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ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF ARIEL CORPORATION:
Notice is hereby given that a special meeting of the stockholders of Ariel
Corporation (the "Company") will be held at the Company's offices at 2540 Route
130, Cranbury, New Jersey on Wednesday, December 20, 2000 at 10:00 A.M., Eastern
Standard Time, for the following purposes:
1. To vote upon the future issuance of 2,151,000 shares of common stock upon
the exercise of warrants issued by the Company in connection with a private
placement of common stock completed in February 2000; and to approve the
issuance to the investors in the February 2000 private placement of up to
2,151,000 additional warrants to purchase one share of common stock as
consideration for their agreement to amend certain provisions of the original
warrants and only in the event that investors exercise their original warrants
before January 15, 2001; in each case to comply with Rule 4350 (formerly Rule
4460) of the National Association of Securities Dealers, Inc.; and
2. To transact such other business as may properly come before the meeting
and any continuations and adjournments thereof.
Stockholders of record at the close of business on November 15, 2000 are
entitled to notice of and to vote at the meeting.
In order to ensure a quorum, it is important that the stockholders
representing a majority of the total number of shares issued and outstanding and
entitled to vote be present in person or represented by their proxies. Whether
you expect to attend the meeting in person or not, please sign, fill out, date
and return the enclosed proxy in the enclosed self-addressed, postage-paid
envelope. If you attend the meeting and prefer to vote in person, you can revoke
your proxy.
In addition, please note that abstentions are included in the determination
of the number of shares present and voting, for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
not counted as voted either for or against a proposal.
By Order of the Board of Directors
HAROLD W. PAUL
Secretary
November 29, 2000
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE PROXY MAY BE REVOKED
IN WRITING PRIOR TO THE MEETING OR, IF YOU ATTEND THE MEETING, YOU MAY REVOKE
THE PROXY AND VOTE YOUR SHARES IN PERSON.
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ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
This proxy statement contains information related to the Special Meeting of
stockholders of Ariel Corporation to be held on Wednesday, December 20, 2000,
beginning at 10:00 A.M. at the Company's offices at 2540 Route 130, Cranbury,
New Jersey and at any postponements or adjournments thereof. This statement is
first being sent to stockholders on or about November 29, 2000.
ABOUT THE MEETING
What is the purpose of the Special Meeting?
At the meeting, stockholders will act upon the matters outlined in the
accompanying notice of meeting and as more fully described therein.
Who is entitled to vote?
Only stockholders of record at the close of business on the Record Date,
November 15, 2000, are entitled to receive notice of the meeting and to vote the
shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon. Stockholders who
purchased shares of common stock in the February 2000 private placement must
abstain from voting on Proposal No. 1.
Who can attend the Meeting?
All stockholders as of the Record Date, or their duly appointed proxies, may
attend the meeting. Each stockholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through a
broker or other nominee), you will need to bring a copy of a brokerage statement
reflecting your stock ownership as of the Record Date and check in at the
registration desk at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the Record Date will
constitute a quorum, permitting the meeting to conduct its business. As of the
Record Date, 13,083,720 shares of common stock of the Company were outstanding.
Proxies received but marked as abstentions and broker "non-votes" will be
included in the calculation of the number of shares considered to be present at
the meeting.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you are a registered
stockholder and attend the meeting, you may deliver your completed proxy card in
person. "Street name" stockholders who wish to vote at the meeting will need to
obtain a proxy form from the institution that holds their shares.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
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What are the Board of Directors' recommendations?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors.
The Board of Directors' recommendation is a vote in favor of Proposal No. 1.
With respect to any other matter that properly comes before the Meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
What vote is required to approve Proposal No. 1?
The affirmative vote of the holders of a majority of the votes cast by the
stockholders at the meeting, represented in person or by proxy is required for
the approval of Proposal No. 1 pursuant to Rule 4350 of the NASD. A properly
executed proxy marked "ABSTAIN" with respect to any such matter will not be
voted, although it will be counted for purposes of determining whether there is
a quorum. Accordingly, an abstention will not have an effect on the outcome of
the vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee will not be permitted to exercise voting discretion with
respect to Proposal No. 1. Thus, if you do not give your broker or nominee
specific instructions, your shares will not be voted. Shares represented by such
broker "non-votes" will, however, be counted in determining whether there is a
quorum.
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STOCK OWNERSHIP
Who are the largest owners of the Company's common stock?
The Company knows of no single person or group that is the beneficial owner
of more than 5% of the Company's common stock, other than Mr. Agnello, the
Company's Chairman, who owns 6.0%.
How much stock do the Company's directors and executive officers own?
