ZONIC CORPORATION
Park 50 TechneCenter, 50 West TechneCenter Drive
Milford, Ohio 45150-9777
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 9, 2000
To the Shareholders of ZONIC CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Zonic Corporation, an Ohio corporation, will be held at the RSVP
Conference Center, 453 Wards Corner Road, Cincinnati, Ohio 45140, on August 9,
2000 at 2:00 p.m., Eastern Daylight Savings Time, for the purpose of considering
and acting upon:
1. A proposal to fix the number of directors for the ensuing year at three in
number.
2. A proposal to elect the Board of Directors for the next year.
3. Such other business as may properly be brought before the Annual Meeting or
any adjournment(s) thereof.
The Board of Directors has fixed the close of business on June 12, 2000 as the
record date for the determination of the shareholders entitled to receive notice
of, and to vote at, the meeting and any adjournment(s) thereof, notwithstanding
any subsequent transfers of stock.
Your attention is called to the accompanying Proxy and Proxy Statement submitted
with this Notice.
A copy of the Company's 2000 Annual Report and Form 10-K Report is being
forwarded to you herewith, but it is not deemed to be part of the official proxy
soliciting material. If any shareholder fails to receive a copy of same, one may
be obtained by writing to the Treasurer of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
Dale R. Nieman, Secretary
Milford, Ohio
June 19, 2000
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER YOU EXPECT
TO ATTEND OR NOT, PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE STAMPED ENVELOPE PROVIDED. IN THE EVENT YOU ATTEND THE MEETING,
YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
2
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement and accompanying proxy are furnished in connection with the
solicitation of proxies by Zonic Corporation (hereinafter referred to as
"Company"), for the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on August 9, 2000. Such solicitation is being made by mail,
although the Company may also use its officers and regular employees to solicit
proxies from shareholders personally, or by telephone, telegraph or letter. The
costs of this solicitation will be borne by the Company. The Company may request
nominees and brokers to solicit their principals and customers for their
proxies, and in such event the Company may reimburse such nominees and brokers
for their reasonable out-of-pocket expenses.
All shares represented by valid proxies received pursuant to this solicitation,
and not revoked, will be voted at the Annual Meeting, and where a specification
is made on the proxy, such shares will be voted in accordance with such
specification. Unless contrary instructions are given, shares will be voted in
favor of the proposals set forth in the accompanying Notice of Meeting and for
the nominees for Directors set forth herein and in the discretion of the
appointed proxies upon such other matters as may properly come before the
meeting. Any proxy may be revoked by the shareholder at any time prior to the
voting thereof, by giving written notice to the Company prior to the Annual
Meeting or by giving oral notice to the Company at the Annual Meeting.
The Board of Directors has fixed the close of business on June 12, 2000 as the
record date (the "Record Date") for the determination of the shareholders
entitled to receive notice of, and to vote at, the Annual Meeting and at any
adjournment(s) thereof, notwithstanding any subsequent transfers of stock.
OUTSTANDING VOTING SECURITIES
On June 12, 2000 there were 3,044,136 outstanding shares of the Company's common
stock without par value ("Common Stock") each of which is entitled to one vote
on each matter to be considered at the Annual Meeting. The Company has no other
class of securities outstanding which has voting rights. The presence either in
person or by proxy of the persons entitled to vote a majority of the Common
Stock is necessary for a quorum for the transaction of business at the Annual
Meeting.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock (its only outstanding voting securities on June
12, 2000) (i) by each person who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) by each Director that owns Common Stock,
(iii) by the executive officer named in the Summary Compensation Table in this
Proxy Statement and (iv) by all Directors and Officers of the Company as a
group.
<PAGE>
9
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount & Nature of Percent of Class (1) Percent of
Owner or Identity of Group Beneficial Ownership Common Stock Only (2)
------------------------------ ---------------------- -------------------- ---------------------
(Including exercisable stock options or
options which will become exercisable
within 60 days of the record date and
conversion of preferred stock to common shares.)
================================== ================================================ =======================
<S> <C> <C> <C>
A&D Company, Ltd. 3,069,560 (3) 58.5% (3) 28.6%
Daihatsu-Nissay
Ikebukuro Bldg.
