SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ARIZONA INSTRUMENT CORPORATION
------------------------------
(Name of Registrant As Specified In Its Charter)
------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 its filing.
1) Amount Previously Paid: _______________________________
2) Form, Schedule or Registration Statement No.:___________________
3) Filing Party:_____________________________
4) Date Filed:_____________________________
<PAGE>
[LOGO]
4114 East Wood Street
Phoenix, Arizona 85040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 27, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Arizona Instrument Corporation, a
Delaware corporation (the "Company"), will be held on Friday, June 27, 1997 at
2:00 p.m. local time, at the corporate offices of the Company, 4114 East Wood
Street, Phoenix, Arizona, for the following purposes:
(1) To elect three directors to serve for the next three years or until
their successors are elected;
(2) To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. A copy of the Company's 1997 Annual Report
to Stockholders, which includes certified financial statements, also accompanies
this Notice.
Only stockholders of record at the close of business on May 16, 1997
are entitled to notice of and to vote at the Meeting and at any adjournment or
postponement thereof. Shares can be voted at the Meeting only if the holder is
present or represented by proxy. A list of stockholders entitled to vote at the
Meeting will be open for inspection at the Company's corporate headquarters for
any purpose germane to the meeting during ordinary business hours for 10 days
prior to the meeting.
All stockholders are cordially invited to attend the Meeting in person.
Sincerely,
Susan D. Berry
Secretary
Phoenix, Arizona
May 23, 1997
- --------------------------------------------------------------------------------
IMPORTANT: It is important that your stockholdings be represented at this
meeting. Whether or not you expect to attend the Meeting, please complete, date
and sign the enclosed Proxy and mail it promptly in the enclosed envelope to
assure representation of your shares. No postage need be affixed if mailed in
the United States.
- --------------------------------------------------------------------------------
<PAGE>
ARIZONA INSTRUMENT CORPORATION
4114 East Wood Street
Phoenix, Arizona 85040
--------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 27, 1997
-------------------------------
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of Arizona Instrument Corporation, a
Delaware corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held on June 27, 1997 or any adjournment thereof. All shares
represented by properly executed proxies, unless such proxies have previously
been revoked, will be voted in accordance with the direction on the proxies. If
no direction is indicated, the shares will be voted in favor of the proposals to
be acted upon at the Annual Meeting. The Board of Directors is not aware of any
other matter which may come before the Annual Meeting. If any other matters are
properly presented at the meeting for action, including a question of adjourning
the Annual Meeting from time to time, the persons named in the proxies and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
When stock is in the name of more than one person, the proxy is valid
if signed by any of such persons unless the Company receives written notice to
the contrary. If the stockholder is a corporation, the proxy should be signed in
the name of such corporation by an executive or other authorized officer. If
signed as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
This Proxy Statement and the form of proxy which is enclosed are being
mailed to the Company's stockholders commencing on or about May 23, 1997.
A stockholder executing and returning a proxy has the power to revoke
it at any time before it is voted. A stockholder who wishes to revoke a proxy
can do so by executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of the Company prior to the vote at the Annual
Meeting, by written notice of revocation received by the Secretary prior to the
vote at the Annual Meeting or by appearing in person at the Annual Meeting,
filing a written notice of revocation and voting in person the shares to which
the proxy relates.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by the directors, officers and
regular employees of the Company. Such persons will receive no additional
compensation for such services. Arrangements will also be made with certain
brokerage firms and certain other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Common Stock
held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection therewith. It is not anticipated that any other persons
will be engaged to solicit proxies. However, the Company may seek services of an
outside proxy solicitor in the event such services become necessary. All
expenses incurred in connection with this solicitation will be borne by the
Company.
The mailing address of the principal corporate office of the Company is
4114 East Wood Street, Phoenix, Arizona 85040.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on May 16, 1997
(the "Record Date") will be entitled to vote at the meeting. On the Record Date,
there were issued and outstanding 6,710,894 shares of Common Stock. Each holder
of Common Stock is entitled to one vote, exercisable in person or by proxy, for
each share of the Company's Common Stock held of record on the Record Date. The
presence of a majority of the shares of Common Stock entitled to vote, in person
or by proxy, is required to constitute a quorum for the conduct of business at
the Annual Meeting. The Inspector of Election appointed by the Chairman of the
Board of Directors shall determine the shares represented at the Meeting and the
validity of proxies and ballots and shall count proxies and ballots. The three
nominees for director receiving the highest number of affirmative votes (whether
or not a majority) cast by the shares represented at the Annual Meeting and
entitled to vote thereon, a quorum being present, shall be elected as directors.
