ARIEL CORPORATION
STOCK OPTION AGREEMENT
Agreement made this 21st day of December, 1998 between ARIEL
CORPORATION, a Delaware corporation, (hereinafter called the "Corporation") and
Xxxxxx Xxxxxxxxx, (hereinafter called the "Grantee").
WHEREAS, the Corporation desires to provide the Grantee with
an opportunity to acquire or increase his or her proprietary interest in the
business of the Corporation and, through stock ownership, to possess an
increased personal interest in its continued success and progress;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants hereinafter set forth, and other good and valuable consideration, the
Corporation and the Grantee agree as follows:
1. Award of Option. The Corporation hereby awards to the
Grantee, as a matter of separate inducement and agreement, and not in lieu of
salary or any other compensation for services, options to purchase an aggregate
of 95,000 shares of the Corporation's Common Stock on the terms and conditions
hereinafter set forth, at the purchase price of $2.375 per share.
2. Exercise of Option. The stock option granted pursuant to
this Agreement is exercisable in installments in accordance with the following
schedule, in which time periods are calculated from the date of this Agreement:
Installments Exercisable After
------------ -----------------
22,500 December 21, 2000
17,500 December 21, 2001
17,500 December 21, 2002
17,500 December 21, 2003
The Grantee has the right to exercise the options with respect
to the remaining 20,000 shares (the "Last 20,000 Options") on December 21, 2004
or earlier, in part, if the following average common stock prices are achieved
as measured by closing prices during any sixty (60) consecutive trading days on
Nasdaq: 5,000 shares @ $6 per share; 5,000 shares @ $9 per share; 5,000 shares @
$12 per share; and 5,000 shares at $15 per share.
Such portion of the Last 20,000 Options which meet the sixty (60) day
minimum price requirement referred to above shall vest immediately; otherwise,
the Last 20,000 Options shall all vest on December 21, 2004.
Such installments shall be cumulative, but each exercise must
encompass at least one installment or one thousand shares, whichever is less. In
the event the Grantee's exercise includes a fractional share, the Corporation
will not be required to issue a fractional share but will pay the Grantee in
cash the value of such fraction. All unexercised rights shall lapse and forever
terminate after the expiration of ten years from the date of this Agreement.
3. Termination of Employment. If the Grantee's employment with
the Corporation or with a subsidiary of the Corporation is terminated, the term
of any then outstanding 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 such last date of employment,
except in the event the Corporation is acquired and the grantee's job is
terminated as a result of corporate restructuring, the option shall remain in
full force and effect. The representative of a deceased Grantee's estate or
beneficiaries thereof to whom the option has been transferred shall have the
right during the three-month period following his or her death to exercise any
then outstanding option in whole or in part. Notwithstanding the foregoing, the
specific provisions of Grantee's Employment Agreement of even date shall control
all termination events as to vesting.
4. Manner of Exercise. Full payment for the shares purchased
shall be made at the time of any exercise of this Agreement. The purchase price
shall be payable to the Corporation either (i) in United States dollars in cash
or by check, bank draft, or postal or express money order, or (ii) through the
delivery of shares of Stock of the Corporation owned by the Grantee for at least
six months prior to the date of exercise having a Fair Market Value on the date
of exercise equal to the full purchase price, or (iii) by a combination of (i)
and (ii) above; provided, however, that no fractional share shall be accepted by
the Corporation in partial payment of the purchase price of any Stock but the
value of any such fractional interest shall be paid to the Corporation in the
manner specified in (i) above.
Subject to the terms and conditions hereof, the options shall
be exercisable by notice to the Corporation on the form provided by the
Corporation, a copy of which is attached hereto. In the event that the options
are being exercised by any person or persons, other than the Grantee, the notice
shall be accompanied by proof, satisfactory to the Corporation, of the right of
such person or persons to exercise any right under this Agreement.
5. Rights of Grantee. The grant of an option in any year shall
give such Grantee neither any right to similar grants in future years nor any
right to be retained as an employee of the Corporation or its subsidiaries, such
employment being terminable to the same extent as if this Agreement were not in
effect. The right and power of the Corporation or its subsidiaries to dismiss or
discharge any participant is specifically and unqualifiedly unimpaired by this
Agreement.
