SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
ARI Network Services, Inc.
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(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:
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(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.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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ARI NETWORK SERVICES, INC.
330 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 13, 2001
To the Shareholders of ARI Network Services, Inc.:
The 2001 Annual Meeting of Shareholders of ARI Network Services, Inc.
will be held at the headquarters of ARI Network Services, Inc., 330 East
Kilbourn Avenue, Milwaukee, Wisconsin, on Thursday, December 13, 2001 at 9:00
a.m., local time, for the following purposes:
1. To elect two directors to serve until 2004.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors.
3. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on November 2, 2001 are
entitled to notice of and to vote at the meeting and at all adjournments
thereof.
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES MUST BE PRESENT IN
PERSON OR BY PROXY IN ORDER FOR THE MEETING TO BE HELD. SHAREHOLDERS ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE WHETHER
OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU ATTEND THE
MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO BY REVOKING YOUR
PROXY AT ANY TIME PRIOR TO THE VOTING THEREOF.
By order of the Board of Directors,
Timothy Sherlock, Secretary
November 19, 2001
ARI NETWORK SERVICES, INC.
330 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
(414) 278-7676
PROXY STATEMENT
The Board of Directors of ARI Network Services, Inc. (the "Company")
submits the enclosed proxy for the annual meeting to be held on the date, at the
time and place and for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders. Each shareholder of record at the close of
business on November 2, 2001 will be entitled to one vote for each share of
Common Stock registered in such shareholder's name. As of November 2, 2001, the
Company had outstanding 6,184,281 shares of Common Stock. The presence, in
person or by proxy, of a majority of the shares of Common Stock outstanding on
the record date is required for a quorum at the meeting. This proxy statement
and the accompanying proxy and Annual Report to Shareholders are being sent to
the Company's shareholders commencing on or about November 19, 2001.
Any shareholder executing and delivering the enclosed proxy may revoke
the same at any time prior to the voting thereof by written notice of revocation
given to the Secretary of the Company.
UNLESS OTHERWISE DIRECTED, ALL PROXIES WILL BE VOTED FOR THE ELECTION
OF THE INDIVIDUALS NOMINATED TO SERVE AS DIRECTORS AND FOR THE OTHER PROPOSAL.
DIRECTORS WILL BE ELECTED BY A PLURALITY OF VOTES CAST AT THE MEETING (ASSUMING
A QUORUM IS PRESENT). THE OTHER PROPOSALS WILL BE APPROVED IF THE AFFIRMATIVE
VOTES EXCEED THE VOTES CAST AGAINST. BROKER NON-VOTES ARE COUNTED ONLY FOR
PURPOSES OF DETERMINING WHETHER A QUORUM IS PRESENT AT THE MEETING BUT ARE NOT
CONSIDERED PRESENT WITH RESPECT TO THAT MATTER AND, THEREFORE, WILL HAVE NO
EFFECT ON THE OUTCOME OF THE VOTING. ABSTENTIONS WILL ALSO HAVE NO EFFECT ON THE
VOTING.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock by each person known by the
Company to beneficially own 5% or more of the Common Stock, by each director or
nominee of the Company, by certain executive officers of the Company, and by all
directors and executive officers of the Company as a group as of October 31,
2001.
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNERS BENEFICIAL OWNERSHIP (1) PERCENT
----------------- ------------------------ -------
WITECH Corporation (2) 1,130,308 18.0%
N16 W23217 Stone Ridge Drive
Waukesha, WI 53188
Ashford Capital Management, Inc. 540,100 8.8%
P.O. Box 4172
Wilmington, DE 19807
Briggs & Stratton Corporation 840,000 13.6%
12301 West Wirth Street
Milwaukee, WI 53201
John C. Bray 79,000 1.3%
Gordon J. Bridge 62,916 1.0%
Brian E. Dearing 134,250 2.2%
Ted C. Feierstein 4,039 *
Steven M. Katz 5,000 *
Michael E. McGurk 63,500 1.0%
D. Bruce Merrifield, Jr. 38,600 *
Frederic G. Tillman 23,750 *
Richard W. Weening (3) 148,157 2.4%
All executive officers and directors as a group 559,212 8.6%
(9 persons)
-------------------
* Less than 1%
(1) Except as otherwise noted, the persons named in the above table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. Includes options and warrants exercisable
within 60 days of October 31, 2001 as follows: Mr. Bray (77,750
shares), Mr. Bridge (48,416 shares), Mr. Dearing (55,750 shares), Mr.