The affirmative vote of a majority of such quorum is required with respect to
the approval of Proposal 2.
Abstentions and broker non-votes are each included in the determination
of the number of shares present for quorum purposes. Because abstentions
represent shares entitled to vote, the effect of an abstention will be the same
as a vote cast against a proposal. A broker non-vote, on the other hand, will
not be regarded as representing a share entitled to vote on the proposal and,
accordingly, will have no effect on the voting for such proposal. Only
affirmative votes are relevant in the election of directors.
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 May 16, 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:
<TABLE>
<CAPTION>
Shares of Common Stock Beneficially Owned (1)
---------------------------------------------
Number Percent
Name and Address (2) of Shares of Total
- -------------------- --------- --------
<S> <C> <C>
Walfred R. Raisanen (3) 196,400 2.9%
S. Thomas Emerson (3) 37,500 (4)
John P. Hudnall (3) 27,521 (4)
Quinn Johnson (3) 52,501 (4)
Richard Long (3) 34,500 (4)
Patricia Onderdonk (3) 18,500 (4)
Stanley H. Weiss (3) 42,500 (4)
Steven G. Zylstra (3) 5,600 (4)
Scott M. Carter (3)(6) 17,000 (4)
Michael Grant (3) 17,100 (4)
Allen D. Porter (3) 21,671 (4)
All directors and executive 498,819 7.4%
officers as a group (3) (5)
(12 persons)
</TABLE>
- ----------------------------------------
-2-
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes
voting or investment power with respect to securities. In accordance
with SEC rules, shares which may be required upon exercise of stock
option which are currently exercisable or which become exercisable
within 60 days of the date of the table are deemed beneficially owned
by the optionee. Except as indicated by footnote, and subject to
community property laws where applicable, the persons or entities named
in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
(2) Unless otherwise indicated, the beneficial owner's address is:
c/o the Company, 4114 East Wood Street, Phoenix, Arizona 85040.
(3) Includes shares issuable upon exercise of options which are currently
exercisable or become exercisable within 60 days of May 16, 1997 as
applicable for each of the following individuals:
Raisanen 40,000 shares
Emerson 17,500 shares
Hudnall 24,000 shares
Johnson 2,500 shares
Long 17,500 shares
Onderdonk 15,000 shares
Weiss 7,500 shares
Zylstra 5,000 shares
Carter 15,000 shares
Grant 15,000 shares
Porter 12,000 shares
(4) Less than one percent.
(5) Includes 24,000 shares issuable upon exercise of options (in addition
to shares issuable upon exercise of options indicated in note 3).
(6) Mr. Carter terminated his employment with the Company on March 21,
1997.
PROPOSAL 1
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting to serve as
directors until the Annual Meeting of Stockholders to be held in the year 2000
and until their respective successors are elected. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the Company's
nominees, John P. Hudnall, Walfred R. Raisanen and Steven G. Zylstra. Each
nominee is currently a director of the Company.
The Board of Directors currently consists of eight members and is
classified into three classes with each class holding office for a three-year
period. The terms of Mr. Hudnall and Mr. Raisanen expire in 1997; the terms of
Mr. Long, Ms. Onderdonk, and Mr. Weiss expire in 1998; and the terms of Mr.
Johnson and Mr. Emerson expire in 1999. Mr. Zylstra was elected by the Board of
Directors on November 1, 1996 to fill a vacancy ont he Board of Directors.
The Certificate of Incorporation restricts the removal of directors
under certain circumstances. The number of directors may be increased to a
maximum of 10.
If any nominee of the Company 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. It is not expected that any nominee will be unable or will decline to
serve as a director.
-3-
<PAGE>
Any stockholder entitled to vote for the election of directors at a
meeting may nominate persons for election as directors only if written notice of
such stockholder's intent to make such nomination is given, either by personal
delivery at 4114 East Wood Street, Phoenix, Arizona or by United States mail,
postage prepaid to Secretary, Arizona Instrument Corporation, 4114 East Wood
Street, Phoenix, Arizona 85040 not later than: (i) with respect to the election
to be held at an annual meeting of stockholders, 20 days in advance of such
meeting, and (ii) with respect to any election to be held at a special meeting
of stockholders for the election of directors, the close of business on the
tenth day following the date on which notice of such meeting is first given to
stockholders. Each such notice must set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that such stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or understandings
between such stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by such stockholder; (d) such other information regarding each
nominee proposed by such stockholder as would have been required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission if such nominee had been nominated, or intended to be
nominated, by the Board of Directors; and (e) the consent of each nominee to
serve as a director of the corporation if elected. The chairman of a stockholder
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
The names of the directors and certain information about them are set
forth below.
