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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Ariel Corporation
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3137699
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(State of Incorporation or Organization) (I.R.S. Employer Identification No.)
2540 Route 130 Cranbury, NJ 08512
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(Address of Principal Executive Offices) (Zip Code)
If this form relates to the If this form relates to the
registration of a class of registration of a class of
securities pursuant to Section securities pursuant to Section of
12(b) of the 12(g) Exchange Act and the Exchange Act and is effective
is effective pursuant to General pursuant to General Instruction
Instruction A.(c), please check the A.(d), check the following box.
please following box.
Securities Act registration statement file number to which
this form relates: 0-25326
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(If applicable)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Stock Purchase Rights
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(Title of Class)
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(Title of Class)
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Item 1. Description of Registrant's Securities to be Registered.
Ariel Corporation (the "Company") announced that a dividend of one
preferred share purchase right ("Right") has been declared for each outstanding
share of common stock, par value $.001 per share, of the Company (the "Common
Stock"). The dividend is payable to stockholders of record at the close of
business on October 9, 1998 (the "Effective Date"). Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
newly created Series A Preferred Stock, par value $.001 per share, of the
Company (the "Preferred Stock"). The purchase price is $25 per one one-hundredth
of a share of Preferred Stock (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Plan dated as of
October 9, 1998, as the same may be amended from time to time (the "Rights
Plan"). Continental Stock Transfer and Trust Co. will serve as the "Rights
Agent."
Until the earlier of (i) such time as the Company learns that a person
or group of affiliated or associated persons (with certain exceptions, an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock or (ii) the close of business on the date
designated by the Board of Directors following the commencement of, or public
disclosure of, an intent to commence a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the outstanding shares of Common Stock (the earlier of
such dates being called the "Distribution Date"), the Rights will be evidenced,
with respect to any of the Common Stock certificates outstanding as of the
Effective Date, by such Common Stock certificate and will be transferable only
in connection with the transfer of Common Stock.
Until the Distribution Date (or earlier expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Effective Date, even without such notation, will also
constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate. Until the Distribution Date (or earlier
expiration of the Rights), new Common Stock certificates issued after the
Effective Date will contain a notation incorporating the Rights Plan by
reference. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on October 9, 2008 (the "Expiration Date"), unless the Expiration
Date is advanced or extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights is subject
to adjustment from time to time to prevent dilution in the event there is a
change in the Common Stock or Preferred Stock, whether by reason of Stock
dividends, stock splits, recapitalizations, mergers, consolidation, combinations
or exchanges of securities, split-ups, split-offs, spin-offs, liquidations other
similar changes in capitalization, any distribution or issuance of cash, assets,
evidences of indebtedness
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or subscription rights, options or warrants to holders of Common Stock or
Preferred Stock.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable by election of holders. Each share of Preferred Stock will be
entitled, when, as and if declared by the Board of Directors, to a minimum
preferential quarterly dividend payment of $1 per share, but will be entitled to
an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, dissolution or winding up of the Company,
the holders of the Preferred Stock will be entitled to a minimum preferential
payment of $1 per share (plus any accrued but unpaid dividends) and will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock. Each share of Preferred Stock will have 100 votes, voting together
with the Common Stock and not as a class. Finally, in the event of any
consolidation, merger or other transaction in which outstanding shares of Common
Stock are converted or exchanged, each share of Preferred Stock will be entitled
to receive 100 times the amount received per share of Common Stock. These rights
are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right is intended to
approximate the value of one share of Common Stock.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right, for the
Purchase Price, that number of one one-hundredths (1/100ths) of a Preferred
Share equivalent to the number of Common Shares that at the time of such event
would have a market value of twice the Purchase Price.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
the Rights Plan provides that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person, which will have become void) will
thereafter have the right to receive upon the exercise of a Right that number of
shares of common stock of the person with whom the Company has engaged in the
foregoing transaction (or its parent) that at the time of such transaction have
a market value of two times the exercise price of the Right. If the Company is
so acquired by an Acquiring Person or an associate or affiliate of an Acquiring
Person that is not a publicly traded entity, each Right will entitle its holder
with certain exceptions to purchase, for the Purchase Price, at such holder's
option, (i) that number of shares of the surviving corporation in the
transaction with such entity (which surviving corporation could be the Company)
that at the time of the transaction would have a book value of twice the
Purchase Price, (ii) that number of shares of such entity that at the time of
the transaction would have a book value of twice the Purchase Price or (iii) if
such entity has an affiliate that has publicly traded common shares, that number
of common shares of such affiliate that at the time of the transaction would
have a market value of twice the Purchase Price.
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraph,
that is, merger, combination or sale of assets, or the acquisition by such
Acquiring Person of 50% or more of the outstanding shares of Common Stock, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such Acquiring Person, which will have become void), in whole or in
part, for shares of Common Stock or Preferred Stock (or a series of the
Company's preferred stock having equivalent rights, preferences and privileges),
at an exchange ratio of one share of Common Stock, or a fractional share of
Preferred Stock (or other preferred stock) equivalent in value thereto, per
Right.
The Company may issue fractions of Rights or distribute Right
Certificates evidencing
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fractional Rights or in lieu thereof pay registered holders an amount in cash
based on the current market price of the Preferred Stock or the Common Stock.
At any time prior to the time any person or group becomes an Acquiring
Person, the Board of Directors may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price"), payable in cash, Common
Stock or such other form of consideration deemed appropriate by the Board of
Directors. The redemption of the Rights may be effective at such time, on such
basis and with such conditions as the Board of Directors may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Prior to the Distribution Date, the Company may, except with respect to
the Redemption Price, amend the Rights Plan in any manner. After the
Distribution Date, the Company may, except with respect to the Redemption Price,
amend the Rights Plan in any manner that does not adversely affect the interests
of holders of the Rights.
Until a Right is exercised or exchanged, the holder thereof, as such,
will have no rights as a stockholder of the Company, including the right to vote
or to receive dividends.
The Rights Plan specifying the terms of the Rights, which includes as
Exhibit A the form of Certificate of Designations of Series A Preferred Stock of
the Company and as Exhibit B the form of Right Certificate and as Exhibit C the
form of Summary of Rights to Purchase Preferred Stock, and a press release to be
issued by the Company on October 22, 1998 with respect to the Rights, are
attached hereto and incorporated herein by reference. The foregoing description
of the Rights is qualified by reference to such exhibits.
Item 2. Exhibits.
4. Rights Plan dated October 9, 1998, together with the
following exhibits thereto: Exhibit A - Form of Certificate
of Designation of Series A Preferred Stock of Ariel
Corporation; Exhibit B - Form of Right Certificate; Exhibit C
- Summary of Rights to Purchase Shares of Preferred Stock of
Ariel Corporation.
99. Form of Press Release to be dated October 22, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 21, 1998
ARIEL CORPORATION
BY: /s/ Jack Loprete
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Jack Loprete
Chief Financial Officer
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EXHIBIT 4
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Rights Plan dated as of October 9, 1998
adopted by the Board of Directors of Ariel
Corporation (the "Company").
Statement of Board Action
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The Board of Directors (the "Board") of the Company has authorized and
declared a dividend of one Right (as hereinafter defined) for each share of
Common Stock, par value $.001 per share, of the Company (the "Common Stock")
outstanding at Close of Business (as hereinafter defined) on the date hereof
(the "Effective Date") and one Right (as such number may hereafter be adjusted
pursuant to this Plan) with respect to each share of Common Stock that becomes
outstanding between the Effective Date and the earliest of the Distribution
Date, Redemption Date and Expiration Date (as such terms are hereinafter
defined) provided that Rights may be issued with respect to Common Stock that
becomes outstanding after the Distribution Date and prior to the earlier of the
Redemption Date and Expiration Date. Each Right initially represents the right
to purchase one one-hundredth (1/100th) of a share of Series A Preferred Stock,
par $.001 per share, of the Company (the "Preferred Shares"), having the powers,
rights and preferences set forth in the Certificate of Designation attached as
Exhibit A.
The Plan shall consist of the following:
1. Certain Definitions. For purposes of this Plan, the following terms
have the meanings indicated:
"Acquiring Person" means any Person who, alone or together with all
Affiliates of such person, shall be the Beneficial Owner of more thant 15% of
the Common Shares outstanding as
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of such time. "Acquiring Person" shall not include (a) the Company, any employee
benefit plan of the Company or any Person holding Common Shares under any such
employee benefit plan, (b) any Person who alone or together with one or more of
its Affiliates becomes such pursuant to a Qualifying Offer (c) subject to the
following sentence, any Person who becomes such solely as the result of a change
in the number of Common Shares outstanding since the most recent preceding date
on which such Person acquired Beneficial Ownership of any Common Shares, (d)
subject to the following sentence, any Person who the Board determines became
such solely as the result of the acquisition by such Person if such acquisition
was made in the good faith belief that such acquisition would not cause either
the number of Common Shares Beneficially Owned to exceed 15% of the Common
Shares outstanding at the time of such acquisition or otherwise cause a
Distribution Date or the adjustment provided in Section 11(a) to occur and such
good faith belief is based upon inaccurate information contained in publicly
filed reports or documents of the Company, (e) subject to the following
sentence, any Person who becomes such solely as the result of the acquisition of
Beneficial Ownership of any Common Shares by any of such Person's Affiliates who
are not Controlled Related Parties of such Person or (f) subject to the
following sentence, any Person who becomes such solely as the result of any
transaction or event pursuant to which any Person who Beneficially Owns any
Common Shares and was not previously an Affiliate of such Person becomes an
Affiliate of such Person. In the case of any of clauses (c) through (f), a
Person shall not be considered an Acquiring Person if the percentage of Common
Shares outstanding represented by the number of Common Shares Beneficially Owned
by such Person is reduced to less than 15% within the applicable cure period,
which shall be the period commencing on the date that such Person becomes aware
that the number of Common Shares Beneficially Owned is or exceeds 15% of the
Common Shares outstanding and ending upon the Close of Business on the fifth
Business Day thereafter.
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"Affiliate" has the meaning ascribed to "Affiliate" or "Associate" in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the Effective Date.