Feierstein (4,039 shares), Mr. McGurk (61,000 shares), Mr. Merrifield
(11,600 shares), Mr. Tillman (23,750 shares), Mr. Weening (11,230
shares), and all other executive officers and directors as a group
(293,535 shares).
3
(2) WITECH's shares include 105,000 shares subject to warrants. Excludes
20,350 shares of non-voting, non-convertible Series A Preferred Stock
(the entire series) also owned by WITECH.
(3) Includes options for 11,230 shares. Mr. Weening's total also includes
40,677 shares held by Quaestus Limited Partnership ("QLP"), 10,000
shares held by Quaestus Management Corp. ("QMC"), 85,000 shares held by
RPI Holdings, Inc. ("RPI"), 1,125 shares held by Tenancy in Common with
a third party and 125 shares held by his spouse. Mr. Weening disclaims
any beneficial ownership in the shares held by QLP, QMC, RPI and
Tenancy in Common by a third party in excess of his pecuniary interest,
and the filing of this proxy statement shall not be deemed an admission
that Mr. Weening is the beneficial owner of such securities for
purposes of Section 16 of the Securities Exchange Act of 1934 or for
any other purpose.
On April 27, 2000, the Company issued and sold, pursuant to a
Securities Purchase Agreement, dated as of April 25, 2000, by and among the
Company and RGC International Investors, LDC ("RGC"), (i) a convertible
subordinated debenture in the amount of $4,000,000 due on April 27, 2003 (the
"Debenture"), convertible into shares of the Company's Common Stock, (ii)
warrants to purchase 600,000 shares of Common Stock (the "Warrants"), and (iii)
an investment option to purchase 800,000 shares of Common Stock (the "Investment
Option"). The Investment Option expired on October 27, 2001 and the Warrants
expire on April 27, 2005. The Debenture is convertible into Common Stock at $4
per share and the Warrants and Investment Option are exercisable at $6 per
share, subject in each case to certain anti-dilution adjustments. The Company
can require RGC to convert the amount owed under the Debenture into Common Stock
at $4.00 per share provided that: (i) the closing bid price of the Common Stock
has been greater than $6.60 for twenty (20) consecutive trading days and (ii)
the Company's resale registration statement has been effective for at least
three (3) months. Under the terms of the Debenture and the Investment Option and
Warrants, the Debenture is convertible and the Investment Option and Warrants
are exercisable by RGC only to the extent that the number of shares of Common
Stock issuable, together with the number of shares of Common Stock owned by RGC
and its affiliates, would not exceed 4.9% of the Company's outstanding Common
Stock at the time of conversion or exercise. In certain circumstances where the
Company has the right to force conversion of the Debenture and exercise of the
Investment Option, RGC's percentage ownership may exceed 4.9% but cannot exceed
9.9%. Except as described above, RGC cannot acquire more than 4.9% of the
Company's Common Stock at one time, and is not included in the table above or in
"Certain Transactions," below.
The Company is currently in default of the Agreement due to being
delisted from Nasdaq and is currently negotiating with RGC to accomplish a
restructuring of the Agreement.
4
ELECTION OF DIRECTORS
The Company's directors are divided into three classes, with staggered
terms of three years each. At the meeting, shareholders will elect two directors
to serve until 2004.
NOMINEES FOR ELECTION TO SERVE
UNTIL THE ANNUAL MEETING IN 2004
BRIAN E. DEARING, 46; Mr. Dearing, is the Chairman of the Board,
President and Chief Executive Officer of the Company. He has been a director
since 1995 and was elected Chairman of the Board of Directors in 1997. Prior to
joining ARI in 1995, Mr. Dearing held a series of electronic commerce executive
positions at Sterling Software, Inc. in the U.S. and in Europe. Prior to joining
Sterling in 1990, Mr. Dearing held a number of marketing management positions in
the EDI business of General Electric Information Services since 1986. Mr.
