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Stock Options
Prospectus 1994
THE ARA GROUP, INC.
ARA OWNERSHIP PROGRAM
Stock Options
14,644,387 Shares
Common Stock, Class B, $.01 Par Value
This Prospectus relates to up to 14,644,387 shares of the Common Stock,
Class B, $.01 par value ("Common Stock" or "Class B Common Stock"), of The ARA
Group, Inc. ("ARA" or the "Company") being offered upon exercise of Options to
purchase shares of Common Stock heretofore or hereafter granted by the Company
to eligible employees of the Company and its subsidiaries under the ARA
Ownership Program (the "Program"). The Program consists of the 1984 Stock
Option Plan (the "1984 Option Plan") the 1987 Stock Option Plan (the "1987
Option Plan") and the 1991 Stock Ownership Plan (the "1991 Ownership Plan").
There is no established public trading market for the Company's Common Stock
and each new management investor is required to be bound by the terms of an
Amended and Restated Stockholders' Agreement (the "Stockholders' Agreement")
which also binds all other management investors. Management investors may
transfer their shares only in limited instances, and then only in accordance
with the terms of the Stockholders' Agreement.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________________
Neither the delivery of this Prospectus nor any sale made through its use
shall, under any circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus
does not constitute an offer or solicitation in any jurisdiction in which such
offer or solicitation is not authorized or in any jurisdiction in which the
Company is not qualified to make such an offer or solicitation or to anyone to
whom it is unlawful to make such offer or solicitation.
________________________
The date of this Prospectus is March 1, 1994.
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TABLE OF CONTENTS
Page
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Available Information................................................. 2
Prospectus Summary.................................................... 3
Questions and Answers................................................. 5
The ARA Ownership Program............................................. 15
The Deferred Payment Program.......................................... 16
Income Tax Considerations............................................. 17
Description of Equity Securities...................................... 18
Experts............................................................... 20
Incorporation of Certain Documents by Reference....................... 20
Annex A -- Amended and Restated Stockholders' Agreement............. A-1
Annex B -- Stock Option Exercise Form............................... B-1
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission" or the "SEC"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W. Washington,
D.C., and at the Commission's Regional Offices at 75 Park Place, New York, New
York; and 500 West Madison Street, Chicago, Illinois. Copies of such material
also may be obtained from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. at prescribed rates. In addition,
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the Philadelphia Stock Exchange, 1900 Market
Street, Philadelphia, Pennsylvania.
The Company has filed with the Commission registration statements relating
to the shares of Common Stock offered hereby (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act of 1933. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, the reader is referred to the
Registration Statement.
The Company will provide without charge to each person holding a stock
option granted under the Program, upon the request of such person, a copy of
any or all of the documents which are incorporated by reference herein, other
than exhibits to such documents. Written or telephone requests should be
directed to William B. Bourne, The ARA Group, Inc., The ARA Tower, 1101 Market
Street, Philadelphia, Pennsylvania 19107 (telephone: 215-238-3213).
The ARA Group, Inc. is a Delaware corporation with its principal offices
located at The ARA Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107
(telephone 215-238-3000). As used herein, references to the "Company" include
The ARA Group, Inc. and its subsidiaries unless the context otherwise
requires.
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PROSPECTUS SUMMARY
The following is a summary of this Prospectus and is qualified in its entirety
by the more detailed information appearing elsewhere in, or
incorporated into, this Prospectus.
The Company
The Company, through ARA Services, Inc. ("ARA Services") and its other
subsidiaries, is engaged in providing or managing services, including food,
leisure and support services, uniform services, health and education services
and distributive services.
As a result of a management buyout transaction that was completed in 1984 by
a group of investors led by ARA senior management, ARA Holding Company became
the parent of ARA Services. Since then, the number of management investors
has increased through stock offerings made from time to time to selected
management employees pursuant to the ARA Ownership Program. In 1988, as part
of the Company's Shareholder Enhancement Plan, management investors increased
their direct ownership interest in the Company, and the Company changed its
name to The ARA Group, Inc.
Currently, approximately 900 management investors directly own approximately
55% of the equity of the Company.
In November 1993, the Board of Directors declared and the Company paid a
four-for-one split of the Common Stock effected in the form of a stock
dividend. As a result of the stock split, each share of Class B Common Stock
(a "Class B Share") covered by an outstanding stock option was automatically
converted into the right to receive a total of four Class B Shares upon
exercise of a stock option. Consequently, while the total purchase price for
a stock option (assuming exercise in full) will remain virtually the same, the
per share exercise price under an outstanding stock option will now be equal
to the pre-split exercise price divided by four.
