United States
Securities and Exchange Commission
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 14, 1997
ZONIC CORPORATION
__________________
(Exact name of registrant as specified in its charter)
Ohio 0-12283 31-0791199
____ _______ __________
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization ) file number) (Identification No.)
Park 50 TechneCenter, 50 W. TechneCenter Drive, Milford, Ohio 45150-9777
__________________________________________________________________________
(Address of principal Executive offices)
Registrant's telephone number, including area code (513) 248-1911
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Item 2. Acquisition or Disposition of Assets.
On January 14, 1997, Zonic Corporation (the "Company"), sold its Zeta
technology and software (the "Zeta Technology") to A&D Company, Ltd., a
Japanese corporation located in Tokyo, Japan ("A&D"), pursuant to a
Confidential "Zeta Technology" Sale Agreement between A&D and the Company
dated December 31, 1996, and related letters (the "Agreement"). The
transaction was effective as of December 31, 1996. The principal assets
disposed of included the core software (inclusive of its micro code), all
the application software and associated techniques and know-how employed
within the collection of software that the Company has developed and
designed for its System 7000 and WS 7000 product lines. This includes the
Zeta phased sine, Zeta data manager, Zeta intensity and Zeta rotating
machinery. Under the terms of the Agreement, the Company retains the right
to distribute the Zeta Technology internationally in exchange for a royalty
payment to A&D in the amount of 15% of the proceeds of the sale of the Zeta
Technology.
The sale price was $3.5 million and consisted of (i) two notes, one in
the amount of $900,000 due on March 31, 1997 and one in the amount of $1.5
million due on June 30, 1997, the proceeds of which will be used upon
receipt to pay down the Company's outstanding bank debt; (ii) a $530,000
set-off against accounts payable owed to A&D by the Company; and (iii) a
$570,000 set-off against loans A&D extended to the Company under a credit
agreement between the parties. In addition, A&D forgave $118,000 in
accrued interest on loans it has made to the Company. The sale price was
determined through arm's-length negotiations between the parties based on
the value of the Zeta Technology and the amount of indebtedness the Company
felt it needed to retire. A&D owns approximately 28.6% of the Company's
outstanding common stock. A&D is also the exclusive marketing agent for
the distribution of the Company's products in Japan. The Company and a
subsidiary of A&D are equal 50% owners of a sales and marketing joint
venture for the distribution of A&D and the Company's products in North
and South America. Furthermore, Shoiche Sekine, a director, Executive Vice
President and Secretary of the Company is a director of A&D.
Item 7. Financial Statements and Exhibits.
_______ __________________________________
(c) Exhibits
Filed
Herewith
(Page No.)
__________
Exhibit
_______
10.1 Confidential "Zeta Technology" Sale
Agreement between A&D and the
Company dated December 31, 1996
and Related Letters 4 to 14
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SIGNATURES
Pursuant to the requirements 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.
ZONIC CORPORATION
By: /s/ James B. Webb,
________________________
President
Date: January 29, 1997
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EXHIBIT 10.1
CONFIDENTIAL
"Zeta Technology" Sale Agreement
This agreement is made and entered into as of this 31st day of
December, 1996 (closing date) by and between A&D Company, Ltd., a Japanese
Corporation, having its principal place of business at 3-23-14 Higashi-
Ikebukuro, Toshima-ku, Tokyo 170, Japan (hereinafter called "A&D") and
Zonic Corporation, an Ohio Corporation having its principal place of
business at 50 West TechneCenter Drive, Milford, Ohio 45150, U.S.A.
(hereinafter called "ZONIC")>
Whereas, the technology knows as "ZETA," which ZONIC has developed,
designed and possessed.
Whereas, A&D expresses a willingness to purchase "ZETA TECHNOLOGY,"
and Zonic expresses a willingness to sell "ZETA TECHNOLOGY to A&D.
Now, therefore, in consideration of mutual convenants herein set
forth, the parties hereto hereby agree as follows:
Article 1 Definition
The know-how of "ZETA" which ZONIC shall sell and deliver to A&D, is
defined as follows:
The core software (inclusive of its micro code) all the application
software and associated techniques and know-how employed and embodied
within the collection of software which ZONIC has developed and designed
for system 7000 and WS7000.
This includes, but is not limited to the following:
Z-Core
ZPS: ZETA Phased Sine
ZDM: ZETA Data Manager
ZIMTEM: ZETA Intensity
Z-ROM: ZETA Rotating Machinery
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Article 2. Disclosure
Zonic shall disclose all the technology and know-how concerning "ZETA
TECHNOLOGY" as defined in Article 1 upon demand from A&D.
Article 3. Methods of Transfer
Zonic shall submit the relevant information as agreed in the above by the
following methods.
