-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MIszY2eM6GMWow/YoEnANQNFYQjYEDVH5SMQIPrdG36GXNyxiWB/EHc+hCaw62D6 CMK3+qSpyfSrzTuF+xlM0w== 0000950147-97-000267.txt : 19970501 0000950147-97-000267.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950147-97-000267 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARIZONA INSTRUMENT CORP CENTRAL INDEX KEY: 0000724904 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 860410138 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12575 FILM NUMBER: 97591618 BUSINESS ADDRESS: STREET 1: 4114 E WOOD ST CITY: PHOENIX STATE: AZ ZIP: 85040 BUSINESS PHONE: 6024701414 MAIL ADDRESS: STREET 1: 4114 E WOOD STREET CITY: PHOENIX STATE: AZ ZIP: 85040 FORMER COMPANY: FORMER CONFORMED NAME: QUINTEL CORP DATE OF NAME CHANGE: 19870329 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTRAC INSTRUMENTS INC DATE OF NAME CHANGE: 19840613 10KSB/A 1 FORM 10-KSB/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM 10-KSB/A [X] Annual Report pursuant to Section 13 or 15(d) of the Securities Act of 1934 (fee required) For the fiscal year ended December 31, 1996, or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) For the transition period from ____________ to ______________. Commission File No. 0-12575 ARIZONA INSTRUMENT CORPORATION - -------------------------------------------------------------------------------- (Name of small business issuer as specified in its charter) Delaware 86-0410138 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4114 East Wood Street, Phoenix, AZ 85040 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (602) 470-1414 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of April 25, 1997, the aggregate market value of the voting stock held by non-affiliates of the registrant was $12,824,150. The aggregate market value is computed with reference to the average bid and asked price of $2.00 as reported on the Nasdaq SmallCap Market for April 25, 1997. Shares of Common Stock held by each officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive. [ ] Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. As of April 25, 1997, 6,710,894 shares of Common Stock ($.01 par value) were outstanding. Arizona Instrument Corporation (the "Company") hereby amends its Report on Form 10-KSB for the year ended December 31, 1996 by adding thereto Items 9, 10, 11, and 12, as set forth below, and by amending Item 13 thereto. Item 9. Directors, Executive Officers, Promoters and Control Persons. The names of the directors and certain executive officers of the Company, and certain information about them, are set forth below.
Name Age Principal Occupation - ---- --- -------------------- Walfred R. Raisanen 62 Chairman of the Board, Vice President-Research and Development, and Treasurer of the Company S. Thomas Emerson 56 Chairman of Xantel Corporation John P. Hudnall 46 President and Chief Executive Officer of the Company Quinn Johnson 52 President of Timberline Engineering and Testing, Inc. Richard Long 68 Marketing and Management Consultant Patricia Onderdonk 46 Marketing Consultant Stanley H. Weiss 54 Director and President of Terrell, Weiss & Sugar, Ltd. Steven G. Zylstra 43 Director of Business Development, Simula Technologies, Inc. George G. Hays 41 Vice President of Finance, Chief Financial Officer, and Vice President of Manufacturing of the Company Susan Berry 48 Secretary of the Company Michael Grant 47 Vice President of Services of the Company Allen D. Porter 39 Vice President of Marketing of the Company
Walfred R. Raisanen has been the Chairman of the Board of Directors since the Company's inception in January 1981. From 1981 until 1986 he was the President and Treasurer of the Company. Mr. Raisanen was re-elected Treasurer in 1991 and also serves as Vice President of Research and Development. From June 1976 until January 1981 he was President and a Director of Motorola Process Control, Inc., the predecessor to the Company. S. Thomas Emerson, Ph.D. has been a Director since 1989. He has been Chairman of Xantel Corporation, a private company engaged in computer communications, since August 1992. Dr. Emerson was Chief Executive Officer of Syntellect Incorporated, a manufacturer of voice response systems, from 1984 to April 1992. Prior to founding Syntellect in 1984, Dr. Emerson was a founder of Periphonics Corporation of Bohemia, New York where he served for 14 years in various executive capacities. John P. Hudnall came to the Company in 1985 as Chief Financial Officer. He became President and Chief Executive Officer in 1986 and has been a Director since 1988. Mr. Hudnall's background spans 22 years in industry, with positions in production, sales, finance and