnson has agreed to indemnify Horizon and the Company against
certain liabilities in connection with the Company's acquisition of Horizon, and
has placed 49,030 shares of the Company's Common Stock in escrow in connection
therewith.
Non-Competition Agreement. Pursuant to a Non-Competition Agreement
dated September 30, 1993, and in consideration of a cash payment of $350,000,
Mr. Johnson agreed to refrain from competing with Horizon until the later of
September 30, 1998 or two years after leaving the employment of Horizon, subject
to earlier termination under certain circumstances.
Employment Agreement. Mr. Johnson served as President of Horizon
pursuant to an Employment Agreement dated September 30, 1992. Mr. Johnson
resigned from his position as President of Horizon in September 1996 and now
serves as a director of the Company. The Employment Agreement provided for a
base salary of $125,000 over its four-year term, with annual adjustments tied to
increases in the Consumer Price Index. The Employment Agreement also provided
for an annual bonus equal to (i) 15% of Horizon's pretax profit (as defined)
with respect to pretax profit representing up to 15% of Horizon's gross
revenues; and (ii) 20% of Horizon's pretax profit on that portion of the pretax
profit in excess of 15% of gross revenues, with a maximum bonus over the term of
the four-year agreement equal to $700,000. In the event of termination of the
Employment Agreement by the Company without cause, Mr. Johnson was entitled to
receive (i) the difference between $700,000 and bonus payments prior to
termination; plus (ii) an amount equal to the then-applicable annual base
salary.
Stock Registration. Pursuant to registration rights previously granted,
the Company filed a shelf registration statement with the Securities and
Exchange Commission ("SEC") relating to 3,781,003 shares of its Common Stock
issued in connection with private placements in September 1992 and November 1993
and in connection with the acquisition of Horizon in September 1992. Also
included in the registration are 209,000 shares of Common Stock issuable upon
the exercise of warrants issued to Cruttenden & Co., Inc. ("Cruttenden") and its
assignees in connection with Cruttenden's activities as placement agent for the
November 1993 private placement. The registration statement was declared
effective by the SEC in February 1994. The Company has agreed that it will
maintain the effectiveness of the registration statement (i) until November
1996, with respect to the shares issued in the November 1993 private placement;
(ii) until September 1995, with respect to the shares issued in the September
1992 private placement and the Horizon acquisition; and (iii) until two years
after exercise, with respect to shares issuable upon exercise of the warrants
referred to above. The registration statement as originally filed included
465,001 shares beneficially owned by Quinn Johnson, a director and executive
officer of the Company, which shares were acquired by Mr. Johnson in connection
with the acquisition of Horizon by the Company in September 1992. In connection
with the registration, Mr. Johnson agreed that his registered and other sales of
the Company's Common Stock shall not exceed the volume limitations set forth in
Rule 144 under the Securities Act of 1933, as amended, subject to certain
exceptions. The registration statement also includes 20,000 shares and 20,000
shares beneficially owned by S. Thomas Emerson and Stanley Weiss, directors of
the Company, which shares were acquired in the November 1993 private placement.
The Company and the holders of the shares of Common Stock included in the
registration have agreed to indemnify each other against certain liabilities.
Other. During September 1993, the Company loaned $45,000 to Walfred R.
Raisanen, a director and executive officer of the Company. The loan bears
interest at 10% per annum, is collateralized by a pledge of 15,000 shares of the
Company's Common Stock and $30,000 of the cash value of a life insurance policy
covering Mr. Raisanen. Mr. Raisanen has paid the principal on the loan to the
Company, and currently owes $5,367 in interest, which is to be paid by the end
of 1997.
-11-
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
Financial Statements. The following is a list of the consolidated financial
statements of Arizona Instrument Corporation and its subsidiaries included in
Item 8 of Part II of the Company's Form 10-KSB filed on March 31, 1997.
Independent auditors' report.
Consolidated balance sheets - December 31, 1996 and 1995.
Consolidated statements of operations - Years ended December 31, 1996, 1995 and
1994
Consolidated statements of shareholders' equity - Years ended December 31, 1996,
1995 and 1994
Consolidated statements of cash flows - Years ended December 31, 1996, 1995 and
1994
Notes to consolidated financial statements
(a) The following exhibits are incorporated by reference or are filed with this
Form 10-KSB.
3.1 Composite Certificate of Incorporation of Registrant as amended through
July 5, 1994. Incorporated by reference from the Form 8-A filed on June
26, 1996.
