<PAGE>
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 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ARIEL CORPORATION
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[Ariel letterhead]
May 14, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
(the "Meeting") of Ariel Corporation (the "Company") to be held on June 12, 1997
at 10:00 a.m. at the Forrestal at Princeton Hotel and Conference Center, 100
College Road East, Princeton, New Jersey, 08540.
This year, two directors are nominated for election to the Board. At the
Meeting you will be asked to elect two directors to serve until the 2000 Annual
Meeting. You will also be asked to ratify the Company's selection of Coopers &
Lybrand as the Company's auditors for the 1997 fiscal year. You will also be
asked to consider a proposal to amend the Company's 1995 Stock Option Plan to
increase the number of shares that can be issued under the Plan from 600,000 to
1,200,000.
The accompanying Proxy Statement provides a detailed description of these
proposals. You are urged to read the accompanying materials so that you may be
informed about the business to come before the Meeting.
It is important that your shares be represented at the Meeting.
Accordingly, we urge you, whether or not you plan to attend the Meeting, to
complete, sign and date your proxy and return it to us promptly in the enclosed
envelope. If you attend the Meeting, you may vote in person, even if you have
previously mailed in your proxy.
We look forward to seeing you at the Meeting.
Sincerely,
ANTHONY M. AGNELLO
Chairman and
Chief Executive Officer
<PAGE>
ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
ARIEL CORPORATION
The Annual Meeting of Stockholders of Ariel Corporation (the "Company")
will be held at the Forrestal at Princeton Hotel and Conference Center,
Princeton, New Jersey 08540 on Thursday, June 12, 1997 at 10:00 A.M., Eastern
Standard Time (the "Annual Meeting"), for the following purposes:
1. To elect (2) directors of the Company to serve as Class III Directors
for a three-year term until the third succeeding Annual Meeting of Stockholders
and until their successors are duly elected and qualify.
2. To ratify the appointment of Coopers & Lybrand as independent public
accountants of the Company for the fiscal year ending December 31, 1997.
3. To amend the Company's 1995 Stock Option Plan adopted by the Board of
Directors on June 18, 1995 and approved by the stockholders at the Company's
1996 annual meeting.
4. To transact such other business as may come before the Annual Meeting or
any adjournment thereof.
Only stockholders of record at the close of business on May 8, 1997 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
Jeffrey M. Sasmor
Secretary
May 14, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE PROXY MAY BE REVOKED
IN WRITING PRIOR TO THE MEETING OR, IF YOU ATTEND THE MEETING, YOU MAY REVOKE
THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 12, 1997
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Ariel Corporation (the "Company") of proxies to be
voted at the Annual Meeting of Stockholders (the "Meeting") to be held on
Thursday, June 12, 1997, or any adjournment thereof. The purposes for which the
Meeting is to be held are set forth in the preceding Notice of Annual Meeting.
Shares represented by properly executed proxies, if received in time, will
be voted in accordance with any specifications made therein. If no direction is
given, a properly executed proxy will be voted in favor of the election of
directors, the ratification of independent public accountants and the amendment
of the 1995 Stock Option Plan. A proxy may be revoked by delivering a written
notice of revocation to the Company (Attention: Anthony M. Agnello, Chief
Executive Officer) at its principal executive office or in person at the
Meeting, or by a subsequently dated proxy, at any time prior to the voting
thereof. The principal executive office of the Company is located at the above
address.
This Proxy Statement and the enclosed form of proxy are first being mailed
on or about May 14, 1997 to holders of record of the Company's Common Stock,
$.01 value (the "Common Stock"), as of the close of business on May 8, 1997 (the
"Record Date"), which has been fixed as the record date for the determination of
the stockholders entitled to notice of, and to vote at, the Meeting. On the
Record Date, 9,169,325 shares of Common Stock, which is the only class entitled
to vote at the Meeting, were issued and outstanding. Each share of the Common
Stock is entitled to one vote. A majority of the votes cast at the Meeting shall
be necessary to elect a director, to approve the selection of the independent
auditors and to amend the 1995 Stock Option Plan.