systems, including a position as Chief Financial Officer for Inter-Tel, Inc., an independent telephone company. Quinn Johnson has been a Director since 1992. Mr. Johnson became President of Horizon Engineering & Testing, Inc., a wholly-owned subsidiary of the Company ("Horizon"), in September 1992 upon the acquisition by the Company of Horizon's predecessor. Mr. Johnson resigned from his position as President of Horizon in September 1996 and still serves as a director of the Company. He has been President of Timberline Engineering and Testing, Inc., a civil engineering firm in Mesa, Arizona, since September 1996. Mr. Johnson founded Horizon's predecessor in 1990. Prior to forming Horizon's predecessor, Mr. Johnson founded and served since 1983 as president of a company engaged in general construction, paving and civil engineering. Previously, Mr. Johnson was a construction manager for Northern Industries of Eagar, Arizona; a project manager for the U.S. Forest Service; and a structural engineer for Fluor Corp. of Los Angeles, California. Richard Long has been a Director since 1987. He has been involved in the private sector of the telecommunications industry for over 20 years. Mr. Long is currently a marketing and management consultant. He has been both President and Chairman of the trade association representing suppliers, contractors and manufacturers in the private sector and has acted as a spokesman before Congress and regulatory bodies during that time. Patricia Onderdonk has been a Director since 1992. Ms. Onderdonk is currently a marketing consultant. From mid-1994 to May 1996, she was the Vice President of Marketing for Optical Disc Corporation of Santa Fe Springs, California, a company engaged in developing and manufacturing high-density CD ROMs. Previously, she co-founded Onderdonk & Haynes, Inc. in 1986 and had become President of the marketing and communication consulting firm focused on technology-based customers. Ms. Onderdonk's background spans 19 years of marketing and communications experience with positions in account and general management, including the position of Vice President and General Manager for Regis McKenna, Inc., a high-technology marketing and public relations firm. Stanley H. Weiss has been a Director since 1993. He has been President and Director of Terrell, Weiss & Sugar, Ltd., an accounting firm in Chicago, Illinois, since September 1990. Mr. Weiss served as the firm's secretary-treasurer from October 1981 until September 1990 and has been a principal of the firm since December 1978. As a practicing certified public accountant since 1974, Mr. Weiss has been actively involved in consulting with entrepreneurs and managers in the areas of income taxes, business planning, financial controls and employee incentives. Steven G. Zylstra has been a Director since 1996. He has been the Director of Business Development for Simula Technologies, Inc., (as new subsidiary, formerly a division of Simula Government Products, Inc.) of Phoenix, Arizona, since 1995. The company specializes in the development and production of high-tech transportation seating and safety systems, composite technologies, and ballistic armor systems. From 1984 to 1995, Mr. Zylstra served as General Manager of General Pneumatics Corporation, Western Research Center, of Scottsdale, Arizona. He is a Co-Founder and Member of the Governor's Arizona Science and Technology Council, Co-Founder and Director of the Arizona Innovation Network and Director of the Arizona Technology Incubator, among other outside activities. George G. Hays joined the Company in March 1997 as Vice President of Finance, Chief Financial Officer, and Vice President of Manufacturing. Prior to his position with the Company, Mr. Hays was president and founder of Hays Financial Group, Inc., an investment banking firm, since 1986. Susan Berry was named Secretary of the Company in 1989. She has served as Human Resources Manager for the Company since 1985. Prior to her position with the Company, Ms. Berry was in corporate administration for Inter-Tel, Inc. Michael Grant became Vice President of Services in 1996. Prior to that, he was Vice President of Manufacturing since 1993. He started with the Company in 1988, first serving as National Service Manager, then as Director of Customer Service, and as Director of Operations. Mr. Grant has over 25 years of experience in manufacturing. -4- Allen D. Porter was named Vice President of Marketing in 1996. Mr. Porter has been with the Company since 1985, working in sales, sales management and product management. Prior to his position with the Company, he was program director for an Arizona-based behavioral health agency. Compliance