<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
ARIEL CORPORATION
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
May 8, 2000
Dear Stockholder:
On behalf of the Board of Directors and employees of Ariel, I cordially
invite you to attend the 2000 Annual Meeting of Stockholders (the "Meeting") of
Ariel Corporation (the "Company") to be held on June 8, 2000 at 10:00 A.M. at
the Marriott Princeton, 201 Village Boulevard, Princeton, New Jersey 08540.
This year one director is nominated for election to the Board. At the
Meeting you will be asked to elect one director to serve until the 2003 Annual
Meeting. You will also be asked to ratify the Company's selection of
PricewaterhouseCoopers, LLP as the Company's auditors for the 2000 fiscal year
and to consider a proposal to amend the Company's Certificate of Incorporation
to increase the number of authorized shares that the Company can issue from
20,000,000 to 40,000,000 shares.
The accompanying Proxy Statement provides a detailed description of
these proposals. You are urged to read the accompanying materials so that you
may be informed about the business to come before the Meeting.
It is important that your shares be represented at the Meeting.
Accordingly, we urge you, whether or not you plan to attend the Meeting, to
complete, sign and date your proxy and return it to us promptly in the enclosed
envelope. If you attend the Meeting, you may vote in person, even if you have
previously mailed in your proxy.
We look forward to seeing you at the Meeting.
Sincerely,
JAY H. ATLAS
Chief Executive Officer
<PAGE>
ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF
ARIEL CORPORATION
The Annual Meeting of Stockholders of Ariel Corporation (the "Company")
will be held at the Marriott Princeton, 201 Village Boulevard, Princeton, New
Jersey 08540 on Thursday, June 8, 2000 at 10:00 A.M., Eastern Standard Time (the
"Annual Meeting"), for the following purposes:
1. To elect one (1) director of the Company to serve as a director for
a three-year term until the third succeeding Annual Meeting of Stockholders and
until his successor is duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers, LLP as
independent public accountants of the Company for the fiscal year ending
December 31, 2000.
3. To amend the Company's Certificate of Incorporation to increase the
authorized common shares the Company can issue from 20,000,000 to 40,000,000
shares.
4. To transact such other business as may come before the Annual
Meeting or any adjournment thereof.
Only stockholders of record at the close of business on May 1, 2000 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
HAROLD W. PAUL
Secretary
May 8, 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.
2
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ARIEL CORPORATION
2540 Route 130
Cranbury, New Jersey 08512
PROXY STATEMENT
This proxy statement contains information related to the Annual Meeting
of stockholders of Ariel Corporation to be held on Thursday, June 8, 2000,
beginning at 10:00 A.M. at the Marriott Princeton, 201 Village Boulevard,
Princeton, New Jersey 08540 and at any postponements or adjournments thereof.
ABOUT THE MEETING
What is the purpose of the Annual Meeting?
At the Company's Annual Meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, ratification of the Company's independent auditors and amending the
Company's Certificate of Incorporation. In addition, the Company's management
will report on the performance of the Company during fiscal 1999 and respond to
questions from stockholders.
Who is entitled to vote?
Only stockholders of record at the close of business on the record
date, May 1, 2000 are entitled to receive notice of the Annual 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.
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, 13,038,920 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.
3
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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.
What are the Board's 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's recommendation is set
forth together with the description of each item in this proxy statement. In
summary, the Board recommends a vote:
o for election of the nominated director (see page 5);
o for ratification of the appointment of PricewaterhouseCoopers, LLP
as the Company's independent auditors (see page 14); and
o for amendment of the Company's Certificate of Incorporation
(see page 15).
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 each item?
Election of Directors. The affirmative vote of a majority of the votes
cast at the Meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of the
director will not be voted, although it will be counted for purposes of
determining whether there is a quorum.
Other Items. For each other item, the affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote on the item will be required for approval. 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 have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes"
will, however, be counted in determining whether there is a quorum.
ANNUAL REPORT
A copy of the Ariel Corporation Annual Report, including financial
statements for the year ended December 31, 1999, on which no action will be
asked by the Board of Directors, is enclosed herewith. It is not to be regarded
as proxy solicitation material.
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STOCK OWNERSHIP
Who are the largest owners of the Company's 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 and former Chief Executive Officer.
How much stock do the Company's directors and executive officers own?