1
<PAGE>
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Directors
Two directors will be elected at the Meeting. The Company's Board of
Directors is composed of seven directors. The Board of Directors are divided
into three classes and the members of each class are elected at the annual
meeting of the stockholders held in the year in which the terms for that class
expire, as follows: Messrs. Clayton, Ranalli and Horowitz are Class I Directors,
with terms expiring at the date of the Meeting in 1997; Messrs. Agnello and Paul
are Class II Directors, with terms expiring at the next Stockholders Meeting;
and Messrs. Sasmor and Perold are Class III Directors, with terms expiring at
the second succeeding Stockholders Meeting. The incumbent Board serves as a
nominating committee for new directors.
Proxies received in response to this solicitation will be voted for the
election of Robert J. Ranalli and Edward D. Horowitz unless otherwise specified
in the proxy. Both nominees are currently serving as directors and have
consented to continue to serve as directors if elected at the Meeting. Mr.
Clayton is not being nominated for re-election. The Board of Directors has no
reason to believe that any nominee will decline or be unable to serve as a
Director of the Company. However, if a nominee should not be available for
election as contemplated, the management proxy holders will vote for such lesser
number of directors as are available to serve or will vote for a substitute
designated by the current Board of Directors. In no event will proxies be voted
for more than two nominees or other than a classified basis.
The following table sets forth certain information, as of the Record Date,
concerning the nominees for election as directors of the Company. For
information as to the shares of the Common Stock held by each nominee, see the
section "Security Ownership of Certain Beneficial Holders and Management"
elsewhere in this Proxy Statement.
Nominee Age Present Position
- --------------------------- ------ ------------------
Robert J. Ranalli ...... 59 Director
Edward D. Horowitz ...... 49 Director
Robert J. Ranalli is a Director of the Company and a member of the Audit
Committee. Mr. Ranalli served as President for AT&T Consumer Services from 1984
until his retirement in 1994, and three year terms each as Chairman of the Board
for AT&T Universal Card Services and AT&T Transtech Services.
Edward D. Horowitz is a Director of the Company and a member of the Audit
Committee. Since 1989 Mr. Horowitz has been employed by Viacom International
Inc., most recently as Senior Vice President--Technology. He is also the
Chairman and Chief Executive Officer of Viacom Interactive Media, and is a
Director of Star Sight Telecast. Effective January, 1997 he became Executive
Vice President of Advanced Development of Citicorp.
Information About Other Directors and Executive Officers
The Company's other directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------- ------ --------------------------------------------
<S> <C> <C>
Anthony M. Agnello ...... 47 Chairman of the Board of Directors, Chief
Executive Officer and President
Jeffrey M. Sasmor ...... 46 Vice Chairman of the Board of Directors,
Vice President and Secretary
Brian A. Hoerl ......... 41 Chief Operating Officer And President
Gerard E. Dorsey ......... 50 Senior Vice President, Finance and Chief
Financial Officer
Harold W. Paul ......... 49 Director
Etienne A. Perold ...... 40 Director
</TABLE>
2
<PAGE>
Anthony M. Agnello co-founded the Company in 1982 and has served in
various capacities since inception. He has been Chairman of the Board of
Directors and Chief Executive Officer since 1988.
Jeffrey M. Sasmor has served as Vice President and Director of the Company
since 1987. He was appointed Secretary of the Company in June, 1996 and Vice
Chairman of the Board of Directors in February, 1997. His responsibilities
include new product development.
Brian A. Hoerl was appointed President and Chief Operating Officer
effective September, 1996. He was previously Vice President of Sales since
November, 1993. From December, 1991 through October, 1993 he was Northeast
District Sales Manager for Spectron Microsystems, Inc., a California based
manufacturer of DSP operating systems.
Gerard E. Dorsey joined the Company in April, 1995. Previously, he was
President, Chief Executive Officer and Chief Financial Officer of Information
Management Technologies Corporation, New York, New York, from December, 1990
until September, 1994. From August, 1987 until December, 1990 he was Corporate
Treasurer of Loral Corporation, New York, New York.
Harold W. Paul is a Director of the Company and a member of the
Compensation Committee. For more than five years Mr. Paul has been a partner at
Berger & Paul, a New York law firm specializing in securities matters.