3-23-14 Higashi-Ikebukuro
Toshima-Ku, Tokyo 170, Japan
Shoiche Sekine 3,069,560 (4) 58.5% (4) 28.6%
c/o A&D Company, Ltd.
Daihatsu-Nissay
Ikebukuro Bldg.
3-23-14 Higashi-Ikebukuro
Toshima-Ku, Tokyo 170, Japan
Gerald J. Zobrist 685,030 (5) 20.8% (5) 14.2%
2900 Eight Mile Road
Cincinnati, Ohio 45244
CapTec Corporation 395,530 (6) 13.0% (6) 13.0%
2900 Eight Mile Road
Cincinnati, Ohio 45144
James B. Webb 156,900 (7) 4.9% (7) .6%
All Directors and Executive 4,055,390 (8) 70.6% (8) 44.4%
Officiers as a Group (4 in number)
</TABLE>
-----------------------------------------------------------------------------
(1) Percentages are based on an aggregate of 3,044,136 shares of Common Stock
outstanding as of the Record Date. Shares of Common Stock subject to options
exercisable within 60 days of the Record Date under the Company's stock option
plans and shares issuable upon conversion of Class A Non-Voting, Redeemable
Convertible Preferred Stock (Class A Preferred Stock) are deemed outstanding for
computing the percentage of class of the person holding such option but are not
deemed outstanding for computing the percentage of class for any other person.
See footnotes (3), (5) and (7) below.
(2) Percentages are based on an aggregate of 3,044,136 shares of Common Stock
outstanding as of the Record Date and exclude shares of Common Stock subject to
options exercisable within 60 days of the Record Date under the Company's stock
option plans and preferred stock convertible into Common Stock.
(3) Includes a stock option granted to A&D Company, Ltd., of Tokyo, Japan
("A&D") for 1,000,000 shares at an exercise price of $2.00 per share, as
consideration for making loans, and guaranteeing bank loans, to the Company. The
option is currently exercisable and expires on March 20, 2005. Also includes
1,200,000 shares issuable upon conversion of 12,000 shares of Class A Preferred
Stock which are currently convertible. Does not include 6,000 shares of Class B
Non-Convertible, Redeemable Non-Voting Preferred Stock. Percentage is based on
3,044,136 presently outstanding shares plus the 1,000,000 shares subject to
options and the 1,200,000 shares subject to conversion.
(4) These shares represent the shares owned by A&D. Mr. Sekine, internal auditor
and a minority owner of A&D, and a director and executive officer of the
Company, does not individually own any shares of the Company and disclaims
beneficial ownership of the shares held by A&D.
(5) Includes 395,530 shares held by CapTec Corporation, a company of which Mr.
Zobrist is the president and director. 252,500 shares subject to currently
exercisable options and 37,000 shares held in trust for his children. Percentage
is based on 3,044,136 shares presently outstanding shares plus the 252,500
shares subject to options.
(6) Excludes shares deemed to be beneficially owned by Mr. Zobrist and his
spouse.
(7) Includes 15,000 shares held by Mr. Webb's wife and 140,000 shares subject to
presently exercisable options. Percentage is based on 3,044,136 presently
outstanding shares plus the 140,000 shares subject to options.
(8) Includes 35,800 shares owned of record and beneficially, 1,317,090 shares
held by wives, corporations, minor children or held in trust for minor children.
1,502,500 options which are presently exercisable or exercisable within 60 days
of the Record Date held by four officers and directors and A&D, and 1,200,000
shares issuable upon conversion of 12,000 shares of Class A Preferred Stock,
which are currently convertible. Percentage is based on presently outstanding
shares of 3,044,136 plus 1,502,500 shares held subject to options, plus
1,200,000 shares subject to conversion.
None of the above persons have shared voting or investment powers with regard to
their shares of Common Stock.
FIXING NUMBER OF DIRECTORS
At the Annual Meeting, shareholders will vote on a proposal to fix the number of
Directors of the Company for the ensuing year at three (3) in number. The
affirmative vote of the holders of a majority of the shares of Common Stock
which are represented at the meeting in person or by proxy and entitled to vote
will be necessary to approve this proposal. Management recommends that
shareholders vote FOR the foregoing resolution.