The following table shows the amount of common stock of the Company
beneficially owned (unless otherwise indicated) by the Company's directors, the
executive officers of the Company named in the Summary Compensation Table and
the directors and executive officers of the Company as a group. Except as
otherwise indicated, all information is as of May 1, 2000.
<TABLE>
<CAPTION>
Number of Shares
Directors and Executive Officers Beneficially Owned Percentage
- -------------------------------- ------------------ ----------
<S> <C> <C>
Jay H. Atlas 202,500 (1) 1.5%
Anthony M. Agnello 812,000 (2) 6.2%
Esmond T. Goei 15,000 (3) *
Edward D. Horowitz 125,000 (3) *
Harold W. Paul 18,500 (4) *
Charles S. Strauch 50,000 (3) *
Carlos G. Borgialli 12,500 (7) *
John R. Loprete 8,500 (5) *
Dennis I. Schneider 35,000 (6) *
---------
All officers and directors as a group (nine people). 1,279,000
</TABLE>
* Less than l%.
(1) Includes 202,500 shares subject to presently exercisable options.
(2) Includes 175,000 shares subject to presently exercisable options.
(3) All shares beneficially owned by Messrs. Horowitz, Goei and Strauch
reflect options issued in exchange for their services as directors.
(4) Includes 15,000 shares subject to presently exercisable options.
(5) Includes 7,500 shares subject to presently exercisable options.
(6) Includes 35,000 shares subject to presently exercisable options.
(7) Includes 12,500 shares subject to presently exercisable options.
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PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Directors
One director will be elected at the Meeting. The Company's Board of
Directors is currently composed of six directors. The Board of Directors is
divided into three classes and the members of each class are elected at the
Annual Meeting of the stockholders held in the year in which the terms for that
class expire, as follows: Messr. Edward Horowitz is a director with a term
expiring at the next Stockholders Meeting in 2000; Messrs. Agnello and Paul are
directors with terms expiring at the date of the Meeting in 2001; and Messrs.
Atlas, Goei and Strauch are directors with terms expiring at the Stockholders
Meeting in 2002. The incumbent Board serves as a nominating committee for new
directors. Mr. Horowitz is not standing for re-election. Dennis Schneider, the
Company's Vice President of Marketing, has been nominated as a director.
Proxies received in response to this solicitation will be voted for the
election of Messr. Schneider unless otherwise specified in the proxy. The
nominee has consented to serve as a director if elected at the Meeting. The
Board of Directors has no reason to believe that the nominee will decline or be
unable to serve as a director of the Company. However, if the nominee should not
be available for election as contemplated, the management proxy holders will
vote for a substitute designated by the current Board of Directors.
The following table sets forth certain information, as of the Record
Date, concerning the nominee for election as a director of the Company. For
information as to the shares of the Common Stock held by the nominee, see the
section "Stock Ownership" elsewhere in this Proxy Statement.
Nominee Age Present Position
Dennis I. Schneider ...................... 48 Vice President of Marketing
Dennis I. Schneider was appointed Senior Vice President - Marketing in
December 1998. For more than five years, he was a marketing consultant to major
corporations in the computer, networking and telecommunications industry
including Chase Manhattan Bank, Andersen Consulting, IBM and Lucent
Technologies. He has more than 25 years' experience in the industry, holding
senior marketing and general management positions with Digital Equipment
Corporation and as an officer of Motorola Inc.
Information About Directors Continuing in Office
The following directors were elected at the Company's 1998 Annual
Meeting for terms ending in 2001:
Name Age Present Position
Anthony M. Agnello ..................... 50 Chairman of the Board of Directors
Harold W. Paul ......................... 52 Director, Secretary
Anthony M. Agnello co-founded Ariel in 1982 and serves as Chairman of
the Board. He has been a member of the compensation committee since June 1995.
He also held the title of President from 1988 until September 1996. In December
1998, Mr. Agnello resigned as Chief Executive Officer simultaneously with the
appointment of Mr. Atlas to that position.
6
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Harold W. Paul has been a director since June 1995 and was appointed
secretary in March 1998. He is a member of the compensation committee. Mr. Paul
has been a partner at Paul & Rosen LLP, a New York law firm specializing in
securities matters. Since 1999, he is a director of Kirlin Holding Corp., a
brokerage and investment banking company.