Dearing holds a Masters Degree in Industrial Administration from Krannert School
of Management at Purdue University and a BA in Political Science from Union
College.
RICHARD W. WEENING, 55; Mr. Weening, a director since 1981, organized
the Company in 1981 as a business information publishing subsidiary of Raintree
Publishers, Inc., now known as RPI Holdings, Inc. ("RPI"). He served as
President and Chief Executive Officer of the Company until October 1987,
Chairman and Chief Executive Officer of the Company until October 1990, and
Chairman of the Board of Directors until 1997. Mr. Weening is also the Chief
Executive Officer of QUAESTUS Management Corporation, an asset management and
merchant banking firm, and is a director of Cumulus Media, Inc. (NASDAQ:CMLS).
Mr. Weening has served as President of RPI from 1972 to the present.
DIRECTORS WHOSE TERMS
EXPIRES AT THE ANNUAL MEETING IN 2002
D. BRUCE MERRIFIELD, JR., 51; Mr. Merrifield, a director since August
2000, is President of Merrifield Consulting Group, Inc., a consulting practice
specializing in independent physical distribution channels. Mr. Merrifield is
also Chairman of Clark Security Products, Inc., a national distributor of
locksmith supplies, door hardware and access control hardware. Prior to his
acquisition of Clark Security in 1983, Mr. Merrifield was chief operating
officer of Distribix, Inc., a Missouri-based paper distribution chain. Mr.
Merrifield received a B.A. from Princeton University in 1972 and an MBA from the
Harvard Business School in 1974.
STEVEN M. KATZ, 54; Mr. Katz, a director since October 2001, was
president of the Commerce Internet Division of Sterling Commerce, Inc., a
leading global provider of electronic commerce software products and services,
until September 1997. In 1972, he co-founded SEI Corporation, where he built
TRUST- AID(TM)the nation's most widely used trust accounting system. He sold his
interest in SEI in 1979 to a venture capital firm. In 1980, Mr. Katz founded
Premier Systems, Ltd., where he developed systems used in the banking and
securities industries; a controlling stake in Premier Systems was sold in 1990.
In 1991, Mr. Katz became co-founder and president of Automated Catalogue
Services L.P., a publisher of electronic catalogs that Sterling Commerce
acquired in May 1997. Since 1997, Mr. Katz has been a private investor. Mr. Katz
holds an MBA with an emphasis in Finance and Information Systems, and a BS in
Economics, both degrees awarded by the Wharton School of the University of
Pennsylvania.
DIRECTORS WHOSE TERMS
EXPIRE AT THE ANNUAL MEETING IN 2003
GORDON J. BRIDGE, 59; Mr. Bridge, a director since December 1995, is
Chairman of the Board and CEO of SurferNETWORK. From 1995 to January 2000, Mr.
Bridge was Chairman of the Board of ConnectInc.com Company. Mr. Bridge was with
AT&T where he held various executive management positions from 1988 to 1995,
culminating in his appointment as Vice President, Corporate Strategy for
Emerging Services and Products for AT&T. He previously managed three business
units for AT&T, including Consumer Interactive Services, EasyLink
5
Services and Computer Systems. Prior to joining AT&T, Mr. Bridge was with the
IBM Corporation for 23 years. Mr. Bridge holds a B.A. in mathematics from
Bradley University.
TED C. FEIERSTEIN, 43; Mr. Feierstein, a director since January 2000,
is a partner in Ascent Partners ("Ascent"), a merchant bank specializing in
investments, mergers and acquisitions, and strategic assistance for Internet,
software and information technology-focused professional service companies. Mr.
Feierstein is also a founding partner of Prism Capital, a private equity fund.