3.2 Bylaws of Registrant. Incorporated by reference from the Form 8-A filed
on June 26, 1996.
10.1 United States Patent No. 4,165,633 issued August 28, 1979. Incorporated
by reference from the Form S-8 filed on July 27, 1983.
10.2* 1983 Incentive Stock Option Plan of Registrant. Incorporated by
reference from the Form S-8 filed on July 17, 1983.
10.3* 1985 Stock Purchase Plan, as amended. Incorporated by reference from
the Form S-8 filed on August 5, 1996.
10.4* 1991 Stock Option Plan, as amended. Incorporated by reference from the
Form S-8 filed on June 28, 1996.
10.5 Amended and Restated Silicon Valley Bank, Export-Import Guaranteed
Business Loan Agreement, February 1993. Incorporated by Reference from
the Form 10-KSB filed in March 1993.
10.6 Loan Modification Agreement with Silicon Valley Bank dated March 15,
1994 to renew the lines of credit through March 15, 1995. Incorporated
by reference from the Form 10-QSB filed in March 1994.
10.7 Amended and Restated Silicon Valley Bank Domestic and Export Loan
Agreements, dated March 15, 1995 through March 15, 1996. Incorporated
by reference from the Form 10-KSB filed on April 28, 1995.
10.8 Warrant Purchase Agreement dated as of December 15, 1991 between
Arizona Instrument Corporation and Silicon Valley Bank: Incorporated by
reference from the Form 10-KSB filed in March 1992.
10.9* Employment Agreement dated September 30, 1992 between Horizon
Acquisition Co. and Quinn Johnson. Incorporated by reference from the
Form 8-K dated September 30, 1992.
-12-
<PAGE>
10.10 Noncompete Agreement dated September 30, 1992 between Horizon
Acquisition Co. and Quinn Johnson. Incorporated by reference from the
Form 8-K dated September 30, 1992.
10.11* Employment Agreement between Walfred R. Raisanen and Arizona Instrument
Corporation dated November 5, 1992. Incorporated by reference from the
Form 10-KSB filed in March 1993.
10.12* Employment Agreement between the Company and John P. Hudnall dated June
3, 1996. (filed herewith)
10.13 Lease Agreement between the Company and Wood Street Limited Partnership
dated September 1, 1993. Incorporated by reference from the Form 10-QSB
filed August 1993.
10.14 Amended and Restated License Agreement between the Company and Tracer
Research Corporation dated October 27, 1993. Incorporated by reference
from the Form 10-QSB filed November 1993.
10.15 Warrant Agreement between the Company and Cruttenden & Co., Inc. dated
November 30, 1993. Incorporated by reference from the Form 10-QSB filed
November 1993.
10.16 Amendment No. 7 to the Purchase Agreement between Arizona Instrument
Corporation and Bridge Capital Investors II, dated July 1, 1994.
Incorporated by reference from the Form 10-KSB filed April 28, 1995.
10.17 Amendment No. 8 to the Purchase Agreement between Arizona Instrument
Corporation and Bridge Capital Investors II, dated March 30, 1995.
Incorporated by reference from the Form 10-KSB filed April 28, 1995.
10.18 Promissory Note between Arizona Instrument Corporation and Classic
Syndicate, Inc., dated April 15, 1996. Incorporated by reference from
the Form 10-KSB filed March 29, 1996.
10.19 Loan Modification Agreement between Arizona Instrument Corporation and
Silicon Valley Bank related to a new Promissory Note, dated November 7,
1995. Incorporated by reference from the Form 10-KSB filed March 29,
1996.
10.20 Promissory Note between Arizona Instrument Corporation and Silicon
Valley Bank, dated November 7, 1995. Incorporated by reference from the
Form 10-KSB filed March 29, 1996.
10.21 Agreement between Arizona Instrument Corporation and Bridge Capital
Investors II, regarding the terms for prepayment of the Bridge Note,
dated November 27, 1995. Incorporated by reference from the Form 10-KSB
filed March 29, 1996.
22.1 Subsidiaries: Quintel International, Inc., incorporated under the
Companies Act of 1982 of Barbados, W.I.; Computrac International, Inc.,
an Arizona Corporation, Horizon Engineering and Testing Inc., an
Arizona Corporation, each of which is wholly owned by Arizona
Instrument Corporation.
24.1 Accountants' Consent: Incorporated by reference from the Form 10-KSB
filed on March 31, 1997.
27 Financial Data Schedule: Incorporated by reference from the Form 10-KSB
filed on March 31, 1997.