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Walfred R. Raisanen 62 Chairman of the Board, Vice 1981
President-Research and
Development, and Treasurer of the
Company
S. Thomas Emerson 56 Chairman of Xantel Corporation 1989
John P. Hudnall 46 President and Chief Executive 1988
Officer of the Company
Quinn Johnson 52 President of Timberline Engineering 1992
and Testing, Inc.
Richard Long 68 Marketing and Management 1987
Consultant
Patricia Onderdonk 46 Marketing Consultant 1992
Stanley H. Weiss 54 Director and President Terrell, 1993
Weiss & Sugar, Ltd.
Steven G. Zylstra 43 Director of Business Development, 1996
Simula Technologies, Inc.
</TABLE>
-4-
<PAGE>
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 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 a Director in 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.
Quinn Johnson has been President of Timberline Engineering and Testing,
Inc., a civil engineering firm in Mesa, Arizona, since September 1996. 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. 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 involved in the private sector of the
telecommunications industry for over 20 years. 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 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 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 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.
-5-
<PAGE>
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 SEC.
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.
Board Meetings and Committees
The Board of Directors held a total of four meetings during the fiscal
year ended December 31, 1996. No director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors or any committee on which
such director served during the period of such service.
The Board presently has an Audit Committee and a Compensation
Committee. The Audit Committee currently consists of Mr. Long, Mr. Emerson and
Mr. Weiss and met one time in fiscal 1996. The Audit Committee meets
independently with representatives of the Company's independent auditors and
with representatives of senior management. The Committee reviews the general
scope of the Company's annual audit, the fee charged by the independent auditors
and other matters relating to internal control systems. In addition, the Audit
Committee is responsible for reviewing and monitoring the performance of
non-audit services by the Company's auditors. The Committee is also responsible
for recommending the engagement or discharge of the Company's independent
auditors.
The Compensation Committee currently consists of Messrs. Emerson, Long,
Weiss, Zylstra and Ms. Onderdonk, and met two times in fiscal 1996. The
Compensation Committee reviews and reports to the Board the salaries and benefit
programs designed for senior management, officers and directors with a view to
insure that the Company is attracting and retaining highly qualified managers
through competitive salary and benefit programs and encouraging extraordinary
effort through incentive rewards.
The Company does not have a nominating committee or a committee
performing the functions of a nominating committee. Nominations of persons to be
directors are considered by the full Board of Directors.
-6-
<PAGE>
REMUNERATION OF EXECUTIVE OFFICERS
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 $100,000 for services rendered to the Company during
fiscal 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- ------------------------------------
Pay-
----
Awards outs
--------------------------- ----
Other Re- Securities
Annual stricted Underlying LTIP
Compen- Stock Options/ Pay- All Other
sation Awards SARs outs Compen-
Name and Principal Position Year Salary($) Bonus ($) (#) (#)(2) ($) sation($)
- --------------------------- ---- --------- ----- ------------ ------------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. Hudnall, Chief 1996 161,666 56,000 5,400(1) 0 0 0 1,603(4)
Executive Officer 1995 154,400 0 5,400(1) 0 120,000(3) 0 1,518(4)
1994 153,226 0 5,400(1) 0 0 0 1,425(4)
Walfred R. Raisanen, 1996 153,622 42,000 0 0 0 0 4,309(4)
Chairman 1995 147,262 0 0 0 100,000(3) 0 3,771(4)
1994 135,009 26,460 0 0 0 0 3,329(4)
Scott M. Carter, Chief 1996 110,484 25,000 0 0 0 0 431(4)
Financial Officer (5) 1995 89,897 0 0 0 75,000(3) 0 405(4)
1994 91,855 0 0 0 0 0 390(4)
Michael Grant, Vice 1996 122,039 20,000 0 0 0 0 625(4)
President of Services 1995 94,989 0 0 0 75,000 0 584(4)
1994 96,708 0 0 0 0 0 549(4)
Allen D. Porter 1996 105,762 0 0 0 55,000 0 0
Vice President of 1995 87,040 0 0 0 15,000 0 0
Marketing 1994 72,365 0 0 0 0 0 0
</TABLE>
(1) Automobile allowance.
(2) Consists entirely of stock options.
(3) Represents 24,520, 52,760 and 48,520 new option grants to Messrs.