Prior to co-founding Ascent, Mr. Feierstein was a senior vice-president with the
Corum Group, a firm specializing in merger and acquisition advisory services to
the software industry, and was a venture capitalist with Wind Point Partners, a
private equity fund. Mr. Feierstein received an MBA from the Harvard Business
School in 1989 and a BBA from the University of Wisconsin-Madison in 1979.
The Board of Directors held 9 meetings in fiscal 2001. Each incumbent
director attended 75 percent or more of the combined number of meetings of the
Board and Committees on which such director served, during the period for which
he has been a director or served on the Committee.
The Company's Board of Directors has established an Audit Committee.
The Board of Directors has adopted a written charter, which was included in the
annual proxy statement for the previous fiscal year. Information regarding the
functions performed by the Audit Committee, its membership, and the number of
meetings held during fiscal 2001 is set forth in the "Report of the Audit
Committee," included in this annual proxy statement. The members of the Audit
Committee are considered independent under the rules adopted by the NASD
regarding the independence of audit committee members.
The Company's Board of Directors has established a Compensation
Committee that currently is composed of Mr. Bridge, Mr. Merrifield and Mr.
Feierstein. The duties of the Compensation Committee are to approve all
executive compensation and to administer the Company's 1991 Incentive Stock
Option Plan, the 1992 Employee Stock Purchase Plan, the 1993 Director Stock
Option Plan and the 2000 Stock Option Plan. The Compensation Committee met 3
times during fiscal 2001.
The Board of Directors does not have a nominating committee, as
decisions regarding Board membership are made by the full Board.
Each non-employee member of the Board of Directors receives options in
lieu of any cash compensation. Currently, non-employee directors receive options
for 800 shares of the Company's common stock on the first business day of each
calendar year and options for an additional 800 shares for each meeting of the
Board and 400 shares for each meeting of a Committee attended by the director.
The options have a 10-year term, are exercisable one year after issuance and
have an exercise price equal to the fair market value of the stock on the date
of grant.
6
EXECUTIVE COMPENSATION
The following table sets forth compensation for the last three fiscal
years for each of the Company's executive officers whose salary and bonus during
fiscal 2001 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
----------------------------------------- --------------------------------
Awards Payouts
------ -------
Securities
Name and Other Annual Underlying LTIP
Principal Position Year Salary Bonus Compensation Options/SARs(#) Payouts($)
------------------------------------ ----- ---------- ---------- ------------- ---------------- -----------
Brian E. Dearing, 2001 $ 170,000 $ 41,621 $ -- 30,000 $ 22,913
President and Chief Executive 2000 $ 161,538 $ 20,625 $ -- 25,000 $ 8,756
Officer 1999 $ 150,000 $ 50,023 $ -- 35,000 $
John C. Bray, 2001 $ 140,000 $ 8,498 $ 42,600 20,000 $ 10,183
Vice President of Sales (1) 2000 $ 135,769 $ 9,167 $ 10,000 15,000 $ 3,891
1999 $ 130,000 $ 15,566 $ 56,121 15,000 $ --
Michael E. McGurk, 2001 $ 110,000 $ 27,289 $ -- 13,000 $ 10,646
Vice President of Technology 2000 $ 105,769 $ 11,458 $ -- 7,500 $ 2,781
Operations 1999 $ 100,000 $ 11,124 $ -- 12,500 $ --
Frederic G. Tillman, 2001 $ 115,600 $ 27,289 $ -- 15,000 $ 7,865
Vice President of Technology 2000 $ 110,769 $ 11,458 $ -- 30,000 $ --
Development 1999 $ 88,846 $ 39,937 $ -- 10,000 $ --
(1) Mr. Bray's other annual compensation consists of commission paid on new
sales.