Etienne A. Perold has been a Director of the Company since July 1995 and a
member of the Compensation Committee. For more than five years Mr. Perold has
been a management consultant specializing in the area of organizational
communication and leadership development.
Mark Clayton co-founded The Company in 1982 and served in various
capacities until his resignation as an officer in June, 1996. His term as a
director expires at the 1997 annual meeting.
Family Relationship
There are no family relationships among any director or executive officer
of the Company.
The Board of Directors recommends a FOR vote for each of the two nominees.
Executive Compensation
The following table summarizes the compensation earned by the Chief
Executive Officer and the four most highly compensated executive officers whose
compensation exceeded $100,000 for each of the last three years:
3
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------------------------- --------------------------------
Other Annual Number of All Other
Year Salary Bonus Compensation(3) Options Compensation(4)
------- ----------------- ---------- ------------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Anthony M. Agnello 1996 $202,408 $65,000 $ 19,669 -- $4,476
Chief Executive 1995 $160,000 -- 12,863 -- $4,620
Officer and Chairman 1994 $186,937(1) -- -- -- $4,497
Brian A. Hoerl 1996 $159,470 36,388 13,214 50,000 --
Chief Operating 1995 -- -- -- -- --
Officer and President 1994 -- -- -- -- --
Jeffrey Sasmor 1996 $154,166 30,000 $137,747(5) -- $3,578
Vice President 1995 $140,000 -- 15,775 -- $2,800
and Secretary 1994 $140,100(2) -- 12,182 -- $2,800
Gerard E. Dorsey 1996 $150,000 -- 20,020 -- 4,500
Chief Financial Officer 1995 -- -- -- -- --
and Senior Vice 1994 -- -- -- -- --
President
John Lynch 1996 $148,847 -- 12,092 -- 4,465
Vice President 1995 -- -- -- -- --
1994 -- -- -- -- --
</TABLE>
(1) Includes $11,937 of royalties earned and $15,000 of royalties paid in 1994.
(2) Includes $100 of royalties paid in 1994.
(3) Represents contributions made by the Company to the Company's medical and
life insurance plans, a Company provided automobile and club dues.
(4) Represents the Company's contributions to the Company's 401(k) plan and/or
profit sharing plan on behalf of its executive officers.
(5) Includes $114,184 of relocation expenses.
Options Granted in 1996
The following table sets forth certain information regarding stock options
granted to the five individuals named in the Summary Compensation Table. In
addition, in accordance with the Commission's rules, the table also shows a
hypothetical potential realizable value of such options based upon assumed rates
of annual compounded stock price appreciation of 5% and 10% from the date such
options were granted over the full term. The assumed rates of growth were
selected by the Commission for illustrative purposes only, and are not intended
to predict future stock prices which will depend upon market conditions and the
Company's future performance and prospects. Based upon the closing stock price
and the number of common shares outstanding at the end of 1996, an assumed
annual stock price appreciation of 10% would produce a corresponding aggregate
pretax gain over the full option term of approximately for the Company's common
stockholders.
<TABLE>
<CAPTION>
Number of
Securities Potential Realized Value at
Underlying % of Total Options Per Share Assumed Annual Rates of Stock
Options Granted to Employees Exercise Expiration Price Aprreciation for Term
Name Granted (1) In Fiscal Year Price (2) Date 5% 10%
- -------------------- -------------- ----------------------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brian Hoerl ...... 50,000 8.84% $7.125 9/17/06 $580,294 $924,021
</TABLE>
(1) All options were made pursuant to the 1995 Stock Option Plan
(2) Exercise price is the fair market value of the common stock at the date of
grant.