The following Director was elected at the 1999 Annual Meeting for a
term ending in 2002:
Name Age Present Position
Jay H. Atlas ......................... 54 Chief Executive Officer, President,
and Director
Jay H. Atlas was appointed as our Chief Executive Officer and President
in December 1998. He was appointed a director in January 1999. From 1995 to
1998, he served as the President and CEO of CTF Group, a management consulting
firm. Since 1998, he has served as a trustee of the Kobrick Investment Trust, a
group of mutual funds. Mr. Atlas has more than 30 years' experience in the
industry, including 20 years at Digital Equipment Corporation, in senior
management positions in sales, service and marketing.
The following directors were appointed to the Board of Directors in
September of 1999 and have terms which expire in 2002.
Name Age Present Position
Esmond T. Goei......................... 48 Vice Chairman of the Board of
Directors
Charles S. Strauch..................... 64 Director
Esmond T. Goei joined Ariel as Vice-Chairman of the Board in August
1999. He is a member of the audit and compensation committees. Prior to joining
us, he worked at Northern Telecom, where he last served as director of the
corporate Venture Capital Division. Prior to that, he was Vice President of the
Venture Capital Division at Toronto Dominion Bank and a senior systems
consultant at Touche Ross (now Deloitte & Touche).
Charles S. Strauch was appointed a director in September 1999. He is a
member of the audit committee. Mr. Strauch is currently Chairman of the Board of
PairGain, a telecommunications company. He has served on PairGain's board of
directors since 1991. Mr. Strauch previously served as CEO of MST Data
Corporation, listed on AMEX. He was President and COO of Memorex and Executive
Vice President of the Electronics and Electrical Group at Gould. Mr. Strauch has
been active in the technology sector for almost 30 years.
Family Relationship
There are no family relationships among any director or executive
officer of the Company.
The Board of Directors recommends a FOR vote for the nominee.
7
<PAGE>
Executive Compensation
The following table summarizes the compensation earned by the Chief
Executive Officer and the four most highly compensated executive officers whose
compensation exceeded $100,000 for each of the last three years:
SUMMARY COMPENSATION SCHEDULE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Other Annual Number of All other
Year Salary Bonus Compensation Options Compensation
<S> <C> <C> <C> <C> <C>
Jay H. Atlas 1999 $ 275,502 $ 137,500 $ 5,119 -- $ 11,000
1998 5,288(1) -- -- 486,000 --
1997
Dennis Schneider 1999 200,000 120,000 5,119 95,000 4,615
1998 7,692(1) -- -- 95,000 --
1997
Brian A. Hoerl 1999 124,231 35,250 12,261 -- 3,413,109(2)
1998 189,269 255,417(3) 19,609 20,000 5,000
1997 181,231 47,104 20,393 -- 3,228
John Loprete 1999 118,462 85,500 14,286 -- 1,798
1998 84,231 -- 10,462 30,000 --
1997
John F. Lynch 1999 150,000 7,500 6,142 53,000 394,069(4)
1998 155,769 28,077 15,096 35,000 84,363(5)
1997 150,000 -- 31,569 -- 8,536
Carlos G. Borgialli 1999 113,333(6) 20,000 8,912 50,000 1,569
1998
1997
</TABLE>
(1) Reflects employment commencement date of December 21, 1998.
(2) Includes option exercises of $3,163,460 and severance of $234,769.
(3) Includes CSG sale bonus of $200,000 and executive quarterly bonuses.
(4) Includes option exercise of $378,327.
(5) Includes option exercise of $77,140.
(6) Reflects employment commencement date of May 1, 1999.
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How are directors compensated?
Base Compensation. In August 1999, the Board of Directors adopted a
standardized method for compensating non-employee directors. Each non-employee
director received a retainer based on an annualized rate of $6,000. Directors
who were also employees received no additional compensation for service as
directors. Under this compensation plan, we also reimbursed our non-employee
directors for their expenses incurred in attending meetings of the Board of
Directors.
Options. Each non-employee director receives an automatic grant, upon
his election, of options to purchase 80,000 shares of common stock, vesting
50,000 upon election and 15,000 per annum for each additional year of service in
equal installments over three years and having a ten-year term, permitting the
holder to purchase shares at their fair market value on the date of grant.
Additional years of service are compensated with a grant of 15,000 options per
year.
How often did the Board meet during fiscal 1999?