1. Submission by all the specifications, instruction manuals and the
documents relevant to the technology.
2. Submission by the electronic media which includes the relevant software
(micro codes).
3. Technology transfer by Zonic's software engineers.
A. By responding to inquires from A&D in writing, telephone calls and
visits.
B. Transfer of know-how by visits of ZONIC's engineers to A&D (Japan).
A&D has the right to demand ZONIC to send their relevant engineers
for up to 60 days and up to 10 accumulated visits.
Article 4. Follow-up Period
A&D has the right to demand the disclosure of the relevant information
based on this agreement for three years following closing date.
Article 5. Payment
A&D agrees to pay to ZONIC an amount of U.S. $3,500,000 for "ZETA
TECHNOLOGY." The payment method shall be set separately.
Article 6. Use of Trade Mark
A&D has the right to use the trade marks relevant to this agreement which
Zonic possesses except "ZONIC" itself.
Article 7. Application of know-how
A&D has the right to use the know-how acquired under this agreement for
any products which A&D has designed and manufactured so far, and will design
and manufacture in the future and also has the right to market and sell the
products to any customer including to OEM's.
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Article 8. Use of Patents
ZONIC shall allow A&D to use all the patents relevant to this agreement,
free of charge.
Article 9. Infringement of Patents
1. ZONIC guarantees that the know-how provided under this agreement
shall not infringe on any patents of third parties.
2. In the event that ZONIC and/or A&D faces or has the potential of
facing a lawsuit provoked by a third party concerning the patents
mentioned in the above, ZONIC shall inform A&D of such occurrences in
writing, and do all in their power at their own reasonable expense to
protect A&D from any damages.
Article 10. Zonic's Responsibility
A&D has no obligation nor responsibility for any products or any variants
of ZETA TECHNOLOGY previously employed by ZONIC on or before closing date.
Any claim, any request for repair or maintenance service and after care,
including up grades to those products which ZONIC provided customers on or
before closing date, should be dealt with by ZONIC.
Article 11. ZONIC's Representation
Zonic hereby represents and warrants that:
1. It has owned "ZETA Technology" free from any liens, encumbrances or
security interest and may sell, assign and transfer "ZETA TECHNOLOGY"
freely.
2. The execution, delivery and performance by ZONIC of this agreement
is within the corporate powers of ZONIC having been duly authorized
by all necessary corporate action, and do not violate, contravene or
conflict with or result in a breach of any agreement, contract or
document to which it is a party or by which it is bound or its
properties or assets is affected: and,
3. This agreement when duly executed, delivered will constitute a legal
valid and binding obligation of ZONIC, enforceable in accordance with
its terms.
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Article 12. A&D's Representation
A&D hereby represents and warrants that:
1. The execution, delivery and performance by A&D of this agreement is
within the corporate powers of A&D having been duly authorized by all
necessary corporate action, and do not violate, contravene or conflict
with or result in a breach of any agreement, contract or document to
which it is a party of by which it is bound or its properties or assets
is affected, and
2. This agreement when duly executed, delivered will constitute a legal
valid and binding obligation of A&D, enforceable in accordance with
its terms.
Article 13. Language of Agreement
This agreement shall be made in both Japanese and English, and in the
event a discrepancy occurs between the two languages, the agreement in
Japanese shall be considered to be original and take priority in any legal
actions.
Article 14. Applicable Law
This agreement shall be governed by, interpreted and construed in
accordance with the laws of Japan.
Article 15. Court
Either party shall file to Tokyo District court in Japan in the event of
law suit or other legal action between A&D and ZONIC.
This agreement shall be written in Both Japanese and English, both of
which shall be given to each party upon signing.
A&D Company, LTD. ZONIC Corporation
By: /s/ Hikaru Furukawa By: /s/ James B. Webb
___________________ __________________
President President & CEO
A&D Company, Limited ZONIC Company
Tokyo, Japan
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December 31, 1996
Zonic Corporation
50 West TechneCenter Drive,
Milford, Ohio 45150
U.S.A.
Gentlemen:
Under "ZETA Technology Sale Agreement" signed on December 31, 1996, we
have purchased "ZETA Technology" for the sum of $3,5000,000. Payment shall
be done as follows:
$1,100,000 on December 31, 1996 (closing date) by off-set against A/R
and loans.
$ 900,000 due on March 31, 1997 by promissory note on closing date
$1,500,000 due on June 30, 1997 by promissory note on closing date.
Sincerely,
A&D Company, Ltd.
By: /s/ Hikaru Furukawa
_____________________
President
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December 31, 1996
Zonic Corporation
50 West TechneCenter Drive
Milford, Ohio 45150 U.S.A.