4
<PAGE>
AGGREGATE FISCAL YEAR-END OPTION VALUE
The following table sets forth certain information concerning stock option
exercises by the five individuals named in the Summary Compensation Table during
1996 including the aggregate value of gains on the date of exercise. In
addition, this table includes the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1996. Also reported are the
values for "in-the-money" options which represent the excess of the closing
market price of the Common Stock at December 31, 1996 over the exercise price of
the option.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money-Options
Shares Acquired Value At December 31, 1996 (#) At December 31, 1996($)
Name On Exercise Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------- ------------------ -------------- --------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Jeffrey Sasmor ...... 20,000 $204,750 37,875/37,875 $300,159/$300,159
Brian Hoerl ......... -0- -0- 37,500/112,500 $245,625/$503,125
Gerard Dorsey ...... 50,000 $350,000 25,000/25,000 $146,875/$146,875
John Lynch ......... 5,900 $ 41,763 23,525/70,575 $ 97,513/$292,538
</TABLE>
Employment Agreements
Anthony M. Agnello and Jeffrey Sasmor are each employed under three-year
employment agreements pursuant to which they are paid base annual salaries of
$202,408 and $154,166, respectively. Gerard E. Dorsey is also employed under a
three-year employment agreement, effective May 1, 1995, and pursuant to which he
is paid an annual base salary of $150,000 with an additional allowance of $7,200
per year and a grant of 100,000 non-qualified stock options from the 1994 Stock
Option Plan. Brian Hoerl is also employed under a three year employment
agreement pursuant to which he is paid an annual base salary of $190,000. Each
of these four employees receives an automobile allowance and each may also
receive annual bonuses at the sole discretion of the Board of Directors of the
Company, based upon the financial and operating performance of the Company.
Messrs. Agnello, Sasmor and Hoerl have executed non-competition and
non-solicitation agreements with the Company covering the two years following
termination of their employment pursuant to which they have agreed not to
solicit the customers or employees of the Company or become employed by or
otherwise associated with a competitor of the Company.
Committees and Board Meetings
On July 11, 1995, the Board of Directors authorized the establishment of a
Compensation Committee and appointed Harold Paul and Etienne Period, outside
directors as members of said sub-committee.
On October 19, 1995 the Board of Directors authorized the establishment of
an Audit and Finance Committee and appointed Robert Ranalli and Edward Horowitz,
outside directors as members of said committee.
During the fiscal year ended December 31, 1996 ("fiscal 1996"), there were
4 meetings of the Board of Directors. Messrs. Agnello, Sasmor, Paul and Perold
attended all four meetings. Messrs. Ranalli and Horowitz attended three
meetings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Report of Compensation Committee
The Compensation Committee of the Board is responsible for reviewing the
Company's executive compensation program and policies each year and determining
the compensation of the Company's executive officers. The Company's compensation
programs and policies are designed to provide incentives that account for value
delivered to the Company's stockholders and that attract and retain individuals
of outstanding ability in key positions. The Company recognizes individual
performance and the performance of the Company relative to the performance of
other companies of comparable size, complexity and quality, and performance that
supports both the short-term and long-term goals of the Company. The executive
compensation program includes elements which, taken together, constitute a
flexible and balanced method of establishing total compensation for senior
management.
5
<PAGE>
Compensation paid to the Company's executive officers for 1996 consisted
primarily of base salary, amounts deferred and matching contributions by the
Company under a long-term deferred compensation plan. Additionally, stock option
grants are made from time to time to executive officers. The Company believes
that stock-based compensation aligns executive interests with stockholder
interests by tying an executive's compensation to stockholder return, gives
executives a significant long-term interest in the Company's success, and helps
to retain executives. Therefore, the Company has utilized stock-based
compensations arrangements in its compensation packages for most of its
executive officers. In recommending and approving stock option grants for
executive officers, the Committee considers the executive's current and
anticipated contribution to the long-term performance of the Company and the
executive's overall compensation package, including the executive's current
option and stock holdings. Stock option grants are not necessarily made to each
executive officer during each year. In 1996 the Committee approved grants of
stock options to one of the executive officers as shown in the Summary
Compensation Table.
It is the opinion of the Committee that the aforementioned compensation
structures provide features which properly align the Company's executive
compensation with corporate performance and the interests of its stockholders
and which offer competitive compensation relevant to comparable opportunities in
the marketplace.