The Board of Directors met 12 times during fiscal 1999. Each director
attended more than 92% of the total number of meetings of the Board and
Committees on which he served.
What committees has the Board established?
The Board of Directors has standing Compensation and Audit Committees.
BOARD COMMITTEE MEMBERSHIP
<TABLE>
<CAPTION>
Name Compensation Committee Audit Committee
<S> <C> <C>
Anthony M. Agnello ........................ *
Jay H. Atlas ..............................
Esmond T. Goei............................. * *
Edward D. Horowitz ........................ *
Harold W. Paul ............................ *
Charles S. Strauch......................... *
</TABLE>
Compensation Committee. The Compensation Committee is charged with
reviewing the Company's general compensation strategy; establishing salaries and
reviewing benefit programs (including pensions) for the Chief Executive Officer
and those persons who report directly to him; reviewing, approving, recommending
and administering the Company's stock option plans and certain other
compensation plans; and approving certain employment contracts. In fiscal 1999,
the Compensation Committee met three times.
Audit Committee. The Audit Committee met twice during fiscal 1999. Its
functions are to recommend the appointment of independent accountants; review
the arrangements for and scope of the audit by independent accountants; review
the independence of the independent accountants; consider the adequacy of the
system of internal accounting controls and review any proposed corrective
actions; review and monitor the Company's policies relating to ethics and
conflicts of interests; discuss with management and the independent accountants
the Company's draft annual financial statements and key accounting and/or
reporting matters; and review the activities and recommendations of the
Company's management audit department.
Certain relationships and related transactions.
Berger & Paul, LLP, a law firm of which Mr. Paul, also one of our
directors, is a partner, received fees of approximately $120,000, $124,000 and
$75,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
These fees were for legal services which it performed on our behalf.
Brown, Coburn & Co., of which Mr. Coburn, one of our directors until
September 1999, received fees of $22,000, $156,200 and $88,000 for the years
ended December 31, 1999, 1998 and 1997 respectively, in connection with
investment banking advisory services. In addition, 40,000 stock options
previously granted to Mr. Coburn for investment banking advisory services,
20,000 in each of July 1996 and May 1997, vested during 1998.
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In February 1999, we entered into a consulting agreement with GIOS
Incorporated to advise our senior management in connection with the installation
of new product development process capabilities, including assessing process
issues and providing strategic decision support. GIOS was co-founded in
September 1998 by Dennis Schneider, our Senior Vice President - Marketing. The
agreement provides that Mr. Schneider will represent only our interests during
the course of the consulting relationship. Compensation to GIOS under the
agreement is $2,000 per day, three days per week for the first month of the
agreement, and $1,750 per day for the remainder of the relationship, with
specific time commitments to be negotiated by the parties. At December 31, 1999,
we had paid approximately $162,000 to GIOS for consulting services.
We believe that the transactions described above were on terms no less
favorable than could have been obtained from unaffiliated third parties. We have
undertaken that all future transactions with our executive officers, directors
and any 5% stockholders will be on terms no less favorable than could be
obtained from unaffiliated third parties and will be approved by a majority of
the directors disinterested in the transaction.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options
granted to the executive officers named in the summary executive compensation
table. The table also shows a hypothetical potential realizable value of these
options based upon assumed rates of an annual compounded stock price
appreciation of 5% and 10% from the date the options were granted and over the
full term. The assumed rates of growth were selected for illustrative purposes
only, and are not intended to predict future stock prices which will depend upon
market conditions and our future performance and prospects. Based upon the
closing stock price and the number of common shares outstanding at the end of
1999, an assumed annual stock price appreciation of 10% would produce a
corresponding aggregate pretax gain over the full option term of approximately
$122 million for our common stockholders.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options Potential Realized Value at
Underlying Granted to Per Share Assumed Annual Rates of Stock
Options Employees in Exercise Expiration Price Appreciation for Term
Name Granted Fiscal Year Price Date 5% 10%
---- ------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Carlos G. Borgialli 50,000 7.3% $2.375 7/02/09 $193,431 $308,087
Dennis I. Schneider (1) 95,000 13.8% $2.375 7/02/09 $367,519 $585,213
</TABLE>
(1) Some options may vest at an accelerated rate if certain performance goals
are achieved.