With Section 16(a) Reporting Requirements Under the securities laws of the United States, the Company's directors, its executive officers, and any persons holding more than 10% of the Company's Common Stock are required to report their initial ownership of the Company's Common Stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established and the Company is required to disclose any failure to file by these dates. All of these filing requirements were satisfied during the year ended December 31, 1996, except: (i) John P. Hudnall reported on a Form 5 dated February 10, 1997 a November 1996 option exercise; (ii) Stanley H. Weiss reported on a Form 5 dated February 10, 1997 two November 1996 option exercises; and (iii) Michael Grant reported on a Form 5 dated February 10, 1997 a December 1996 option exercise. Additionally, the Company has not received copies of ownership reports due from Bridge Capital Investors II, which formerly beneficially owned greater than 10% of the Company's outstanding Common Stock, and thus has no information regarding whether such reports have been filed or filed on a timely basis with the Commission. In making these disclosures, the Company has relied solely on written representations of its directors and executive officers and copies of the reports that they have filed with the Commission. Item 10. Executive Compensation SUMMARY COMPENSATION TABLE The following table sets forth, with respect to the years ended December 31, 1994, 1995 and 1996, compensation awarded to, earned by or paid to the Company's Chief Executive Officer and each of the Company's other executive officers who were serving as an executive officer at December 31, 1996 and whose salary and bonus aggregated at least $100,000 for services rendered to the Company during fiscal 1996. -5-
Annual Compensation Long-Term Compensation --------------------------------- ---------------------------------- Pay- ---- Awards outs -------------------------- ---- Other Re- Securities Annual stricted Underlying LTIP Compen- Stock Options/ Pay- All Other sation Awards SARs outs Compen- Name and Principal Position Year Salary($) Bonus ($) (#) (#)(2) ($) sation($) - --------------------------- ---- --------- ----- ------------ ------------ -------- ----- --------- John P. Hudnall, Chief 1996 161,666 56,000 5,400(1) 0 0 0 1,603(4) Executive Officer 1995 154,400 0 5,400(1) 0 120,000(3) 0 1,518(4) 1994 153,226 0 5,400(1) 0 0 0 1,425(4) Walfred R. Raisanen, 1996 153,622 42,000 0 0 0 0 4,309(4) Chairman 1995 147,262 0 0 0 100,000(3) 0 3,771(4) 1994 135,009 26,460 0 0 0 0 3,329(4) Scott M. Carter, Chief 1996 110,484 25,000 0 0 0 0 431(4) Financial Officer (5) 1995 89,897 0 0 0 75,000(3) 0 405(4) 1994 91,855 0 0 0 0 0 390(4) Michael Grant, Vice 1996 122,039 20,000 0 0 0 0 625(4) President of Services 1995 94,989 0 0 0 75,000 0 584(4) 1994 96,708 0 0 0 0 0 549(4) Allen D. Porter 1996 105,762 0 0 0 55,000 0 0 Vice President of 1995 87,040 0 0 0 15,000 0 0 Marketing 1994 72,365 0 0 0 0 0 0
(1) Automobile allowance. (2) Consists entirely of stock options. (3) Represents 24,520, 52,760 and 48,520 new option grants to Messrs. Hudnall, Raisanen and Johnson, respectively, in 1995. All remaining options shown in this table as granted in 1995 represent repricing of options granted in prior years. (4) Life insurance premium payments. (5) Mr. Carter terminated his employment with the Company on March 21, 1997. -6- OPTION/SAR GRANTS IN LAST FISCAL YEAR (1) The following table sets forth information about stock option grants during the last fiscal year to the executive officers named in the Summary Compensation Table.
Individual Grants ------------------------------------------------------------------------- Number of % of Total Securities Option/SARs Underlying Granted Options/SARs to Employees in Exercise or Base Expiration Name Granted (#) Fiscal Year Pricing ($/Sh) Date - ------------- ------------ ----------- ----------------- ---------- John P. Hudnall 0 0% 0 0 Walfred R. Raisanen 0 0% 0 0 Scott M. Carter (4) 0 0% 0 0 Michael Grant 0 0% 0 0 Allen D. Porter 30,000(2) 37% $2.62 4/16/2006 25,000(3) 31% $2.60 11/1/2006
(1) Consists entirely of stock options. (2) Vest in 5 equal annual installments beginning April 16, 1996. (3) Vest in 5 equal annual installments beginning November 1, 1996. (4) Mr. Carter terminated his employment with the Company on March 21, 1997. -7- AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE TABLE The following table sets forth information with respect to the executive officers named in the Summary Compensation Table concerning option exercises during 1996 and the number and value of options outstanding at the end of the last fiscal year.
