Document:

EXHIBIT 4.1

COMMON STOCK                                                        COMMON STOCK
   NUMBER                                                              SHARES

                            CALTON ACQUISITION CORP.

                                CUSIP __________

              INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
                      SEE REVERSE FOR CERTAIN RESTRICTIONS

This Certifies that

is the owner of

            FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,

                              $0.001 PAR VALUE, OF

                            CALTON ACQUISITION CORP.

transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.

<PAGE>

     WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated _________________________

                                     [CALTON ACQUISITION CORP. Corporate Seal]

/s/ MARY H. MAGEE                                  /s/ ANTHONY J. CALDARONE
SECRETARY                                          PRESIDENT

                                                   COUNTERSIGNED AND REGISTERED:

                                                   FIRST CITY TRANSFER COMPANY

                                                   TRANSFER AGENT AND REGISTRAR

                                                   BY
                                                      -------------------------
                                                        AUTHORIZED SIGNATURE

<PAGE>

                            CALTON ACQUISITION CORP.

     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>

<S>                                           <C>                             <C>

TEN COM - as tenants in common Custodian      UNIF GIFT MIN ACT --                    CUSTODIAN
                                                                             --------------  -------------
                                                                                 (CUST)        (MINOR)
                                                                             Under Uniform Trans to Minors
                                                                                       (State)
</TABLE>

TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in common

     Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, _____________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OF ASSIGNEE

_______________________________________

_______________________________________

______________________________________________________________________________

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

<PAGE>

______________________________________________________________________________

_______________________________________________________________________ Shares

represented by the within Certificate, and do hereby irrevocably constitute and
appoint

_______________________________________________________________________ Attorney

to transfer the said shares on the books to the within named Corporation with
full power of substitution in the premises.

Dated:__________________________

                  X ___________________________________________________________

                  X ___________________________________________________________

                    NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
                    WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE
                    IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
                    ANY CHANGE WHATEVER.

THE SIGNATURES(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.

SIGNATURE(S) GUARANTEED BY:

_________________________________________PROMISSORY NOTE

$750,000.00                                                          May 1, 2000

     FOR VALUE RECEIVED, the undersigned, Calton Acquisition Corp., a Delaware
corporation (the "Maker"), hereby promises to pay to the order of Calton, Inc.,
a New Jersey corporation, having its principal place of business at 125 Half
Mile Road, Red Bank, New Jersey 07701 (together with its successors and assigns,
the "Holder"), the principal sum of SEVEN HUNDRED FIFTY THOUSAND AND 00/100
DOLLARS ($750,000.00), together with interest thereon at the rate of seven
percent (7%) per annum, on May 1, 2003.

     If (i) the Maker or any other person liable hereunder should make an
assignment for the benefit of creditors or (ii) a receiver, trustee or
liquidator is appointed over or execution levied upon any property of the Maker
or any other person liable hereunder or (iii) any proceeding is instituted by or
against the Maker or any other person liable hereunder under any bankruptcy,
insolvency, reorganization or other law relating to the relief of debtors,
including without limitation the United States Bankruptcy Code, as amended,
then, and in each such event, the Holder may, at its option, declare the
remaining unpaid principal balance of this Promissory Note and all accrued
interest thereon immediately due and payable in full.

     Maker agrees to pay all reasonable costs of collection, including
attorneys' fees paid or incurred by the Holder in enforcing this Promissory Note
on default or the rights and remedies herein provided.

     All amounts due under this Promissory Note shall be unsecured.

     The Maker may prepay this Promissory Note in whole or in part without
premium or penalty.

     The Maker, for itself and for any guarantors, sureties, endorsers and/or
any other person or persons now or hereafter liable hereon, if any, hereby
waives demand of payment, presentment for payment, protest, notice of nonpayment
or dishonor and any and all other notices and demands whatsoever, and any and
all delays or lack of diligence in the collection hereof, and expressly consents
and agrees to any and all extensions or postponements of the time of payment
hereof from time to time at or after maturity and any other indulgence and
waives all notice thereof.

     This Promissory Note shall be governed by and construed and enforced in
accordance with the laws of the State of New Jersey.

     IN WITNESS WHEREOF, the undersigned has duly caused this Promissory Note to
be executed and delivered as of the date first written above.

                                             CALTON ACQUISITION CORP.

                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:<PAGE>

                    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.

<PAGE>

         (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.

                                       2
<PAGE>

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.

                                        3

<PAGE>

         (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

                                        4

<PAGE>

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.

                                        5

<PAGE>

                   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

                                        6

<PAGE>

(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

                                        7

<PAGE>

                  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.

                                        8

<PAGE>

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:

                                        9

<PAGE>
                           "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

                                        10

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