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AGGREGATE FISCAL YEAR-END OPTION VALUE
The following table sets forth information concerning stock option
exercises by the executive officers named in the summary executive compensation
table during 1999, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1999. Also
reported are the values for "in-the-money" options which represent the excess of
the closing market price of the common stock at December 31, 1999 over the
exercise price of the option.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Shares Options At December 31, Money Options At December
Acquired On Value 1999 (#) 31, 1999 ($)
Name Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Jay H. Atlas -0- -0- 141,750 / 344,250 $664,524 / $1,613,844
Brian A. Hoerl 145,000 $3,163,460 -0- / -0- -0- / -0-
John F. Lynch 41,250 $378,327 -0- / 63,750 -0- / $211,673
Dennis I. Schneider -0- -0- 30,000 / 160,000 $140,640 / $750,080
Jack Loprete -0- -0- -0- / 50,000 -0- / $234,400
Carlos G. Borgialli -0- -0- 7,500 / 22,500 $29,223 / $87,668
</TABLE>
Employment Agreements
Jay H. Atlas is employed under a three year employment agreement
effective December 21, 1998 pursuant to which he is paid a base salary of
$275,000. He is eligible for a bonus of 50% of his annual base salary based upon
the attainment of certain goals set by the Board of Directors. Upon execution of
the employment agreement, Mr. Atlas was granted an aggregate of 486,000 common
stock purchase options exercisable at $2.38 per share, vesting over a four year
period from December 21, 1999 through December 21, 2002. Mr. Atlas has executed
non-competition and non-solicitation agreements with the Company pursuant to
which for a specified period following the termination of his employment, he has
agreed not to solicit the Company's customers or employees or to become
associated with the Company's competitors. Mr. Agnello resigned as Chief
Executive Officer of the Company effective upon Mr. Atlas' employment in
December 1998. Mr. Agnello entered into an agreement with the Company in
December 1998 providing for a one time severance payment of $600,000 in March
1999 and the issuance of 100,000 common stock purchase options at $2.38 per
share. Additionally, Mr. Agnello entered into a two year consulting agreement
with the Company pursuant to which is paid $50,000 per year. His non-competition
and non-solicitation agreements have been extended through December 2001. Carlos
G. Borgialli is employed under a three-year employment agreement effective May
4, 1999 pursuant to which he is paid a base salary of $170,000 and is eligible
for an incentive bonus of up to $30,000 based upon the attainment of certain
goals. Mr. Borgialli was granted 50,000 common stock purchase options as set
forth in the table above. Dennis I. Schneider, our Senior Vice President -
Marketing, is employed under an employment agreement effective December 21, 1998
pursuant to which he is paid a base salary of $200,000. He is eligible for a
bonus of 60% of his annual base salary based upon the attainment of certain
goals set by management. Upon execution of the employment agreement, Mr.
Schneider was granted an aggregate of 95,000 common stock purchase options
exercisable at $2.375 per share, vesting over a five-year period commencing
December 21, 2000 through December 21, 2004. Some of his options may vest at an
accelerated rate if certain performance goals are achieved. In July 1999, he was
granted an additional 95,000 options at an exercise price of $2.375 per share
vesting over a five year period commencing December 21, 1999 through December
21, 2003.
11
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance
graphs included elsewhere in this proxy statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report or the performance graphs by reference therein.
Report of Compensation Committee
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 1999.
What is the Company's philosophy of executive officer compensation?
o a base salary,
o a performance-based annual bonus, and
o periodic grants of stock options.
The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the Company
to meet the requirements of the highly competitive environment in which the
Company operates while ensuring that executive officers are compensated in a way
that advances both the short and long-term interests of stockholders. Under this
approach, compensation for these officers involves a high proportion of pay that
is "at risk"- namely, the annual bonus and stock options. The annual bonus
permits individual performance to be recognized on an annual basis, and is
based, in significant part, on an evaluation of the contribution made by the
officer to Company performance. Stock options relate a significant portion of
long-term remuneration directly to stock price appreciation realized by all of
the Company's stockholders.
Base Salary. Base salaries for the Company's executive officers, as
well as changes in such salaries, are based upon recommendations by the Chief
Executive Officer, taking into account such factors as competitive industry
salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer, and the length of the officer's
service.
Annual Bonus. In December 1998, the Company entered into employment
agreements with two new executive officers, Mr. Atlas and Mr. Schneider. Each of
these officers have bonus provisions in their agreements which are performance
based.