ELECTION OF DIRECTORS
At the meeting, Directors of the Company are to be elected to serve for the
ensuing year and until their respective successors are elected and qualified.
The existing three members of the Board of Directors will be nominees for
Directors (see below). The shares represented by the enclosed Proxy will be
voted for the election as Directors of the three nominees named below unless
otherwise indicated on the Proxy. If any nominee becomes unavailable for any
reason or if a vacancy should occur before the election (which events are not
anticipated), the shares represented by the enclosed Proxy may be voted for such
other persons as may be determined by the holders of such proxies.
<PAGE>
Information Concerning Nominees
The information appearing in the following table with respect to age and
principal occupation has been furnished to the Company by the nominees.
Name Age Business Experience for Past Five Years
James B. Webb 43 President and Chief Executive Officer of the Company
since December 31, 1995. Treasurer of the Company since
September 1994. Secretary of the Company from September
1993 to February 1996. Senior Vice President of the
Company from July 1989 to February 1996. Director of the
Company since 1985.
Shoiche Sekine 68 Director of the Company since 1988. Director of A&D, a
manufacturer of electronic measurement instrumentation
from 1985 until June 1997. Internal auditor of A&D
since June 1997. Executive Vice-President of the Company
since December, 1992. Secretary of the Company from
February 1996 to February 1998.
Gerald J. Zobrist 57 President and Owner of CapTec Corporation (Acquisition
and Investment Company). Director of the Company since
1970. President and Chief Executive Officer of the
Company from June 1970 until December 31, 1995.
None of the Directors are related.
The Board of Directors does not have standing audit, nominating or compensation
committees or committees performing similar functions.
During the fiscal year ended March 31, 2000, four meetings of the Board of
Directors were held. All existing Directors attended each meeting during the
year, except Mr. Sekine was present for two of the meetings by conference
telephone call from his home in Tokyo, Japan.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
Name Age Business Experience for Past Five Years
James B. Webb 43 President and Chief Executive Officer of the Company
since December 31, 1995. Treasurer of the Company since
September 1994. Secretary of the Company from September
1993 to February 1996. Senior Vice President of the
Company from July 1989 to February 1996. Director of the
Company since 1985.
Shoiche Sekine 68 Executive Vice President of the Company since
December 1992 and Secretary of the Company from February
1996 to February 1998. Director of the Company since
1988.
Dale R. Nieman 53 Vice President of the Company since 1985; Assistant
Treasurer since February, 1996 and Secretary since
February 1998.
EXECUTIVE COMPENSATION
Summary
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and any executive officer of the Company whose compensation exceeded
$100,000 during the last fiscal year (the "Named Executive Officer").
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name and Principal Year Salary Bonus Securities Underlying All Other Compensation
Position ($) (1) ($) Options ($) (2)
<S> <C> <C> <C> <C> <C>
James B. Webb, President 2000 120,000 2,330 140,000 1,860
1999 115,834 8,867 140,000(3) 2,896
1998 110,000 -0- -0- 1,650
</TABLE>
(1) Includes amounts deferred at the direction of the executive officer pursuant
to the Company's 401(k) Retirement Plan.
(2) Amounts shown represent the Company's contribution for the executive officer
to the Company's 401(k) Retirement Plan.
(3) Represents options which were repriced in fiscal 1999. See "Executive
Compensation" -- Ten Year Option Repricings" and "Executive Compensation -
Report of the Board on Executive Compensation."
Stock Option Grants in Fiscal 2000
----------------------------------
No options were granted to the Named Executive Officer during the year ended
March 31, 2000.
Aggregated Option Exercises in Fiscal 2000 and Fiscal Year End Option Values
----------------------------------------------------------------------------
No options were exercised by the Named Executive Officer during the 2000 fiscal
year. The following table sets forth certain information concerning the number
and value of stock options at March 31, 2000, held by the Named Executive
Officer.