The Option Plans
The ARA Ownership Program (the "Program") provides selected management
employees of the Company and its subsidiaries with an opportunity to purchase
shares of ARA's Common Stock.
Under the Program, selected management employees are granted options to
purchase shares of Common Stock. The exercise price of each stock option is
the current fair market value at the time the stock option is granted, based
upon the most recent available independent appraisal.
Generally, each stock option is granted for ten years, but may not be
exercised at the time it is granted. Half of the option becomes exercisable
after five years, and the portion exercisable increases each year thereafter
until the option is fully exercisable after nine years.
Options that become exercisable may be exercised at any time, until their
expiration date, as long as the option holder remains an employee of the
Company or its subsidiaries (or any entity designated by the Board of
Directors in which ARA owns an equity interest).
The specific terms of your stock option are set by the terms of the Plans
and your stock option certificate.
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How to Purchase Shares
To exercise all or a portion of your stock option and thereby purchase
shares, you must deliver to the Company (at the address set forth on the
exercise form) (1) a completed exercise form (included in this Prospectus as
Annex B), and (2) payment of the aggregate purchase price plus the aggregate
amount of applicable income taxes required to be withheld or collected (as
computed on the exercise form). For the exercise of non-qualified stock
options, you may elect to defer payment of up to 1/2 of the total purchase
price (including required withholding taxes) under ARA's Deferred Payment
Program.
Stockholders' Agreement
At the time of the ARA management buyout in 1984, all of the management
investors and other investors (except the ARA employee benefit plans, which
were prohibited by law from doing so) entered into a Stockholders' Agreement.
The Stockholders' Agreement was entered into to assure that the Company would
have consistent and uniform management as a private company, and that
ownership of the Company would be strictly controlled. At the time of the
adoption of the Shareholder Enhancement Plan in 1988, the Stockholders'
Agreement was amended and restated. By exercising your stock option, you will
be agreeing to be bound by the terms of the Stockholders' Agreement.
Under the terms of the Stockholders' Agreement, your investment in the
Common Stock can be sold only in limited instances. In addition, upon your
termination of employment, the Company may, but is not generally obligated to,
repurchase your shares.
The Stockholders' Agreement also provides that each year you must vote your
shares in favor of the election of directors nominated by the Board of
Directors.
The terms of the Stockholders' Agreement are summarized in this Prospectus,
and a copy of the Stockholders' Agreement is included as Annex A.
Other Factors
You have received a copy of ARA's most recent annual report on Form 10-K.
The annual report contains financial and other information about ARA's
operations. Available information for subsequent periods can be obtained as
described under "Available Information" on page 2. You should read carefully
the annual report as well as this Prospectus, and consider the following (as
well as the other information presented) before electing to invest.
Additional Information
If you did not receive a copy of ARA's most recent annual report on Form 10-
K, or if you have any questions about the Program or would like to obtain
further information, you should call one of the following persons in the ARA
Corporate Human Resources Department:
William Bourne at (215) 238-3213
Mari Fulginiti at (215) 238-3217
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QUESTIONS AND ANSWERS
To assist you in better understanding the offering, this Prospectus briefly
describes certain significant provisions of the Program, the Common Stock and
the Stockholders' Agreement in a question and answer format. For more
complete answers to the questions, you are referred to the text of the
Stockholders' Agreement. References to the appropriate sections of the
Stockholders' Agreement appear below at the end of the answers to specific
questions where applicable. Those sections are incorporated by such reference
into the answer, and the answer is qualified in its entirety by such
reference. The text of the Stockholders' Agreement is set forth as Annex A to
this Prospectus.
1. Q: What is The ARA Group, Inc.?
A: The ARA Group, Inc. was formed by a group of investors led by ARA
senior management and acquired ARA Services in a management buyout
transaction in 1984. As a result of the adoption of the Shareholder
Enhancement Plan in 1988, management investors directly own
approximately 50% of the equity of the Company.
2. Q: Are the shares of Common Stock being offered the same as the shares
owned by current management investors?
A: Yes, with the same rights and obligations to which current management
investors are subject under the Stockholders' Agreement.
3. Q: Am I required to purchase shares?
A: No. Any exercise of all or any portion of your stock option by you is
strictly voluntary.
4. Q: What is the purchase price per share?
A: The price per share for your stock option is set at the time your stock
option is granted. The price appears on your certificate and
represents the fair market value based on the most recent available
independent appraisal as of the date of grant. This price remains
fixed subject to adjustments for stock dividends, stock splits,
reorganizations, mergers or the like as described in Question 5 below.
5. Q: Is my stock option adjusted in the event of a Common Stock dividend,
split, reorganization, merger or the like?