A Person, other than an underwriter, shall be deemed the "Beneficial
Owner" of, and shall be deemed to "Beneficially Own", and shall be deemed to
have "Beneficial Ownership" of Common Shares:
(a) so owned within the meaning of Rule 13d-3 of the General
Rules and Regulations under the Exchange Act;
(b) that such Person has the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights), warrants or options, or
otherwise, but excluding pursuant to tender offer;
(c) the right to vote pursuant to any agreement, arrangement
or understanding unless such right to vote arises solely from a revocable proxy
and such Beneficial Ownership is not then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(d) which are Beneficially Owned, directly or indirectly, by
any other Person with which such Person has any agreement, arrangement or
understanding to acquire, hold, vote or dispose of any Common Shares, any other
securities of the Company generally entitled to vote together with the Common
Shares or any rights, warrants, options or other securities exercisable or
exchangeable for, or convertible into, Common Shares or other securities of the
Company generally entitled to vote together with the Common Shares; or
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(e) in the number of other securities of the Company (whether
or not convertible into or exchangeable for Common Shares) such Person is
generally entitled to vote together with Common Shares.
"Book Value", when used with reference to Common Shares issued by any
Person, means the amount of equity of such Person applicable to each Common
Share, determined (a) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (b) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a Business Combination, and (c) after giving effect
to (i) the exercise of all rights, options and warrants to purchase such Common
Shares (other than the Rights), and the conversion of all securities convertible
into such Common Shares, at an exercise or conversion price, per Common Share,
which is less than such Book Value before giving effect to such exercise or
conversion (whether or not exercisability or convertibility is conditioned upon
occurrence of a future event), (ii) all dividends and other distributions on the
capital stock of such Person declared prior to the date as of which such Book
Value is to be determined and to be paid or made after such date, and (iii) any
other agreement, arrangement or understanding or transaction or other action
prior to the date as of which such Book Value is to be determined which would
have the effect of thereafter reducing such Book Value.
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"Business Combination" has the meaning set forth in Section 11(c).
"Business Day" means each weekday other than legal holidays.
"Certificate of Designation" means the Certificate of Designation of
Series A Preferred Stock setting forth the powers, preferences, rights,
qualifications, limitations and restrictions of such series of Preferred Stock
of the Company, a copy of which is attached as Exhibit A.
"Close of Business" on any given date means 5:00 p.m., Eastern Standard
Time on such date provided, that if such date is not a Business Day, "Close of
Business" shall mean 5:00 p.m., Eastern Standard Time, on the next succeeding
Business Day.
"Common Shares", when used with reference to the Company prior to a
Business Combination, means Common Stock of the Company or any other capital
stock of the Company into which Common Stock shall be reclassified or changed
and, when used with reference to any Person other than the Company prior to a
Business Combination, means shares of capital stock of such Person (if such
Person is a corporation) or units of equity interests in such Person (if such
Person is not a corporation) the terms of which do not limit the amount
distributable upon any liquidation, dissolution or winding up of such Person.
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"Common Shares outstanding" or "outstanding Common Shares" means the
number of securities then issued and outstanding together with the number of
such securities not then actually issued and outstanding which such Person would
be deemed to Beneficially Own hereunder.
"Company" has the meaning set forth in the heading of this Plan, and if
there is a Business Combination, has the meaning set forth in Section 11(e).
"Control" with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, by or through
stock ownership, agency or otherwise, or pursuant to or in connection with an
agreement, arrangement or understanding with one or more other Persons by or
through stock ownership, agency or otherwise.
"Controlled Related Party" means, when used with respect to any
specified Person, each Affiliate of such Person if such Person possesses,
directly or indirectly, by or through stock ownership, agency or otherwise, or
pursuant to or in connection with an agreement, arrangement or understanding
with one or more other persons, the power to direct decisions regarding the
acquisition, disposition or voting by such Affiliate of Common Shares or rights
to acquire or vote Common Shares.
"Distribution Date" has the meaning set forth in Section 3(b).
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"Exchange Act" means the Securities Exchange Act of 1934, as in effect
on the date in question, unless otherwise specifically provided.
"Exchange Consideration" has the meaning set forth in Section 11(b).
"Expiration Date" means the Close of Business, ten years from
the Effective Date.
"Major Part", when used with reference to the assets of the Company and
its Subsidiaries, means assets (a) having a fair market value aggregating 50% or
more of the total fair market value of all the assets of the Company and its
Subsidiaries (b) accounting for 50% or more of the total value (net of
depreciation and amortization) of all the assets of the Company and its
Subsidiaries as would be shown on a consolidated or combined balance sheet of
the Company and its Subsidiaries as of the date in question, prepared in
accordance with generally accepted accounting principles then in effect, or (c)
accounting for 50% or more of the total amount of earnings before interest,
taxes, depreciation and amortization or revenues of the Company and its
Subsidiaries as would be shown on, or derived from, a consolidated or combined
statement of income of the Company and its Subsidiaries for the period of 12
months ending on the last day of the Company's monthly accounting period next
preceding the date in question, prepared in accordance with generally accepted
accounting principles then in effect.
"Market Value", when used with reference to Common Shares on any date,
is deemed to be the average of the daily closing prices, per share, of such
Common Shares for the period which is the shorter of (a) 30 consecutive Trading
Days immediately prior to the date in question
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or (b) the number of consecutive Trading Days commencing on the Trading Day
immediately after the date of the first public announcement of the event
requiring a determination of the Market Value and ending on the Trading Day
immediately prior to the record date of such event provided, that if the Market
Value of such Common Shares is to be determined in whole or in part during a
period following the announcement by the issuer of such Common Shares of any
action of the type described in Section 12(a) that would require an adjustment
thereunder, then the Market Value of such Common Shares shall be appropriately
adjusted to reflect the effect of such action on the market price of such Common
Shares. The closing price for each Trading Day is the closing price quoted on
the composite tape for securities listed on the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or if no such quotations are available, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such securities selected by the Board. If on any such Trading Day no
market maker is making a market in such securities, the closing price of such
securities on such Trading Day shall be deemed to be the fair value of such
securities as determined in good faith by the Board provided, that for the
purpose of determining the closing price of the Preferred Shares for any Trading
Day on which there is no such market maker for the Preferred Shares the closing
price on such Trading Day shall be deemed to be the Formula Number (as defined
in the Certificate of Designation) times the closing price of the Common Shares
of the Company on such Trading Day.
"Person" means an individual or a corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
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"Preferred Shares" has the meaning set forth in the first full
paragraph of this Plan. Any reference in this Plan to Preferred Shares shall be
deemed to include any authorized fraction of a Preferred Share, unless the
context otherwise requires.
"Principal Party" means the Surviving Person in a Business Combination
provided, that if such Surviving Person is a direct or indirect Subsidiary of
any other Person, "Principal Party" means the Person which is the ultimate
parent of such Surviving Person and which is not itself a Subsidiary of another
Person. If ultimate control of such Surviving Person is shared by two or more
Persons, "Principal Party" means that Person that is immediately controlled by
such two or more Persons.
"Purchase Price" with respect to each Right means $25, as such amount
may from time to time be adjusted as provided herein.
"Qualifying Offer" means an acquisition of shares of Common Stock
pursuant to a tender offer or an exchange offer for all outstanding shares of
Common Stock at a price and on terms determined by a majority of the
disinterested members of the Board after receiving advice from one or more
investment banking firms, to be (a) fair to stockholders and (b) otherwise in
the best interests of the Company and its stockholders.
"Redemption Date" has the meaning set forth in Section 24(a).
"Redemption Price" with respect to each Right means $.01, as such
amount may from time to time be adjusted in accordance with Section 12.
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"Registered Common Shares" means Common Shares which are, as of the
date of consummation of a Business Combination, and have continuously been for
the 12 months immediately preceding such date, registered under the Exchange
Act.
"Right Certificate" means a certificate evidencing a Right in
substantially the form attached as Exhibit B.
"Rights" means the rights to purchase Preferred Shares (or other
securities) as provided in this Plan.
"Rights Agent" means, initially, Continental Stock Transfer and Trust
Co. and, thereafter, its successor in accordance with this Plan.
"Securities Act" shall mean the Securities Act of 1933, as in effect on
the date in question, unless otherwise specifically provided.
"Subsidiary" means a Person, at least a majority of the total
outstanding voting power (being the power under ordinary circumstances, and not
merely upon the happening of a contingency to vote in the election of directors
of such Person, if such Person is a corporation, or to participate in the
management and control of such Person if such Person is not a corporation) of
which is owned, directly or indirectly, by another Person or by one or more of
its Subsidiaries.
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"Surviving Person" means (a) the Person which is the continuing or
surviving Person in a consolidation or merger specified in Section 11(c)(i) or
11(c)(ii) or (b) the Person to which the Major Part of the assets of the Company
and its Subsidiaries is sold, leased, exchanged or otherwise transferred or
disposed of in a transaction specified in Section 11(c)(iii); provided, that if
the Major Part of the assets of the Company and its Subsidiaries is sold,
leased, exchanged or otherwise transferred or disposed of in one or more related
transactions specified in Section 11(c)(iii) to more than one Person, the
"Surviving Person" in such case means the Person that acquired assets of the
Company and/or its Subsidiaries with the greatest fair market value in such
transaction or transactions.
"Trading Day" means a day on which the principal national securities
exchange (or recognized foreign stock exchange, as the case may be) on which any
securities or Rights, as the case may be, are listed or admitted to trading is
open for the transaction of business or, if the securities or Rights in question
are not listed or admitted to trading on any national securities exchange (or
recognized foreign stock exchange, as the case may be), a Business Day.
2. Appointment of Rights Agent. The Company hereby appoints Continental
Stock Transfer and Trust Co. as Rights Agent to act as agent for the Company in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint one or more
co-Rights Agents as it may deem necessary or desirable (the term "Rights Agent"
being used herein to refer, collectively, to Continental Stock Transfer and
Trust Co., as Rights Agent, together with any such co-Rights Agents). In the
event the Company appoints one or more co-Rights Agents, the respective duties
of the Rights Agent and any co-Rights Agents shall be as the Company shall
determine.
