SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ARIZONA INSTRUMENT CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO]
4114 East Wood Street
Phoenix, Arizona 85040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 9, 1999
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Arizona Instrument Corporation, a
Delaware corporation (the "Company"), will be held on Friday, July 9, 1999 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 a director to serve for the next three years or until his
successor is elected;
(2) To consider and act upon a proposal to amend the Company's Employee
Stock Purchase Plan to increase the number of shares of Common Stock available
for grant thereunder by 65,000 shares;
(3) To consider and act upon a proposal to ratify the appointment of
Toback CPAs, P.C. as independent auditors of the Company for the fiscal years
ending December 31, 1998 and December 31, 1999; and
(4) 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 1999 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, 1999
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,
Linda J. Shepherd
Secretary
Phoenix, Arizona
June 3, 1999
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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 July 9, 1999
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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 July 9, 1999 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 3, 1999.
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, 1999
(the "Record Date") will be entitled to vote at the meeting. On the Record Date,
there were issued and outstanding 1,382,670 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 nominee
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 director. The
affirmative vote of a majority of such quorum is required with respect to the
approval of Proposals 2 and 3.
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, 1999 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)(2)
Number Percent
Name and Address (3) of Shares of Total
- -------------------- --------- --------
George G. Hays (4) 39,051 2.8%
S. Thomas Emerson (4) 10,500 (5)
Harold D. Schwartz (4) 45,370 3.3%
Steven G. Zylstra (4) 4,120 (5)
All directors and executive 100,381 7.3%
officers as a group (4) (6)
(5 persons)
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(1) All share amounts are adjusted to reflect the 5 to 1 revenue stock split
effective February 16, 1999.
(2) 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.
(3) Unless otherwise indicated, the beneficial owner's address is:
c/o the Company, 4114 East Wood Street, Phoenix, Arizona 85040.
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<PAGE>
(4) Includes shares issuable upon exercise of options which are currently
exercisable or become exercisable within 60 days of May 13, 1999 as
applicable for each of the following individuals:
Hays 36,000 shares
Emerson 6,500 shares
Schwartz 3,000 shares
Zylstra 4,000 shares
(5) Less than one percent.
(6) Includes 1,144 shares issuable upon exercise of options and 196 shares
owned by officers in addition to shares issuable upon exercise of options
indicated in note (4).
PROPOSAL 1
ELECTION OF DIRECTOR
One director is to be elected at the Annual Meeting to serve as
director until the Annual Meeting of Stockholders to be held in the year 2002
and until his respective successor is elected. UNLESS OTHERWISE INSTRUCTED, THE
PROXY HOLDERS WILL VOTE THE PROXIES RECEIVED BY THEM FOR THE COMPANY'S NOMINEE,
S. THOMAS EMERSON. The nominee is currently a director of the Company.
The Board of Directors currently consists of four members and is
classified into three classes, with each class holding office for a three-year
period. There are currently 6 vacancies on the Board of Directors. Mr. Emerson
was elected on June 16, 1989 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 the 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 the
nominee who shall be designated by the present Board of Directors to fill the
vacancy. It is not expected that the 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) 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.
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<PAGE>
The names of the nominee for director and of the directors, and certain
information about them, are set forth below.
Principal Occupation Director
Name Age and Directorships Since
- ---- --- ----------------- -----
NOMINEE FOR ELECTION AS DIRECTOR WHOSE TERM WILL EXPIRE IN 2002:
S. Thomas Emerson 58 President and CEO of Arizona Technology 1989
Incubator, a partnership that mentors
promising young technology companies. Dr.
Emerson was chairman of Xantel Corporation, a
private company engaged in computer
communications, from August 1992 to January
1998 and 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.
DIRECTORS WHOSE TERMS EXPIRE IN 2000:
Steven G. Zylstra 44 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.
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<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 2001:
George G. Hays 43 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 73 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.
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, 1998, except that
Harold Schwartz, a director of the Company, reported an April and a July
purchase of shares by his wife on a Form 5 dated February 10, 1999 and Linda
Shepherd, the Controller and Chief Accounting Officer of the Company, reported
an August purchase of shares on a Form 5 dated February 8, 1999. In making these
disclosures, the Company has relied solely on written representation 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 seven meetings during the fiscal
year ended December 31, 1998. 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 Messrs. Emerson, Schwartz
and Zylstra and met twice in fiscal 1998. Richard Long and Stanley Weiss were
members of the audit committee 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 1998. Richard Long, Stanley
Weiss and Patricia Onderdonk were members of the Compensation Committee during
fiscal 1998 until their resignations from the Board of Directors on January 14,
-5-
<PAGE>
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.
