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ARIEL CORPORATION 1995 STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Ariel Corporation 1995 Stock Option and
Restricted Stock Plan is to provide an incentive to key Employees, Directors and
Consultants 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 Employees, Directors and Consultants 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) "Consultant" shall mean any person retained by the
Corporation or any of its subsidiaries to render services
on a consultant basis.
(e) "Corporation" shall mean Ariel Corporation, a Delaware
corporation, and any successor thereto.
(f) "Directors" shall mean those members of the Board of
Directors of the Corporation who are not Employees.
(g) "Disability" shall mean a medically determinable physical or
mental condition which causes an Employee, Director or
Consultant to be unable to engage in any substantial gainful
activity and which can be expected to result in death or to be
of long-continued and indefinite duration.
(h) "Employee" shall mean any common law employee, including
officers, of the Corporation or any of its subsidiaries as
determined in the Code and the Treasury Regulations
thereunder.
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(i) "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.
(j) "Grantee" shall mean an Employee, Director or Consultant
granted a Stock Option or awarded Restricted Stock under this
Plan.
(k) "Incentive Stock Option" shall mean an option granted pursuant
to the Incentive Stock Option provisions as set forth in Part
II of this Plan.
(l) "Non-Qualified Stock Option" shall mean an option granted
pursuant to the Non-Qualified Stock Option provisions as set
forth in Part III of this Plan.
(m) "Plan" shall mean the Ariel Corporation 1995 Stock Option and
Restricted Stock Plan as set forth herein as amended from time
to time.
(n) "Restricted Stock" shall mean authorized but unissued shares
of common stock bearing a restrictive legend awarded pursuant
to Part IV of this Plan. At present this includes all stock of
the corporation.
(o) "Stock" shall mean authorized but unissued shares of the
Common Stock of the Corporation or reacquired shares of the
Corporation's Common Stock.
(p) "Stock Option" shall mean an option granted pursuant to
the Plan to purchase shares of stock.
(q) "Ten Percent Stockholder" shall mean an Employee who at the
time a Stock Option is granted owns stock possessing more than
ten (10%) percent of the total combined voting power of all
stock of the Corporation or of its parent or subsidiary
corporation.
3. Shares of Stock Subject to the Plan. Subject to the provisions of Paragraph 2
of Part IV, the Stock which may be issued or transferred pursuant to Stock
Options granted under the Plan and the Restricted Stock which may be awarded
under the Plan shall not exceed 2,200,000 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. There shall be no terms and conditions in a
Stock Option which provide that the exercise of an Incentive Stock Option
reduces the number of shares of Stock for which an outstanding Non-Qualified
Stock Option may be exercised; and there shall be no terms and conditions in a
Stock Option which provide that the exercise of a Non-Qualified Stock Option
reduces the number of shares of Stock for which an outstanding Incentive Stock
Option may be exercised.
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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
or Restricted Stock awarded 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 of Employees
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 or Restricted Stock
awarded under the Plan thereafter, but such termination shall not affect any
Stock Option or Restricted Stock theretofore granted.
II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
(a) Only key Employees of the Corporation shall be eligible to
receive Incentive Stock Options under the Plan. Directors of
the Corporation who are not also Employees shall not be
eligible for Incentive Stock Options.
(b) The purchase price of each share of Stock subject to an
Incentive Stock Option shall not be less than 100% of the
Fair Market Value of a share of the Stock on the date the
Incentive Stock Option is granted; provided, however,
that the purchase price of each share of Stock subject to
an Incentive Stock Option granted to a Ten Percent
Stockholder shall not be less than 110% of the Fair
Market Value of a share of the Stock on the date the
Incentive Stock Option is granted.
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(c) No Incentive Stock Option shall be exercisable more than ten
years from the date the Incentive Stock Option was granted;
provided, however, that an Incentive Stock Option granted to a
Ten Percent Stockholder shall not be exercisable more than
five years from the date the Incentive Stock Option was
granted.
(d) The Committee shall determine and designate from time to time
those Employees who are to be granted Incentive Stock Options
and specify the number of shares subject to each Incentive
Stock Option.
(e) Notwithstanding any other provisions hereof, the
aggregate Fair Market Value (determined at the time the
option is granted) of the Stock with respect to which
Incentive Stock Options are exercisable for the first
time by the Employee during any calendar year (under all
such plans of the Grantee's employer corporation and its
parent and subsidiary corporations) shall not exceed
$100,000.