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3. Issue of Rights and Right Certificates. (a) One Right shall be
associated with each Common Share outstanding on the Effective Date, each
additional Common Share that becomes outstanding between the Effective Date and
the earliest of the Distribution Date, the Redemption Date and the Expiration
Date and each additional Common Share with which Rights are issued after the
Distribution Date but prior to the earlier of the Redemption Date and the
Expiration Date as set forth in Section 23 provided, that if the number of
outstanding Rights are combined into a smaller number of outstanding Rights
pursuant to Section 12(a) the appropriate fractional Right determined pursuant
to such Section shall thereafter be associated with each such Common Share.
(b) Until the earlier of (i) such time as the Company learns
that a Person has become an Acquiring Person and (ii) the Close of Business on
such date, if any, designated by the Board following the commencement of, or
public disclosure of an intent to commence, a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Person holding Common Shares under any such
employee benefit plan) and other than a Qualifying Offer for outstanding Common
Shares, if upon consummation of such tender or exchange offer such Person could
be the Beneficial Owner of more than 15% of the outstanding Common Shares (the
Close of Business on the earlier of such dates being the "Distribution Date"),
(x) the Rights shall be evidenced by the certificates for Common Shares
registered in the names of the holders thereof and not by separate Right
Certificates and (y) the Rights including the right to receive Right
Certificates shall be transferable only in connection with the transfer of
Common Shares. As soon as practicable after the Distribution Date, the Rights
Agent shall send to each record holder of Common Shares as of the Distribution
Date, at the address of such holder shown on the records of the Company, a Right
Certificate evidencing one Right for each Common Share (or for the number of
Common Shares with which one whole Right is then associated if the number of
Rights per Common Share held by such record holder has been adjusted in
accordance with Section 12(a). If the number of Rights associated with each
Common Share has been adjusted in accordance with Section 12(a), at the time of
distribution of the Right Certificates the Company may make appropriate rounding
adjustments so that Right Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Right in accordance
with Section 15(a).
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(c) Certificates issued for Common Shares after the Effective Date
(including upon transfer or exchange of outstanding Common Shares), but prior to
the earliest of the Distribution Date, Redemption Date and Expiration Date, may
be issued with the following or similar legend (provided that the omission of a
legend shall not affect the enforceability of any part of this Plan or the
rights of any holder of Rights):
This certificate also evidences and entitles the holder hereof
to certain "Rights" as set forth in a Rights Plan dated as of
October 9, 1998, as amended from time to time (the "Plan"),
adopted by the Board of Directors of Ariel Corporation (the
"Company"), the terms of which are hereby incorporated by
reference and a copy of which is on file at the principal
executive offices of the Company. Under certain circumstances,
as set forth in the Plan, such Rights shall be evidenced by
separate certificates and shall no longer be evidenced by this
certificate. The Rights Agent (set forth in the Plan) shall
mail to the holder of this certificate a copy of the Plan
without charge after receipt of a written request therefor.
Rights Beneficially Owned by Acquiring Persons or their
Affiliates (as such terms are defined in the Plan) and by any
subsequent holder of such Rights are null and void and
nontransferable.
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4. Form of Right Certificates. The Right Certificates shall be in
substantially the form set forth as Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon not inconsistent with this Plan as the Company may deem
appropriate, or as may be required to comply with any applicable law, rule or
regulation including any rule or regulation of any stock exchange on which the
Rights may be listed. Subject to Sections 7, 11 and 23, the Right Certificates
shall be dated as of the Distribution Date and on their face shall entitle the
holders thereof to purchase such number of Preferred Shares as shall be set
forth therein for the Purchase Price set forth therein subject to adjustment as
provided herein.
5. Execution and Registration. (a) The Right Certificates shall be
executed on behalf of the Company by authorized officers. The Right Certificates
shall be manually countersigned by the Rights Agent and shall not be valid or
obligatory for any purpose unless so countersigned. If any officer who has
signed ceases to be such an officer of the Company before issuance and delivery
by the Company, such Right Certificates may nevertheless be issued and delivered
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such an officer of the Company.
(b) Following the Distribution Date, the Rights Agent shall
keep or cause to be kept at its principal office books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
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6. Transfer, Division, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates; Uncertificated Rights.
(a) A registered holder desiring to transfer, divide, combine or exchange a
Right Certificate shall make and deliver such request in writing delivered to
the Rights Agent and surrender the Right Certificate to be transferred, divided,
combined or exchanged at the principal office of the Rights Agent provided that
the Rights shall remain non-detachable from the Common Shares and shall
automatically trade only with such Common Shares prior to the Distribution Date,
and provided further that neither the Company nor the Rights Agent shall be
obligated to take any such action until the registered holder completes and
signs an appropriate stock power or form of assignment in respect of such Right
Certificate and provides such additional evidence of identity as the Company
reasonably requests. Thereupon the Rights Agent shall, subject to Sections 7(e)
and 15, deliver to the Person entitled thereto a Right Certificate as so
requested. The Company may require payment to cover any tax or governmental
charge imposed in connection therewith.
(b) Upon receipt by the Company and the Rights Agent of
satisfactory evidence of the loss, theft, destruction or mutilation of a Right
Certificate and, in case of loss, theft or destruction, upon receipt of
satisfactory security and reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and, in the case of mutilation,
cancellation of the Right Certificate, the Rights Agent shall make a Right
Certificate of like tenor and deliver such new Right Certificate to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
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(c) Notwithstanding any other provision hereof, the Company
and the Rights Agent may amend this Plan to provide for uncertificated Rights
in addition to or in place of Rights evidenced by Right Certificates.
7. Exercise of Rights; Expiration Date of Rights. (a) Subject to
Sections 7(e) and 11 and as otherwise provided herein each Right shall entitle
the registered holder, upon exercise thereof, to purchase for the Purchase
Price, at any time after the Distribution Date and prior to the earlier of the
(i) Expiration Date and (ii) Redemption Date (the "Exercise Period") one
one-hundredth (1/100th) of a Preferred Share, subject to adjustment from time to
time as provided therein.
(b) The registered holder of a Right Certificate may exercise
the Rights evidenced thereby in whole or in part during the Exercise Period upon
surrender of the Right Certificate, with the form of election duly executed, to
the Rights Agent at its principal office, together with payment of the Purchase
Price for each one one-hundredth (1/100th) of a Preferred Share as to which the
Rights are exercised.
(c) Upon receipt of a Right Certificate with the form of
election to purchase duly executed, accompanied by payment of the Purchase Price
for the Preferred Shares to be purchased, together with an amount equal to any
applicable transfer tax, in immediately available funds, the Rights Agent shall
thereupon (i) either promptly requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be purchased
or, if the Company elects to deposit the Preferred Shares with a depository
agent, under a depository arrangement promptly requisition from the depository
agent depository receipts representing the number of Preferred Shares to be
purchased, (ii) when appropriate, arrange for cash to be paid in lieu of
fractional shares in accordance with Section 15, (iii) promptly after receipt of
such certificates or depository receipts, cause the same to be delivered to the
order of the registered holder of such Right Certificate and (iv) when
appropriate, after receipt promptly deliver such cash to the order of the
registered holder of such Right Certificate.
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(d) If the registered holder of a Right Certificate exercises
fewer than all the Rights evidenced thereby, a new Right Certificate evidencing
the unexercised Rights shall be issued by the Rights Agent and delivered to the
registered holder.
(e) Any Rights Beneficially Owned by an Acquiring Person or
any Affiliate of an Acquiring Person shall be null and void and nontransferable,
and any holder of any such Right (including any purported transferee or
subsequent holder) shall not have any right to exercise or transfer any such
Right.
(f) The Company may temporarily suspend for up to 90 days
after the Distribution Date (or such extended period necessary to respond to
comments of the Securities and Exchange Commission) the exercisability of the
Rights in order to prepare and file a registration statement under the
Securities Act with respect to the Preferred Shares purchasable upon exercise of
the Rights and permit such registration statement to become effective provided
that no such suspension shall remain effective after, and the Rights shall
without any further action by the Company or any other Person become exercisable
immediately upon, the effectiveness of such registration statement. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and shall issue a
further public announcement at such time as the suspension is no longer in
effect.
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(g) Notwithstanding any provision herein to the contrary, the
Rights shall not be exercisable in any jurisdiction if any requisite
qualification or exemption under such jurisdiction's blue sky or securities laws
has not been obtained or is not available or the exercise of the Rights is not
permitted under applicable law.
8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered or presented for the purpose of exercise, transfer,
division, combination or exchange shall, and any Right Certificate representing
Rights that have become null and void and nontransferable pursuant to Section
7(e) surrendered or presented for any purpose shall, if surrendered or presented
to the Rights Agent, be in canceled form and no Right Certificates shall be
issued in lieu thereof except pursuant to this Plan. The Rights Agent shall
cancel and retire and may destroy any Right Certificate purchased or acquired by
the Company.
9. Reservation and Availability of Preferred Shares. (a) The Company
shall (i) cause to be reserved and kept available out of its authorized and
unissued Preferred Shares or any authorized and issued Preferred Shares held in
its treasury a number of Preferred Shares sufficient to permit the exercise in
full of all outstanding Rights or (ii) take all such reasonable action to permit
such exercise or exchange of Rights pursuant to Section 11 provided that the
Company may in lieu of seeking any such authorization (x) upon surrender of a
Right, pay cash equal to the Purchase Price in lieu of issuing Preferred Shares
and requiring payment therefor, or (y) upon due exercise of a Right and payment
of the Purchase Price, issue equity securities having a value equal to the value
of the Preferred Shares that otherwise would have been issuable pursuant to
Section 11 or (z) upon due exercise of a Right and payment of the Purchase
Price, distribute any one or a combination of Preferred Shares, cash or other
equity or debt securities having an aggregate value equal to the value of the
Preferred Shares that otherwise would have been issuable pursuant to Section 11.