<TABLE>
<CAPTION>
Name Shares Acquired Value Number of Options at Value of Options at
on Exercise Realized March 31,2000 March 31, 2000
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
James B. Webb 0 0 140,000 0 $24,150 $0
</TABLE>
Other Compensation
------------------
Directors of the Company receive no compensation for their services as
Directors.
Insider Participation in Compensation Determination
---------------------------------------------------
The Board of Directors is responsible for executive compensation decisions. Mr.
Webb serves on the Board and is the President and Chief Executive Officer of the
Company. Mr. Sekine is a director and the Executive Vice President of the
Company. He is also a minority owner and internal auditor of A&D, a company
which, as of the Record Date, could own 58.5% of the Company upon exercising its
outstanding stock option and converting its Class A Preferred Stock. The Company
has in place a policy that no director shall participate in determinations of
his own compensation. See "Related Party Transactions."
Financial Performance
---------------------
The graph below summarizes the cumulative return experienced by the Company's
shareholders over the fiscal years ended 1996 through 2000, compared to the
NASDAQ Market Index U.S. and the S&P High-tech Composite Index.
<PAGE>
STOCK PERFORMANCE GRAPH
<TABLE>
<CAPTION>
Cumulative Total Return
<S> <C> <C> <C> <C> <C> <C>
3/95 3/96 3/97 3/98 3/99 3/00
Zonic Corporation 100 90 86 31 47 102
NASDAQ Stock Market (U.S.) 100 136 151 229 309 574
S & P Technology Sector 100 135 183 276 442 783
</TABLE>
*$100 invested on 3/31/95 in stock or index-including reinvestment of dividends.
Fiscal year ending March 31
RELATED PARTY TRANSACTIONS
In February 1988, the Company became affiliated with A&D, a Japanese instrument
manufacturing company. As part of this relationship, A&D acquired a 28%
ownership interest in the Company. The Company had entered into various joint
product development arrangements, marketing arrangements and a credit agreement
with A&D dated December 7, 1992 (the "Credit Agreement") pursuant to which the
Company borrowed money from A&D, most of which have been terminated in the past
few years.
The Company is the exclusive distributor in the Western Hemisphere of A&D WCA
products and purchases components from A&D used principally in the production of
its WCA product line. Such purchases totaled $536 during fiscal 2000.
Pursuant to the terms of a Subscription Agreement between the Company and A&D,
dated January 30, 1998, A&D purchased 12,000 shares of Class A Non-Voting,
Redeemable Convertible Preferred Stock of the Company at a price of $100 per
share which is convertible on or after January 30, 1999 at the rate of one Class
A Preferred Share for 100 shares of common stock ("Class A Preferred Stock").
Proceeds of $1,200,000 from this sale were used to repay a bank loan of
$1,078,000 and related accrued interest of $26,757 and to settle a portion of
the loans payable to A&D of $95,243. In addition, A&D purchased 6,000 shares of
Class B Non-Convertible, Redeemable, Non-Voting Preferred Stock of the Company
at a price of $200 per share with an annual dividend equal to 20% of the
Company's annual after-tax earnings excluding non-recurring earnings ("Class B
Preferred Stock"). Proceeds of $1,200,000 from the sale of Class B Preferred
Stock were used to repay a short-term bank loan of $600,000 which A&D
guaranteed, the balance of loans payable to A&D totaling $538,203 and related
accrued interest of $61,797. In the event of liquidation or dissolution of the
Company, the Class A Preferred Stock is entitled to receive $100.00 per share,
and the Class B Preferred Stock $200.00 per share, before holders of common
stock receive any amounts. Both classes of Preferred Stock may be redeemed by
the Company upon thirty days prior notice, the Class A shares at $100.00 per
share and the Class B shares at $200.00 per share. Pursuant to the Subscription
Agreement, the Credit Agreement was terminated and A&D released its security
interest in the Company's assets.
Except as otherwise noted, with respect to each of the foregoing related party
transactions, it is the opinion of management of the Company that said
transactions were upon terms as favorable to the Company as those which could
have been secured from non-affiliated parties.
Report of the Board on Executive Compensation
---------------------------------------------
The Company's Board of Directors does not have a Compensation Committee but
rather the entire Board establishes policies and procedures, as well as amounts
of compensation, for all executive officers of the Company. The Company's
compensation package for its executive officers consists of one or more of the
following: base salary, annual performance based bonus and stock option grants.