A: In such cases your stock option will be equitably adjusted, if
appropriate, as determined by the Human Resources, Compensation and
Public Affairs Committee of the Board of Directors. For example, as a
result of such adjustments previously made, a stock option originally
granted in February 1985 for 10 shares at an exercise price of $350.00
per share is now an option for 4,280 shares at an exercise price of
$.81 per share.
6. Q: When can I exercise my stock option and purchase shares?
A: You can exercise your stock option (and thereby purchase shares) only
after the conditions set forth in your stock option certificate are
satisfied. Generally, stock options have two conditions:
(1) You must have held your stock option for at least the minimum time
specified in your certificate.
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(2) A registration statement must have become effective with respect to
the exercise of your option. This second condition has been satisfied
for all stock options under the Program.
7. Q: What is the required holding period for stock options?
A: The required holding period is specified in your stock option
certificate. Generally, half of your option becomes exercisable after
five years, and the portion exercisable increases each year thereafter
until the option is fully exercisable after nine years.
8. Q: Do the stock options have an expiration date?
A: Yes. The expiration date is specified in your stock option
certificate. Generally, stock options expire ten years after they are
granted.
9. Q. What if my employment is terminated?
A: Your stock option is canceled if your employment with the Company and
its subsidiaries (or any entity designated by the board of directors in
which ARA continues to own an equity interest) is terminated for any
reason. Unless you are terminated for cause, however, you may exercise
your option at any time during the three months following your
termination (but not after the expiration date of your option) to buy
those shares which were exercisable at the time of your termination.
If you die or become permanently disabled while employed by the Company
and its subsidiaries, (or any entity designated by the board of
directors in which ARA continues to own an equity interest) you (or
your legal representative) may exercise your options at any time during
the 12 months after your disability or death (but in any case not after
the expiration date) to buy those shares which were exercisable at the
time of your disability or death.
See Questions 44 and 45 for information relating to the Company's
ability to call any shares obtained upon exercise of stock options and
the price paid for such shares upon exercise of a Call.
10. Q: If I exercise only a portion of my stock option, what happens to the
unexercised portion of my stock option?
A: The unexercised portion of your stock option is not affected.
11. Q: How do I purchase shares of Common Stock?
A: To exercise all or a portion of your stock option and thereby purchase
shares, you must deliver to the Company, at the address which appears
on the exercise form included in this Prospectus as Annex B, (1) your
completed exercise form and (2) payment of the aggregate purchase price
plus the estimated aggregate amount of applicable income taxes required
to be withheld or collected. Instructions for computing your estimated
income taxes are included on the exercise form. For the exercise of
non-qualified stock options, you may elect to defer payment of up to
1/2 of the total purchase price (including required withholding taxes)
under ARA's Deferred Payment Program (see Questions 19 through 30).
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12. Q: Do I have to pay taxes when I exercise my stock option?
A: The answer depends on whether your option is an incentive stock option
or a non-qualified stock option. Certain stock options issued in 1985
are incentive stock options ("ISOs"), and income subject to regular
taxation generally is not recognized upon their exercise. Your stock
option certificate will state whether your stock option is intended to
be an ISO. However, stock options held by employees of former
subsidiaries of ARA (regardless of any statement in the stock option
certificate) are non-qualified stock options. All other stock options
are non-qualified stock options, and taxes are payable upon their
exercise. The tax consequence of exercising an ISO involves the
Alternative Minimum Tax ("AMT") and can be very complex. You are urged
to discuss any planned exercise of ISOs with your tax adviser. See
"Federal Income Tax Considerations".
13. Q: Why do I have to pay taxes when I exercise a non-qualified stock
option?
A: When you exercise a non-qualified stock option, the difference (if any)
between the exercise price and any higher fair market value of the
Common Stock at the time of the exercise is considered under the tax
law to be ordinary taxable income. The Company is required to withhold
taxes at the time of the exercise. These include federal income taxes,
social security taxes (if appropriate), applicable state income taxes,
and state unemployment taxes (depending on the state in which you are
employed). This is not necessarily the entire amount of tax that you
will owe as a result of this exercise. Additional tax, including
estimated tax payments, may be required to meet your full tax liability
due to this exercise. You should discuss your particular situation
with your tax advisor.
14. Q: Will the Company report to the IRS the taxable income (if any) that I
realize upon the exercise of my non-qualified stock option?
A: Yes. The taxable income (if any) and the taxes withheld will be
reported on your W-2 form for the year in which the purchase occurs.
The purchase occurs at the time your completed exercise form and your
check are received by the Company.
15. Q: How will I know what the fair market value of the Common Stock is when
I exercise a non-qualified stock option?
