<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 CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
May 18, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders (the "Meeting") of Ariel Corporation (the "Company") to be held on
June 24, 1998 at 10:00 a.m. at the Forrestal at Princeton Hotel and Conference
Center, 100 College Road East, Princeton, New Jersey 08540.
This year three directors are nominated for election to the Board. At the
Meeting you will be asked to elect three directors to serve until the 2001
Annual Meeting. You will also be asked to ratify the Company's selection of
Coopers & Lybrand, LLP as the Company's auditors for the 1998 fiscal year and
to consider proposals to amend the company's 1995 Stock Option Plan to increase
the number of shares that can be issued under the Plan from 1,200,000 to
1,700,000 and to amend the Company's 1996 Directors Stock Option Plan to
increase the number of shares that can be issued under the Plan from 250,000 to
450,000.
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, 100
College Road East, Princeton, New Jersey 08540 on Thursday, June 24, 1998 at
10:00 A.M., Eastern Standard Time (the "Annual Meeting"), for the following
purposes:
1. To elect three (3) 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, LLP as independent
public accountants of the Company for the fiscal year ending December 31, 1998.
3. To amend the Company's 1995 Stock Option Plan.
4. To amend the Company's 1996 Directors Stock Option Plan.
5. 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 15, 1998 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
HAROLD W. PAUL
Secretary
May 18, 1998
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 24, 1998
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 24, 1998, 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, the amendment of
both the 1995 Stock Option Plan and 1996 Directors Stock Option Plan and the
ratification of the Employee Stock Purchase 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 18, 1998 to holders of record of the Company's Common Stock,
$.0l value (the "Common Stock"), as of the close of business on May 15, 1998
(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, 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 and 1996 Directors
Stock Option Plan.
ANNUAL REPORT
A copy of the Ariel Corporation Annual Report, including financial
statements for the year ended December 31, 1997, on which no action will be
asked by the Board of Directors, is enclosed herewith. It is not to be regarded
as proxy solicitation material.
1
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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, ha sole investment and voting power with
respect to such shares.
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned Percentage
---------------- ------------------ ----------
<S> <C> <C>
Anthony M. Agnello ........................................... 738,500 7.3%
2540 Route 130
Cranbury, NJ 08512
Brian Hoerl .................................................. 50,000(2) *
2540 Route 130
Cranbury, NJ 08512
Gerard E. Dorsey ............................................. 50,000(3) *
2540 Route 130
Cranbury, NJ 08512
Robert J. Ranalli ............................................ 75,000(4) *
2540 Route 130
Cranbury, NJ 08512
Edward D. Horowitz ........................................... 75,000(4) *
2540 Route 130
Cranbury, NJ 08512
Etienne A. Perold ............................................ 89,000(5) *
2540 Route 130
Cranbury, NJ 08512
Harold Paul .................................................. 21,000(6) *
630 Third Ave.
New York, NY 10017
Theodore J. Coburn ........................................... 72,500(7) *
2540 Route 130
Cranbury, NJ 08512
All Officers and Directors as a group (eight people) ......... 1,171,500 11.5%
</TABLE>
- ------------
* Less than one percent.
(1) Includes 37,500 shares subject to presently exercisable options.
(2) Includes 50,000 shares presently subject exercisable options.
(3) Includes 50,000 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 89,000 shares subject to presently exercisable options.
(6) Includes 17,500 shares subject to presently exercisable options.
(7) Includes 72,500 shares subject to presently exercisable options.
2
<PAGE>
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Directors
Three directors will be elected at the Meeting. The Company's Board of
Directors is composed of six 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. Agnello, Paul and Coburn are Class I Directors, with terms
expiring at the date of the Meeting in 1998; Messrs. Ranalli and Horowitz are
Class II Directors, with terms expiring at the next Stockholders Meeting; and
Messr. Perold is the Class III Director, with his term 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 Anthony Agnello, Harold Paul and Theodore Coburn unless otherwise
specified in the proxy. All nominees are currently serving as directors and
have consented to continue to serve as directors if elected at the Meeting. 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 three 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
- ------- --- ----------------
Anthony M. Agnello .......... 48 Chairman of the Board of Directors and
Chief Executive Officer
Harold W. Paul .............. 50 Secretary and Director
Theodore J. Coburn .......... 43 Director
Anthony M. Agnello co-founded the Company in 1982 and has served as
Chairman of the Board and Chief Executive Officer. He also held the title of
President from 1988 until September 16, 1996.