Neither the Grantee nor any other person legally entitled to
exercise any rights under this Agreement shall be entitled to any of the rights
or privileges of a stockholder of the Corporation with respect to any shares
which may be issuable upon any exercise pursuant to this Agreement, unless and
until a certificate or certificates representing such shares will have been
actually issued and delivered to the Grantee or such person.
6. Non-Transferability of Option. Except as otherwise provided
herein, an option and the rights and privileges conferred hereby may not be
transferred, assigned, pledged or hypothecated in any way, other than by will or
the laws of descent and distribution, and an option shall be exercisable during
the Grantee's lifetime only by the Grantee or his conservator.
Neither the Grantee nor any other person legally entitled to
exercise any rights under this Agreement shall be entitled to any of the rights
or privileges of a stockholder of the Corporation with respect to any shares
which may be issuable upon any exercise pursuant to this Agreement, unless and
until a certificate or certificates representing such shares will have been
actually issued and delivered to the Grantee or such person.
7. Taxes and Withholding. All payments to a Grantee or to his
legal representative 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.
8. Notices. Each notice to the Corporation relating to this
Agreement shall be in writing and delivered in person or by registered mail to
the Corporation at its office, 0000 Xxxxx 000, Xxxxxxxx, Xxx Xxxxxx 00000 to the
attention of the General Counsel. All notices to the Grantee or other person
then entitled to exercise any right pursuant to this Agreement shall be
delivered to the Grantee or such other person or persons at the Grantee's
address specified below or at such other address as the Grantee or such other
person or persons at the Grantee's address specified below or at such other
address as the Grantee or such other person may specify in writing to the
Corporation by a notice delivered in accordance with this paragraph.
9. Restriction on Shares. The Corporation's obligation to
issue or deliver any certificate or certificates for shares of Stock under this
option, and the transferability of shares acquired by the exercise of this
option, shall be subject to all of the following conditions:
(a) 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 Corporation shall, in its absolute
discretion upon the advice of counsel, deem necessary or
advisable.
(b) The obtaining of any other consent, approval, or
permit from any state or federal governmental agency which the
Corporation shall, in its absolute discretion upon the advice
of counsel, determine to be necessary or advisable; and
(c) 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 an Agreement between the
registered owner of such stock and Ariel Corporation. A copy
of the Agreement is on file in the office of the Secretary of
Ariel Corporation."
10. Miscellaneous. This Agreement comprises the whole
Agreement between the parties hereto. It may not be modified or terminated
orally, and it shall be deemed to be a Delaware contract, subject to
construction and enforcement in accordance with the laws of Delaware.
This Agreement shall inure to the benefit of and be binding
upon each successor of the Corporation and to the extent specifically provided
herein shall inure to the benefit of and be binding upon the Grantee's heirs,
legal representatives, and successors.
IN WITNESS WHEREOF, this Agreement is executed by the Grantee
and by the Corporation through its duly authorized officer or officers as of the
day and year first above written.
GRANTOR:
ARIEL CORPORATION
By:________________________
CEO
By:________________________
Secretary
GRANTEE:
__________________________
Full Name
__________________________
Mailing Address
__________________________
__________________________
Social Security No.
LETTER OF STOCK OPTION EXERCISE
CONFIDENTIAL
Dated:______________________
ARIEL CORPORATION
0000 Xxxxx 000
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
Gentlemen:
I wish to purchase the following number of shares of Common Stock
pursuant to the option granted to me on December 21, 1998:
Number of Non-Qualified Stock Option shares:_____________________
The purchase price for these shares is $2.375 per share. My check
payable to Ariel Corporation in the amount $ in payment of the purchase
price is enclosed.* Please issue the stock certificate(s) for these shares in my
name as follows:
____________________________________
Name**
____________________________________
Address
____________________________________
____________________________________
Social Security Number
Sincerely yours,
_______________________________
Signature
_______________________________
Office/Home Telephone
* If stock is used in payment, please contact the General Counsel's office at
(000) 000-0000.
** If you wish to have the shares issued in your name and that of another person
jointly, we suggest that the following form be used: "(Your name) and (name of
other person), as joint tenants with right of survivorship."