In setting compensation levels the Board considers various factors including
salary levels of similarly situated executive officers at comparable companies,
the achievement of performance targets taking into consideration competitive and
economic conditions, and the Company's current adverse financial condition.
The Board reviewed compensation for the Company's executive officers and kept
their salaries at their current level. James B. Webb's salary remained at
$120,000. To provide an incentive for executive officers, the Company
implemented a bonus for its top executives for fiscal 2000. James B. Webb, the
President, CEO and Treasurer of the Company received a bonus equal to 5% of the
Company's net after tax profit in fiscal 2000, excluding extraordinary gains or
losses, but before preferred stock dividends and stock option repricing charges.
Board of Directors
Gerald J. Zobrist James B. Webb Shoiche Sekine
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Common Stock, to file with the Securities and Exchange Commission initial
reports of stock ownership and reports of changes in stock ownership. To the
Company's knowledge, any such reports required to be filed were filed in a
timely manner.
OTHER MATTERS
Effective December 17, 1998, the Board of Directors of the Company dismissed its
former auditor and selected Clark, Schaefer, Hackett & Co. ("Clark"), as the
sole auditor for the Company beginning the fiscal year ending March 31, 1999.
Since November 11, 1991, Deloitte & Touche LLP ("Deloitte"), acted as the
Company's auditor. The decision to change auditors was recommended by the Board
of Directors based upon management's belief that the Company could substantially
reduce its accounting fees by selecting a smaller regional rather than national
accounting firm.
During the past two years, Clark and Deloitte's reports on the financial
statements of the Company have not contained an adverse opinion or a disclaimer
of opinion, and were not qualified or modified as to the uncertainty, audit
scope, or accounting principles, except that their reports have expressed
uncertainty as to the Company's ability to continue as a going concern. The
Company has had no disagreements with Deloitte or Clark on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures which, if not resolved to Deloitte's or Clark's
satisfaction, would have caused them to make a reference to the subject matter
of the disagreement in connection with their audit reports.
A representative of Clark will be present at the Annual Meeting and shall have
the opportunity to make a statement if he desires to do so, and the
representative will be available to respond to appropriate questions from
shareholders.
Management does not know of any other matters which may come before the Annual
Meeting. However, if any other matters are properly presented to the meeting, or
any adjournment thereof, it is the intention of the persons named in the
accompanying Proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
SHAREHOLDER PROPOSALS
Proposals intended to be presented by shareholders at the next annual meeting of
the Company must be received by the Company, to be considered for inclusion in
any proxy material, not later than April 11, 2001, at the Company's offices at
Park 50 TechneCenter , 50 West TechneCenter Drive, Milford, Ohio 45150-9777.
BY THE BOARD OF DIRECTORS
James B. Webb, President
Milford, Ohio
June 19, 2000
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ZONIC CORPORATION
Proxy for Annual Meeting of Shareholders, August 9, 2000
The undersigned hereby appoints John H. Reifschneider and/or Dale R. Nieman
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Zonic Corporation held of record by the undersigned on June 12, 2000 at
the annual meeting of shareholders to be held on August 9, 2000 or any
adjournment thereof.
1. PROPOSAL TO FIX THE NUMBER OF DIRECTORS AT THREE IN NUMBER
______ For ______ Against _______ Abstain
2. ELECTION OF DIRECTORS
INSTRUCTIONS: Indicate by "X", For, Against, or Abstain for each nominee.
S. Sekine ______ For ______ Against _______ Abstain
J. Webb ______ For ______ Against _______ Abstain
G. Zobrist ______ For ______ Against _______ Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
ZONIC CORPORATION
PARK 50 TECHNECENTER, 50 WEST TECHNECENTER DRIVE
MILFORD, OHIO 45150
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, AUGUST 9, 2000
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, the proxy will be voted
for Proposals 1 and 2.
--------------------------------------------------------------
Signature
--------------------------------------------------------------
Signature if held jointly
Dated: __________________________, 2000
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership or limited liability company, please sign in partnership or LLC name
by authorized person.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