Harold W. Paul has been a Director of the Company since June 1995 and was
appointed Secretary in March 1998. For more than five years he has been a
partner at Berger & Paul, LLP, a New York law firm specializing in securities
matters.
Theodore J. Coburn was appointed a Director of the Company and a member of
the Compensation and Audit Committees of the Board of Directors in March 1998.
Mr. Coburn is a co-founder and principal in Brown, Coburn & Co., an investment
banking service company founded in 1994. He was a managing director of Merrill
Lynch's Capital Markets Group from 1982 to 1986 and head of the Global Equity
Transactions Group for Prudential Securities from 1986 to 1990. Mr. Coburn is a
member of the Board of Directors of Nicholas Applegate Fund, Inc., the Emerging
German Fund, Moovies Inc. and Measurement Specialties, Inc.
3
<PAGE>
Information About Other Directors and Executive Officers
The Company's other directors and executive officers are as follows:
Name Age Position
- ---- --- --------
Brian A. Hoerl .............. 42 Chief Operating Officer And President
Gerard E. Dorsey ............ 51 Senior Vice President, Finance and Chief
Financial Officer
Edward D. Horowitz .......... 50 Director
Etienne A. Perold ........... 41 Director
Robert J. Ranalli ........... 60 Director
Brian A. Hoerl was appointed President and Chief Operating Officer
effective September 16, 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. Mr. Dorsey resigned his
position as Senior Vice President -- Finance and Chief Financial Officer
effective May 15, 1998.
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.
Etienne A. Perold has been a Director of the Company since July 1995 and a
member of the Compensation Committee from August 1995 to March 1998. For more
than five years Mr. Perold has been a management consultant specializing in the
area of organizational communication and leadership development.
Robert J. Ranalli is a Director of the Company and a member of the Audit
Committee since August 1995 and a member of the Compensation Committee since
March 1998. 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.
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 three
nominees.
4
<PAGE>
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:
SUMMARY COMPENSATION SCHEDULE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------- --------------------------------------------------
Other Annual Number of All Other
Year Salary Bonus Compensation(1) Options Compensation(2)
------ ----------- --------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Anthony Agnello .......... 1997 $193,462 -- $ 18,780 -- $ 5,338
1996 202,408 65,000 19,669 -- 4,476
1995 160,000 -- -- -- --
Brian Hoerl .............. 1997 181,231 47,104 20,393 -- 3,228
1996 159,470 36,888 13,214 50,000 --
1995 -- -- -- -- --
Jeffrey Sasmor ........... 1997 140,539 -- 14,507 40,000 84,019(5)
1996 154,166 30,000 137,747(4) -- 3,578
1995 140,000 -- 15,775 -- 2,800
Gerard E. Dorsey ......... 1997 146,538 -- 25,461 -- 4,396
1996 150,000 -- 20,020 -- 4,500
1995 -- -- -- -- --
John Lynch ............... 1997 150,000 -- 13,134 -- 8,536
1996 148,847 -- 12,092 -- 4,465
1995 -- -- -- -- --
Mark Clayton ............. 1997 -- -- -- -- --
1996 72,365 -- 12,591 -- 87,291(3)
1995 150,000 -- 13,212 -- 4,500
</TABLE>
- ------------
(1) Represents contributions made by the Company to the Company's medical and
life insurance plans, a Company-provided automobile and club dues. Each
individual item is less than 10% of salary for each year in which an
aggregate amount appears in this column.
(2) Represents the Company's contributions to the Company's 401 (k) plan and
profit sharing plan on behalf of its executive officers.
(3) Includes severance payment of $85,006.
