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 26, 1998
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Arizona Instrument Corporation, a
Delaware corporation (the "Company"), will be held on Tuesday, June 26, 1998 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 two directors to serve for the next three years or until
their successors are elected; and
(2) 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 1998 Annual Report
to Stockholders, which includes certified financial statements, also accompanies
this Notice.
Only stockholders of record at the close of business on May 13, 1998
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
June 1, 1998
- --------------------------------------------------------------------------------
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 26, 1998
-------------------------------
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 26, 1998 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 June 1, 1998.
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 13, 1998
(the "Record Date") will be entitled to vote at the meeting. On the Record Date,
there were issued and outstanding 6,819,582 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 two
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 13, 1998 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 (1)
---------------------------------------------
Number Percent
Name and Address (2) of Shares of Total
- -------------------- --------- --------
George G. Hays (6) 92,000 1.3%
Walfred R. Raisanen (3) 216,400 3.1%
S. Thomas Emerson (3) 40,000 (4)
John P. Hudnall (7) 58,000 (4)
Harold D. Schwartz (3)(8) 154,350 2.2%
Steven G. Zylstra (3) 8,100 (4)
Allen D. Porter (3)(9) 35,671 (4)
All directors and executive 643,647 9.4%
officers as a group (3) (5)
(9 persons)
- ----------------------------------------
(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 acquired 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-
<PAGE>
(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 13, 1997 as
applicable for each of the following individuals:
Hays 90,000 shares
Raisanen 60,000 shares
Emerson 20,000 shares
Hudnall 48,000 shares
Schwartz 2,500 shares
Zylstra 7,500 shares
Porter 26,000 shares
(4) Less than one percent.
(5) Includes 39,000 shares issuable upon exercise of options (in addition
to shares issuable upon exercise of options indicated in note 3).
(6) Mr. Hays commenced his employment with the Company on March 10, 1997.
(7) Mr. Hudnall's employment with the Company was terminated on November
15, 1997.
(8) Mr. Schwartz joined the Company's Board of Directors on January 14,
1998.
(9) Mr. Porter left his employment with the Company on May 22, 1998.
PROPOSAL 1
ELECTION OF DIRECTORS
Two 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 2001
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, George G. Hays and Harold D. Schwartz. Each nominee is currently a
director of the Company.
The Board of Directors currently consists of five members and is
classified into three classes, with each class holding office for a three-year
period. There are currently three vacancies on the Board of Directors. The terms
of Mr. Hays was elected by the Board of Directors on November 15, 1997 to fill a
vacancy on the Board of Directors. Mr. Schwartz was elected by the Board of
Directors on January 14, 1998 to fill a vacancy on the 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.
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) withrespect to the election
-3-
<PAGE>
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 allarrangements 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 nominees for director and of the directors, and
certain information about them, are set forth below.
<TABLE>
<CAPTION>
Name Age Principal Occupation and Directorships Director Since
- ---- --- -------------------------------------- --------------
<S> <C> <C> <C>
Nominees for election as directors whose terms will expire in 2001:
George G. Hays 42 Chairman of the Board, President and Chief 1997
Executive Officer of the Company. Mr. Hays joined
the Company in March 1997 as Vice President of
Finance, Chief Financial Officer and Vice
President of Manufacturing of the Company. In
November 1997, Mr. Hays was elected President and
Chief Executive Officer of the Company. In
January 1998, Mr. Hays was elected Chairman of the
Board of Directors. Prior to joining the Company,
Mr. Hays was president and founder of Hays
Financial Group, Inc., an investment banking firm,
since 1986. Mr. Hays is still President of Hays
Financial Group, Inc.
Harold D. Schwartz 72 President of Chez & Schwartz, Incorporated, a 1998
marketing and sales consulting firm, since 1973.
Mr. Schwartz currently serves on the Board of
Directors of Cobra Electronics Corporation, a
public company.
Director whose term expires in 1999:
S. Thomas Emerson 57 Independent Management Consultant. Chairman of 1989
Xantel Corporation, a private company engaged in
computer communications, from August 1992 to
January 1998. 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.
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C> <C>
Directors whose terms expire in 2000:
Walfred R. Raisanen 63 Vice President of Engineering and Treasurer of the 1981
Company. He served as Chairman of the Board of
Directors from the inception of the Company in
1982 until his resignation in January 1998. From
1986 until January 1998 he served as Vice
President of Research and Development, and became
Vice President of Engineering in January 1998.