Stock Option. Under the stock option guidelines adopted by the
Compensation Committee, stock option grants may be made to executive officers
upon initial employment, upon promotion to a new, higher level position that
entails increased responsibility and accountability and in connection with the
execution of a new employment agreement. Options typically vest over a minimum
four year period.
How is the Company's Chief Executive Officer compensated?
As Chief Executive Officer, Mr. Atlas is compensated pursuant to an
employment agreement entered into in December 1998. The agreement, which extends
through December 2001, subject to earlier termination under certain
circumstances, provides for an annual base salary of $275,000. Mr Atlas' bonuses
for each fiscal year may be up to 50% of his base annual salary based upon
performance related goals set by the Board of Directors. Additionally, he was
granted 486,000 options exercisable at $2.38 per share vesting over a four year
period commencing December 21, 1999.
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<PAGE>
It is the opinion of the Committee that the aforementioned compensation
structures provide features which properly align the Company's executive
compensation with corporate performance and the interests of its stockholders
and which offer competitive compensation relevant to comparable opportunities in
the marketplace.
Respectfully submitted,
The Compensation Committee:
Anthony M. Agnello
Harold W. Paul
Esmond Goei
Compliance with Section 16(a) of the Exchange Act
Section 16 (a) of the Securities and Exchange Act of 1934 requires
Ariel's directors and executive officers to file with the SEC initial reports of
ownership and reports of changes in ownership of Ariel's common stock. Ariel
believes that during the fiscal year ended December 31, 1998, its officers and
directors complied with all these filing requirements. In making this statement,
Ariel has relied upon the representations of its directors and executive
officers. The Company does not believe any other stockholders are subject to
Section 16 (a) filing requirements.
COMPARATIVE PERFORMANCE CHART
The graph set forth below compares the cumulative total return on the
Company's Common Stock for the period commencing January 25, 1995 and ending
December 31, 1999 against the cumulative total return on the NASDAQ Market Index
and a peer group comprised of certain public companies whose business activities
fall within the same standard industrial classification code as the Company.
This graph assumes an investment of $100 made on January 25, 1995 in the
Company's Common Stock and in each index assuming the reinvestment of any
dividends paid by the companies. The Common Stock price performance shown below
should not be viewed as indicative of future performance.
<TABLE>
<CAPTION>
Company Name / Index 25 Jan 95 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
ARIEL CORP 100 235.14 224.32 121.62 74.34 152.69
NASDAQ INDEX 100 139.54 171.69 210.37 296.44 535.55
PEER GROUP 100 180.42 164.64 226.89 77.44 336.17
</TABLE>
13
<PAGE>
PROPOSAL NO. 2:
APPOINTMENT OF INDEPENDENT AUDITORS
On March 30, 2000, the Board of Directors selected
PricewaterhouseCoopers, LLP to continue as the Company's independent public
accountants for the fiscal year ending December 31, 2000.
Although neither federal nor state law requires the approval of the
auditors by stockholders, the Board believes that, in view of the importance of
financial statements to the stockholders, the selection of independent public
accountants should be passed on by stockholders. Accordingly, approval of the
following resolution will be requested at the Meeting:
"RESOLVED, that the Board of Directors appointment of Pricewaterhouse
Coopers, LLP to serve as the Company's independent public accountants
for fiscal year ending December 31, 2000 be, and the same hereby is
ratified and approved."
The Board of Directors recommends a vote FOR the foregoing resolution.
In the event that stockholders disapprove of the selection, the Board of
Directors will consider the selection of other auditors.
A representative of PricewaterhouseCoopers, LLP will be present at the
Meeting. The Company has been informed that the representative does not intend
to make any statement to the stockholders at the Meeting, but will be available
to respond to appropriate questions from stockholders.
PROPOSAL NO. 3:
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
On March 30, 2000 the Board of Directors unanimously approved an
amendment to the Company's Certificate of Incorporation to permit the Company to
issue up to 40,000,000 shares of common stock. The resolution was as follows:
"RESOLVED, that the Company's Certificate of Incorporation shall be
amended to increase the common shares that the Company is authorized to
issue from 20,000,000 to 40,000,000 shares."
The Board directed that the amendment be voted on by stockholders. The
form of the proposed amendment is attached to this proxy statement as Appendix
A.