To the extent that any legal or contractual restrictions prevent the Company
from paying the full amount payable in accordance with the foregoing sentence,
the Company shall pay to holders of the Rights as to which such payments are
being made all amounts that are not then restricted on a pro rata basis as such
payments become permissible under such legal or contractual restrictions until
such payments have been paid in full.
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(b) In the event there are not sufficient Preferred Shares
issued but not outstanding or authorized to permit the exercise or exchange of
Rights in accordance with Section 11, the Company shall take all such action as
may be necessary to authorize additional Preferred Shares for issuance upon the
exercise or exchange of Rights pursuant to Section 11 provided that if the
Company is unable to cause the authorization of additional Preferred Shares,
then the Company shall, or in lieu of seeking any such authorization, the
Company may, to the extent necessary and permitted by applicable law and any
agreements or instruments in effect prior to the Distribution Date to which it
is a party, (i) upon surrender of a Right, pay cash equal to the Purchase Price
in lieu of issuing Preferred Shares and requiring payment therefor, (ii) upon
due exercise of a Right and payment of the Purchase Price for each Preferred
Share as to which such Right is exercised, issue equity securities having a
value equal to the value of the Preferred Shares which otherwise would have been
issuable pursuant to Section 11, which value shall be determined by an
investment banking firm selected by the Board or (iii) upon due exercise of a
Right and payment of the Purchase Price for each Preferred Share as to which
such Right is exercised, distribute a combination of Preferred Shares, cash
and/or other equity and/or debt securities having an aggregate value equal to
the value of the Preferred Shares which otherwise would have been issuable
pursuant to Section 11, which value shall be determined by a nationally
recognized investment banking form selected by the Board. To the extent that any
legal or contractual restrictions (pursuant to agreements or instruments in
effect prior to the Distribution Date to which it is a party) prevent the
Company from paying the full amount payable in accordance with the foregoing
sentence, the Company shall pay holders of the Rights as to which such payments
are being made all amounts which are not then restricted on a pro rata basis as
such payments become permissible under such legal or contractual restrictions
until such payments have been paid in full.
(c) The Company shall take all such action as may be
reasonable and necessary to ensure that all Preferred Shares delivered upon
exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
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<PAGE>
10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares or Common Shares or other securities is issued
upon the exercise or exchange of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares or Common Shares or other
securities, as the case may be, represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of any Purchase Price (and any applicable
transfer taxes) was made provided that if the date of such surrender and
payment is a date upon which the transfer books of the Company for the Preferred
Shares or Common Shares or other securities, as the case may be, are closed,
such Person shall be deemed to have become the record holder of such Preferred
Shares or Common Shares or other securities, as the case may be, on, and such
certificate shall be dated, the next succeeding Business Day on which the
transfer books of the Company for the Preferred Shares or Common Shares or other
securities, as the case may be, are open. Notwithstanding anything contained
herein Rights holders shall not be deemed or have rights as or conferred on
stockholders of the Company.
11. Adjustments in Rights After There is an Acquiring Person; Exchange
of Rights for Shares; Business Combinations. (a) Upon a Person becoming an
Acquiring Person, provision shall be made so that each holder of a Right, except
as provided in Section 7(e), shall thereafter have a right to receive, upon
exercise thereof for the Purchase Price in accordance with this Plan, such
number of one one-hundredth (1/100th) of a Preferred Share equal to the product
obtained by multiplying the Purchase Price by a fraction, the numerator of which
is the number of one one-hundredth (1/100th) of a Preferred Share for which a
Right is then exercisable and the denominator of which is 50% of the Market
Value of the Common Shares on the date a Person becomes an Acquiring Person. As
soon as practicable after a Person becomes an Acquiring Person (provided the
Company does not elect to make the exchange permitted by Section 11(b) for all
outstanding Rights), the Company shall use its best efforts to (i) prepare and
file a registration statement under the Securities Act, on an appropriate form,
with respect to the Preferred Shares purchasable upon exercise of the Rights,
(ii) cause such registration statement to become effective as soon as
practicable after such filing, (iii) cause such registration statement to remain
effective until the Expiration Date and (iv) qualify or register the Preferred
Shares purchasable upon exercise of the Rights under any applicable blue sky or
securities laws.
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<PAGE>
(b) The Board may, at any time after a Person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights (excluding Rights null and void pursuant to Section 7(e)) for
consideration per Right consisting of one-half of the securities that would be
issuable at such time upon the exercise of one Right in accordance with Section
12(a) or, if applicable, Section 9(b) (the consideration issuable per Right
pursuant to this Section 11(b) being the "Exchange Consideration"). The Board
may issue, in substitution for Preferred Shares, Common Shares in an amount per
Preferred Share equal to the Formula Number (as defined in the Certificate of
Designation) if there are sufficient Common Shares issued but not outstanding or
authorized but unissued. If the Board elects to exchange all the Rights for
Exchange Consideration pursuant to this Section 11(b) prior to distribution of
the Rights Certificates, the Company may distribute the Exchange Consideration
in lieu of distributing Right Certificates, in which case for purposes of this
Plan holders of Rights shall be deemed to have simultaneously received and
surrendered for exchange Right Certificates on the date of such distribution.
Any action of the Board ordering the exchange of any Rights pursuant to this
Section 11(b) shall be irrevocable and, immediately upon the taking of such
action and without any further action and without any notice, the right to
exercise any such Right pursuant to Section 11(a) shall terminate and the only
right thereafter of a holder of such Right shall be to receive the Exchange
Consideration in exchange for each such Right held by such holder. The Company
shall promptly give public notice of any such exchange provided that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall promptly give notice of any such exchange to
all holders of such Rights. Any notice that is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange shall state the method by which the exchange of the
Rights for the Exchange Consideration shall be effected and, in the event of any
partial exchange, the number of Rights to be exchanged.
26
<PAGE>
(c) If, following a Distribution Date, directly or indirectly,
any transactions specified in any one of the following clauses (i), (ii) or
(iii) of this Section 11(c) (each such transaction being a "Business
Combination") shall be consummated (i) the Company consolidates with, or merges
with and into, any Acquiring Person or Affiliate thereof, (ii) any Acquiring
Person or Affiliate thereof merges with and into the Company and, in connection
with such merger, all or part of the Common Shares are changed into or exchanged
for capital stock or other securities of the Company or of any Acquiring Person
or Affiliate thereof or cash or any other property or (iii) the Company or any
of its Subsidiaries sells, leases, exchanges or otherwise transfers or disposes
of, in one or more transactions, the Major Part of the assets of the Company and
its Subsidiaries to any Acquiring Person or any Affiliate thereof, provision
shall be made so that each holder of a Right, except as provided in Section
7(e), shall thereafter have the right to receive, upon the exercise thereof for
the Purchase Price in accordance with this Plan, the securities specified below
or, at such holder's option, the securities specified in Section 11(a):
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<PAGE>
(A) If the Principal Party in such Business
Combination has Registered Common Shares outstanding, each Right shall
thereafter represent the right to receive, upon the exercise thereof for the
Purchase Price in accordance with this Plan, such number of Registered Common
Shares of such Principal Party, free and clear of all liens, with an aggregate
Market Value equal to the result obtained by multiplying the Purchase Price by
two;
(B) If the Principal Party involved in such
Business Combination does not have Registered Common Shares outstanding, each
Right shall thereafter represent the right to receive, upon the exercise thereof
for the Purchase Price in accordance with this Plan, at the election of the
holder of such Right at the time of the exercise thereof, any of (x) such number
of Common Shares of the Surviving Person in such Business Combination with an
aggregate Book Value immediately after giving effect to such Business
Combination equal to the result obtained by multiplying the Purchase Price by
two, (y) such number of Common Shares of the Principal Party in such Business
Combination (if the Principal Party is not also the Surviving Person in such
Business Combination) as shall have an aggregate Book Value immediately after
giving effect to such Business Combination equal to the result obtained by
multiplying the Purchase Price by two or (z) if the Principal Party in such
Business Combination is an Affiliate of one or more Persons which has Registered
Common Shares outstanding, such number of Registered Common Shares of whichever
of such Affiliates of the Principal Party has Registered Common Shares with the
greatest aggregate Market Value on the date of consummation of such Business
Combination as shall have an aggregate Market Value on the date of such Business
Combination equal to the result obtained by multiplying the Purchase Price by
two.
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<PAGE>
(d) The Company shall not consummate any Business Combination
unless each issuer of Common Shares for which Rights may be exercised, as set
forth in this Section 11(d), has sufficient authorized Common Shares that have
not been issued or reserved for issuance (and which, when issued upon exercise
thereof in accordance with this Plan, shall be validly issued, fully paid and
nonassessable and free of preemptive rights, rights of first refusal or any
other restrictions or limitations on the transfer or ownership thereof) to
permit the exercise in full of the Rights in accordance with this Section 11(d)
and unless prior thereto:
(i) a registration statement under the
Securities Act on an appropriate form, with respect to the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights, shall be
effective under the Securities Act; and
(ii) the Company and each such issuer shall
have:
(A) executed and delivered to the Rights
Agent a supplemental agreement providing for the assumption by such issuer of
the obligations set forth in this Section 11(d) (including the obligation of
such issuer to issue Common Shares upon the exercise of Rights in accordance
with Sections 11(c) and 11(e)) and further providing that such issuer, at its
own expense, shall use its best efforts to:
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<PAGE>
(1) cause a registration statement under
the Securities Act with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, to remain effective until the
Expiration Date;
(2) qualify or register the Rights and
the Common Shares of such issuer purchasable upon exercise of the Rights under
the blue sky or securities laws of such jurisdictions as may be appropriate; and
(3) list the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights on each national
securities exchange on which the Common Shares were listed prior to the
consummation of the Business Combination or, if the Common Shares were not
listed on a national securities exchange prior to the consummation of the
Business Combination, on a national securities exchange;
(B) furnished to the Rights Agent a written
opinion of independent counsel stating that such supplemental agreement is a
valid, binding and enforceable agreement of such issuer; and
(C) filed with the Rights Agent a certificate
of a nationally recognized firm of independent accountants setting forth the
number of Common Shares of such issuer which may be purchased upon the exercise
of each Right after the consummation of such Business Combination.