Number of Unexercised Value of Unexercised in-the- Options/SARs at FY-End Money Options/SARs at ----------------------------- FY End ($)(3) (#)(1) ------------------------------ ------ Shares Exercisable Unexercisable Exercisable Unexercisable Acquired Value ----------- ------------- ----------- ------------- on Realized Name Exercise (2) - ------------------- -------- -------- John P. Hudnall 24,000 $37,920 0 96,000 0 $139,680 Walfred R. Raisanen 0 0 20,000 80,000 $29,100 $116,400 Scott M. Carter (4) 0 0 15,000 60,000 $21,825 $ 87,300 Michael Grant 15,000 $21,825 0 60,000 0 $ 87,300 Allen D. Porter 0 0 3,000 55,000 $ 4,365 $ 0
(1) No SARs are outstanding. (2) Calculated based on the closing price as reported on the Nasdaq SmallCap Market for the date of exercise minus the exercise price, multiplied by the number of shares acquired on exercise. (3) Value as of December 31, 1996 is based upon the average bid and asked price of $2.375 as reported on the Nasdaq SmallCap Market for December 31, 1996, minus the exercise price, multiplied by the number of shares underlying the options. (4) Mr. Carter terminated his employment with the Company on March 21, 1997. Employment/Change of Control Arrangements Effective November 5, 1992, the Company entered into a five-year employment agreement with Walfred R. Raisanen pursuant to which Mr. Raisanen agreed to serve as Vice President of Research and Development for a base annual salary of $120,000, which is to be adjusted annually for cost-of-living increases. Mr. Raisanen is also entitled to participate in any benefit arrangements available to executive officers of the Company. Upon termination of the employment agreement by the Company without cause, Mr. Raisanen is entitled to receive a cash payment equal to the compensation due him over the balance of the term of the employment agreement, and to participate in applicable benefit programs for the balance of the term of the employment agreement. Effective June 3, 1996, the Company entered into a three-year employment agreement with its President and Chief Executive Officer, John P. Hudnall. The agreement provides for a base annual salary of $165,542, which is to be adjusted annually for cost-of-living increases. Mr. Hudnall is also entitled to participate in any benefit arrangements available to executive officers of the Company. Upon termination of the employment agreement by the Company without cause, Mr. Hudnall is entitled to receive an amount equal to the compensation due him over -8- the balance of the term of the employment agreement, and to participate in applicable benefit programs for the balance of the term of the employment agreement. The Company's 1991 Option Plan provides that options granted to any executive officer or director of the Company will become immediately exercisable and vested in full upon the occurrence, before the expiration or termination of such option, of (a) delivery of written notice of a stockholders' meeting at which the stockholders will consider a proposed merger, sale of assets or other reorganization of the Company, (b) the acquisition by any person of securities representing 25% or more of the total number of votes entitled to be case for the election of directors of the Company, (c) commencement of a tender offer for the stock of the Company, or (d) failure, at any annual or special meeting of stockholders following an election contest, of any of the persons nominated by the Company to win election seats on the board of directors. The Company's 1991 Option Plan further provides that subject to the above provisions, in the event a merger or similar reorganization that the Company does not survive, a sale of all or substantially all of the assets of the Company, or the dissolution and liquidation of the Company, shall cause every option outstanding under the 1991 Option Plan to terminate, to the extent not then exercised, except to the extent that any surviving entity agrees to assume the 1991 Option Plan and/or the obligations under any such option. Compensation of Directors Outside directors are currently paid $1,000 plus expenses per Board or committee meeting attended. Pursuant to the 1991 Stock Option Plan, non-employee directors are automatically granted options exercisable for 2,500 shares at the market price on the date of grant upon joining the Board and on each January 1 thereafter. The options become exercisable six months after grant and expire two years after termination of Board service. Directors who are employees are only paid their expenses (if any) for attendance at meetings. Item 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information regarding the beneficial ownership of the Company's Common Stock at April 25, 1997 with respect to (i) each director and director nominee of the Company, (ii) each executive officer named in the Summary Compensation Table set forth herein, (iii) all directors and executive officers as a group, and (iv) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company's Common Stock: Shares of Common Stock Beneficially Owned ----------------------------------------- Number Percent Name and Address (1) of Shares of Total - -------------------- --------- -------- Walfred R. Raisanen (2) 196,400 2.9% S. Thomas Emerson (2) 35,000 (3) John P. Hudnall (2) 27,521 (3) Quinn Johnson (2) 50,001 (3) Richard Long (2) 32,000 (3) Patricia Onderdonk (2) 16,000 (3) Stanley H. Weiss (2) 35,000 (3) Steven G. Zylstra (2) 3,100 (3) Scott M. Carter (2)(5) 17,000 (3) Michael Grant (2) 17,100 (3) Allen D. Porter (2) 21,671 (3) -9- All directors and executive 478,819 7.1% officers as a group (2) (4) (12 persons) - ---------------------------------------- (1) Unless otherwise indicated, the beneficial owner's address is: c/o the Company, 4114 East Wood Street, Phoenix, Arizona 85040. (2) Includes shares issuable upon exercise of options which