(b) There were no reports on Form 8-K for the year ended December 31, 1996
* Management Contract or compensatory plan or arrangement.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ARIZONA INSTRUMENT CORPORATION
Date: April 29, 1997 By:/s/ George G. Hays
-------------------------------------
George G. Hays, Vice President and
Chief Financial Officer
-14-
EMPLOYMENT AGREEMENT
ARIZONA INSTRUMENT CORPORATION
AND
JOHN P. HUDNALL
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of June 3, 1996 is
between Arizona Instrument Corporation ("AZI" or the "Company" or "Employer")
and John P. Hudnall ("Employee").
1. Employment Duties. Employer hereby employs Employee and Employee
hereby accepts employment on the terms and conditions set forth herein. Employee
shall serve in the position of President and Chief Executive Officer, with
responsibility for overseeing the daily operations of the Corporation, and will
have such other powers and duties consistent with such position as may from time
to time be prescribed by the Board of Directors.
2. Term. Employee's employment shall continue for a period of three
years, beginning with the effective date of this Agreement and ending three
years thereafter. At the conclusion of the three-year period, this Agreement
shall be automatically renewed for a one-year period unless the Company has
given Employee written notice of nonrenewal at least six months prior to the
conclusion of the three-year term.
3. Full-time Employment. Employee shall devote full employment
energies, interest, abilities and time to the performance of his obligations
hereunder and shall not, without the written consent of the Board of Directors
of AZI, render to others any service of any kind for compensation.
4. Compensation. Employer shall pay to employee the sum of $165,542.00
per year during the term hereof, to be paid in accordance with the Employer's
normal payroll practice, but in no event shall such salary be paid less
frequently than twice a month. The Board of Directors will consider merit
increases on a periodic basis commensurate with the executive compensation
practices of the Company. Additionally, the base pay will be annually adjusted
based on the cost of living index for the Greater Phoenix area. Employer may
deduct from the compensation to Employee social security taxes and all federal,
state and municipal taxes and charges as may now be in effect or which may
hereafter be enacted or required. Employer shall pay or reimburse Employee for
reasonable travel and other expenses incurred by Employee in furtherance of or
in connection with the performance of his duties hereunder, consistent with
Employer policies regarding such expenses.
5. Participation in Employee Benefits. Employee shall be entitled to
and shall receive all other benefits and conditions of employment available
generally to executives of AZI pursuant to Employer plans and programs,
including group health insurance, benefits, life insurance benefits and the
opportunity to participate in any stock option, profit sharing or retirement
income plan; provided, however, that Employee may request leave of absence
without pay during the term hereof, and Employer agrees to grant such leave if
it determines that the
<PAGE>
leave would not be materially injurious to the operations of Employer; and
provided, further, that Employee shall be entitled to a vacation of four weeks
in each twelve-month period during the term of this Agreement, during which time
his compensation shall be paid in full. The manner of implementation of such
benefits with respect to such items as procedures and amounts is discretionary
with the Company.
6. Termination.
A) For Cause. The Company may terminate this Agreement for
cause upon written notice to the Employee stating the facts constituting such
cause, provided that Employee shall have 10 days following such notice to cure
any conduct or act, if curable, alleged to provide grounds for termination for
cause hereunder. In the event of termination for cause, the Company shall be
obligated to pay the Employee only the base salary due him through the date of
termination. Cause shall include material neglect of duties, wilful failure to
abide by ethical and good faith instructions or policies from or set by the
Chairman or the Board, commission of a felony or serious misdemeanor offense or
pleading guilty or nolo contendere to same, the commission by Employee of an act
of dishonesty or moral turpitude involving the Company, Employee's material
breach of this Agreement, the filing of bankruptcy proceedings by or against
Employee, or breach by Employee of any other material obligation to the Company.
B) Without Cause. The Company may terminate this Agreement at
any time immediately, without cause, by giving written notice to Employee. Upon
termination under this Section 6(b), the Company shall be obligated to pay
Employee the base salary payable hereunder for the balance of the employment
term set forth in Section 2. At the Company's election, such payment can be made
in a lump sum or pursuant to the Company's normal payroll practices over the
balance of the term. The Company shall also maintain Employee's participation in
the employee benefit programs referred to in Section 5 hereof for the remainder
of the employment term set forth in Section 2 and to the extent contemplated in
Section 5 hereof, except that the Company shall have no obligation to Employee
under any profit sharing or retirement plan other than amounts due through the
date of termination of employment. If continued coverage or participation in any
such benefit program is prohibited by the terms thereof, the Company will
provide a substantially similar benefit during such period. The obligations
provided in this Section 6(b) shall be the Company's sole obligations upon
termination under this Section 6(b).