7
The table below provides information regarding option grants in the
year ended July 31, 2001 to the persons named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS GRANTED
UNDERLYING TO EMPLOYEES IN
OPTIONS/SARS FISCAL YEAR (1) EXERCISE OR BASE
NAME GRANTED # (1) PRICE ($/SHARE) EXPIRATION
------------------------- ------------------ ----------------------- ---------------------- ---------------
Brian E. Dearing 10,000 2.6% $ 2.06250 9/5/10
20,000 5.3% $ 1.21871 2/23/11
John C. Bray 10,000 2.6% $ 2.06250 9/5/10
10,000 2.6% $ 1.21871 2/23/11
Michael E. McGurk 3,000 .8% $ 2.06250 9/5/10
10,000 2.6% $ 1.21871 2/23/11
Frederic G. Tillman 5,000 1.3% $ 2.06250 9/5/10
10,000 2.6% $ 1.21871 2/23/11
(1) All options granted in the fiscal year were awarded with an exercise price
equal to the fair market value of the Common Stock on the date of grant.
The options vest in four equal annual increments beginning on the last day
of the fiscal year (July 31) during which the options were granted. Under
the terms of the Plan, the Compensation Committee retains discretion to,
among other things, accelerate the exercise of an option, modify the terms
of outstanding options (including decreasing the exercise price), and
permit the exercise price and tax withholding obligations related to
exercise to be paid by delivery of already owned shares or by offset of the
underlying shares.
The table below provides information regarding the exercises of stock
options during fiscal 2001 and the value of stock options held at July 31, 2001
by the persons named in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTION/SARS AT FISCAL YEAR END
ACQUIRED ON VALUE FISCAL YEAR END (#) EXERCISABLE/UNEXERCISABLE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE (1)
---------------------- -------------- --------------- -------------------------------- --------------------------
Brian E. Dearing -- $ -- 55,750/43,750 $ --
John C. Bray -- $ -- 77,750/26,250 $ --
Michael E. McGurk -- $ -- 61,000/16,625 $ --
Frederic G. Tillman -- $ -- 23,750/28,750 $ --
-----------------
(1) All outstanding options held by the named executive officers had exercise
prices greater than the closing sales price of the common stock at July 31,
2001.
8
The table below provides information regarding long-term incentive plan
awards in fiscal 2001 to the persons named in the Summary Compensation Table.
LONG-TERM INCENTIVE PLAN AWARDS
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
--------------------------------------------
NUMBER PERIOD
NAME OF UNITS UNTIL PAYMENT THRESHOLD TARGET MAXIMUM
------------------------------- ------------- ---------------- ------------ ----------- ------------
Brian E. Dearing (1) (2) $ 20,000 $ 20,000 $ 20,000
(1) (3) $ 21,791 $ 29,055 $ 58,110
John C. Bray (1) (2) $ 15,000 $ 15,000 $ 15,000
(1) (3) $ 5,935 $ 7,913 $ 15,826
Michael E. McGurk (1) (2) $ 15,000 $ 15,000 $ 15,000
(1) (3) $ 13,669 $ 18,225 $ 36,450
Frederic G. Tillman (1) (3) $ 13,669 $ 18,225 $ 36,450
------------------
(1) Consists of contingent, deferred cash awards.
(2) Paid out at such time as the Company, in the judgment of the Board,
generates sufficient cash resources from operations regardless of whether
the participant is then employed by the Company.
(3) Vesting in two equal installments (August 1, 2002 and August 1, 2003),
provided the participant is then employed by the Company.
On May 20, 1999 the Board of Directors adopted Change of Control
Agreements ("Change of Control Agreements") which contained "Change of Control"
benefits for the current key officers of ARI. The officers include Brian E.
Dearing, John C. Bray, and Michael M. McGurk. In addition, on August 19, 1999,
the Board approved a similar Change of Control Agreement for Frederic G. Tillman
and on March 15, 2001, approved one for Timothy Sherlock, the Company's chief
financial officer. The Change of Control Agreements are intended to retain the
services of these officers and provide for continuity of management in the event
of any "Change of Control," as defined below. These Change of Control Agreements
provide that each officer shall receive severance benefits equal to two times
the sum of salary and targeted bonuses and medical and dental plan continuation
for two years if, within two years following a "Change of Control," as defined
below, the officer's employment is terminated without cause. For this purpose,
"without cause" is defined to include: (i) a significant reduction in the
executive's compensation, duties, title or reporting responsibilities; (ii) a
change in the executive's job location; or (iii) the termination by the officer
of his employment for certain enumerated reasons. In addition, the officer will
receive a prorated portion of the officer's average annual bonus for the
preceding three fiscal years. If the officer leaves ARI for any other reason,
within two years following a Change of Control, the officer will receive a
prorated portion of the officer's average annual bonus for the preceding three
fiscal years. The officer is under no obligation to mitigate amounts payable
under the Change of Control Agreements. In addition, upon a Change of Control,
all stock options and similar awards become immediately vested and all deferred
compensation becomes payable.