are currently exercisable or become exercisable within 60 days of April 25, 1997 as applicable for each of the following individuals: Raisanen 40,000 shares Emerson 15,000 shares Hudnall 24,000 shares Long 15,000 shares Onderdonk 12,500 shares Weiss 5,000 shares Zylstra 2,500 shares Carter 15,000 shares Grant 15,000 shares Porter 12,000 shares (3) Less than one percent. (4) Includes 24,000 shares issuable upon exercise of options (in addition to shares issuable upon exercise of options indicated in note 2). (5) Mr. Carter terminated his employment with the Company on March 21, 1997. Item 12. Certain Relationships and Related Transactions Bridge Agreements. On July 6, 1989, the Company entered into an agreement (the "Note Agreement") with Bridge Capital Investors II ("Bridge II"), a former owner of greater than 5% of the Company's Common Stock. Pursuant to the Note Agreement as amended through September 2, 1992, Bridge II held 12% convertible subordinated notes in the principal amount of $3,000,000 with a maturity date of June 30, 1996 and a warrant to purchase up to 115,000 shares of the Company's Common Stock at an exercise price of $1.00 per share. As a result of common stock issued in conjunction with the acquisition of Horizon on September 30, 1992 and related financing and other transactions, the notes became convertible into 847,937 shares of common stock at $3.54 per share. The Note Agreement further provided that the Company would have the right to prepay the notes at any time if prepayment were accompanied by the issuance of warrants to purchase Common Stock at the rate of 200,000 warrants for each $1,000,000 of principal which is prepaid. In November 1995, the Company prepaid the remaining principal balance of the notes payable to Bridge II. In connection with the prepayment, Bridge II waived all rights to receive any additional warrants under its loan agreement with the Company. The Company had also made a scheduled principal payment of $375,000 on April 30, 1995 and a $616,667 principal payment on October 31, 1995. Merger Agreement. On September 30, 1992, Horizon Engineering and Testing, Inc. was merged (the "Merger") into a wholly-owned subsidiary of the Company pursuant to an Agreement of Merger (the "Merger Agreement"). Shareholders of Horizon received cash consideration of $190,000 and shares of the Company's Common Stock. Quinn Johnson held 90% of the outstanding stock of Horizon at the time of the Merger and received 529,328 shares of Common Stock in connection with the Merger. The Company agreed to register the shares of the Company's Common Stock issued pursuant to the Merger Agreement under applicable federal and state -10- securities laws at any time after April 1, 1993 upon the request of holders of 25% of such shares and to keep such registration effective through September 30, 1995. Mr. Johnson has agreed to indemnify Horizon and the Company against certain liabilities in connection with the Company's acquisition of Horizon, and has placed 49,030 shares of the Company's Common Stock in escrow in connection therewith. Non-Competition Agreement. Pursuant to a Non-Competition Agreement dated September 30, 1993, and in consideration of a cash payment of $350,000, Mr. Johnson agreed to refrain from competing with Horizon until the later of September 30, 1998 or two years after leaving the employment of Horizon, subject to earlier termination under certain circumstances. Employment Agreement. Mr. Johnson served as President of Horizon pursuant to an Employment Agreement dated September 30, 1992. Mr. Johnson resigned from his position as President of Horizon in September 1996 and now serves as a director of the Company. The Employment Agreement provided for a base salary of $125,000 over its four-year term, with annual adjustments tied to increases in the Consumer Price Index. The Employment Agreement also provided for an annual bonus equal to (i) 15% of Horizon's pretax profit (as defined) with respect to pretax profit representing up to 15% of Horizon's gross revenues; and (ii) 20% of Horizon's pretax profit on that portion of the pretax profit in excess of 15% of gross revenues, with a maximum bonus over the term of the four-year agreement equal to $700,000. In the event of termination of the Employment Agreement by the Company without cause, Mr. Johnson was entitled to receive (i) the difference between $700,000 and bonus payments prior to termination; plus (ii) an amount equal to the then-applicable annual base salary. Stock Registration. Pursuant to registration rights previously granted, the Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") relating to 3,781,003 shares of its Common Stock issued in connection with private placements in September 1992 and November 1993 and in connection with the acquisition of Horizon in September 1992. Also included in the registration are 209,000 shares of Common Stock issuable upon the exercise of warrants issued to Cruttenden & Co., Inc. ("Cruttenden") and its assignees in connection with Cruttenden's activities as placement agent for the November 1993 private placement. The registration statement was declared effective by the SEC in February 1994. The Company has agreed that it will maintain the effectiveness of the registration statement (i) until November 1996, with respect to the shares issued in the November 1993 private placement; (ii) until September 1995, with respect to the shares issued in the September 1992 private placement and the Horizon acquisition; and (iii) until two years after exercise, with respect to shares issuable upon exercise of the warrants referred to above. The registration statement as originally filed included 465,001 shares beneficially owned by Quinn Johnson, a director and executive officer of the Company, which shares were acquired by Mr. Johnson in connection with the acquisition of Horizon by the