SUMMARY COMPENSATION TABLE (1)
The following table sets forth, with respect to the years ended December 31,
1996, 1997 and 1998, compensation awarded to, earned by or paid to all
individuals serving as the Company's Chief Executive Officer during fiscal 1998
and each of the Company's other executive officers who were serving as an
executive officer at December 31, 1998 and whose salary and bonus aggregated at
least $100,000 for services rendered to the Company during fiscal 1998.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------- ----------------------------
Awards Payouts
------ -------
Other Re- Securities
Annual stricted Underlying LTIP
Compen- Stock Options/ Pay- All Other
sation Awards SARs outs Compen-
Name and Principal Position Year Salary($) Bonus ($) (#) (#)(3) ($) sation($)
- --------------------------- ---- --------- ----- ------- ------- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George G. Hays, President 1998 165,000 0 5,400(2) 0 45,000 0 1,338(4)
and Chief Executive 1997 113,749 6,300 4,050(2) 0 15,000 0 1,228(4)
Officer(6)
Walfred R. Raisanen, 1998 166,734 0 0 0 0 0 5,736(4)
Vice President of 1997 166,740 29,250 0 0 0 0 4,981(4)
Engineering(5) 1996 153,622 42,000 0 0 0 0 4,309(4)
</TABLE>
- ----------
(1) All share amounts are adjusted to reflect the 5 to 1 reverse stock split
effective February 16, 1999.
(2) Automobile allowance.
(3) Consists entirely of stock options.
(4) Life insurance premium payments.
(5) Mr. Raisanen left his employment with the Company on February 26, 1999. He
resigned from the Board of Directors on March 15, 1999.
(6) Mr. Hays commenced his employment with the Company on March 10, 1997.
Therefore no information for 1996 is available.
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<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)(2)
The following table sets forth information about stock option grants
during the last fiscal year to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Number of % of Total
Securities Option/SARs
Underlying Granted
Options/SARs to Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Pricing ($/Sh) Date
---- ----------- ----------- -------------- ----
<S> <C> <C> <C> <C> <C>
George G. Hays 45,000(4) 65% $4.60 1/13/2008
Walfred R. Raisanen (3) 0 -- -- --
</TABLE>
- ----------
(1) All share amounts are adjusted to reflect the 5 to 1 reverse stock split
effective February 16, 1999.
(2) Consists entirely of stock options.
(3) Mr. Raisanen left his employment with the Company on February 26, 1999. He
resigned from the Board of Directors on March 15, 1999.
(4) Vest in three equal annual installments with the first installment vesting
on January 13, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE TABLE (1)
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning option
exercises during the last fiscal year and the number and value of options
outstanding at the end of the last fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Value Options/SARs at Fiscal In-The-Money Options/SARs at
Acquired on Realized Year-End (#)(1) Fiscal Year End ($)(3)
Name Exercise(#) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George G. Hays 0 0 18,000 0 (4) (5) (4) (5)
Walfred R. Raisanen 0 0 12,000 0 (4) (5) (4) (5)
</TABLE>
- ----------
(1) All share amounts are adjusted to reflect the 5 to 1 reverse stock split
effective February 16, 1999.
(2) No SARs are outstanding.
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<PAGE>
(3) 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.
(4) Value as of December 31, 1998 is based upon the average bid and asked price
of $3.75 as reported on the Nasdaq SmallCap Market for December 31, 1998,
minus the exercise price, multiplied by the number of shares underlying the
options.
(5) None of these options were in-the-money on December 31, 1998.
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. In March of 1999, the Company amended and renewed Mr. Hays' employment
agreement and extended it through March 31, 2001.
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 was 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. In 1999, the Company decided not to renew Mr.
Raisanen's employment agreement. Mr. Raisanen terminated his employment with the
Company on February 26, 1998. He resigned from the Board of Directors on March
15, 1999.
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.
-8-
<PAGE>
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 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. In addition, the Company decided to
grant each outside shareholder an additional 500 shares at the market price on
January 1, 1999. 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 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.