C) Disability. If during the term of this Agreement, Employee
fails to perform his duties hereunder because of illness or other incapacity for
a period of two consecutive months, or for 90 days during any 150-day period,
the Company shall have the right to terminate this Agreement without further
obligation hereunder except for any amounts payable pursuant to disability plans
generally applicable to executive employees.
D) Death. If Employee dies during the term of this Agreement,
this Agreement shall terminate immediately, and Employee's legal representatives
shall be entitled to receive the base salary due Employee through the last day
of the calendar month in which his death shall have occurred and any other death
benefits generally applicable to executive employees.
<PAGE>
E) Employee Termination. Employee may terminate this Agreement
at any time upon written notice to the Company.
7. Cooperation with Employer After Termination of Employment. Following
any termination of employment hereunder, Employee shall fully cooperate with
Employer in all matters relating to the winding up of his pending work on behalf
of Employer and the orderly transfer of any such pending work to other employees
of Employer as may be designated by Employer. Employer shall be entitled to such
full time or part time services of Employee as Employer may reasonably require
during all or any part of the 30-day period following any termination hereunder,
and shall compensate Employee for such services on a basis consistent with
Employee's compensation pursuant to Section 4 hereof.
8. Non-Competition. The parties acknowledge that the Employee will
acquire much knowledge and information concerning the business of the Company
and its affiliates as the result of his employment. The parties further
acknowledge that the scope of business in which the Company is engaged as of the
date of execution of this Agreement is world-wide and very competitive and one
in which few companies can successfully compete. Competition by Employee in that
business after this Agreement is terminated would severely injure the Company.
Accordingly, for a period of one year after this Agreement is terminated for any
reason (except termination by the Company without cause), Employee agrees not to
become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently existing or then existing products and
markets.
9. Specific Performance. The parties agree that the provisions in
Sections 3 and 8 are of a special, unique and extraordinary character, which
gives them a peculiar value, the loss of which could not be reasonably or
adequately compensated in damages in any action at law, and that a breach by
Employee will cause Employer great and irreparable injury and damage. Employee
hereby expressly agrees that Employer shall be entitled to the remedies of
injunction, specific performance and other equitable relief to prevent a breach
by Employee. This provision shall not, however, be construed as a waiver of any
of the rights which Employer may have for damages.
10. Miscellaneous Provisions.
10.1 Decisions by Employer. For all purposes herein, Employee
may not make any decisions or take any action with respect to this Agreement as
an agent of Employer. Actions of Employer hereunder shall be taken by its Board
of Directors.
10.2 Governing Law. This Agreement is governed by Arizona law.
10.3 Entire Agreement. This Agreement supersedes all prior
agreements between the parties concerning the subject matter hereof and this
Agreement constitutes the entire agreement between the parties with respect
hereto. This Agreement may be modified only
<PAGE>
with a written instrument duly executed by each of the parties. No person has
any authority to make any representation or promise not set forth herein on
behalf of any of the parties and this Agreement has not been executed in
reliance upon any representation or promise except those contained herein.
10.4 Notices. Any notice, request, demand or other
communication hereunder shall be in writing and shall be deemed given when
personally delivered to AZI or to Employee, as the case may be, or when
delivered by certified mail, return receipt requested.
To the Company: 4114 East Wood Street
Phoenix, AZ 85040
To the Employee: 4114 East Wood Street
Phoenix, AZ 85040
10.5 Waiver of Breach. The failure of either party to require
the performance of any term or condition of the Agreement, or the waiver by
either party of any breach of this Agreement shall not prevent a subsequent
enforcement of any such term or any other term nor be deemed to be a waiver of
any subsequent breach.
10.6 Severability. The provisions of this Agreement shall be
deemed severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provisions shall be reformed so as to give maximum legal effect to the intent of
the parties as expressed herein.
11. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by binding arbitration
conducted in Phoenix, Arizona in accordance with the laws of the State of
Arizona conducted in accordance with the rules of the American Arbitration
Association. Judgement upon the award rendered by the arbitration may be entered
in any court having jurisdiction thereof.
/s/ Patricia Onderdonk 6/3/96 /s/ John P. Hudnall 6/3/96
- --------------------------------- -------------------------------------
Employer Date Employee Date