Company in September 1992. In connection with the registration, Mr. Johnson agreed that his registered and other sales of the Company's Common Stock shall not exceed the volume limitations set forth in Rule 144 under the Securities Act of 1933, as amended, subject to certain exceptions. The registration statement also includes 20,000 shares and 20,000 shares beneficially owned by S. Thomas Emerson and Stanley Weiss, directors of the Company, which shares were acquired in the November 1993 private placement. The Company and the holders of the shares of Common Stock included in the registration have agreed to indemnify each other against certain liabilities. Other. During September 1993, the Company loaned $45,000 to Walfred R. Raisanen, a director and executive officer of the Company. The loan bears interest at 10% per annum, is collateralized by a pledge of 15,000 shares of the Company's Common Stock and $30,000 of the cash value of a life insurance policy covering Mr. Raisanen. Mr. Raisanen has paid the principal on the loan to the Company, and currently owes $5,367 in interest, which is to be paid by the end of 1997. -11- Item 13. Exhibits and Reports on Form 8-K. Financial Statements. The following is a list of the consolidated financial statements of Arizona Instrument Corporation and its subsidiaries included in Item 8 of Part II of the Company's Form 10-KSB filed on March 31, 1997. Independent auditors' report. Consolidated balance sheets - December 31, 1996 and 1995. Consolidated statements of operations - Years ended December 31, 1996, 1995 and 1994 Consolidated statements of shareholders' equity - Years ended December 31, 1996, 1995 and 1994 Consolidated statements of cash flows - Years ended December 31, 1996, 1995 and 1994 Notes to consolidated financial statements (a) The following exhibits are incorporated by reference or are filed with this Form 10-KSB. 3.1 Composite Certificate of Incorporation of Registrant as amended through July 5, 1994. Incorporated by reference from the Form 8-A filed on June 26, 1996. 3.2 Bylaws of Registrant. Incorporated by reference from the Form 8-A filed on June 26, 1996. 10.1 United States Patent No. 4,165,633 issued August 28, 1979. Incorporated by reference from the Form S-8 filed on July 27, 1983. 10.2* 1983 Incentive Stock Option Plan of Registrant. Incorporated by reference from the Form S-8 filed on July 17, 1983. 10.3* 1985 Stock Purchase Plan, as amended. Incorporated by reference from the Form S-8 filed on August 5, 1996. 10.4* 1991 Stock Option Plan, as amended. Incorporated by reference from the Form S-8 filed on June 28, 1996. 10.5 Amended and Restated Silicon Valley Bank, Export-Import Guaranteed Business Loan Agreement, February 1993. Incorporated by Reference from the Form 10-KSB filed in March 1993. 10.6 Loan Modification Agreement with Silicon Valley Bank dated March 15, 1994 to renew the lines of credit through March 15, 1995. Incorporated by reference from the Form 10-QSB filed in March 1994. 10.7 Amended and Restated Silicon Valley Bank Domestic and Export Loan Agreements, dated March 15, 1995 through March 15, 1996. Incorporated by reference from the Form 10-KSB filed on April 28, 1995. 10.8 Warrant Purchase Agreement dated as of December 15, 1991 between Arizona Instrument Corporation and Silicon Valley Bank: Incorporated by reference from the Form 10-KSB filed in March 1992. 10.9* Employment Agreement dated September 30, 1992 between Horizon Acquisition Co. and Quinn Johnson. Incorporated by reference from the Form 8-K dated September 30, 1992. -12- 10.10 Noncompete Agreement dated September 30, 1992 between Horizon Acquisition Co. and Quinn Johnson. Incorporated by reference from the Form 8-K dated September 30, 1992. 10.11* Employment Agreement between Walfred R. Raisanen and Arizona Instrument Corporation dated November 5, 1992. Incorporated by reference from the Form 10-KSB filed in March 1993. 10.12* Employment Agreement between the Company and John P. Hudnall dated June 3, 1996. (filed herewith) 10.13 Lease Agreement between the Company and Wood Street Limited Partnership dated September 1, 1993. Incorporated by reference from the Form 10-QSB filed August 1993. 10.14 Amended and Restated License Agreement between the Company and Tracer Research Corporation dated October 27, 1993. Incorporated by reference from the Form 10-QSB filed November 1993. 10.15 Warrant Agreement between the Company and Cruttenden & Co., Inc. dated November 30, 1993. Incorporated by reference from the Form 10-QSB filed November 1993. 10.16 Amendment No. 7 to the Purchase Agreement between Arizona Instrument Corporation and Bridge Capital Investors II, dated July 1, 1994. Incorporated by reference from the Form 10-KSB filed April 28, 1995. 10.17 Amendment No. 8 to the Purchase Agreement between Arizona Instrument Corporation and Bridge Capital Investors II, dated March 30, 1995. Incorporated by reference from the Form 10-KSB filed April 28, 1995. 10.18 Promissory Note between Arizona Instrument Corporation and Classic Syndicate, Inc., dated April 15, 1996. Incorporated by reference from the Form 10-KSB filed March 29, 1996. 10.19 Loan Modification Agreement between Arizona Instrument Corporation and Silicon Valley Bank related to a new Promissory Note, dated November 7, 1995. Incorporated by reference from the Form 10-KSB filed March 29, 1996. 10.20 Promissory Note between Arizona Instrument Corporation and Silicon Valley Bank, dated November 7, 1995. Incorporated by reference from the Form 10-KSB filed March 29, 1996. 10.21 Agreement between Arizona Instrument Corporation and Bridge Capital Investors II, regarding the terms for prepayment of the Bridge Note, dated November 27, 1995. Incorporated by reference from the Form 10-KSB filed March 29, 1996. 