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ARIEL CORPORATION 1996 DIRECTORS STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Ariel Corporation 1996 Directors Stock Option
Plan is to provide an incentive to non-employee directors of Ariel Corporation
(the "Corporation"), who are in a position to contribute materially to the
long-term success of the Corporation, to increase their interest in the
Corporation's welfare, and to aid in attracting and retaining non-employee
directors of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise,
the following terms shall have the meanings set forth below:
(a) "Board shall mean the Board of Directors of the
Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
it may be amended from time to time.
(c) "Committee" shall mean a committee whose members shall,
from time to time, be appointed by the Board; provided,
however, that on such date as the Corporation's Stock is
first registered under Section 12 of the Securities
Exchange Act of 1934 such committee shall consist of at
least two Directors, all of whom are disinterested within
the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934.
(d) "Corporation" shall mean Ariel Corporation, a Delaware
corporation, and any successor thereto.
(e) "Directors" shall mean those members of the Board of
Directors of the Corporation who are not Employees.
(f) "Fair Market Value" shall mean the fair market value of the
Stock as determined by the Committee on the basis of a review
of the facts and circumstances at the time.
(g) "Grantee" shall mean a non-employee director granted a
Stock Option under this Plan.
(h) "Non-Qualified Stock Option" shall mean an option granted
pursuant to the Non-Qualified Stock Option provisions as set
forth in Part II of this Plan.
(i) "Plan" shall mean the Ariel Corporation 1996 Directors Stock
Option Plan as set forth herein as amended from time to time.
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(j) "Stock" shall mean authorized but unissued shares of the
Common Stock of the Corporation or reacquired shares of the
Corporation's Common Stock.
(k) "Stock Option" shall mean an option granted pursuant to
the Plan to purchase shares of stock.
3. Shares of Stock Subject to the Plan. Subject to the provisions of Paragraph 2
of Part III, the Stock which may be issued or transferred pursuant to Stock
Options granted under the Plan to Directors shall not exceed 450,000 shares in
the aggregate. If a Stock Option shall expire and terminate for any reason, in
whole or in part, without being exercised, the number of shares of Stock as to
which such expired or terminated Stock Option shall not have been exercised may
again become available for the grant of Stock Options.
4. Administration of the Plan. The Plan shall be administered by the Committee.
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to it, to determine the terms and provisions of Stock
Option agreements, and to make all other determinations necessary or advisable
for the administration of the Plan. Any controversy or claim arising out of or
related to this Plan shall be determined unilaterally by and at the sole
discretion of the Committee.
5. Amendment or Termination. The Board may, at any time, alter, amend, suspend,
discontinue, or terminate this Plan; provided, however, that such action shall
not adversely affect the right of Grantees to Stock Options previously granted
and no amendment, without the approval of the stockholders of the Corporation,
shall increase the maximum number of shares which may be awarded under the Plan
in the aggregate, materially increase the benefits accruing to Grantees under
the Plan, change the class eligible to receive options under the Plan, or
materially modify the eligibility requirements for participation in the Plan.
6. Effective Date and Duration of the Plan. The Plan shall become effective upon
its approval by the Board subject to its subsequent approval by the stockholders
of the Corporation. This Plan shall terminate ten years from the date the Plan
becomes effective, and no Stock Option may be granted under the Plan thereafter,
but such termination shall not affect any Stock Option theretofore granted.
II. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Stock Options.
(a) Directors of the Corporation who are not also Employees
shall be eligible to receive Non-Qualified Stock Options
under the Plan.
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(b) The Committee shall determine and designate from time to time
those Directors who are to be granted Non-Qualified Stock
Options and the amount subject to each Non- Qualified Stock
Option.
(c) The Committee may grant at any time new Non-Qualified Stock
Options to a Director who has previously received
Non-Qualified Stock Options or other options, whether such
prior Non-Qualified Stock Options or other options are still
outstanding, have previously been exercised in whole or in
part, or are canceled in connection with the issuance of new
Non-Qualified Stock Options.
(d) When granting a Non-Qualified Stock Option, the Committee
shall determine the purchase price of the Stock subject
thereto. Such price shall not be less than 100% of the Fair
Market Value of such Stock on the date the Non- Qualified
Stock Option is granted.
(e) The Committee, in its sole discretion, shall determine
whether any particular Non-Qualified Stock Option shall
become exercisable in one or more installments, specify
the installment dates, and, within the limitations herein
provided, determine the total period during which the
Non-Qualified Stock Option is exercisable. Further, the
Committee may make such other provisions as may appear
generally acceptable or desirable to the Committee.
(f) No Non-Qualified Stock Option shall be exercisable more than
ten years from the date such option is granted.
2. Exercise of Stock Options. The option price of a Non-Qualified Stock Option
shall be payable on exercise of the option (i) in cash or by check, bank draft
or postal or express money order; (ii) by the surrender of Stock then owned by
the Grantee, provided that the stock surrendered by the Grantee has been owned
by the Grantee for at least six (6) months; or (iii) partially in accordance
with clause (i) and partially in accordance with clause (ii) of this Paragraph.
Shares of Stock so surrendered in accordance with clause (ii) or (iii) shall be
valued at the Fair Market Value thereof on the date of exercise, surrender of
such Stock to be evidenced by delivery of the certificate(s) representing such
shares in such manner, and endorsed in such form, or accompanied by stock powers
endorsed in such form, as the Committee may determine.
3. Termination of Service as a Director.
(a) If a Grantee ceases to be a Director (other than by death),
the terms of any then outstanding Non-Qualified Stock Option
held by the Grantee shall extend for a period ending on the
earlier of the date on which such option would otherwise
expire or three months after such
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cessation of being a Director and such option shall be
exercisable to the extent it was exercisable as of the date of
cessation of being a Director.
