REPLACEMENT STOCK OPTION AGREEMENT
This Replacement Stock Option Agreement is made as of December 15,
1997 between AHC I Acquisition Corp., a Delaware corporation (the "Company"),
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇"),
1. BACKGROUND. As of August 4, 1994, ▇▇▇▇▇▇▇ was granted a stock
option ("Arcade Option") under the 1993 Stock Option Plan of Arcade Holding
Corporation, a Delaware Corporation ("Arcade"). In connection with the
acquisition of all the shares of common stock of Arcade by the Company (the
"Transaction") and pursuant to the terms of an Option Substitution Agreement
dated as of December 15, 1997 ("Option Substitution Agreement") among the
Company, ▇▇▇▇▇▇▇ and Arcade, a portion of the Arcade Option ("Surrendered
Arcade Option") was surrendered, terminated and cancelled. This option is
granted in replacement of the Surrendered Arcade Option to preserve those
opportunities and benefits under the Arcade Option which were terminated and
cancelled in connection with the Transaction,
2. GRANT OF OPTION. The Company hereby irrevocably grants to ▇▇▇▇▇▇▇ a
stock option (the "Option") to purchase all or any part of an aggregate of
100,000 shares of 15% Senior Preferred Stock Due 2012, per value $.01 per share
of the Company (the "Preferred Stock") (such number being subject to adjustment
as provided in Section 8) on the terms and conditions hereinafter set forth.
The number of shares of Preferred Stock subject to the Option has been
determined in accordance with the Option Substitution Agreement.
3. PURCHASE PRICE. The per share purchase price of the shares of
Preferred Stock deliverable upon exercise of the Option shall be $1.37. The per
share purchase price has been determined in accordance with the Option
Substitution Agreement.
4. VESTING AND TERM. The Option shall be fully vested and may be
exercised, in part or in full, at any time and from time to time prior to the
expiration or termination thereof.
The term of the Option shall expire, if not sooner terminated as
provided herein, on August 4, 2004, (which is the 10th anniversary of the date
of grant of the Arcade Option), and the Option is not exercisable as to any
shares on or after such date.
5. PUT AND CALL AGREEMENT. ▇▇▇▇▇▇▇ and the Company agree that this
Option and any Preferred Shares acquired pursuant to the Option shall be
subject to the terms and conditions of that certain Put and Call Agreement
dated as of December 15, 1997, a copy of which is attached hereto.
6. NONTRANSFERABILITY. The Option shall not be transferable (other
than pursuant to the Put and Call Agreement dated the date hereof among the
parties hereto and certain shareholders of the Company) otherwise than by will
or the laws of descent and distribution and the Option may be exercised, during
the lifetime of ▇▇▇▇▇▇▇, only by him (or in the event of Executive's death, his
estate),
7. CHARACTERIZATION. The Option granted hereunder is intended to be a
nonqualified stock option and not an incentive stock option.
8. RECAPITALIZATION AND OTHER ADJUSTMENTS. The number of shares
subject to the Option (and the purchase price of such shares) will be equitably
adjusted for any reorganization, recapitalization, reclassification, stock
split, stock dividend or similar change in the Preferred Stock which occurs
subsequent to the date of this agreement, it being understood that no
adjustment shall be made to the shares subject to the Option in respect of the
accretion to liquidation value or payment of dividends on such shares In
accordance with the terms of the Preferred Stock.
9. SALE OR REORGANIZATION. In case the Company is merged or
consolidated with another corporation and the Company is not the surviving
company, or in case all or substantially all the assets of the Company is
acquired by another corporation, or in case of a reorganization or liquidation
of the Company, the Board of Directors of the Company or the board of directors
of any corporation assuming the obligations of the Company hereunder, shall
either (i) make appropriate provisions for the protection of the value of any
outstanding portion of the Option by the substitution on an equitable basis of
appropriate stock of the Company, or an appropriate stock of the merged,
consolidated, or otherwise reorganized corporation following written notice to
the holder of the Option, or (ii) give written notice to the holder of the
Option of the contemplated transaction in order to permit the holder of the
Option to elect to exercise prior to the effectiveness of such transaction.