Gentlemen:
Under Guaranty Agreement signed by A&D Company, Ltd., and Zonic Corporation
dated September 30, 1996, Zonic has requested and A&D has provided Guaranty
to Nippon Credit Bank totaling U.S. $600,000 under the lien on the assets
of Zonic.
Zonic is seeking financial institutions in local instead of Nippon Credit
Bank. If Zonic can get enough financing from local financial institutions
to repay whole borrowing from N.C.B., then A&D shall release the lien on
the assets of Zonic.
Sincerely,
By: /s/ Hikaru Furukawa
___________________
President
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December 31, 1996
Zonic Corporation
50 West TechneCenter Drive,
Milford, Ohio 45150
U.S.A.
Gentlemen:
Under the credit agreement signed by A&D Company, Ltd., and Zonic
Corporation dated December 7, 1992, Zonic has requested and A&D has
provided loans balancing U.S. $480,000 and under other consideration U.S.
$90,000, making total amount of U.S. $570,000 and you have repaid U.S.
$570,000 today.
This will certify that we hereby forgive and waive all accrued, but unpaid
interest on the loans made my A&D to Zonic such interest as of December 31,
1996 amount of: US $118,578.
Sincerely,
A&D Company, Ltd.
By: /s/ Hikaru Furukawa
___________________
President
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December 31, 1996
Zonic Corporation
50 West TechneCenter Drive,
Milford, Ohio 45150
U.S.A.
Gentlemen:
On December 31, 1996, Zonic and A&D sign "ZETA Technology" Sale Agreement.
Subject to payment a royalty equal to 15% of the amount Zonic receives from
the customer for ZETA software, A&D hereby grants to Zonic to use "ZETA
Technology" defined in the article 1 definition of the said "ZETA
Technology" Sale Agreement for the securing sales of Zonic's 7000 series
products.
Within a month after end of every quarter Zonic shall pay to A&D total
royalty for the quarter with calculation details.
A&D has the right to check Zonic's relevant documents for the purpose of
calculation confirmation.
Sincerely,
A&D Company, Ltd.
By: /s/ Hikaru Furukawa
____________________
President
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December 31, 1996
Zonic Corporation
50 West TechneCenter Drive,
Milford, Ohio 45150
U.S.A.
Gentlemen:
On December 31, 1996, Zonic and A&D sign "ZETA Technology" Sale Agreement.
It is our understanding that any variants on ZETA Technology previously
employed by Zonic in conjunction with its machinery monitoring products
line and Medallion products line are not included in the agreement.
Sincerely,
A&D Company, Ltd.
By: /s/ Hikaru Furukawa
___________________
President
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December 31, 1996
Zonic Corporation
50 West TechneCenter Drive,
Milford, Ohio 45150
U.S.A.
Gentlemen:
On December 31, 1996, Zonic and A& D sign "ZETA Technology" Sale Agreement.
Article 3-3-b stipulated that A&D has the right to demand Zonic to send
their relevant engineers for up to 60 days and up to 10 accumulated visits.
However, it is A&D's intention that real purpose of the above mentioned
agreement is just as you know and A&D will not apply to the article 3-3-b.
Sincerely,
A&D Company, Ltd.
By: /s/ Hikaru Furukawa
___________________
President
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Confidential
December 31, 1996
Mr. H Furukawa
A&D Company, Ltd.
3-23-14 Higashi-Ikebukuro
Toshima-ku, Tokyo 170
Japan
This will confirm our agreement that the proceeds from the sale of "ZETA"
as provided in the "Zeta Technology Sale Agreement" between A&D Company,
Ltd. ("A&D") and Zonic Corporation ("ZONIC") dated December 31, 1996 (the
"Sale Agreement") and amounting to $3,500,000 will be applied to:
First: Payment of accounts payable to A&D as of November 30, 1996
Yen 56,711,430 equivalent to US$530,000.
Second: US$570,000 against loans under the Credit Agreement dated
December 7, 1992. (US$480,000 plus other US$90,000)
Third: US$2,400,000 partial payment against loans from Ashikaga Bank.
Therefore, ZONIC hereby proposes to A&D that the amount of proceeds of the
sale of ZETA and payment of accounts payable, and the loans under the
credit agreement, total amounting to US$1,100,000, shall be off-set at the
closing date (as defined in the sale agreement). The third payments of
US2,400,000 will be applied as follows; upon receipt of funds, US$900,000
will be repaid on March 31, 1997 and US$1,500,000 will be repaid on June
30, 1997 to Ashikaga Bank.
Sincerely,
By: /s/ James B. Webb
__________________
President and Chief Executive Officer
Zonic Corporation
JBW/mac
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