(b) If a Grantee ceases to be a Director by reason of death,
the representative of his estate or beneficiaries thereof
to whom the option has been transferred shall have the
right during the three-month period following his death
to exercise any then outstanding Non-Qualified Stock
Options in whole or in part. If a Grantee dies within
three months after he ceases to be a Director without
having fully exercised any then outstanding Non-Qualified
Stock Options, the representative of his estate or
beneficiaries thereof to whom the option has been
transferred shall have the right during such three month
period to exercise such options in whole or in part. The
number of shares of Stock in respect of which a Non-
Qualified Stock Option may be exercised after a Grantee's
death shall be the number of shares of Stock in respect
of which such option could be exercised as of the date of
the Grantee's death. In no event may the period for
exercising a Non-Qualified Stock Option extend beyond the
date on which such option would otherwise expire.
III. GENERAL PROVISIONS
1. Substitution of Options. In the event of a corporate merger or consolidation,
or the acquisition by the Corporation of property or stock of an acquired
corporation or any reorganization or other transaction qualifying under Section
425 of the Code, the Committee may, in accordance with the provisions of that
Section, substitute options under this Plan for options under the plan of the
acquired corporation provided (i) the excess of the aggregate fair market value
of the shares subject to option immediately after the substitution over the
aggregate option price of such shares is not more than the similar excess
immediately before such substitution and (ii) the new option does not give the
Director additional benefits, including any extension of the exercise period.
2. Adjustment Provisions.
(a) If the shares of Stock outstanding are changed in number or
class by reason of a split-up, merger, consolidation,
reorganization, reclassification, recapitalization, or any
capital adjustment, including a stock dividend, or if any
distribution is made to the holders of common stock other than
a cash dividend, then
(i) the aggregate number and class of shares or other
securities that may be issued or transferred
pursuant to Paragraph 3 of Part I;
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(ii) the number and class of shares or other securities
which are issuable under outstanding Stock Options,
and
(iii) the purchase price to be paid per share under
outstanding Stock Options, shall be adjusted as
provided hereinafter.
(b) Adjustment under this Paragraph 2 shall be made in an
equitable manner by the Committee, whose determination as to
what adjustments shall be made, and the extent thereof, shall
be final, binding, and conclusive.
3. General.
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with
this Plan, as the Board shall approve.
(b) The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any
right to be retained as a Director of the Corporation.
(c) No director, and no beneficiary or other person claiming
under or through him, shall have any right, title or
interest by reason of any Stock Option to any particular
assets of the Corporation, or any shares of Stock
allocated or reserved for the purposes of the Plan or
subject to any Stock Option except as set forth herein.
The Corporation shall not be required to establish any
fund or make any other segregation of assets to assure
the payment of any Stock Option.
(d) No right under the Plan shall be subject to anticipation,
sale, assignment, pledge, encumbrance, or charge except by
will or the laws of descent and distribution, and a Stock
Option shall be exercisable during the Grantee's lifetime only
by the Grantee.
(e) Notwithstanding any other provision of this Plan or agreements
made pursuant thereto, the Corporation's obligation to issue
or deliver any certificate or certificates for shares of Stock
under a Stock Option, and the transferability of Stock
acquired by exercise of a Stock Option, shall be subject to
all of the following conditions:
(i) Any registration or other qualification of such
shares under any state or federal law or regula-
tion, or the maintaining in effect of any such
registration or other qualification which the Board
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shall, in its absolute discretion upon the advice
of counsel, deem necessary or advisable;
(ii) The obtaining of any other consent, approval, or
permit from any state or federal governmental agency
which the Board shall, in its absolute discretion
upon the advice of counsel, determine to be necessary
or advisable; or
(iii) Each stock certificate issued pursuant to a Stock
Option shall bear the following legend:
"The transferability of this certificate and the
shares of Stock represented hereby are subject to
restrictions, terms and conditions contained in the
Ariel Corporation 1996 Directors Stock Option Plan,
and an Agreement between registered owner of such
Stock and Ariel Corporation. A copy of the Plan and
Agreement are on file in the office of the Secretary
of Ariel Corporation"
(f) All payments to Grantees or to their legal
representatives shall be subject to any applicable tax,
community property, or other statutes or regulations of
the United States or of any state having jurisdiction
thereof. The Grantee may be required to pay to the
Corporation the amount of any withholding taxes which the
Corporation is required to withhold with respect to a
Stock Option or its exercise. In the event that such
payment is not made when due, the Corporation shall have
the right to deduct, to the extent permitted by law, from
any payment of any kind otherwise due to such person all
or part of the amount required to be withheld.
(g) A Grantee entitled to Stock as a result of the exercise
of an option shall not be deemed for any purpose to be,
or have rights as, a shareholder of the Corporation by
virtue of such exercise, except to the extent a stock
certificate is issued therefor and then only from the
date such certificate is issued. No adjustments shall be
made for dividends or distributions or other rights for
which the record date is prior to the date such stock
certificate is issued. The Corporation shall issue any
stock certificates required to be issued in connection
with the exercise of a Stock Option with reasonable
promptness after such exercise.
(h) The grant or exercise of Stock Options granted under the Plan
shall be subject to, and shall in all respects comply with,
applicable Delaware corporate law relating to such grant or
exercise.
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Adopted by the Board of Directors: January 24, 1996 to be
effective February 1, 1996
Adopted by the Stockholders: 1996 Annual Meeting
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