10. METHOD OF EXERCISING OPTION. At any time and from time to time
prior to the termination or cancellation of the Option, ▇▇▇▇▇▇▇ may exercise
all or a portion of the Option by delivering written notice of exercise to the
Company, together with (i) a written acknowledgment, reasonably satisfactory to
the Company, that ▇▇▇▇▇▇▇ has read and has been afforded an opportunity to ask
questions of management of the Company regarding all financial and other
information provided to ▇▇▇▇▇▇▇ regarding the Company and (ii) payment in full
of the amount of the purchase price with respect to the number of shares with
respect to which the Option is being exercised ("Exercise Price") by delivery
to the Company of a cashier's or certified check or by wire transfer in
immediately available funds in the amount of the Exercise Price. ▇▇▇▇▇▇▇ shall
be liable for and shall remit to the Company all federal, state, local and
foreign withholding taxes for which the Company may be liable with respect to
the Option. As a condition to any exercise of the Option, ▇▇▇▇▇▇▇ will permit
the Company to deliver to him all financial and other information regarding the
Company and its affiliates which the Company believes necessary to enable
▇▇▇▇▇▇▇ to make an informed investment decision. In the event the Option shall
be exercised by any person or persons other than ▇▇▇▇▇▇▇, such notice of
exercise shall be accompanied by appropriate proof of the right of such person
or persons to exercise the Option.
11. SECURITIES LAWS RESTRICTIONS. ▇▇▇▇▇▇▇ represents that when ▇▇▇▇▇▇▇
exercises the Option, ▇▇▇▇▇▇▇ will be purchasing Preferred Shares for ▇▇▇▇▇▇▇'▇
own account and not on behalf of any other person. ▇▇▇▇▇▇▇ understands and
acknowledges that federal and state
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securities laws govern and restrict ▇▇▇▇▇▇▇'▇ right to offer, sell, pledge or
otherwise dispose of any Preferred Stock acquired on exercise of the Option
unless ▇▇▇▇▇▇▇'▇ offer, sale or other disposition thereof is registered under
the Securities Act of 1933, as amended (the "1933 Act"), and applicable state
securities laws or such offer, sale or other disposition is exempt from
registration thereunder. ▇▇▇▇▇▇▇ agrees that ▇▇▇▇▇▇▇ will not offer, sell or
otherwise dispose of any shares of Preferred Stock acquired on exercise of the
Option in any manner which would (i) require the Company to file any
registration statement (or similar filing under state law) with the Securities
and Exchange Commission (or with any state securities commission or agency) or
to amend or supplement any such filing or (ii) violate or cause the Company to
violate the 1933 Act, the rules and regulations promulgated thereunder or any
other state or federal law. ▇▇▇▇▇▇▇ further understands that the certificates
for any Preferred Stock ▇▇▇▇▇▇▇ purchases will bear the legend set forth below
or such other legend as the Company deems necessary or desirable to assure
compliance with the 1933 Act and other applicable laws, rules and regulations.
The certificates representing Preferred Stock acquired on exercise of the
Option will bear the following legend:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF (OTHER THAN PURSUANT
TO THE PUT AND CALL AGREEMENT DESCRIBED BELOW) UNTIL HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE
DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER,
OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE
SECURITIES LAWS.
THE ISSUER IS AUTHORIZED TO ISSUE SHARES OF MORE THAN ONE CLASS AND
TO ISSUE SHARES IN MORE THAN ONE SERIES OF AT LEAST ONE CLASS. THE
ISSUER WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH
CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, RESTRICTIONS
ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 15, 1997, AS THE SAME
MAY BE AMENDED FROM TIME TO
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TIME, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER AT ITS PRINCIPAL
EXECUTIVE OFFICES.