For purposes of the Change of Control Agreements, a "Change of Control"
means any of the following events: the acquisition (other than from ARI) by any
individual, entity or group, subject to certain exceptions, of beneficial
ownership, directly or indirectly, of 50% or more of the combined voting power
of ARI's then outstanding voting securities; (ii) a merger, consolidation, share
exchange, or sale or disposition of substantially all of the assets of the
Company; or (iii) approval by the Company's shareholders of a complete
liquidation or dissolution of the Company.
9
CERTAIN TRANSACTIONS
The Company has a revolving line of credit with WITECH Corporation (the
"WITECH Line") of $1.0 million and a term loan payable in equal monthly
installments over three years. The term loan was initially for $1.0 million. The
WITECH Line bears interest at prime plus 3.25% and the term loan bears interest
at prime plus 4.0%. As of July 31, 2001 there was $200,000 outstanding under the
WITECH Line and $388,889 outstanding under the term loan. The WITECH Line will
terminate on December 31, 2001 and the last scheduled payment on the term loan
is October 1, 2002. During fiscal 2001, the Company incurred approximately
$113,675 of interest with respect to our borrowings from WITECH.
Since the inception of the WITECH Line, the Company has issued warrants
for an aggregate of 280,000 shares of Common Stock exercisable at prices ranging
from $2 1/8 to $5 1/8 per share. The exercise price of the warrants is reduced
if the Company sells stock for less than the then current exercise price. On
October 1, 2000, warrants to purchase 175,000 shares of Common Stock expired. Of
the 105,000 warrants to purchase shares of Common Stock currently owned by
WITECH (i) warrants to purchase up to 75,000 shares of Common Stock at $2.125
expire on January 1, 2002; and (ii) warrants to purchase 30,000 shares of Common
Stock at $4.00 expire on October 1, 2006.
On July 8, 1999, Briggs & Stratton Corporation ("Briggs") executed a
Master Agreement with the Company (the "Customer Contract"). The Customer
Contract provides for the Company to license its electronic commerce and
electronic cataloging software to Briggs and its dealers and distributors and to
provide certain related professional services. The Customer Contract has an
initial term of one year and automatically renews for additional terms of one
year each unless either party gives written notice of termination to the other
party. On March 30, 2000 and July 31, 2000, ARI and Briggs signed additional
contracts for the license of the Company's Web-based communications and catalog
software. During fiscal 2001, the Company invoiced Briggs $485,585 for products
and services.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon its review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company pursuant to Section 16 of the Securities Exchange Act
of 1934, as amended, all of such forms were filed on a timely basis by reporting
persons, except Mr. Storm filed one late Form 4.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed Ernst & Young LLP to serve as principal accountant to audit the books
and accounts of the Company and its subsidiaries for the fiscal year ending July
31, 2002 and is seeking the ratification of this appointment by the
shareholders. It is intended that the shares represented by the proxy will be
voted (unless the proxy indicates to the contrary) for ratification of the
appointment.
A representative of Ernst & Young LLP is expected to be present at the
meeting with the opportunity to make a statement if he or she desires to do so,
and is expected to be available to respond to appropriate questions.
AUDIT FEES
Aggregate fees billed by Ernst & Young LLP for audit related services
were $201,340. Fees for the last annual audit and reviews of the quarterly
statements were $122,700 and fees for audit related services were $78,640. Audit
related services generally include fees for SEC registration statements and
accounting consultations.
FINANCIAL INFORMATION SYSTEMS DESIGN
AND IMPLEMENTATION FEES
Ernst & Young LLP received no fees from the Company for financial
information systems design and implementation.