(4) Includes $114,184 of relocation expenses.
(5) Includes severance payment of $80,000.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted to the six 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 1997, an assumed
annual stock price appreciation of 10% would produce a corresponding aggregate
pretax gain over the full option term of approximately $135 million for the
Company's common stockholders.
<TABLE>
<CAPTION>
Number of
Securities Per Potential Realized Value at
Underlying % of Total Options Share Assumed Annual Rates of Stock
Options Granted to Employees Exercise Expiration Price Appreciation for Term
Name Granted (1) In Fiscal Year Price (2) Date 5% 10%
---- ----------- -------------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Sasmor ......... 40,000 14.52% $ 7.125 7/02/07 $464,234 $739,217
</TABLE>
- ------------
(1) All options were made pursuant to the 1995 Stock Option Plan.
(2) Exercise price is the fair market value of the common stock at the date of
grant.
AGGREGATE FISCAL YEAR-END OPTION VALUE
The following table sets forth certain information concerning stock option
exercises by the four individuals named in the Summary Compensation Table
during 1997 including the aggregate value of gains on the date of exercise. In
addition, this table includes the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1997. Also reported are
the values for "in-the-money" options which represent the excess of the closing
market price of the Common Stock at December 31, 1997 over the exercise price
of the option.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised Options At In-The-Money-Options At
Acquired Value December 31, 1997 (#) December 31, 1997($)
Name On Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jeffrey Sasmor ......... -0- -0- 115,750/-0- 240,506/-0-
Brian Hoerl ............ 25,000 255,625 50,000/75,000 43,438/43,438
Gerard Dorsey .......... -0- -0- 50,000/-0- 56,250/-0-
John Lynch ............. 4,100 29,213 40,000/50,000 7,500/15,000
</TABLE>
Employment Agreements
Anthony M. Agnello and Jeffrey M. Sasmor are each employed under a
three-year employment agreement effective January 1997, pursuant to which they
are paid annual base salaries of $200,000 and $180,000 respectively. Effective
September 26,1997, the Company has terminated the employment agreement of
Jeffrey Sasmor, its Vice Chairman and Secretary and entered into termination
agreement with Jeffrey Sasmor under which Mr. Sasmor will receive total
compensation of $285,000 payable in installments of 580,000 on September 26,
1997 and two equal payments of $102,500 on January 2, and July 1, 1998. In
accordance with his employment agreement, the Company had also agreed to fully
vest Mr. Sasmor in any stock options that were not currently vested and to pay
for medical and dental insurance through December 31, 1998. Thus, 20,000 stock
options exercisable at $7.125 per share vested and were exercisable by Mr.
Sasmor as of September 26, 1997 rather than July 2, 1998. 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. Mr. Dorsey resigned as an
officer of this company effective May 15, 1998. Brian Hoerl is also employed
under a three year employment agreement effective September 3, 1996, pursuant
to which he is paid an annual base salary of $190,000. Each
6
<PAGE>
of these 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 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,
non-employee directors as members of said sub-committee. In March 1998 the
Board of Directors appointed a new Compensation Committee comprised of Messrs.
Coburn and Ranalli.
On October 19, 1995 the Board of Directors authorized the establishment of
an Audit and Finance Com- mittee and appointed Robert Ranalli and Edward
Horowitz, non-employee directors as members of said committee. In March 1998
Messr. Coburn was appointed to the Audit Committee.
During the fiscal year ended December 31, 1997 ("fiscal 1997"), there were
five (5) meetings of the Board of Directors. Messrs. Agnello, Paul and Perold
attended all five meetings. Messrs. Ranalli and Horowitz attended four
meetings. There were two (2) meetings each of the Compensation and Audit
Committees which were attended by all members of each committee as then
comprised.
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.
Compensation paid to the Company's executive officers for 1997 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 1997 the Committee approved a grant of
stock options to Mr. Sasmor who was an executive officer at that time 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:
Robert J. Ranalli
Theodore J. Coburn
7
<PAGE>
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 1997 the Company is not aware of
any director or officer of the Company who failed to file on a timely basis, as
dis- closed in such forms, report required by Section 16(a) of the Exchange Act
during fiscal 1995 or prior years. As of December 31, 1997, 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.