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<PAGE>
(e) After consummation of any Business Combination and subject
to Section 11(d), (i) each issuer of Common Shares for which Rights may be
exercised shall be liable for and shall assume by virtue of such Business
Combination all the obligations and duties of the Company pursuant to this Plan,
(ii) the term "Company" shall thereafter be deemed to refer to such issuer,
(iii) each such issuer shall take such steps in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights and (iv)
the number of Common Shares or Preferred Shares, as the case may be, of each
such issuer thereafter receivable upon exercise of any Right shall be subject to
adjustment in a manner and on terms as nearly equivalent as practicable to this
Plan.
12. Certain Adjustments. (a) To preserve the actual or potential
economic value of the Rights, if at any time after the Effective Date there
shall be any change in the Common Shares or the Preferred Shares, whether by
reason of a stock dividend, stock split, recapitalization, merger,
consolidation, combination or exchange of securities, split-up, split-off,
spin-off, liquidation, other similar changes in capitalization, or any
distribution or issuance of cash, assets, evidences of indebtedness or
subscription rights, options or warrants to holders of Common Shares or
Preferred Shares, as the case may be (other than distribution of the Rights or
regular quarterly cash dividends) or otherwise, then the Board shall adjust the
number of Preferred Shares (or the number and kind of other securities) issuable
upon exercise of each Right, the Purchase Price and Redemption Price in effect
at such time and the number of Rights outstanding at such time.
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(b) If, as a result of an adjustment made pursuant to Section
12(a), the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Preferred Shares, thereafter the number of
such securities so receivable upon exercise of any Right shall be subject to
adjustment in a manner and on terms as nearly equivalent as practicable to this
Plan.
(c) Irrespective of any adjustment or change in the Purchase
Price or the number of Preferred Shares or number or kind of other securities
issuable upon the exercise of the Rights, the Right Certificates therefore and
thereafter issued may continue to express the terms which were expressed in the
initial Right Certificates issued hereunder.
(d) In any case in which action taken pursuant to Section
12(a) requires that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the Preferred Shares or other securities, if any, issuable upon such exercise
over and above the Preferred Shares or other securities, if any, issuable before
giving effect to such adjustment provided that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional securities upon the occurrence of the event requiring
such adjustment.
13. Certificate of Adjustment. Whenever an adjustment is made as
provided in Section 11 or 12, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate (or, prior to
the Distribution Date, of the Common Shares) in accordance with Section 29. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
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14. Additional Covenants. (a) Except as provided in Sections 7(e) and
15, no adjustment by the Company in the number of Preferred Shares issuable upon
exercise of each Right shall be effective if such adjustment or other action is
intended to or is reasonably foreseeable to materially reduce or limit the
benefits the holders of the Rights would have had absent such adjustment or
other action.
15. Fractional Rights and Fractional Shares. (a) The Company may issue
fractions of Rights or distribute Right Certificates which evidence fractional
Rights. In lieu of such fractional Rights, the Company may pay to the registered
holders of the Right Certificates an amount in cash equal to the same fraction
of the current market value of a whole Right. For purposes of this Section
15(a), the current market value of a whole Right shall be the closing price of
the Rights (as determined pursuant to the second and third sentences of the
definition of Market Value contained in Section 1) for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable.
(b) The Company may issue fractions of Preferred Shares upon
exercise of the Rights or distribute certificates which evidence fractional
Preferred Shares. In lieu of fractional Preferred Shares, the Company may elect
to (i) utilize a depository arrangement as provided by the terms of the
Preferred Shares or (ii) in the case of a fraction of a Preferred Share (other
than one one-hundredth (1/100th) of a Preferred Share or any integral multiple
thereof), pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share, if any are
outstanding and publicly traded (or the Formula Number times the current market
value of one Common Share if the Preferred Shares are not outstanding and
publicly traded). For purposes of this Section 15(b), the current market value
of a Preferred Share or Common Share shall be the closing price of a Preferred
Share or Common Share (as determined pursuant to the second and third sentences
of the definition of Market Value contained in Section 1) for the Trading Day
immediately prior to the date of such exercise. If, as a result of an adjustment
made pursuant to Section 12(a), the holder of any Right thereafter exercised
shall become entitled to receive any securities other than Preferred Shares,
this Section 15(b) shall apply, as nearly as reasonably may be, on like terms to
such other securities.
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<PAGE>
(c) The Company may issue fractions of Common Shares upon
exchange of Rights pursuant to Section 11(b) or to distribute certificates which
evidence fractional Common Shares. In lieu of such fractional Common Shares, the
Company may pay to the registered holders of the Right Certificates with regard
to which such fractional Common Shares would otherwise be issuable an amount in
cash equal to the same fraction of the current Market Value of one Common Share
as of the date on which a Person became an Acquiring Person.
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<PAGE>
(d) Each holder of Rights expressly waives such holder's right
to receive any fractional Rights or any fractional shares upon exercise of a
Right except as provided in this Section 15.
16. Rights of Action. (a) All rights of action in respect of this Plan
are vested in the respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the Common Shares)
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares) and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares) may enforce and institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Plan. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Plan and shall be entitled to specific performance of the
obligations of any Person under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this Plan.
(b) Any holder of Rights who prevails in an action to enforce
this Plan shall be entitled to recover the reasonable costs and expenses,
including attorneys' fees, incurred in such action.
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17. Transfer and Ownership of Rights and Right Certificates. (a) Prior
to the Distribution Date, the Rights shall be transferable only in connection
with the transfer of the Common Shares.
(b) After the Distribution Date, the Right Certificates shall
be transferable, subject to Section 7(e), if surrendered at the principal office
of the Company, duly endorsed or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the
Person in whose name a Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated certificate for
Common Shares made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
18. Right Certificate Holder Not Deemed a Stockholder. No holder, as
such, of any Right Certificate shall be entitled to vote or receive dividends or
be deemed, for any purpose, the holder of the Preferred Shares or of any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company,
including, without limitation, any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, to give or
withhold consent to any corporate action, to receive notice of meetings or other
actions affecting stockholders, to receive dividends or other distributions or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate are exercised in accordance with the provisions hereof.
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<PAGE>
19. Concerning the Rights Agent. (a) The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Rights Agreement and the exercise and performance of its
duties hereunder.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon any
Right Certificate or certificate for the Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
20. Merger or Consolidation or Change of Rights Agent. (a) Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Plan without the execution
or filing of any paper or any further act on the part of any of the parties
hereto provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 22. In case, at the time
such successor Rights Agent shall succeed to the agency created by this Plan,
any of the Right Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and, in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this Plan.
37
<PAGE>
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and, in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such right
Certificates shall have the full force provided in the Right Certificates and in
this Plan.
21. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Plan upon the following terms and conditions, by all
of which the Company and the holders of Right Certificates (or, prior to the
Distribution Date, of the Common Shares), by their acceptance thereof, shall be
bound:
38
<PAGE>
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Plan
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identify of any Acquiring Person) be proved
or established by the Company prior to taking, refraining from taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by an authorized
executive officer of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Plan in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Plan or in the Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
39
<PAGE>
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Plan or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Plan or in any Right Certificate; nor
shall it be responsible for any adjustment required under the provisions of
Section 11 or 12 or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to be
issued pursuant to this Plan or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it shall perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Plan.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any authorized executive officer of the Company, in connection with its duties
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
40
<PAGE>
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Plan. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct provided reasonable care was exercised in
the selection and continued employment thereof.
(j) The Company agrees to indemnify and hold the Rights Agent
harmless against any loss, liability, damage or expense (including reasonable
fees and expenses of legal counsel) which the Rights Agent may incur resulting
from its actions as Rights Agent pursuant to this Plan provided that the Rights
Agent shall not be indemnified or held harmless with respect to any such loss,
liability, damage or expense incurred by the Rights Agent as a result of, or
arising out of, its own negligence, bad faith or willful misconduct. In no case
shall the Company be liable with respect to any action, proceeding, suit or
claim against the Rights Agent unless the Rights Agent shall have notified the
Company, by letter or by facsimile confirmed by letter, of the assertion of any
action, proceeding, suit or claim against the Rights Agent, promptly after the
Rights Agent shall have notice of any such assertion of an action, proceeding,
suit or claim or have been served with the summons or other first legal process
giving information as to the nature and basis of the action, proceeding, suit or
claim. The Company shall be entitled to participate at its own expense in the
defense of any such action, proceeding, suit or claim, and, if the Company so
elects, the Company shall assume the defense of any such action, proceeding,
suit or claim. In the event that the Company assumes such defense, the Company
shall not thereafter be liable for the fees and expenses of any additional
counsel retained by the Rights Agent, so long as the Company shall retain
counsel satisfactory to the Rights Agent, in the exercise of its reasonable
judgment, to defend such action, proceeding, suit or claim. The Rights Agent
agrees not to settle any litigation in connection with any action, proceeding,
suit or claim with respect to which it may seek indemnification from the Company
without the prior written consent of the Company.
41
<PAGE>
22. Change of Rights Agent. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Plan upon 30 days'
notice in writing mailed to the Company and to each transfer agent of the Common
Shares and the Preferred Shares by registered or certified mail, and to the
holders of the Right Certificates (or, prior to the Distribution Date, of the
Common Shares) by first-class mail. The Company may remove the Rights Agent or
any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Shares and the Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares) by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) (who
shall, with such notice, submit his Right Certificate or, prior to the
Distribution Date, the certificate representing his Common Shares, for
inspection by the Company), then the registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares) may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States in good standing, having a principal office in the State of New York or
New Jersey, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by Federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $10 million provided that the
principal transfer agent for the Common Shares shall in any event be qualified
to be the Rights Agent. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and the Preferred Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares). Failure to give any notice provided
for in this Section 22, however, or any defect therein shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
42
<PAGE>
23. Issuance of Additional Rights and Right Certificates.
Notwithstanding any provisions of this Plan or of the Rights to the contrary,
the Company may issue new Right Certificates evidencing Rights in such form as
may be approved by the Board to reflect any adjustment or change made in
accordance with this Plan. In addition, in connection with the issuance or sale
of Common Shares following the Distribution Date and prior to the earlier of the
Redemption Date and Expiration Date, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company and (b) may,
in any other case, if deemed appropriate by the Board, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale provided, that (x) no such Right Certificate shall be issued if, and to
the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Right Certificate would be issued and (y) no
such Right Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
43
<PAGE>
24. Redemption and Termination. (a) The Board may, at its option, at
any time prior to the earlier of (i) 20 days after such time as a Person becomes
an Acquiring Person and (ii) the Expiration Date, order the redemption of all
the then outstanding Rights at the Redemption Price (the date of such redemption
being the "Redemption Date"). The Company may pay the Redemption Price either in
cash, Common Shares or any other form of consideration deemed appropriate by the
Board. The redemption of the Rights may be effective at such time, on such basis
and with such conditions as the Board may establish.