22.1 Subsidiaries: Quintel International, Inc., incorporated under the Companies Act of 1982 of Barbados, W.I.; Computrac International, Inc., an Arizona Corporation, Horizon Engineering and Testing Inc., an Arizona Corporation, each of which is wholly owned by Arizona Instrument Corporation. 24.1 Accountants' Consent: Incorporated by reference from the Form 10-KSB filed on March 31, 1997. 27 Financial Data Schedule: Incorporated by reference from the Form 10-KSB filed on March 31, 1997. (b) There were no reports on Form 8-K for the year ended December 31, 1996 * Management Contract or compensatory plan or arrangement. -13- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARIZONA INSTRUMENT CORPORATION Date: April 29, 1997 By:/s/ George G. Hays ------------------------------------- George G. Hays, Vice President and Chief Financial Officer -14- EX-10.12 2 EMPLOYMENT AGREEMENT WITH JOHN P. HUDNALL EMPLOYMENT AGREEMENT ARIZONA INSTRUMENT CORPORATION AND JOHN P. HUDNALL THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of June 3, 1996 is between Arizona Instrument Corporation ("AZI" or the "Company" or "Employer") and John P. Hudnall ("Employee"). 1. Employment Duties. Employer hereby employs Employee and Employee hereby accepts employment on the terms and conditions set forth herein. Employee shall serve in the position of President and Chief Executive Officer, with responsibility for overseeing the daily operations of the Corporation, and will have such other powers and duties consistent with such position as may from time to time be prescribed by the Board of Directors. 2. Term. Employee's employment shall continue for a period of three years, beginning with the effective date of this Agreement and ending three years thereafter. At the conclusion of the three-year period, this Agreement shall be automatically renewed for a one-year period unless the Company has given Employee written notice of nonrenewal at least six months prior to the conclusion of the three-year term. 3. Full-time Employment. Employee shall devote full employment energies, interest, abilities and time to the performance of his obligations hereunder and shall not, without the written consent of the Board of Directors of AZI, render to others any service of any kind for compensation. 4. Compensation. Employer shall pay to employee the sum of $165,542.00 per year during the term hereof, to be paid in accordance with the Employer's normal payroll practice, but in no event shall such salary be paid less frequently than twice a month. The Board of Directors will consider merit increases on a periodic basis commensurate with the executive compensation practices of the Company. Additionally, the base pay will be annually adjusted based on the cost of living index for the Greater Phoenix area. Employer may deduct from the compensation to Employee social security taxes and all federal, state and municipal taxes and charges as may now be in effect or which may hereafter be enacted or required. Employer shall pay or reimburse Employee for reasonable travel and other expenses incurred by Employee in furtherance of or in connection with the performance of his duties hereunder, consistent with Employer policies regarding such expenses. 5. Participation in Employee Benefits. Employee shall be entitled to and shall receive all other benefits and conditions of employment available generally to executives of AZI pursuant to Employer plans and programs, including group health insurance, benefits, life insurance benefits and the opportunity to participate in any stock option, profit sharing or retirement income plan; provided, however, that Employee may request leave of absence without pay during the term hereof, and Employer agrees to grant such leave if it determines that the leave would not be materially injurious to the operations of Employer; and provided, further, that Employee shall be entitled to a vacation of four weeks in each twelve-month period during the term of this Agreement, during which time his compensation shall be paid in full. The manner of implementation of such benefits with respect to such items as procedures and amounts is discretionary with the Company. 6. Termination. A) For Cause. The Company may terminate this Agreement for cause upon written notice to the Employee stating the facts constituting such cause, provided that Employee shall have 10 days following such notice to cure any conduct or act, if curable, alleged to provide grounds for termination for cause hereunder. In the event of termination for cause, the Company shall be obligated to pay the Employee only the base salary due him through the date of termination. Cause shall include material neglect of duties, wilful failure to abide by ethical and good faith instructions or policies from or set by the Chairman or the Board, commission of a felony or serious misdemeanor offense or pleading guilty or nolo contendere to same, the commission by Employee of an act of dishonesty or moral turpitude involving the Company, Employee's material breach of this Agreement, the filing of bankruptcy proceedings by or against Employee, or breach by Employee of any other material obligation to the Company. B) Without Cause. The Company may terminate this Agreement at any time immediately, without cause, by giving written notice to Employee. Upon termination under this Section 6(b), the Company shall be obligated to pay Employee the base salary payable hereunder for the balance of the employment term set forth in Section 2. At the Company's election, such payment can be made in a lump sum or pursuant to the Company's normal payroll practices over the balance of the term. The Company shall also maintain Employee's participation in the employee benefit programs referred to in Section 5 hereof for the remainder of the employment term set forth in Section 2 and to the extent contemplated in Section 5 hereof, except that the Company shall have no obligation to Employee under any