The Company is currently authorized and permitted to issue up to
20,000,000 aggregate shares of common stock. As of May 1, 2000, 13,038,920
shares of common stock were issued and outstanding. Approximately 2,800,000
additional shares were reserved for issuance under the Company's compensation
and benefit plans. Additionally, approximately 2,400,000 shares were reserved
for issuance pursuant to outstanding warrants. The Board would like to increase
the number of shares of common stock that the Company can issue for possible
acquisitions, financings and other corporate purposes.
The Company does not currently plan to issue any of the additional
shares of common stock. The Board can issue shares from time to time in
accordance with SEC and Nasdaq rules without obtaining the approval of
stockholders. If this proposal is approved, all or any of the authorized shares
may be issued without further shareowner action (unless such approval is
required by applicable law or regulatory authorities) and without first offering
those shares to the shareowners for subscription. The issuance of shares
otherwise than on a pro-rata basis to all shareowners would reduce the
proportionate interest in the Company of each shareowner.
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<PAGE>
Newly authorized shares would have the same rights as the presently
authorized shares, including the right to cast one vote per share and to receive
dividends paid by the Company. Although the authorization would not, in itself,
have any effect on your rights as a stockholder, issuance of additional shares
of common stock for other than a stock split or dividend could, under certain
circumstances, have a dilutive effect on voting rights and earnings per share.
Stockholders do not have preemptive rights.
While the issuance of shares in certain instances may have the effect
of forestalling a hostile takeover, the Board does not intend or view the
increase in authorized common stock as an antitakeover measure, nor is the
Company aware of any proposed or contemplated transaction of this type.
Required Vote
The affirmative vote of holders of a majority of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting is required to
approve this amendment of the Company's Certificate of Incorporation increasing
the authorized shares the Company can issue from 20,000,000 to 40,000,000.
The Board of Directors recommends that you vote FOR the amendment of
the Company's Certificate of Incorporation.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any matters to be pre- sented to the Meeting other than the first three
proposals set forth in the attached Notice of Annual Meeting. If any other
matters properly come before the Meeting, it is intended that the holders of the
management proxies will vote thereon in their discretion.
The solicitation of proxies on the enclosed form of proxy is made by
and on behalf of the Board of Directors of the Company and the cost of this
solicitation is being paid by the Company. In addition to the use of the mails,
proxies may be solicited personally, or by telephone or telegraph, by the
officers or directors of the Company.
Stockholder proposals for inclusion in the Company's proxy statement
for the 2001 Annual Meeting of Stockholders must be received no later than
January 8, 2001 pursuant to Rule 14a-8 of the Securities Exchange Act of 1934.
By Order of the Board of Directors
HAROLD W. PAUL
May 8, 2000 Secretary
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<PAGE>
APPENDIX A
Article IV A should read as follows:
A. Classes of Stock. The corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock"
and "Preferred Stock". The total number of shares which the
corporation is authorized to issue is 42,000,000 shares, of which
40,000,000 shares shall be Common Stock, par value $.001 per
share, and 2,000,000 shares shall be Preferred Stock, par value
$.001 per share.
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<PAGE>
ARIEL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 8, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jay H. Atlas and Harold W. Paul and
each of them, Proxies, with full power of substitution in each of them, in the
name, place and stead of the undersigned, to vote the Annual Meeting of
Stockholders of Ariel Corporation (the "Company") on June 8, 2000 at 10:00 A.M.
at the Marriott Princeton, 201 Village Boulevard, Princeton, New Jersey or at
any adjournment or adjournments thereof, according to the number of votes that
the undersigned would be entitled to vote is personally present, upon the
following matters:
1. Election of Directors
/ / FOR the nominee listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote
for the nominee listed below
Dennis I. Schneider
2. Proposal to ratify the appointment of PricewaterhouseCoopers, LLP as
Independent Public Accountants for the Company for the Fiscal Year
ending December 31, 2000.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to ratify amending the Company's Certificate of Incorporation.
FOR / / AGAINST / / ABSTAIN / /
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on reverse side)
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES AND PROPOSALS
LISTED ABOVE.
Date: ________________________________2000
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
Please sign exactly as name appears hereon. When shares are held by joint
trusts, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign the full corporate name by President or other authorized officer. If a
partner-ship, please sign in partnership name by authorized person.
Please mark, sign, date and return this proxy card promptly using
the enclosed envelope.
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