Respectfully submitted,
The Compensation Committee:
Harold W. Paul
Etienne A. Perold
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 furnished to the Company under
Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), with respect to fiscal 1996 the Company is not aware of
any director or officer of the Company who failed to file on a timely basis, as
disclosed in such forms, report required by Section 16(a) of the Exchange Act
during fiscal 1995 or prior years. As of December 31, 1995, the Company is not
aware of any beneficial owner of ten (10%) percent or more of the outstanding
shares of the Common Stock which are the only securities registered under
Section 12(b) of the Exchange Act.
6
<PAGE>
COMPARATIVE PERFORMANCE CHART
The graph set forth below compares the cumulative total return on the
Company's Common Stock for the period commencing January 25, 1995 and ending
December 31, 1996 against the cumulative total return on the NASDAQ Market Index
and a peer group comprised of certain public companies whose business activities
fall within the same standard industrial classification code as the Company.
This graph assumes an investment of $100 made on January 25, 1995 in the
Company's Common Stock and in each index assuming the reinvestment of any
dividends paid by the companies. The Common Stock price performance shown below
should not be viewed as indicative of future performance.
-------------------------
TOTAL SHAREHOLDER RETURNS
=========================
300|------------------------------------------------------------------|
| |
| * |
D | * # # #|
O | * *|
L 200|------------------------------------------------------------------|
L | |
A | & * #& & & & |
R | # * # |
S | & #&* &# |
100|&*#------*--------------------------------------------------------|
| # |
| |
| |
| |
0|-|-------|--------|-------|-------|------|-------|-------|--------|
25-Jan-95 Mar 95 Jun 95 Sep 95 Dec 95 Mar96 Jun 96 Sep 96 Dec 96
QUARTERS
*=ARIEL &=NASDAQ INDEX #=PEER GROUP
7
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date for each Director
and executive officer of the Company individually and all directors and
executive officers as a group and each stockholder known to be the beneficial
owner of more than 5% of the Company's outstanding common stock. Except as
otherwise indicated in the footnotes below, the Company believes that each of
the beneficial owners of the Common Stock listed in the table, based on
information furnished by such owner, has sole investment and voting power with
respect to such shares.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned Percentage
--------------------- ------------
<S> <C> <C>
Anthony M. Agnello ..................... 758,000 8.7%
2540 Route 130
Cranbury, NJ 08512
Mark Clayton ........................... 735,000 8.2%
Shore Road
New Windsor, NY
Jeffrey Sasmor ........................ 167,875(1) 1.9%
2540 Route 130
Cranbury, NJ 08512
Brian Hoerl ........................... 37,500(2) *
2540 Route 130
Cranbury, NJ 08512
Gerard E. Dorsey ........................ 25,000(3) *
2540 Route 130
Cranbury, NJ 08512
Robert J. Ranalli ..................... 50,000(4) *
2540 Route 130
Cranbury, NJ 08512
Edward D. Horowitz ..................... 50,000(4) *
2540 Route 130
Cranbury, NJ 085120
Etienne A. Perold ..................... 35,500(5) *
433 River Road
Highland Park, NJ 08904
Harold W. Paul ........................ 31,500(6) *
630 Third Avenue
New York, New York 10017
All Directors and Executive Officers as a
group (eight persons) .................. 1,890,375 21.4%
</TABLE>
- ------------
* Less than one percent.
(1) Includes 27,875 shares subject to presently exercisable options.
(2) Includes 37,500 shares subject to presently exercisable options.
(3) Includes 25,000 shares subject to presently exercisable options.
(4) All shares beneficially owned by Messrs. Ranalli and Horowitz reflect
options issued in exchange for their services as directors.
(5) Includes 35,500 shares subject to presently exercisable options.
(6) Includes 10,000 shares subject to presently exercisable options.
8
<PAGE>
PROPOSAL NO. 2: APPOINTMENT OF INDEPENDENT AUDITORS
On February 27, 1997, the Board of Directors selected Coopers and Lybrand
to continue as the Company's independent public accountants for the fiscal year
ending December 31, 1997.
Although neither federal nor state law requires the approval of the
auditors by stockholders, the Board believes that, in view of the importance of
financial statements to the stockholders, the selection of independent public
accountants should be passed on by stockholders. Accordingly, approval of the
following resolution will be requested at the Meeting:
"RESOLVED, that the Board of Directors appointment of Coopers and Lybrand
to serve as the Company's independent public accountants for fiscal year
ending December 31, 1997 be, and the same hereby is ratified and approved."