PROPOSAL 2
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
INCREASING SHARES AVAILABLE FOR GRANT
BY 65,000 SHARES
The Company's Employee Stock Purchase Plan ("Purchase Plan") was
adopted by the Board of Directors and approved by the stockholders in 1985. The
Purchase Plan originally reserved 40,000 shares (adjusted for the 5 to 1 reverse
stock split effective February 16, 1999) for issuance under the Purchase Plan.
At the 1996 Annual Meeting, the shareholders of the Company approved a proposal
reserving an additional 40,000 shares under the Purchase Plan. As of May 13,
1996, a total of 80,000 shares of Common Stock were available for issuance under
the Purchase Plan. (Note, all share amounts have been adjusted to reflect the 5
to 1 reverse stock split effective February 16, 1999).
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SUMMARY OF PLAN
The summary of the Purchase Plan included in this Proxy Statement is
qualified in its entirety by the specific language of the Purchase Plan. Copies
of the Purchase Plan are available to any stockholder upon request to Investor
Relations, Arizona Instrument Corporation, 4114 East Wood Street, Phoenix,
Arizona 85040.
PURPOSE. The purpose of the Purchase Plan is to provide the employees
of the Company and its subsidiaries with an opportunity to purchase Common Stock
of the Company through payroll deductions. The Purchase Plan is intended to
qualify as an Employee Stock Purchase Plan under Section 423 of the Internal
Revenue Code (the
"Code").
ADMINISTRATION. The Purchase Plan is to be administered by the Board of
the Company or a committee appointed by the Board. All questions of
interpretation or application of the Purchase Plan are determined by the Board
or its committee and its decisions are final and binding upon all participants.
Members of the Board or committee who are eligible employees are permitted to
participate in the Purchase Plan. Members of the Board or its committee receive
no additional compensation for their services in connection with the
administration of the Purchase Plan.
ELIGIBILITY. Participation in the Purchase Plan is completely
voluntary. Any person who is employed by the Company for at least 20 hours per
week and has been so employed for at least 12 months continuously by the Company
or one of its designated subsidiaries is eligible to participate in the Purchase
Plan. No employee is to be granted an option under the Purchase Plan (i) if,
immediately after the grant, such employee would own shares (including
outstanding options to purchase) of stock possessing 5% or more of the total
combined voting power or value of all classes of shares of the Company or of any
parent or subsidiary of the Company, or (ii) which permits his or her rights to
purchase shares under all employee stock purchase plans of the Company and its
parent or subsidiaries to accrue at a rate which exceeds $25,000 of the fair
market value of the shares (determined at the time such option is granted) for
each calendar year in which such stock option is outstanding at any time.
OFFERING DATES. The Purchase Plan is implemented by one offering during
each six-month period of the Plan. The offering periods will generally commence
on January 1 and July 1 of each year.
PARTICIPATION IN THE PURCHASE PLAN. Eligible employees become
participants in the Purchase Plan by delivering a subscription agreement to the
Company's payroll office prior to the applicable offering date. Payroll
deductions for a participant will commence on the first payroll following the
offering date and will end on the termination date of the offering to which the
subscription agreement is applicable, unless sooner terminated by the
participant as provided in the Purchase Plan. See "Withdrawal from the Purchase
Plan." An employee who becomes eligible to participate in the Purchase Plan
after the commencement of an offering must wait until the commencement of the
next offering. Payment under all offerings will be by payroll deduction. The
subscription agreement will indicate the percentage of the participant's
compensation which will be withheld during the offering period and used to
exercise the purchase option. The percentage may not exceed 10% of a
participant's compensation on any payday and the aggregate of such projected
payroll deductions during the offering period may not exceed 10% of the
aggregate projected compensation for the offering period. A participant may
lower, but not increase, the rate of payroll deductions during the offering by
delivering to the Company a new subscription agreement. The change in rate will
be effective within 15 days following the Company's receipt of the new
agreement. By executing a subscription agreement, the participant is given an
option which may or may not be exercised during the six-month offering period.
The participant does not become obligated to make the stock purchase; rather,
the subscription agreement is merely an election by the participant to place
shares under option.
PURCHASE PRICE. The purchase price per share at which shares of Common
Stock are sold in an offering under the Purchase Plan is 85% of the lower of the
fair market value of a share of Common Stock at the beginning or end of the
offering period. The fair market value of the Common Stock on a given date shall
be the mean of the reported
bid and asked prices for that date.