10
ALL OTHER FEES
The aggregate fees billed by Ernst & Young LLP for non-audit related
and non-information systems related services were $19,760.
OTHER MATTERS
OTHER PROPOSED ACTION
The Board of Directors of the Company knows of no other matters which
may come before the meeting. However, if any matters other than those referred
to above should properly come before the meeting, the persons named in the
enclosed proxy will vote such proxy in accordance with their discretion.
SHAREHOLDER PROPOSALS
All proposals of shareholders intended to be presented at the Company's
2002 Annual Meeting must be received by the Company at its executive offices on
or before September 12, 2002, in order to be presented at the meeting (and must
otherwise be in accordance with the requirements of the Bylaws of the Company)
and must be received by July 22, 2002 to be considered for inclusion in the
proxy statement for that meeting.
COSTS OF SOLICITATION
The expenses of printing and mailing proxy materials, including
reasonable expenses involved in forwarding materials to beneficial owners of
Common Stock, will be borne by the Company. No solicitation other than by mail
is contemplated, except that officers or employees of the Company may solicit
the return of proxies from certain shareholders by telephone, facsimile or
personal solicitation.
SHAREHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AT NO COST BY WRITING
TO THE INVESTOR RELATIONS DEPARTMENT, ARI NETWORK SERVICES, INC., 330 E.
KILBOURN AVENUE, MILWAUKEE, WI 53202.
BY ORDER OF THE BOARD OF DIRECTORS
Timothy Sherlock, Secretary
November 19, 2001
11
EXHIBIT A
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. The duties of the Audit Committee are to:
(1) evaluate the independent auditors; (2) make recommendations as to the
selection of independent auditors; (3) review the audit plan and scope with the
independent auditors; (4) review audit results; (5) review transactions between
management and the Company; (6) review reports of the accounting staff of the
Company and its auditors as to the adequacy and quality of its system of
internal controls; and (7) make appropriate inquiries regarding financial
matters to the auditors and others. Management has the primary responsibility
for the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the United
States, their judgments as to the quality, not just the acceptability, of the
Company's accounting principles and such other matters as are required to be
discussed with the Committee under auditing standards generally accepted in the
United States. In addition, the Committee has discussed with the independent
auditors the auditors' independence from management and the Company including
matters in the written disclosures required by the Independence Standards Board
and considered the compatibility of non-audit services with auditors'
independence.
The Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examination and their evaluation of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Committee held five meetings during fiscal 2001.
In reliance on the views and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended July 31, 2001 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended, subject
to shareholder approval, the selection of the Company's independent auditors.
/s/ D. Bruce Merrifield
--------------------------------------------------------------
D. Bruce Merrifield, Jr., Audit Committee Member
/s/ Ted C. Feierstein
--------------------------------------------------------------
Ted C. Feierstein, Audit Committee Member
12
ARI NETWORK SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a shareholder of ARI Network Services, Inc. (the
"Company"), hereby appoints Brian E. Dearing and Timothy Sherlock, and each of
them, as proxies, each with the power to appoint a substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all of
the shares of stock of the Company held of record by the undersigned on November
2, 2001, at the 2001 Annual Meeting of Shareholders of the Company to be held on
December 13, 2001 at 9:00 a.m. and at any and all adjournments thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR the nominees below to serve [ ] WITHHOLD AUTHORITY to vote
until the Company's 2004 Annual for the nominees listed
Meeting and until their successors below.
are elected and qualified (except as
marked to the contrary below).
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.)
BRIAN E. DEARING
RICHARD W. WEENING
2. To ratify the selection of Ernst & Young LLP as the Company's
Independent Public Accountants for fiscal 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxy holders are authorized to vote
upon such other matters as may properly come before the 2001
Annual Meeting and at any adjournment or postponement thereof.
(Continued and to be signed on the reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTORS, AND "FOR" THE OTHER
PROPOSALS.
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Date: , 2001
-----------------------
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(Signature of Shareholder)
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(Signature of Shareholder - if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENVELOPE PROVIDED.