The following table shows the amount of the Company's common stock
beneficially owned (unless otherwise indicated) by the Company's directors and
the executive officers. Except as otherwise indicated, all information is as of
November 15, 2000.
<TABLE>
<CAPTION>
Number of Shares
Directors and Executive Officers Beneficially Owned Percentage
-------------------------------- ------------------ ----------
<S> <C> <C>
Jay H. Atlas.......... ............................................ 236,250(1) 1.8%
Anthony M. Agnello.... ............................................ 782,000(2) 6.0%
Esmond T. Goei........ ............................................ 15,000(3) *
Harold W. Paul........ ............................................ 33,500(4) *
Ira Fuchs............. ............................................ 50,000(3) *
Carlos G. Borgialli... ............................................ 12,500(5) *
John R. Loprete....... ............................................ 8,500(6) *
Dennis I. Schneider... ............................................ 242,000(7) 1.8%
All officers and directors as a group (nine people) ............... 1,379,750 10.5%
</TABLE>
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*Less than l%.
(1) Includes 236,250 shares subject to presently exercisable options.
(2) Includes 175,000 shares subject to presently exercisable options.
(3) All shares beneficially owned by Messrs. Goei and Fuchs reflect options
issued in exchange for their services as directors.
(4) Includes 30,000 shares subject to presently exercisable options.
(5) Includes 12,500 shares subject to presently exercisable options.
(6) Includes 7,500 shares subject to presently exercisable options.
(7) Includes 242,000 shares subject to presently exercisable options.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock is 42,000,000 shares, consisting of 40,000,000
shares of common stock, $.001 par value per share, and 2,000,000 shares of
preferred stock, $.001 par value per share. As of the Record Date, November 15,
2000, 13,083,720 shares of common stock were outstanding, and there were 223
holders of record. In addition, as of November 15, 2000, there were outstanding
options for the purchase of 2,714,776 shares of common stock and outstanding
warrants for the purchase of 2,559,681 shares of common stock, including the
warrants issued in the February 2000 private placement. No shares of preferred
stock are currently outstanding.
Common Stock
The holders of shares of common stock are entitled to one vote for each share
held of record on any matters to be voted on by stockholders. The election of
directors requires a plurality vote of those shares of common stock represented
at any stockholders meeting. Upon the notice of one or more stockholders that
the stockholder intends to cumulate his or her votes, and in accordance with the
conditions contained in our bylaws, every stockholder entitled to vote at an
election for directors shall have the right to cumulate his or her votes. If
cumulative voting is effected, each stockholder will be entitled to give one
candidate a number of votes equal to the number of votes to which the
stockholder's shares are normally entitled, or to distribute the stockholder's
votes among as many candidates as the stockholder sees fit. The holders of
common stock are entitled to receive dividends when, as and if declared by the
board of directors out of legally available funds. We have never paid cash
dividends on our common stock and do not plan to do so in the foreseeable
future. In the event of liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the common stock.
Holders of shares of common stock, as such, have no redemption, preemptive or
other subscription rights, and there are no conversion provisions applicable to
the common stock. All of the outstanding shares of our common stock are fully
paid and nonassessable.
Preferred Stock
Our authorized shares of preferred stock may be issued in one or more series
and the board of directors is authorized, without further action by the
stockholders, to designate the rights, preferences, limitations of, and
restrictions upon, shares of each series, including dividend, voting, redemption
and conversion rights. We believe that the availability of preferred stock
issuable in series provides increased flexibility for structuring possible
future financings and acquisitions, if any, and in meeting other corporate
needs. We cannot describe the actual effects the issuance of any series of
preferred stock would have on the rights of holders of common stock until the
board of directors determines the specific terms, rights and preferences of a
series of preferred stock. However, such effects might include, among other
things, restricting dividend payments on the common stock, diluting the voting
power of the common stock or impairing the liquidation rights of the common
stock. In addition, the issuance of preferred stock may have the effect of
facilitating, as well as impeding or discouraging, a merger, tender offer, proxy
contest, the assumption of control by a holder of a large block of our
securities or the removal of incumbent management. The market price of the
common stock could also be adversely affected by the issuance of preferred
stock.
Pursuant to our rights plan, the board of directors declared a dividend of
one preferred share purchase right for each outstanding share of common stock.
Until the occurrence of certain triggering events, the rights will be evidenced
by the outstanding shares of common stock listed in the books and records
maintained by our transfer agent and will not be separately issued.
Warrants
At September 30, 2000, Transamerica Business Credit Corporation owned 100,000
warrants exercisable at $3.763 per share that were issued as consideration for
certain waivers and amendments to our credit agreement.