From 1981 until 1986 he was the President and
Treasurer of the Company. Mr. Raisanen was
re-elected Treasurer in 1991. From June 1976
until January 1981 he was President and a Director
of Motorola Process Control, Inc., the predecessor
to the Company.
Steven G. Zylstra 43 Director of Business Development for Simula 1996
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.
</TABLE>
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, 1997, except that
Quinn Johnson, a director of the Company until January 1998, reported a December
disposition of shares on a Form 5 dated February 3, 1998.
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 five meetings during the fiscal
year ended December 31, 1997. 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.
-5-
<PAGE>
The Board presently has an Audit Committee and a Compensation
Committee. The Audit Committee currently consists of Messrs. Emerson, Schwartz
and Zylstra and met one time in fiscal 1997. Richard Long and Stanley Weiss were
members of the audit committee for fiscal 1997 and during fiscal 1998 until
their resignations from the Board of Directors on January 14, 1998. 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,
Schwartz and Zylstra, and met two times in fiscal 1997. Richard Long, Stanley
Weiss and Patricia Onderdonk were members of the Compensation Committee for
fiscal 1997 and during fiscal 1998 until their resignations from the Board of
Directors on January 14, 1998. 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>
SUMMARY COMPENSATION TABLE
The following table sets forth, with respect to the years ended December 31,
1995, 1996 and 1997, compensation awarded to, earned by or paid to all
individuals serving as the Company's Chief Executive Officer during fiscal 1997
and each of the Company's other executive officers who were serving as an
executive officer at December 31, 1997 and whose salary and bonus aggregated at
least $100,000 for services rendered to the Company during fiscal 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Pay-
----
Awards outs
-------------------- ----
Other Re- Securities
Annual stricted Underlying LTIP
Compen- Stock Options/ Pay- All Other
sation Awards SARs outs Compen-
Name and Principal Position Year Salary($) Bonus ($) (#) (#)(2) ($) sation($)
- --------------------------- ---- ------- ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George G. Hays, President 1997 113,749 6,300 4,050(1) 0 75,000 0 1,228(4)
and Chief Executive
Officer (5)
John P. Hudnall, Former 1997 157,700 18,750 4,950(1) 0 0 0 1,762(4)
President and Chief 1996 161,666 56,000 5,400(1) 0 0 0 1,603(4)
Executive Officer (6) 1995 154,400 0 5,400(1) 0 120,000(3) 0 1,518(4)
Walfred R. Raisanen, Vice 1997 166,740 29,250 0 0 0 0 4,981(4)
President of 1996 153,622 42,000 0 0 0 0 4,309(4)
Engineering 1995 147,262 0 0 0 100,000(3) 0 3,771(4)
Allen D. Porter, 1997 114,192 0 0 0 0 0 650(4)
Vice President of 1996 105,762 0 0 0 55,000 0 0
Marketing (7) 1995 87,040 0 0 0 15,000 0 0
</TABLE>
(1) Automobile allowance.
(2) Consists entirely of stock options.
(3) Represents 24,520 and 52,760 new option grants to Messrs. Hudnall and
Raisanen respectively, in 1995. All remaining options shown in this
table as granted in 1995 represent repricing of options granted in
prior years.
(4) Life insurance premium payments.
(5) Mr. Hays commenced his employment with the Company on March 10, 1997.
(6) Mr. Hudnall's employment with the Company was terminated on November
15, 1997.
(7) Mr. Porter left his employment with the Company on May 22, 1998.
-7-
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants
during the last fiscal year to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------
Number of % of Total
Securities Option/SARs
Underlying Granted
Options/SARs to Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Pricing ($/Sh) Date
---- ----------- ----------- -------------- ----
<S> <C> <C> <C> <C> <C>
George G. Hays (2) 75,000(3) 94% $ 1.81 5/2/2007
John P. Hudnall (4) 0 -- -- --
Walfred R. Raisanen 0 -- -- --
Allen D. Porter (5) 0 -- -- --
</TABLE>
- ----------------------
(1) Consists entirely of stock options.
(2) Mr. Hays commenced his employment with the Company on March 10, 1997.
(3) Vest in five equal installments with the first installment vesting on
May 2, 1998.
(4) Mr. Hudnall's employment with the Company was terminated on November
15, 1997.
(5) Mr. Porter left his employment with the Company on May 22, 1998.