(b) Immediately upon the action of the Board ordering the
redemption of the Rights, and without any further action and without any notice,
the right to exercise the Rights shall terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price. Within a
reasonable time following the redemption, the Company shall give notice of such
redemption to the holders of the then outstanding Rights. Each such notice of
redemption shall state the method by which payment of the Redemption Price shall
be made. The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been duly given, whether or not the holder of
Rights receives such notice. In any case, failure to give such notice by mail,
or any defect in the notice, to any particular holder of Rights shall not affect
the sufficiency of the notice to other holders of Rights.
25. Notices. Notices or demands authorized by this Plan to be given or
made by the Company, the Rights Agent or the holder of a Right Certificate (or,
prior to the Distribution Date, of the Common Shares) to or on the other party
shall be sufficiently given or made if sent
44
<PAGE>
by first-class mail, postage prepaid, addressed as follows:
if to the Company:
Ariel Corporation
Attn: Chief Executive Officer
2540 Route 130
Cranbury, New Jersey 08512
with a copy to:
Friedman Siegelbaum LLP
Seven Becker Farm Road
Roseland, New Jersey 07068
Attn: Joseph R. Siegelbaum, Esq.
if to the Rights Agent:
Continental Stock Transfer and Trust Co.
2 Broadway
New York, New York 10004
Attn: William Seegraber
and if to a Rights holder:
to the address set forth on the registry or such other address as
may be given to the Company or Rights Agent by means of notice set
forth above.
45
<PAGE>
26. Supplements and Amendments. At any time prior to the Distribution
Date and subject to the last sentence of this Section 26, the Company may, and
the Rights Agent shall if the Company so directs, supplement or amend this Plan
without the approval of any holder of the Rights. From and after the
Distribution Date and subject to applicable law, the Company may amend this Plan
without the approval of any holders of Right Certificates (a) to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision of this Plan or (b) to
make any other provisions in regard to matters or questions arising hereunder
that the Company may deem necessary or desirable and that does not adversely
affect the interests of the holders of Right Certificates (other than an
Acquiring Person or an Affiliate of an Acquiring Person). Any supplement or
amendment adopted during any period after any Person has become an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
supplement or amendment could have been adopted under the prior sentence from
and after the Distribution Date. Any supplement or amendment to this Plan duly
approved by the Company that does not amend Sections 19, 20, 21 or 22 in a
manner adverse to the Rights Agent shall become effective immediately upon such
approval. Notwithstanding anything to the contrary contained in this Plan, no
supplement or amendment to this Plan shall be made which reduces the Redemption
Price (except as required by Section 12(a)).
27. Successors. All the covenants and provisions of this Plan by or for
the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
46
<PAGE>
28. Benefits of Plan; Determinations and Actions by the Board, Etc. (a)
Nothing in this Plan shall be construed to give to any Person other than the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, of the Common Shares) any legal or
equitable right, remedy or claim under this Plan, but rather this Plan shall be
for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, of the Common Shares).
(b) Except as otherwise provided in this Plan, the Board shall
have the exclusive power and authority to administer this Plan and to exercise
all rights and powers specifically granted to the Board or to the Company, or as
may be necessary or advisable in the administration of this Plan, including,
without limitation, the right and power to (i) interpret this Plan and (ii) make
all determinations deemed necessary or advisable for the administration of this
Plan (including, without limitation, a determination to redeem or not redeem the
Rights or to amend this Plan and a determination of whether an offer constitutes
a Qualifying Offer and whether there is an Acquiring Person).
(c) Nothing contained in this Plan shall be deemed to be in
derogation of the obligation of the Board to exercise its fiduciary duty.
Without limiting the foregoing, nothing contained herein shall be construed to
suggest or imply that the Board shall not be entitled to reject any Qualifying
Offer or any other tender offer, or to recommend that holders of Common Shares
reject any Qualifying Offer or any other tender offer, or to take any other
action (including, without limitation, the commencement, prosecution, defense or
settlement of any litigation and the submission of additional or alternative
offers or other proposals) with respect to any Qualifying Offer or any other
tender offer that the Board believes is necessary or appropriate in the exercise
of such fiduciary duty.
47
<PAGE>
29. Severability. If any term, provision, covenant or restriction of
this Plan is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Plan shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
30. Governing Law. This Plan and each right issued hereunder shall be
governed by and construed in accordance with the law of the State of Delaware
(without reference to rules of conflicts of laws).
31. Descriptive Headings. Descriptive headings of the several Sections
of this Plan are inserted for convenience only and shall not control or affect
the meaning or construction of any provision of this Plan.
48
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Plan to be duly
executed as of the day and year first above written.
ARIEL CORPORATION
BY: /s/ Anthony Agnello
----------------------------------
ANTHONY AGNELLO
Chief Executive Officer and
Chairman of the Board
Agreed to and accepted on this 13th day of October, 1998, by:
CONTINENTAL STOCK TRANSFER
AND TRUST CO., as Rights Agent
By: /s/ Roger Bernhammer
--------------------------------
Roger Bernhammer
49
<PAGE>
EXHIBIT A
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS THEREOF, OF SERIES A
PREFERRED STOCK
OF
ARIEL CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware (the "DGCL")
Ariel Corporation, a Delaware corporation (the "Company"), certifies
that the following resolutions were duly adopted by action of the Board of
Directors of the Company (the "Board") at a meeting duly held on September 28,
1998.
RESOLVED that pursuant to the authority granted to and vested in the
Board by the Certificate of Incorporation of the Company (the "Certificate of
Incorporation") and Section 151(g) of the DGCL, the Board hereby creates, from
the authorized shares of Preferred Stock, par value $.001 per share ("Preferred
Stock"), of the Company authorized to be issued pursuant to the Certificate of
Incorporation, a series of Preferred Stock, and hereby fixes the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, of the
shares of such series as follows:
A-1
<PAGE>
1. Designation and Number of Shares. The shares of such series shall be
designated as "Series A Preferred Stock" ("Series A Shares"). The number of
shares initially constituting the Series A Shares shall be 200,000 provided,
that if more than such number of Series A Shares shall be issuable upon the
exercise of rights (the "Rights") issued pursuant to the Plan dated as of
October 9, 1998, the Board, pursuant to Section 151(g) of the DGCL, shall direct
by resolution or resolutions that a certificate be properly executed,
acknowledged, filed and recorded, in accordance with Section 103 thereof
providing for the number of Series A Shares authorized to be issued to be
increased (to the extent that the Certificate of Incorporation then permits) to
the largest whole number of shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights.
2. Dividends or Distributions. (a) Subject to the rights of the holders
of shares of any other series of Preferred Stock or other class of capital stock
of the Company ranking superior to Series A Shares with respect to dividends,
the holders of shares of Series A Shares shall be entitled to receive, when, as
and if declared by the Board, out of the assets of the Company legally available
therefor, (1) quarterly dividends payable in cash on the last day of each fiscal
quarter in each year, or such other dates as the Board shall approve (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or a fraction of the Series A Shares, in the amount of $1.00 per
share (rounded to the nearest cent) less down to zero the amount of cash
dividends declared on the Series A Shares pursuant to the following clause (2)
A-2
<PAGE>
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of Series
A Shares and (2) dividends payable in cash on the payment date for each cash
dividend declared on the common stock, par value $.001 per share ("Common
Stock"), of the Company in an amount per whole share (rounded to the nearest
cent) equal to the Formula Number (as hereinafter defined) then in effect times
the cash dividends then to be paid on each share of Common Stock. In addition,
if the Company pays any dividend or makes any distribution on the Common Stock
payable in assets, securities or other forms of noncash consideration (other
than dividends or distributions solely in shares of Common Stock) the Company
shall simultaneously pay or make on each outstanding Series A Share a dividend
or distribution in like kind equal to the Formula Number then in effect times
such dividend or distribution on each share of the Common Stock. As used herein,
the "Formula Number" shall be 100, provided, that if the Company shall (i)
declare or pay any dividend on the Common Stock payable in shares of Common
Stock or make any distribution on the Common Stock in shares of Common Stock,
(ii) subdivide (by a stock split or otherwise) the outstanding shares of Common
Stock into a larger number of shares of Common Stock or (iii) combine (by a
reverse stock split or otherwise) the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the Formula Number shall be adjusted
to a number determined by multiplying the Formula Number in effect immediately
prior to such event by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately prior to such event (and rounding the result to the nearest whole
number); and provided further, that, if at any time after the date of this
Certificate, the Company shall issue any shares of its capital stock in a
merger, reclassification, or change of the outstanding shares of Common Stock,
then in each such event the Formula Number shall be appropriately adjusted to
reflect such merger, reclassification or change so that each Series A Share
continues to be the economic equivalent of a Formula Number of shares of Common
Stock prior to such merger, reclassification or change.