On February 24, 2000, we issued 2,151,000 warrants to purchase common stock
with an exercise price of $6.875 to the investors in the private placement. The
warrants were not exercisable until September 1, 2000. The warrants currently
provide that the exercise price will be reset on March 1, 2001, the one year
anniversary date of the issuance of the warrants, to the average market price
for the five trading days preceding March 1, 2000,
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provided that the average market price is less than $6.875. The exercise price
is also subject to adjustment in the event the Company sells shares of Common
Stock at a price below the current market price immediately prior to the sale.
The placement agents for the private placement were issued an aggregate of
184,850 warrants to purchase common stock at $6.875 per share as partial
compensation for their services.
PROPOSAL 1
TO VOTE UPON THE FUTURE ISSUANCE OF 2,151,000 SHARES OF COMMON STOCK UPON THE
EXERCISE OF WARRANTS ISSUED BY THE COMPANY IN CONNECTION WITH A PRIVATE
PLACEMENT OF COMMON STOCK COMPLETED IN FEBRUARY 2000; AND TO APPROVE THE
ISSUANCE TO THE INVESTORS IN THE FEBRUARY 2000 PRIVATE PLACEMENT OF UP TO
2,151,000 ADDITIONAL WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK AS
CONSIDERATION FOR THEIR AGREEMENT TO AMEND CERTAIN PROVISIONS OF THE ORIGINAL
WARRANTS AND ONLY IN THE EVENT THAT INVESTORS EXERCISE THEIR ORIGINAL WARRANTS
BEFORE JANUARY 15, 2001. IN EACH CASE TO COMPLY WITH RULE 4350 (FORMERLY RULE
4460) OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
In the fourth quarter of 1999, we began exploring ways in which we could
raise capital to launch our new products targeted at the Internet service
provider market and to support our longer-term growth plans. We hired an
investment banking firm and discussed with them a number of financing
alternatives, including accessing the public and private markets. We concluded,
based on the advice of our investment bankers, that raising capital through a
private placement was the most effective way to raise the minimum amount of
proceeds we needed to execute our new business strategy in the shortest time
frame. In February 2000, we completed a private placement to a group of
investors of 2,151,000 shares of common stock at a purchase price of $4.00 per
share and 2,151,000 warrants to purchase shares of common stock with an initial
exercise price of $6.875, which represented a premium of $0.125 over the closing
price of the Company's common stock on the Nasdaq Stock Market on the day prior
to the closing of the private placement. The warrants were not exercisable until
September 1, 2000. The warrants contain a reset provision which provides that if
the average closing price of the common stock on the National Market System for
the five trading days immediately preceding the first anniversary date of the
issuance of the warrant is lower than the warrant purchase price, then the price
will be reset to such average price. The warrant exercise price is also subject
to adjustment under other circumstances.
Rule 4350 of the Nasdaq Stock Market sets forth certain corporate governance
standards for issuers whose common stock is listed on the Nasdaq Stock Market.
Rule 4350 requires, among other things, that an issuer obtain stockholder
approval for the sale or issuance other than through a public offering of a
number of shares of common stock (or securities convertible into or exercisable
for common stock) at a price less than the greater of book or market value,
which equals 20% or more of the common stock or 20% or more of the voting power
outstanding before the issuance. The issuance of the common stock in the
February private placement represented less than 20% of the Company's
outstanding common stock, and therefore under Rule 4350, did not require
stockholder approval. Based on conversations with a representative of the NASD,
we believed that, inasmuch as the warrant contained a delayed exercise period of
six months and was initially priced above the market price on the date of
issuance, the warrants would be viewed separately from the issuance of the
common stock and therefore would not be included in the calculation of the
percentage of securities being issued at a price below the market price for
purposes of compliance with Rule 4350. In addition, we believed that because the
warrant exercise price would not be reset until one year after their issuance
and that the reset price would not fall below the market price at the time of
the reset, that the reset provision would not affect Rule 4350 compliance. The
common shares and the additional shares underlying the warrants were registered
with the Securities and Exchange Commission. In connection with the registration
of the shares, we sought to list the additional shares with the Nasdaq Stock
Market. We were informed by the listing qualifications unit of the Nasdaq Stock
Market that they believed that the warrant reset provision could potentially
result in the issuance of additional shares below the market price of the common
stock on the day that the warrants were issued, and therefore the issuance of
the common stock and warrants should be considered together. If considered
together, the issuance could exceed the 20% limitation of Rule 4350. After
additional discussions with the NASD, we agreed that we would seek stockholder
approval of the issuance.