8
<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, 1997 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 RETURN
250 |-----------------------------------------------------------------------|
| |
| * |
| * #|
| o|
| |
200 |-----------------------------------------------------------------------|
| |
| # |
| o |
| # |
D | |
150 |-----------------------------------------------------------------------|
O | o |
| |
L | *|
| |
L | |
100 |*o#--------------------------------------------------------------------|
A | |
| |
R | |
| |
S | |
50 |-----------------------------------------------------------------------|
| |
| |
| |
| |
| |
0 |-----------------------------------------------------------------------|
25Jan95 Dec95 Dec96 Dec97
YEARS ENDING
--------------------------------------------------------------------------
* = ARIEL CORP o = NASDAQ INDEX # = PEER GROUP
--------------------------------------------------------------------------
9
<PAGE>
PROPOSAL NO. 2: APPOINTMENT OF INDEPENDENT AUDITORS
On March 9, 1998, the Board of Directors selected Coopers and Lybrand, LLP
to continue as the Company's independent public accountants for the fiscal year
ending December 31, 1998.
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,
LLP to serve as the Company's independent public accountants for fiscal
year ending December 31, 1998 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, LLP 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 AND
1996 DIRECTORS 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, and amended as approved by the stockholders at the annual meeting
held on June 12, 1997. 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 March 9, 1998, 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 1,200,000 to 1,700,000. 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 March 31,
1998, options to purchase 2,118,400 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 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 1,200,000 shares to 1,700,000 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 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.
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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 1,700,000 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:
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"RESOLVED, that the Company's 1995 Stock Option Plan be amended to provide
for the issuance of up to 1,700,000 shares in the aggregate."
The Board of Directors recommends that you vote FOR the amendment of the
1995 Plan.
PROPOSAL NO. 4:
AMENDMENT OF THE COMPANY'S 1996 DIRECTORS STOCK OPTION PLAN
At the 1996 Annual Meeting of Stockholders, held on May 14, 1996, the
Company's stockholders approved the 1996 Directors Stock Option Plan (the "1996
Directors Plan") providing for the issuance of 250,000 shares to non-employee
directors of the Company. The Company's management believes that its ability to
compensate directors in this manner permitted it to attract experienced,
talented directors whose business judgement and experience have materially
assisted the Company's growth and development of its present business strategy.
At present, five of the six Company directors are not members of management. It
is management's intention to expand the Board of Directors by adding at least
two new non-employee directors. To assure that sufficient shares are available
to provide incentives to non-employee directors, on March 9, 1998 the Board of
Directors adopted an amendment to the 1996 Directors Plan increasing the number
of shares issuable thereunder from 250,000 to 450,000.
Accordingly, the approval of the following resolution will be requested at
the meeting:
"RESOLVED, that the Company's 1996 Directors Stock Option Plan be amended
to provide for the issuance of up to 450,000 shares in the aggregate."
The Board of Directors recommends that you vote FOR the amendment of the
1996 Directors 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.
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 January
15, 1999 pursuant to Rule 14a-8 of the Securities Exchange Act of 1934.
By Order of the Board of Directors
HAROLD W. PAUL
May 18, 1997 Secretary
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ARIEL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony M. Agnello, Proxy, with full power
of substitution in the name, place and stead of the undersigned, to vote the
Annual Meeting of Stockholders of Ariel Corporation (the "Company") on
Wednesday, June 24, 1998 at the Forrestal Hotel and Conference Center, 100
College Road East, Princeton, New Jersey 08540 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 the nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
below.
Anthony M. Agnello, Harold W. Paul, Theodore J. Coburn
2. Proposal to ratify the appointment of Coopers & Lybrand LLP as Independent
Public Accountants for the Company for the Fiscal Year ending December 31,
1998.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to amend the Company's 1995 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
4. Proposal to amend the Company's 1996 Directors Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
5. 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 , 1998
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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.