The Board of Directors recommends a vote FOR the foregoing resolution. In
the event that stockholders disapprove of the selection, the Board of Directors
will consider the selection of other auditors.
A representative of Coopers and Lybrand will be present at the Meeting. The
Company has been informed that the representative does not intend to make any
statement to the stockholders at the Meeting, but will be available to respond
to appropriate questions from stockholders.
PROPOSAL NO. 3:
AMENDMENT OF THE COMPANY'S 1995 STOCK OPTION PLAN
In order to provide the Company the ability to issue options, the Board
adopted the 1995 Stock Option Plan (the "1995 Plan") effective January 1, 1996,
which was approved by the Company's stockholders at the annual meeting held on
May 14, 1996, pursuant to which the Company may issue options to acquire up to
600,000 shares of its Common Stock. The 1995 Plan is intended to encourage stock
ownership by officers, employees, independent contractors and advisors of the
Company and thereby enhance their proprietary interest in the Company.
On October 20, 1996, the Board of Directors adopted a resolution, subject
to shareholder approval, to amend the 1995 Stock Option Plan to increase the
number of shares issuable thereunder from 600,000 to 1,200,000. The Board of
Directors believes that stock options are valuable tools for the recruitment,
retention and motivation of qualified employees, including officers and other
persons who can contribute materially to the Company's success. As of April 20,
1997, options to purchase 1,872,575 shares were outstanding under the 1995 Stock
Option Plan and predecessor plans. The Board of Directors believes that equity
ownership by management and other employees has contributed to the Company's
growth over the past five years. The Company has also significantly increased
the number of employees over the past year. The Board believes that it is
important to have additional shares available under the 1995 Stock Option Plan
to provide adequate incentives to the Company's growing workforce and to
continue aligning the interests of management with those of the company's
stockholders.A summary of the significant provisions of the 1995 Stock Option
Plan, as amended from 600,000 shares to 1,200,000 shares is set forth below.
Administration of the 1995 Plan
The 1995 Plan is administered by a committee (the "Committee") consisting
of two or more persons who are appointed by, and serve at the pleasure of, the
Board and each of whom is a "disinterested person" as that term is defined in
Rule 16b of the General Rules and Regulations under the Securities Exchange Act
of 1934. Subject to the express provisions of the 1995 Plan, the Committee has
the sole discretion to determine to whom among those eligible, and the time or
times at which, options will be granted, the number of shares to be subject to
each option and the manner in and price at which options may be exercised. In
making such determinations, the Committee may take into account the nature and
period of service of eligible employees, their level
9
<PAGE>
of compensation, their past, present and potential contributions to the Company
and such other factors as the Committee in its discretion deems relevant.
Options are designated at the time of grant as either "Incentive Stock Options"
intended to qualify under Section 422 of the Internal Revenue Code (the "Code")
or "non-qualified options" which do not so qualify.
The Committee may amend, suspend or terminate the 1995 Plan at any time,
except that no amendment may be adopted without the approval of shareholders
which would (i) increase the maximum number of shares which may be issued
pursuant to the exercise of options granted under the Plan; (ii) change the
eligibility requirements for participation in the 1995 Plan; (iii) permit the
grant of any incentive stock option under the 1995 Plan with an option price of
less than 10% of the fair market value of the shares at the time such incentive
stock option is granted; or (iv) extend the term of any incentive stock options
or the period during which any incentive stock options may be granted under the
1995 Plan.
Unless the 1995 Plan is terminated earlier by the Board, the 1995 Plan will
terminate on December 31, 2005.
Shares Subject to the Plan
No more than 1,200,000 shares of Common Stock may be issued pursuant to the
exercise of options granted under the 1995 Plan. If any option expires or
terminates for any reason, without having been exercised in full, the
unpurchased shares subject to such option will be available again for purposes
of the 1995 Plan.