A-3
<PAGE>
(b) The Company shall declare a dividend or distribution on
the Series A Shares as provided in Section 2(a) immediately prior to or at the
same time it declares a dividend or distribution on the Common Stock (other than
a dividend or distribution solely in shares of Common Stock) provided that if no
dividend or distribution (other than a dividend or distribution in shares of
Common Stock) is declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $.01 per share on the Series A Shares shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The
Board may fix a record date for the determination of holders of Series A Shares
entitled to receive a dividend or distribution declared thereon, which record
date shall be the same as the record date for any corresponding dividend or
distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on
outstanding Series A Shares from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such Series A Shares provided that
dividends on such shares that are originally issued after the record date for
the determination of holders of Series A Shares entitled to receive a quarterly
dividend and on or prior to the next succeeding Quarterly Dividend Payment Date
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date, provided further that dividends on Series A Shares originally issued prior
to the record date for the determination of holders of Series A Shares entitled
to receive a quarterly dividend on the first Quarterly Dividend Payment Date
shall be calculated as if cumulative from the last day of the fiscal quarter
next preceding the date of original issuance of such Shares. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Series A Shares less
than the dividends at the time accrued and payable on such Shares shall be
allocated pro rata on a share-by-share basis among all such Shares at the time
outstanding.
A-4
<PAGE>
(d) So long as any Series A Shares are outstanding, no
dividends or other distributions shall be declared, paid or distributed or set
aside for payment or distribution, on the Common Stock unless the dividend
required by this Section 2 to be declared on the Series A Shares has been
declared.
(e) The holders of the Series A Shares shall not be entitled
to receive any dividends or other distributions except as provided herein.
3. Voting Rights. The holders of Series A Shares shall have the
following voting rights:
(a) Each holder of Series A Shares shall be entitled to a
number of votes equal to the Formula Number then in effect, for each Series A
Share held of record on each matter on which holders of the Common Stock or
stockholders generally are entitled to vote, multiplied by the maximum number of
votes per share that any holder of the Common Stock then has with respect to
such matter (assuming any holding period or other requirement to vote a greater
number of shares is satisfied).
A-5
<PAGE>
(b) Except as otherwise provided herein or by applicable law,
the holders of Series A Shares and the holders of Common Stock shall vote
together as one class for the election of directors and on all other matters
submitted to a vote of stockholders.
(c) If, at the time of any annual meeting of stockholders for
the election of directors, the equivalent of six quarterly dividends (whether or
not consecutive) payable on the Series A Shares are in default, the number of
directors constituting the Board shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other
directors, the holders of record of the Series A Shares, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at such
meeting (and at each subsequent annual meeting of stockholders), unless all such
dividends in arrears have been paid or declared and set apart for payment prior
thereto, to vote for the election of two directors, the holders of any Series A
Shares being entitled to cast a number of votes per Series A Share equal to the
Formula Number. Until the default in payments of all dividends that permitted
the election of such two additional directors ceases to exist, any director so
elected may be removed at any time, either with or without cause, only by the
affirmative vote of the holders of the Series A Shares at the time entitled to
cast a majority of the votes entitled to be cast for the election of such
directors at a special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders. If and when
such default ceases to exist, the holders of the Series A Shares shall be
divested of the foregoing special voting rights, subject to revestment upon a
subsequent like default in payments of dividends. Upon the termination of the
foregoing special voting rights, the terms of office of all persons elected
directors pursuant to such special voting rights shall forthwith terminate, and
the number of directors constituting the Board shall be reduced by two. The
voting rights granted by this Section 3(c) shall be in addition to any other
voting rights granted to the holders of the Series A Shares in this Section 3.
A-6
<PAGE>
(d) Except as provided herein, in Section 11 or by applicable
law, holders of Series A Shares shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) to authorizing or taking any
corporate action.
4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Shares as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on Series A Shares outstanding shall
have been paid in full, the Company shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Shares, except
dividends paid ratably on the Series A Shares and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
A-7
<PAGE>
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Shares provided
that the Company may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Shares; or
(iv) purchase or otherwise acquire for consideration any
Series A Shares, or any shares of stock ranking on a parity with the Series A
Shares, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board) to all holders of such Shares upon such
terms as the Board, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes,
determines in good faith shall result in fair and equitable treatment among the
respective series or classes.
(b) The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any capital stock of the
Company unless the Company could pursuant to Section 4(a), purchase or otherwise
acquire such shares at such time and in such manner.
A-8
<PAGE>
5. Liquidation Rights. Upon the liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary, no distribution shall be made
(a) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Shares unless,
prior thereto, the holders of Series A Shares shall have received an amount
equal to the accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, plus an amount equal to the greater
of (x) $1.00 per whole share and (y) an aggregate amount per share equal to the
Formula Number then in effect times the aggregate amount to be distributed per
share to holders of Common Stock or (b) to the holders of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Shares, except distributions made ratably on the Series A
Shares and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
6. Consolidation, Merger, Etc. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which the Common
Stock are exchanged for or changed into other stock or securities, cash or any
other property, the then outstanding Series A Shares shall at the same time be
similarly exchanged or changed into an amount per share equal to the Formula
Number then in effect times the aggregate amount of stock, securities, cash or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is exchanged or changed. In the case of
conflict between Section 2 of this Section 6, the latter shall control.
7. No Redemption; No Sinking Fund. (a) The Series A Shares shall not be
subject to redemption by the Company or at the option of any holder of Series A
Shares except as set forth in Section 5 of Article IV of the Certificate of
Incorporation provided, that the Company may purchase or otherwise acquire
outstanding Series A Shares in the open market or by offer to any holder or
holders thereof.
A-9
<PAGE>
(b) The Series A Shares shall not be subject to or entitled to
the operation of a retirement or sinking fund.
8. Ranking. The Series A Shares shall rank junior to all other series
of Preferred Stock, unless the Board determines otherwise in determining the
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations and restrictions thereof.
9. Fractional Shares. The Series A Shares shall be issuable upon
exercise of the Rights issued pursuant to the Plan in whole shares or in any
fraction of a share that is one one-hundredth (1/100th) of a share or any
integral multiple of such fraction that shall entitle the holder, in proportion
to such holder's fractional shares, to receive dividends, exercise voting
rights, participate in distributions and to have the benefit of all other rights
of holders of Series A Shares. In lieu of fractional shares, the Company, prior
to the first issuance of a share or a fraction of a share of Series A Shares,
may elect (a) to make a cash payment as provided in the Plan for fractions of a
share other than one one-hundredth (1/100th) of a share or any integral multiple
thereof or (b) to issue depository receipts evidencing such authorized fraction
of a share of Series A Shares pursuant to an agreement between the Company and a
depository selected by the Company if such agreement provides that the holders
of such depository receipts shall have all the rights, privileges and
preferences to which they are entitled as holders of the Series A Shares.
A-10
<PAGE>
10. Reacquired Shares. Any Series A Shares purchased or otherwise
acquired by the Company shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their retirement become
authorized but unissued Preferred Stock, without designation as to series until
such shares are once more designated as part of a particular series by the Board
pursuant to Section 2 of Article IV of the Certificate of Incorporation.
11. Amendment. None of the powers, preferences and relative,
participating, optional or other special rights of the Series A Shares as
provided herein or in the Certificate of Incorporation shall be amended in any
manner that would alter or change the powers, preferences, rights or privileges
of the holders of Series A Shares so as to affect them adversely without the
affirmative vote of the holders of at least 66-2/3% of the outstanding Series A
Shares, voting as a separate class; provided, that no such amendment approved by
the holders of at least 66-2/3% of the outstanding Series A Shares shall be
deemed to apply to the powers, preferences, rights or privileges of any holder
of Series A Shares originally issued upon exercise of the Rights after the time
of such approval without the approval of such holder.
A-11
<PAGE>
IN WITNESS WHEREOF, Ariel Corporation has caused this Certificate to be
duly executed on this ___ day of October, 1998.
ARIEL CORPORATION
BY: _________________________
ANTHONY AGNELLO
Chief Executive Officer and
Chairman of the Board
A-12
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. [R]-
___________ Rights
NOT EXERCISABLE AFTER OCTOBER 9, 2008, OR EARLIER IF REDEEMED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE PLAN.
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
PLAN ) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND
VOID AND NONTRANSFERABLE.
Right Certificate of Ariel Corporation
This certifies that the above registered person, or registered assigns,
is the owner of the number of Rights set forth above, each of which entitles the
registered owner, subject to the Plan dated as of October 9, 1998 (the "Plan"),
adopted by the Board of Directors ("Board") of Ariel Corporation, a Delaware
corporation (the "Company"), unless the Rights evidenced hereby are redeemed by
the Company, to purchase from the Company at any time after the Distribution
Date (as defined in the Plan ) and prior to 5:00 p.m., New York City time, on
October 9, 2008 (the "Expiration Date"), at the principal office of the Rights
Agent one one-hundredth of a fully paid, nonassessable share of Series A
Preferred Stock par value $.001 per share, of the Company (the "Series A
Shares"), at a purchase price per one one-hundredth of a share equal to $25 (the
"Purchase Price") payable in cash, upon presentation and surrender of this Right
Certificate with the form of election to purchase attached hereto duly executed.
The Purchase Price and the number and kind of shares that may be purchased upon
exercise of each Right evidenced by this Right Certificate, as set forth above,
are the Purchase Price and the number and kind of shares which may be so
purchased as of the date of filing of the Certificate of Designation with the
Secretary of State of Delaware, October 9, 1998. As provided in the Plan, the
Purchase Price and the number and kind of shares that may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
Beneficially Owned by an Acquiring Person or an Affiliate of an Acquiring Person
(as such terms are defined in the Plan), such Rights shall be null and void and
nontransferable and the holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right.
B-1
<PAGE>
This Right Certificate is subject to the Plan, which is incorporated
herein by reference and made a part hereof and to which reference to the Plan is
hereby made for a full description of the respective rights, limitations of
rights, obligations, duties and immunities hereunder of the Company, the Rights
Agent and the holders of the Right Certificates. Copies of the Plan are on file
at the principal office of the Rights Agent and are available from the Company
upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number and
kind of shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate is exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Right Certificates for the
number of whole Rights not exercised.