EXERCISE OF OPTION AND PURCHASE OF STOCK. By executing a subscription
agreement to participate in an offering under the Purchase Plan, the employee is
granted an option to purchase as many full shares of Common Stock as he would be
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able to buy with payroll deductions credited to his account during the offering
period at the purchase price described under "Purchase Price." Unless the
employee's participation is discontinued (see "Withdrawal from the Purchase
Plan"), his option for the purchase of shares will be exercised automatically at
the end of the offering period at the applicable price. Any cash remaining to
the credit of a participant in his account under the Purchase Plan after a
purchase of shares at the termination of each offering period, or which is
insufficient to purchase a full share of Common Stock, shall be returned to the
participant without interest.
USE OF FUNDS. All payroll deductions received or held by the Company
under the Purchase Plan may be used by the Company for any corporate purpose.
WITHDRAWAL FROM THE PURCHASE PLAN. The participant's interest in a
given offering may be terminated in whole, but not in part, by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of the applicable six-month offering
period. In such event, the payroll deductions credited to the participant's
account will be returned to such participant, without interest. A participant's
withdrawal from an offering has no effect upon such participant's eligibility to
participate in subsequent offerings under the Purchase Plan. If a participant
fails to remain customarily employed by the Company for at least 20 hours per
week during the offering period in which the employee is a participant, he shall
be deemed to have elected to withdraw from the Purchase Plan and the payroll
deductions credited to his account shall be returned to him and his option
terminated.
TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement or death, immediately cancels his
participation in the Purchase Plan. In such event, the payroll deductions
credited to the participant's account will be returned, without interest, to
such participant or, in the case of death, to the person or persons entitled
thereto as specified by the employee. See "Designation of Beneficiary."
STOCK SUBJECT TO OPTION. The maximum number of shares of Common Stock
which will be made available for sale under the Purchase Plan is 80,000 shares
plus the 65,000 shares now proposed for stockholder approval, subject to
adjustment on changes in capitalization of the Company. See "Capital Changes."
If the total number of shares which would otherwise be subject to options
granted under the Purchase Plan at the beginning of an offering period exceeds
the number of shares then available under the Purchase Plan (after deduction of
all shares for which options have been exercised or are then outstanding), the
Company will allocate options for shares remaining available for option grant
pro rata among the participants. In such event, the Company will give written
notice of such reduction of the number of shares subject to the option to each
participant affected thereby and will similarly reduce the rate of payroll
deductions, if necessary.
CAPITAL CHANGES. In the event of any changes in the capitalization of
the Company, such as mergers, consolidations, reorganizations,
recapitalizations, stock splits or stock dividends, appropriate adjustments will
be made by the Company in the number of shares of Common Stock subject to
purchase under the Purchase Plan and in the purchase price per share.
DESIGNATION OF BENEFICIARY. A participant may file with the Company a
written designation of a beneficiary who is to receive any shares or cash or
both to which the participant may be entitled under the Purchase Plan at the
time of his death. Such designation of beneficiary may be changed by the
participant at any time by written
notice.
NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights of a participant under the Purchase Plan
may be pledged, assigned or transferred for any reason except by will, the laws
of descent and distribution or by designation of beneficiary. See "Designation
of Beneficiary." Any attempt at such pledge, assignment or transfer may be
treated by the Company as an election to withdraw from the Purchase Plan.
REPORTS. Individual accounts will be maintained for each participant in
the Purchase Plan. Statements of account will be given to participating
employees semi-annually promptly following the stock purchase date, and such
statements will set forth the amount of payroll deductions, the per share
purchase price, the number of shares purchased and the remaining cash balance,
if any.