THIS SECURITY IS SUBJECT TO CERTAIN REPURCHASE RIGHTS UPON THE TERMS
AND SUBJECT TO THE CONDITIONS SET FORTH IN THAT CERTAIN PUT AND CALL
AGREEMENT, DATED AS OF DECEMBER 15, 1997, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER AT
ITS PRINCIPAL EXECUTIVE OFFICES, AND THIS SECURITY MAY NOT BE OFFERED
FOR SALE, SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF ON OR
PRIOR TO THE LAST DAY SUCH REPURCHASE RIGHTS MAY BE EXERCISED BY THE
COMPANY.
12. NO RIGHTS OF OWNERSHIP. ▇▇▇▇▇▇▇ shall have no rights of a
stockholder with respect to shares of Preferred Stock to be acquired by the
exercise of the Option until the date of issuance of a certificate or
certificates representing such shares. Except as otherwise expressly provided
herein, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued. All shares
of Preferred Stock purchased upon the exercise of the Option as provided herein
shall be fully paid and non-assessable. The Company shall give ▇▇▇▇▇▇▇ advance
notice prior to declaring any cash dividend on the Preferred Stock to allow
▇▇▇▇▇▇▇ time to exercise the Option prior to the record date of any such
dividend.
13. OBLIGATION OF THE COMPANY. The Company shall at all times during
the term of the Option reserve and keep available such number of shares of
Preferred Stock (which may be newly issued or treasury shares) as will be
sufficient to satisfy the requirements of this agreement, shall pay all
original issue taxes, if any, with respect to the issuance of shares of
Preferred Stock pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith, and shall, from time to time,
use its best efforts to comply with all laws and regulations which, in the
opinion of counsel for the Company, shall be applicable thereto.
14. MISCELLANEOUS.
a. Notices. All notices, requests, consents, instructions and other
communications required or permitted to be given hereunder shall be in writing
and hand delivered, sent by nationally-recognized, next-day delivery service or
mailed by certified or registered mail, return receipt requested, postage
prepaid, addressed as set forth below; receipt shall be deemed to occur on the
earlier of the date of actual receipt or receipt by the sender of confirmation
that the delivery was completed or that the addressee has refused to accept
such delivery or has changed its address without giving notice of such change
as set forth herein.
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(i) if to the Company as follows:
DLJ Merchant Banking II, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇ ▇▇▇▇▇
(ii) if to RLB, as follows:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to counsel for RLB;
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
or such other address or persons as the parties may from time to time designate
in writing in the manner provided in this Section.
b. Binding Effect. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, spouses, heirs and personal and legal representatives.
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C. Headings. The headings contained in this agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this agreement.
d. Amendments/Waivers. No supplement, modification or amendment of
this agreement shall be binding unless executed in writing by each of the
parties hereto, No waiver of any of the provisions of this agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver.
e. Invalid Provisions. If any provision of this agreement is held to
be invalid or unenforceable, such provision shall be automatically severed from
this agreement and there shall be added to this agreement a provision as
similar as possible to such severed provision as may be valid and enforceable,
and the validity and enforceability of the other provisions of this agreement
shall not be affected thereby.
f. Survival. The representations, warranties and covenants hereunder
shall survive any exercise of the Option.
g. Governing Law. This agreement shall be governed and construed in
accordance with the laws of the State of New York, other than its laws
respecting choice of laws,
h. Counterpart. This agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
i. Entire Agreement. This agreement evidences the entire understanding
and agreement of the parties relative to the matters discussed herein. This
agreement supersedes any and all other agreements and understandings, whether
written or oral, relative to the matters discussed herein.
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IN WITNESS WHEREOF, the Company has caused this agreement to be duly
executed by its officer thereunto duly authorized, and ▇▇▇▇▇▇▇ has hereunto set
his hand, all as of the day and year first above written.
AHC I Acquisition Corp.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Its Vice President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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