-8-
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning option
exercises during the last fiscal year and the number and value of options
outstanding at the end of the last fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised
Options/SARs at Fiscal Value of Unexercised in-the-
---------------------- Money Options/SARs at
Year-End (#)(1) Fiscal Year End ($)(3)
--------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
Shares ----------- ------------- ----------- -------------
Acquired Value
on Realized
Name Exercise(#) ($)(2)
- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
George G. Hays (4) 0 0 0 75,000 (7) (7)
John P. Hudnall (5) 0 0 24,000 72,000 (7) (7)
Walfred R. Raisanen 0 0 40,000 60,000 (7) (7)
Allen D. Porter (6) 0 0 17,000 53,000 (7) (7)
</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, 1997 is based upon the average bid and asked
price of $0.90 as reported on the Nasdaq SmallCap Market for December
31, 1997, minus the exercise price, multiplied by the number of shares
underlying the options.
(4) Mr. Hays commenced his employment with the Company on March 10, 1997.
(5) Mr. Hudnall's employment with the Company was terminated on November
15, 1997.
(6) Mr. Porter left his employment with the Company on May 22, 1998.
(7) None of these options were in-the-money on December 31, 1997.
Employment/Change of Control Arrangements
Effective January 1, 1998, the Company entered into an employment
agreement with George G. Hays pursuant to which Mr. Hays agreed to serve as
President and Chief Executive Officer. The agreement provides for a base annual
salary of $165,000, subject to merit increases, plus an annual incentive bonus
of at least 30% of annual salary based on an incentive bonus plan administered
by the Board of Directors. 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 agreement
terminates on March 31, 2000, and will automatically renew for additional
one-year terms until notice of non-renewal by the Company. This agreement
replaces Mr. Hays' previous employment agreement with the Company dated April 1,
1998, pursuant to which he was employed as Vice President and Chief Financial
Officer.
-9-
<PAGE>
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's employment agreement has been renewed according to its
terms effective November 5, 1997. In January 1998, Mr. Raisanen's title was
changed to Vice President of Engineering. 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 John P. Hudnall, the Company's former President and
Chief Executive Officer. The Board of Directors terminated Mr. Hudnall's
employment without cause on November 15, 1997. The agreement provided for a base
annual salary of $165,542, which was to be adjusted annually for cost-of-living
increases. Mr. Hudnall was 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 became
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
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, a former director of the Company,
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
resigned from his position as director of the Company in January 1998. 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
-10-
<PAGE>
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 former director 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, a director of the Company, and Stanley
Weiss, a former director 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. During 1996, a $10,000 principal payment was made on this
loan, leaving a remaining balance of $35,000. The note inducing this loan bears
interest at 10% and was due in December 1997. This loan has been paid in full.
During April 1994, the Company loaned $10,000 to John P. Hudnall, the
former President and Chief Executive Officer of the Company. The note evidencing
this loan bears interest at 10% and was due in December 1997. This loan has been
paid in full by mutual agreement of the Company and Mr. Hudnall out of Mr.
Hudnall's severance payments pursuant to the termination of his employment
agreement. See "Employment/Change in Control Arrangements."
-11-
<PAGE>
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has not yet appointed independent auditors to
audit the consolidated financial statements of the Company for the fiscal year
ending December 31, 1998.
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, 1998 must be received by the Company no later than
February 1, 1999 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 6, 1998.
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: June 1, 1998
-12-
<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 George G. Hays and Walfred R. Raisanen
as Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
Common Stock of Arizona Instrument Corporation held of record by the undersigned
on May 13, 1998, at the Annual Meeting of Stockholders to be held on June 26,
1998 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
Please mark |\ /|
your votes as | \/ |
indicated in | /\ |
this example |/ \|
<TABLE>
<CAPTION>
FOR ALL
NOMINEES (except) WITHHOLD
as marked to the FOR
contrary below) ALL
<S> <C> <C> <C> <C>
__ __
Item 1 - ELECTION OF DIRECTORS | | | | Item 2 - In their discretion, the Proxies
Nominees: |__| |__| are authorized to vote upon such other
George G. Hays business as may properly come before the
Harold D. Schwartz meeting or any adjournment thereof.
WITHHELD FOR: (INSTRUCTION: To withhold
authority to vote for an individual
nominee, write that nominee's name
on the line below.)
- ---------------------------------------
------- 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.
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>