Subject to the Plan, the Rights evidenced by this Right Certificate may
be redeemed by the Company at its option at a redemption price (in cash or
Common Stock or other securities of the Company deemed by the Board to be at
least equivalent in value) of $.01 per Right (which amount shall be subject to
adjustment as provided in the Plan ) at any time prior to the earlier of (a)
such time as a Person becomes an Acquiring Person and (b) the Expiration Date
provided, that, for the 120-day period after any date of a change (resulting
from a proxy or consent solicitation) of a majority of the Board in office at
the commencement of such solicitation, the Rights may only be redeemed if (i)
there are directors then in office who were in office at the commencement of
such solicitation and (ii) the Board, with the concurrence of a majority of such
directors then in office, determines that such redemption is, in their judgment,
in the best interests of the Company and its stockholders.
The Company may, but shall not be required to, issue fractions of
Series A Shares or distribute certificates that evidence fractions of Series A
Shares upon the exercise of any Right or Rights evidenced hereby. In lieu of
issuing fractional shares, the Company may elect to make a cash payment as
provided in the Plan for fractions of a share other than one one-hundredth of a
share or any integral multiple thereof or to issue certificates or utilize a
depository arrangement as provided in the Plan and the designation covering the
shares.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Series A Shares
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Plan or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company, including any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Plan), or to receive dividends or other distributions or subscription rights, or
otherwise, until the
B-2
<PAGE>
Right or Rights evidenced by this Right Certificate are exercised as provided in
accordance with the Plan.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
IN WITNESS WHEREOF, Ariel Corporation has caused this Certificate to be
signed on the date set forth below.
Dated as of: _____________________, _________
ARIEL CORPORATION
BY: _________________________
ANTHONY AGNELLO
Chief Executive Officer and
Chairman of the Board
Countersigned on this __ day of ________, _____ by:
CONTINENTAL STOCK TRANSFER
AND TRUST CO., as Rights Agent
By:_____________________________
Name:
Title:
B-3
<PAGE>
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To Ariel Corporation:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right Certificate to purchase the Series A Shares (or other
shares) issuable upon the exercise of such Rights and requests that certificates
for such shares be issued in the name of:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights is less than the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: ___________________, ________
Signature _______________________________________
Signature Guaranteed:
NOTICE
The signature on the foregoing Form of Election to Purchase must correspond to
the name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.
B-4
<PAGE>
EXHIBIT C
---------
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS PLAN, A RIGHT
OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS PLAN) AND CERTAIN TRANSFEREES
THEREOF WILL BECOME NULL AND VOID
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK OF
ARIEL CORPORATION
The Board of Directors of Ariel Corporation (the "Company") declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock, par value $.001 per share, of the Company (the "Common
Stock"). The dividend is payable to the stockholders of record on October 9,
1998 (the "Effective Date"). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Preferred
Stock, par value $.001 per share, of the Company (the "Preferred Stock") at a
price of $25 per one one-hundredth of a share of Preferred Stock (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Plan dated as of October 9, 1998, as the same may be amended
from time to time (the "Rights Plan"). Continental Stock Transfer and Trust Co.
will serve as the "Rights Agent."
Until the earlier of (i) such time as the Company learns that a person
or group of affiliated or associated persons (with certain exceptions, an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock or (ii) the close of business on the date
designated by the Board of Directors following the commencement, or public
disclosure, of an intent to commence a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the outstanding shares of Common Stock (the earlier of
such dates being called the "Distribution Date"), the Rights will be evidenced,
with respect to any of the Common Stock certificates outstanding as of the
Effective Date, by such Common Stock certificate and will be transferable only
in connection with the transfer of Common Stock.
Until the Distribution Date (or earlier expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Effective Date, even without such notation or a copy of
this Summary of Rights, will also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such certificate.
Until the Distribution Date (or earlier expiration of the Rights) new Common
Stock certificates issued after the Effective Date will contain a notation
incorporating the Rights Plan by reference. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the
C-1
<PAGE>
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on October 9, 2008 (the "Expiration Date"), unless the Expiration
Date is advanced or extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights is subject
to adjustment from time to time to prevent dilution in the event there is a
change in the Common Stock or Preferred Stock, whether by reason of a stock
dividend, stock split, recapitalization, merger, consolidation, combination or
exchange of securities, split-up, split-off, spin-off, liquidation or other
similar changes in capitalization, any distribution or issuance of cash, assets,
evidence of indebtedness or subscription rights, options or warrants to holders
of Common Stock or Preferred Stock.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable by election of holders. Each share of Preferred Stock will be
entitled, when, as and if declared by the Board of Directors, to a minimum
preferential quarterly dividend payment of $1 per share, but will be entitled to
an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, dissolution or winding up of the Company,
the holders of the Preferred Stock will be entitled to a minimum preferential
payment of $1 per share (plus any accrued but unpaid dividends) and will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock. Each share of Preferred Stock will have 100 votes, voting together
with the Common Stock and not as a separate class. Finally, in the event of any
consolidation, merger or other transaction in which outstanding shares of Common
Stock are converted or exchanged, each share of Preferred Stock will be entitled
to receive 100 times the amount received per share of Common Stock. These rights
are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right is intended to
approximate the value of one share of Common Stock.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right, for the
Purchase Price, that number of one one-hundredths (1/100ths) of a Preferred
Share equivalent to the number of Common Shares that at the time of such event
would have a market value of twice the Purchase Price.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
the Rights Plan provides that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person
C-2
<PAGE>
which will have become void) will thereafter have the right to receive upon the
exercise of a Right that number of shares of common stock of the person with
whom the Company has engaged in the foregoing transaction (or its parent) that
at the time of such transaction have a market value of two times the exercise
price of the Right. If the Company is so acquired by an Acquiring Person or an
associate or affiliate of an Acquiring Person that is not a publicly traded
entity, each Right will entitle its holder with certain exceptions to purchase,
for the Purchase Price, at such holder's option, (i) that number of shares of
the surviving corporation in the transaction with such entity (which surviving
corporation could be the Company) that at the time of the transaction would have
a book value of twice the Purchase Price, (ii) that number of shares of such
entity that at the time of the transaction would have a book value of twice the
Purchase Price or (iii) if such entity has an affiliate that has publicly traded
common shares, that number of common shares of such affiliate that at the time
of the transaction would have a market value of twice the Purchase Price.
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraph,
that is, merger, combination or sale of assets, or the acquisition by such
Acquiring Person of 50% or more of the outstanding shares of Common Stock, the
Board of Directors may exchange the Rights (other than Rights owned by such
Acquiring Person which will have become void), in whole or in part, for shares
of Common Stock or Preferred Stock (or a series of the Company's preferred stock
having equivalent rights, preferences and privileges), at an exchange ratio of
one share of Common Stock, or a fractional share of Preferred Stock (or other
preferred stock) equivalent in value thereto, per Right.
The Company may issue fractions of Rights or distribute Right
Certificates evidencing fractional Rights or in lieu thereof pay registered
holders an amount in cash based on the current market price of the Preferred
Stock or the Common Stock.
At any time prior to the time any person or group becomes an Acquiring
Person, the Board of Directors may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price"), payable in cash, Common
Stock or such other form of consideration deemed appropriate by the Board of
Directors. The redemption of the Rights may be effective at such time, on such
basis and with such conditions as the Board of Directors may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Prior to the Distribution Date, the Company may, except with respect to
the Redemption Price, amend the Rights Plan in any manner. After the
Distribution Date, the Company may, except with respect to the Redemption Price,
amend the Rights Plan in any manner that does not adversely affect the interests
of holders of the Rights.
Until a Right is exercised or exchanged, the holder thereof, as such,
will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
A copy of the Rights Plan has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
October 21, 1998. A copy of the Rights Plan is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Plan, as the same
may be amended from time to time, which is hereby incorporated herein by
reference.
C-3
<PAGE>
EXHIBIT 99
----------
PRESS RELEASE
October 21, 1998 Contact: Anthony Agnello
Cranbury, New Jersey - Ariel Corporation (the "Company") announced that
its Board of Directors approved the declaration of a dividend distribution of
one preferred share purchase right on each outstanding share of its Common Stock
("Rights"). Each Right will entitle shareholders to buy one one-hundredth of a
share of newly created Series A Preferred Stock of the Company at an exercise
price of $25. The Rights will be exercisable if a person or group acquires 15%
or more of the Common Stock of the Company or announces a tender offer for 15%
or more of the Common Stock. The Board of Directors will be entitled to redeem
the Rights at one cent per Right at any time before such person acquires 15% or
more of the outstanding Common Stock. The Rights are more fully described in the
Rights Plan dated as of October 9, 1998.
The Rights are designed to assure that all shareholders of the Company
receive fair and equal treatment in the event of any proposed takeover of the
Company and to guard against partial tender offers, open market accumulations
and other tactics designed to gain control of the Company without paying all
shareholders a fair price. The Rights are not being distributed in response to
any specific effort to acquire the Company.
Under the Rights Plan if a person acquires 15% or more of the
outstanding Common Stock of the Company, each Right will entitle its holder to
purchase, at the Right's exercise price, that number of one one-hundredths
(1/100ths) of a Preferred Share equivalent to the number of Common Shares that
at the time of such event would have a market value of twice the Purchase Price.
If the Company is acquired in a merger or other business combination transaction
after a person acquires 15% or more of the Company's Common Stock, each Right
will entitle its holder to purchase, at the Right's then-current exercise price,
a number of the acquiring company's common shares having a market value at that
time of twice the Right's exercise price.
If the Acquiring person is not publicly traded the holder has the
option to receive that number of shares of the surviving corporation (including
the Company) having a book value of twice the Purchase Price or if such entity
has an affiliate that has publicly traded common shares, that number of common
shares of such affiliate that at the time of the transaction would have a market
value of twice the Purchase Price.
The Board of Directors may also exchange the Rights at an exchange
ratio of one share of Common Stock per Right. Rights held by a 15% holder will
become void and will not be exercisable to purchase Common Stock, or the
acquiring person's common shares, at the discounted purchase price, and will not
be available for such exchange.
The dividend distribution will be payable to shareholders of record as
of the close of business on October 9, 1998. The Rights will expire in ten
years. The Rights distribution is not taxable to shareholders.