profit sharing or retirement plan other than amounts due through the date of termination of employment. If continued coverage or participation in any such benefit program is prohibited by the terms thereof, the Company will provide a substantially similar benefit during such period. The obligations provided in this Section 6(b) shall be the Company's sole obligations upon termination under this Section 6(b). C) Disability. If during the term of this Agreement, Employee fails to perform his duties hereunder because of illness or other incapacity for a period of two consecutive months, or for 90 days during any 150-day period, the Company shall have the right to terminate this Agreement without further obligation hereunder except for any amounts payable pursuant to disability plans generally applicable to executive employees. D) Death. If Employee dies during the term of this Agreement, this Agreement shall terminate immediately, and Employee's legal representatives shall be entitled to receive the base salary due Employee through the last day of the calendar month in which his death shall have occurred and any other death benefits generally applicable to executive employees. E) Employee Termination. Employee may terminate this Agreement at any time upon written notice to the Company. 7. Cooperation with Employer After Termination of Employment. Following any termination of employment hereunder, Employee shall fully cooperate with Employer in all matters relating to the winding up of his pending work on behalf of Employer and the orderly transfer of any such pending work to other employees of Employer as may be designated by Employer. Employer shall be entitled to such full time or part time services of Employee as Employer may reasonably require during all or any part of the 30-day period following any termination hereunder, and shall compensate Employee for such services on a basis consistent with Employee's compensation pursuant to Section 4 hereof. 8. Non-Competition. The parties acknowledge that the Employee will acquire much knowledge and information concerning the business of the Company and its affiliates as the result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the date of execution of this Agreement is world-wide and very competitive and one in which few companies can successfully compete. Competition by Employee in that business after this Agreement is terminated would severely injure the Company. Accordingly, for a period of one year after this Agreement is terminated for any reason (except termination by the Company without cause), Employee agrees not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that in any way competes with the Company or its affiliates in any of their presently existing or then existing products and markets. 9. Specific Performance. The parties agree that the provisions in Sections 3 and 8 are of a special, unique and extraordinary character, which gives them a peculiar value, the loss of which could not be reasonably or adequately compensated in damages in any action at law, and that a breach by Employee will cause Employer great and irreparable injury and damage. Employee hereby expressly agrees that Employer shall be entitled to the remedies of injunction, specific performance and other equitable relief to prevent a breach by Employee. This provision shall not, however, be construed as a waiver of any of the rights which Employer may have for damages. 10. Miscellaneous Provisions. 10.1 Decisions by Employer. For all purposes herein, Employee may not make any decisions or take any action with respect to this Agreement as an agent of Employer. Actions of Employer hereunder shall be taken by its Board of Directors. 10.2 Governing Law. This Agreement is governed by Arizona law. 10.3 Entire Agreement. This Agreement supersedes all prior agreements between the parties concerning the subject matter hereof and this Agreement constitutes the entire agreement between the parties with respect hereto. This Agreement may be modified only with a written instrument duly executed by each of the parties. No person has any authority to make any representation or promise not set forth herein on behalf of any of the parties and this Agreement has not been executed in reliance upon any representation or promise except those contained herein. 10.4 Notices. Any notice, request, demand or other communication hereunder shall be in writing and shall be deemed given when personally delivered to AZI or to Employee, as the case may be, or when delivered by certified mail, return receipt requested. To the Company: 4114 East Wood Street Phoenix, AZ 85040 To the Employee: 4114 East Wood Street Phoenix, AZ 85040 10.5 Waiver of Breach. The failure of either party to require the performance of any term or condition of the Agreement, or the waiver by either party of any breach of this Agreement shall not prevent a subsequent enforcement of any such term or any other term nor be deemed to be a waiver of any subsequent breach. 10.6 Severability. The provisions of this Agreement shall be deemed severable. If any part of this Agreement shall be held unenforceable, the remainder shall remain in full force and effect, and such unenforceable provisions shall be reformed so as to give maximum legal effect to the intent of the parties as expressed herein. 11. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by binding arbitration conducted in Phoenix, Arizona in accordance with the laws of the State of Arizona conducted in accordance with the rules of the American Arbitration Association. Judgement upon the award rendered by the arbitration may be entered in any court having jurisdiction thereof. /s/ Patricia Onderdonk 6/3/96 /s/ John P. Hudnall 6/3/96 - --------------------------------- ------------------------------------- Employer Date Employee Date -----END PRIVACY-ENHANCED MESSAGE-----