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AMENDMENT OR TERMINATION. The Board of Directors may at any time
terminate or amend the Plan, subject to the following provisions. The Board has
the power to change the duration of offering periods without stockholder
approval, if such change is announced at least 15 days prior to the scheduled
beginning of the first offering period to be affected and if no offering period
is to be longer than 27 months. No termination may affect options previously
granted and no amendment may make any change in any option granted under the
Purchase Plan which adversely affects the rights of any participant. No
amendment may be made without prior approval of the stockholders of the Company
if such amendment would increase the number of shares which may be issued under
the Purchase Plan, permit payroll deductions at a rate in excess of 10% of the
participant's compensation, materially modify the requirements as to eligibility
for participation in the Purchase Plan or materially increase the benefits which
may accrue to participants under the Purchase Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Purchase Plan is intended to qualify as an Employees' Stock
Purchase Plan under Section 423 of the Code. Accordingly, a participant will not
recognize taxable income at the time Shares are acquired under the Purchase
Plan. If the participant disposes of the Shares within two years after the date
the option is granted, the employee must recognize compensation income in the
year of disposition equal to the difference between the fair market value of the
Shares on the date of acquisition and the purchase price. The difference between
the amount received upon disposition and the participant's basis in the Shares
(the amount paid for the Shares plus the amount included in gross income as
compensation) will be treated as a capital gain or loss. If the participant
disposes of the Shares more than two years after the date the option is granted,
the participant must recognize compensation income in the year of disposition
equal to the lesser of (i) the excess of the fair market value of the stock at
the time of disposition over the purchase price or (ii) the excess of the fair
market value of the stock at the time of option grant over the purchase price.
The difference between the amount received upon disposition and the
participant's basis in the Shares (the sum of the amount paid for the Shares
plus the amount included in gross income as compensation) will be treated as
long-term capital gain or loss.
The Company is generally not entitled to a deduction with respect to
Shares purchased under a Section 423 plan. The Company will be entitled to a
corresponding deduction, however, if an employee disposes of the stock before
the expiration of the two year holding period described above. In such case, the
Company will be entitled to a deduction equal to the amount of compensation
income recognized by the participant.
This summary description is based upon the presently applicable
provisions of the Code and is subject to change in the event of a change in
either the Code or interpretations thereof. Each Purchase Plan participant is
urged to consult his personal tax advisor as to the tax effects in his
individual situation of his participation in the Purchase Plan, including the
effects under state income tax or other tax laws which may be applicable.
VALUATION
As of May 13, 1999, the last sale price of the Company's Common Stock
as reported on the Nasdaq Stock Market was $2.50 per share.
STOCK PURCHASES
As of May 13, 1999, options to purchase a total of 79,457 shares have
been granted to employees of the Company and have been automatically exercised
pursuant to the Purchase Plan. No individual employee of the Company has
received or is to receive grants of 5% or more of such options.
RECOMMENDATION
The Board of Directors unanimously recommends that the stockholders
vote FOR approval of this proposal to increase the number of shares of Common
Stock available under the Purchase Plan.
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PROPOSAL 3
APPOINTMENT OF INDEPENDENT AUDITORS
On June 22, 1998 the Company dismissed Deloitte & Touche LLP, which was
previously engaged as the Company's principal independent accountant to audit
its financial statements. Deloitte & Touche LLP's report on the Company's
financial statements for either of the past two years did not contain an adverse
opinion or disclaimer of opinion, and was not qualified or modified in any
manner. The decision to change accountants was recommended by the Company's
Board of Directors. During the Company's two most recent fiscal years, and the
subsequent quarters preceding such dismissal, there were no disagreements or
reportable events with the former accountant on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure.
On June 22, 1998, the Board of Directors engaged Toback CPAs as its new
principal independent accountant to audit its financial statements. During the
Company's two most recent fiscal years, the Company (or someone on its behalf)
did not consult with Toback CPAs regarding any of the matters set forth in Item
304(a)(2) of Regulation
S-K.
The Board of Directors has appointed Toback CPAs as independent
auditors to audit the consolidated financial statements of the Company for the
fiscal years ending December 31, 1998 and December 31, 1999 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.
Toback CPAs representatives are expected to be present at the 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, 1999 must be received by the Company no later than
February 2, 2000 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
the 1999 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 10, 1999.
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, 1998, 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 3, 1999
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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 Linda Shepherd as
Proxies, each with the power to appoint his or her 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, 1999, at the Annual Meeting of Stockholders to be held on
July 9, 1999 or any adjournment thereof.
Item 1. ELECTION OF DIRECTORS
Nominee: S. Thomas Emerson
[ ] FOR NOMINEE [ ] WITHHOLD VOTE FOR NOMINEE
FOR AGAINST ABSTAIN
Item 2. APPROVAL OF AN AMENDMENT TO EMPLOYEE
STOCK PURCHASE PLAN [ ] [ ] [ ]
Item 3. APPOINTMENT OF INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
Item 4. In their discretion, the Proxies are [ ] [ ] [ ]
authorized to vote upon such other
business as may 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.
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.
Dated: , 1999
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Signature
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Signature
NOTE: Please be sure to date this Proxy.