Hudnall, Raisanen and Johnson, respectively, in 1995. All remaining
options shown in this table as granted in 1995 represent repricing of
options granted in prior years.
(4) Life insurance premium payments.
(5) Mr. Carter terminated his employment with the Company on March 21,
1997.
-7-
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants
during the last fiscal year to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------------------
Number of % of Total
Securities Option/SARs
Underlying Granted
Options/SARs to Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Pricing ($/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% $2.60 11/1/2006
</TABLE>
(1) Consists entirely of stock options.
(2) Vest in 5 equal annual installments with the first installment vesting
April 16, 1997.
(3) Vest in 5 equal annual installments with the first installment vesting
November 1, 1997.
(4) Mr. Carter terminated his employment with the Company on March 21,
1997.
-8-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning option
exercises during 1996 and the number and value of options outstanding at the end
of the last fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in-the-
Options/SARs at FY-End Money Options/SARs at
---------------------- FY End ($)(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
-9-
<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.
Effective April 1, 1997, the Company entered into a three-year
employment agreement with George G. Hays pursuant to which Mr. Hays agreed to
serve as Vice President and Chief Financial Officer. The agreement provides for
a base annual salary of $140,000, which is to be adjusted annually for
cost-of-living increases. Mr. Hays is also entitled to participate in any
benefit arrangements available to executive officers of the Company. Upon
termination of the employment agreement without cause, Mr. Hays is entitled to
receive an amount 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.
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.
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
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<PAGE>
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 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.
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<PAGE>
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as
independent auditors to audit the consolidated financial statements of the
Company for the fiscal year ending December 31, 1997 and recommends that
stockholders vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Board will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since 1981. Its representatives are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's annual meeting for the fiscal
year ending December 31, 1997 must be received by the Company no later than
January 27, 1998 in order that they may be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. Additionally, if a
stockholder wishes to present to the Company an item for consideration as an
agenda item for a meeting, he must timely give notice to the Secretary and give
a brief description of the business desired to be discussed. To be timely for
this Annual Meeting, such notice must be delivered to or mailed to and received
by the Company no later than 5:00 p.m. local time on June 7, 1997.
AVAILABLE INFORMATION
The Company files annual reports on Form 10-KSB with the Securities and
Exchange Commission. A copy of the Form 10-KSB annual report for the fiscal year
ended December 31, 1996, as amended (except for certain exhibits thereto) may be
obtained, free of charge, upon written request by any stockholder to Arizona
Instrument Corporation, 4114 East Wood Street, Phoenix, Arizona 85040,
Attention: Stockholder Relations. Copies of all exhibits to the annual report
are available upon a similar request, subject to payment of a $.15 per page
charge to reimburse the Company for its expenses in supplying any exhibit.
Dated: May 23, 1997
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<PAGE>
PROXY
ARIZONA INSTRUMENT CORPORATION
4114 East Wood Street
Phoenix, Arizona 85040
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John P. Hudnall and George G. Hays as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to present and to vote, as designated below, all the shares of
Common Stock of Arizona Instrument Corporation held of record by the undersigned
on May 16, 1997, at the Annual Meeting of Stockholders to be held on June 27,
1997 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
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^ FOLD AND DETACH HERE ^
<PAGE>
<TABLE>
<CAPTION>
Please mark
your vote as [X]
indicated in
this example
FOR ALL
NOMINEES (except WITHHELD
as marked to the FOR
contrary below) ALL FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C>
Item 1 -- ELECTION OF DIRECTORS [ ] [ ] Item 2 -- PROPOSAL TO APPROVE AND RATIFY [ ] [ ] [ ]
Nominees: THE APPOINTMENT OF DELOITTE &
John P. Hudnall TOUCHE LLP
Walfred R. Raisanen
Steven G. Zylstra
WITHHELD FOR: (INSTRUCTION: To withhold authority Item 3 -- In their discretion, the Proxies are
to vaot for an individual nominee, write that nominee's authorized to vote upon such other business as may
name on the line below.) properly come before the meeting or any adjournment
thereof.
- -------------------------------------------------------
-----| THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
| THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
| STOCKHOLDER IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES AND FOR PROPOSAL 2 AS
RECOMMENDED BY THE BOARD OF DIRECTORS.
Please sign exactly as name appears below. When
shares are held by more than one owner, all should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full
corporate name by President or authorized officer.
If a partnership, please sign in partnership name by
authorized person.
Signature Signature Date
---------------------------------------------- ---------------------------------------------- ------------------
NOTE: Please be sure to date this Proxy
</TABLE>
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^ FOLD AND DETACH HERE ^