(f) The Committee, in its sole discretion, shall determine
whether any particular Incentive 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
Incentive Stock Option is exercisable. Further, the
Committee may make such other provisions as may appear
generally acceptable or desirable to the Committee or
necessary to qualify its grants under the provisions of
Section 422 of the Code.
(g) The Committee may grant at any time new Incentive Stock
Options to an Employee who has previously received
Incentive Stock Options or other options whether such
prior Incentive 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 Incentive Stock Options. The purchase price of
the new Incentive Stock Options may be established by the
Committee without regard to the existing Incentive Stock
Options or other options.
2. Exercise of Incentive Stock Options. The option price of an Incentive 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
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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 Employment.
(a) If a Grantee's employment is terminated (other than by
Disability or death) the terms of any then outstanding
Incentive 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 termination of employment, and such option shall be
exercisable to the extent it was exercisable as of the
date of termination of employment.
(b) If a Grantee's employment is terminated by reason of
Disability, the term of any then outstanding Incentive
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 the
Grantee's last date of employment, and such option shall
be exercisable to the extent it was exercisable as of
such last date of employment.
(c) If a Grantee's employment is terminated by 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 Incentive Stock Options in
whole or in part. If a Grantee dies within three months
after his retirement without having fully exercised any
then outstanding Incentive 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 an Incentive Stock Option may be
exercised after a Grantee's death shall be the number of
shares in respect of which such option could be exercised
as of the date of the Grantee's death or retirement,
whichever occurs first. In no event may the period for
exercising an Incentive Stock Option extend beyond the
date on which such option would otherwise expire.
(d) The Board may grant a leave of absence to any Grantee for
purposes of continuing such Grantee's employment with the
Corporation or its subsidiaries.
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III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Stock Options.
(a) Key Employees and Consultants of the Corporation, including
members of the Committee, shall be eligible to receive
Non-Qualified Stock Options under the Plan. Directors of the
Corporation, generally excluding members of the Committee
except as provided herein, who are not also Employees shall
also be eligible to receive Non-Qualified Stock Options.
(b) The Committee shall determine and designate from time to time
those Employees, Directors and Consultants 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 an Employee, Director or Consultant 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
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(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 Employment.
(a) If a Grantee's employment is terminated, a Director
Grantee ceases to be a Director or a Consultant Grantee
ceases to be a Consultant (other than by Disability or
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
termination of employment or cessation of being a
Director or a Consultant, and such option shall be
exercisable to the extent it was exercisable as of the
date of termination of employment or cessation of being
a Director or a Consultant.
(b) If a Grantee's employment is terminated by reason of
Disability, a Director or Consultant Grantee ceases to be
a Director or Consultant by reason of Disability, the
term 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 the Grantee's last
date of employment or being a Director or Consultant, and
such option shall be exercisable to the extent it was
exercisable as of such last date of employment or
cessation of being a Director or Consultant.
(c) If a Grantee's employment is terminated by death or a
Director or Consultant Grantee ceases to be a Director or
Consultant 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 his
retirement without having fully exercised any then
outstanding Non-Qualified Stock Options, the represent-
ative 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 or retirement, whichever
first occurs. In no event may the period for exercising
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a Non-Qualified Stock Option extend beyond the date on which
such option would otherwise expire.
(d) The Board may grant a leave of absence to any Grantee for
purposes of continuing such Grantee's employment with the
Corporation or its subsidiaries.
IV. 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
Employee additional benefits, including any extension of the exercise period.
Notwithstanding the forgoing, in the event of a change in control of the Company
by merger, consolidation, acquisition or otherwise, any outstanding options
granted hereunder shall be deemed vested in full.
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;
(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.
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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 or Restricted Stock in any year
shall not give the Grantee any right to similar grants in
future years or any right to be retained in the employ of the
Corporation, and all Employees shall remain subject to
discharge to the same extent as if the Plan were not in
effect.
(c) No employee, 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 regulation,
or the maintaining in effect of any such registration
or other qualification which the Board 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:
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"The transferability of this certificate and the
shares of Stock represented hereby are subject to
restrictions, terms and conditions contained in the
Ariel Corporation 1995 Stock Option and Restricted
Stock 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 representa-
tives 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.
Adopted by the Board of Directors: June 8, 1995
Adopted by the Stockholders: 1995 Annual Meeting
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