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Subject to the receipt of stockholder approval and the execution of a
definitive agreement, we have agreed with certain of the investors in the
private placement to amend the terms of the initial warrant to, among other
things, reset the exercise price of the warrants to $1.50 per share and to
change the expiration date of the warrant to January 15, 2001. These warrants,
if exercised, will result in additional working capital for the Company. As
consideration for these changes, we have agreed to issue, to any holder
exercising the initial warrant before January 15, 2001, an additional warrant to
purchase shares of common stock exercisable for a five-year period at an
exercise price of $1.50 per share. If all investors in the private placement
were to agree to these changes to the initial warrant and exercise the initial
warrant, an additional 2,151,000 warrants to purchase common stock may be
issued. Certain of the investors in the private placement have not agreed to
these changes, and unless they otherwise agree, on March 1, 2001, the exercise
price of their warrants will be reset as provided in the original warrant
agreement; however, these investors will not receive an additional warrant.
The Nasdaq Stock Market has the authority to delist the securities of any
issuer that fails to comply with its listing criteria, including the stockholder
voting provisions of Rule 4350. Therefore, if we do not obtain stockholder
approval to issue the shares of common stock upon exercise of the warrants in
excess of the limits of Rule 4350, and we nonetheless issue such shares, the
Company's common stock could be delisted from the Nasdaq Stock Market. In the
event of the delisting of the Company's securities from the Nasdaq Stock Market,
trading, if any, in the Company's securities would thereafter be conducted in
the non-Nasdaq over-the-counter market. As a result of such delisting, the
market price of the Company's common stock could be adversely affected and an
investor could find it more difficult to dispose, or to obtain accurate
quotations as to the market value, of the common stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 1.
SECTION 16(a) REPORTING
Under the Federal securities laws, the Company's directors, its executive
(and certain other) officers, and any persons holding ten percent (10%) or more
of the Company's common stock must report their ownership of the Company's
common stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established. During
the year ended December 31, 1999, the Company believes all reports required to
be filed under Section 16(a) were filed on a timely basis.
OTHER MATTERS
The Board of Directors does not know of any matters, other than those
referred to in the Notice of Meeting, which will be presented for consideration
at the meeting. However, it is possible that certain proposals may be raised at
the meeting by one or more stockholders. In such case, or if any other matter
should properly come before the meeting, it is the intention of the person named
in the accompanying proxy to vote such proxy with his or her or its best
judgment.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. Solicitations
may be made by mail, personal interview, telephone, and telegram by directors,
officers and employees of the Company. The Company will reimburse banks,
brokerage firms, other custodians, nominees and fiduciaries for reasonable
expenses incurred in sending proxy material to beneficial owners of the
Company's common stock.
STOCKHOLDER PROPOSALS
In order to be included in the proxy materials for the Company's next Annual
Meeting of Stockholders, stockholder proposals must be received by the Company
on or before January 8, 2001.
By Order of the Board of Directors
HAROLD W. PAUL
Secretary
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ARIEL CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 20, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dennis I. Schneider with full power of
substitution, proxy to vote all of the shares of common stock of the undersigned
and with all of the powers the undersigned would possess if personally present,
at the Special Meeting of Stockholders of Ariel Corporation (the "Company") to
be held at the principal executive offices of the Company's located at 2540
Route 130, Cranbury, New Jersey on December 20, 2000 at 10:00 A.M. local time
and at all adjournments thereof, upon the matters specified below, all as more
fully described in the Proxy Statement dated November 29, 2000 and with the
discretionary powers upon all other matters which come before the meeting or any
adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF ARIEL CORPORATION'S BOARD OF DIRECTORS.
1. To vote upon the future issuance of 2,151,000 shares of common stock upon the
exercise of warrants issued by the company in connection with a private
placement of common stock completed in February 2000; and to approve the
issuance to the investors in the February 2000 private placement of up to
2,151,000 additional warrants to purchase one share of common stock as
consideration for their agreement to amend certain provisions of the original
warrants and only in the event that investors exercise their original
warrants before January 15, 2001; in each case to comply with rule 4350
(formerly Rule 4460) of the National Association of Securities Dealers, Inc.
FOR |_| AGAINST |_| ABSTAIN|_|
2. In their discretion, upon such other matter or matters that may properly
come before the meeting, or any adjournments thereof.
(Continued and to be signed on reverse side)
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(Continued from other side)
Every properly signed proxy will be voted in accordance with the
specifications made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR PROPOSAL NO. 1.
The undersigned hereby acknowledges receipt of a copy of the accompanying
Notice of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Dated: -----------------------, 2000
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(Print Name of Stockholder)
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(Print Name of Stockholder)
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Signature
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Signature
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Number of Shares
Note: Please sign exactly as name appears in the Company's records. Joint
owners should both sign.