Under certain circumstances involving a change in the number of shares of
Common Stock without the receipt by the Company of any consideration therefor,
such as a stock split, stock consolidation or payment of a stock dividend, the
class and aggregate number of shares of Common Stock in respect of which options
may be granted under the 1995 Plan, the class and number of shares subject to
each outstanding option and the option price per share will be proportionately
adjusted. In addition, if the Company is involved in a merger, consolidation,
dissolution or liquidation, the options granted under the 1995 Plan will be
adjusted or, under certain conditions, will terminate, subject to the right of
the option holder to exercise his option or a comparable option substituted at
the discretion of the Company prior to such event. An option may not be
transferred other than by will or by the laws of descent and distribution, and
during the lifetime of the option holder may be exercised only by such holder.
Participation
The Committee is authorized to grant incentive stock options from time to
time to such employees of the Company as the Committee, in its sole discretion,
may determine. Employees of the Company, advisors and independent contractors
providing services to the Company are eligible to receive non-qualified options
under the 1995 Plan.
Option Price
The exercise price of each option is determined by the Committee, but may
not, in the case of incentive stock options, be less than 100% of the fair
market value of the shares of Common Stock covered by the option on the date the
option is granted. In the case of non-qualified options, the option price per
share may be less than, equal to or greater than the fair market value of the
shares of Common Stock covered by the option on the date the option is granted.
If an incentive stock option is to be granted to an employee who owns over 10%
of the total combined voting power of all classes of the Company's stock, then
the exercise price may not be less than 110% of the fair market value of the
Common Stock covered by the incentive stock option on the date the option is
granted.
Terms of Options
The Committee has the discretion to fix the term of each option granted
under the 1995 Plan, except past the maximum length of term of each option is 10
years, subject to earlier termination as provided in the Plan.
Required Vote
The affirmative vote of holders of a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting is required to approve the
1995 Plan pursuant to the following resolution:
10
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"RESOLVED, that the Company's 1995 Stock Option Plan be amended to
provide for the issuance of up to 1,200,000 shares in the aggregate.
The Board of Directors recommends that you vote FOR the amendment of the
1995 Plan.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any matters to be presented to the Meeting other than the first four
proposals set forth in the attached Notice of Annual Meeting. If any other
matters properly come before the Meeting, it is intended that the holders of the
management proxies will vote thereon in their discretion.
MISCELLANEOUS
The solicitation of proxies on the enclosed form of proxy is made by and on
behalf of the Board of Directors of the Company and the cost of this
solicitation is being paid the Company. In addition to the use of the mails,
proxies may be solicited personally, or by telephone or telegraph, by the
officers or directors of the Company.
Stockholder proposals for inclusion in the Company's proxy statement for
the 1998 Annual Meeting of Stockholders must be received no later than a
reasonable time before the solicitation is made.
A copy of the Annual Report to Stockholders on Form 10-K for the fiscal
year ended December 31, 1996 is being mailed to all stockholders together with
this Notice of Annual Meeting of Stockholders, Proxy Statement and Proxy to each
stockholder of record on May 14, 1997.
By Order of the Board of Directors
Jeffrey M. Sasmor
Secretary
May 14, 1997
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ARIEL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 12, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony M. Agnello and Jeffrey M. Sasmor
and each of them, Proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to vote the Annual Meeting of
Stockholders of Ariel Corporation (the "Company") on Tuesday, June 12, 1997 at
the Forrestal at Princeton Hotel and Conference Center, Princeton, New Jersey or
at any adjournment or adjournments thereof, according to the number of votes
that the undersigned would be entitled to vote is personally present, upon the
following matters:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below). listed below.
Robert J. Ranalli, Edward D. Horowitz
2. Proposal to ratify the appointment of Coopers & Lybrand LLP as Independent
Public Accountants for the Company for the Fiscal Year ending December 31,
1997.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to amend the Company's 1995 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on reverse side)
- -------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES AND PROPOSALS
LISTED ABOVE.
Date: ------------------------, 1997
------------------------------------
Signature
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Signature if held jointly
Please sign exactly as name appears
hereon. When shares are held by joint
trusts, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign the full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Please mark, sign, date and return this proxy card
promptly using the enclosed envelope.