A: The Company's current practice is to have the Common Stock appraised
periodically by an independent appraiser. The appraised fair market
value at December 1, 1993 was $11.20, which includes the effect of the
November 1993 stock split.
16. Q: Can I compute the amount of withholding tax I must deposit with the
Company prior to exercising a non-qualified stock option?
A: Yes. The exercise form (included in this Prospectus as Annex B)
includes a worksheet which allows you to compute the amount of
applicable taxes required to be withheld or collected.
17. Q: Can I borrow money to purchase the shares covered by my stock option?
A: Yes. Generally, you must make your own financing arrangements.
However, for the exercise of non-qualified stock options, you may elect
to defer payment of up to 1/2 of the total purchase price (including
required withholding taxes) under ARA's Deferred Payment Program (see
Questions 19 through 30).
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18. Q. May I pledge my shares of ARA Common Stock?
A. Yes, you may pledge your shares to a commercial bank, savings and loan
institution or any other lending or financial institution as security
for your indebtedness. However, you may do so only if the lender
agrees that, upon realization of its security, the shares shall remain
subject to all of the terms of the Stockholders' Agreement and that the
lender will dispose of the shares only in compliance with the terms of
the Stockholders' Agreement. (Section 3.02(e)) If you are eligible to
participate in ARA's Deferred Payment Program, you will be required to
pledge shares to ARA (see Questions 19 through 30).
19. Q: What is the Deferred Payment Program?
A: The Deferred Payment Program is a Company program that allows you to
purchase shares of Common Stock pursuant to your exercise of a non-
qualified stock option and defer paying a portion of the total purchase
price.
20. Q: Will the Deferred Payment Program be offered for future non-qualified
stock option exercises?
A: The Company anticipates the Deferred Payment Program will continue to
be offered. However, the Deferred Payment Program is subject to
cancellation or modification at the discretion of the Board of
Directors at any time without notice.
21. Q: Do I have to participate in the Deferred Payment Program?
A: No. Any participation by you is strictly voluntary.
22. Q: How much of the purchase price payment may I defer under the Deferred
Payment Program?
A: You may defer payment of up to 1/2 of the total purchase price
(including required withholding taxes) for the shares you are
purchasing. The maximum amount that can be deferred is equal to 1/2 of
the Total Amount Due, as computed on line 11 of the Stock Option
Exercise Form.
23. Q: How do I elect to participate in the Deferred Payment Program?
A: In order to participate in the Deferred Payment Program when exercising
your non-qualified stock option, you should indicate the amount to be
deferred on the Stock Option Exercise Form and also complete the
Deferred Payment Obligation form, which is on the reverse side.
24. Q: What are the terms of the Deferred Payment Program?
A: The deferred payment is due, plus interest, on the February 15, next
following the third anniversary of the date the option is exercised.
For example, for an option exercise in March 1994, the deferred payment
is due on February 15, 1998. Interest accrues at an annual rate of 6%
compounded annually, and is payable at the same time the deferred
payment is due. (The interest rate is based on the current prime
rate.) All of the shares purchased pursuant to the option exercise are
pledged to secure the deferred payment obligation, and the Company
holds the share certificates. If you sell or otherwise transfer the
pledged shares, the deferred payment becomes due at the time of the
sale.
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25. Q: Will I be able to sell pledged shares in the internal market or under
the Emergency Buyback Program?
A: Yes. However, your deferred payment obligation will become due at the
time of such sale.
26. Q: Will I be able to sell shares to pay my deferred payment obligation at
the time it becomes due?
A: The Company intends to allow you to sell shares at that time. However,
all repurchases of shares by the Company must be approved by the Board
of Directors and are subject to the ability of the Company to do so
under its financing agreements.
27. Q: Can I prepay my deferred payment obligation?
A: Yes. You may prepay your deferred payment obligation at any time.
28. Q: Will the pledged shares be subject to the Stockholders' Agreement?
A: Yes.
29. Q: What are the anticipated federal income tax consequences to me for
participation in the Deferred Payment Program?
A: The tax consequences of exercising your stock option will not change.
Generally, under current federal law, the interest paid at the time of
making the deferred payment would be treated for federal income tax
purposes as "investment interest." Accordingly, it may be deductible,
but only to the extent of investment income received during the year
the interest is paid. The 1993 tax law changes have limited the types
of income that can be included in "investment income" and now exclude
from that category any income taxed at the favorable capital gains
rate. As a result, you may not be able, or wish, to deduct deferred
payment interest when you pay it. However, investment interest
expense, including deferred payment interest, that is not deducted for
federal income tax purposes may be carried forward indefinitely until
it is used. You are urged to discuss this matter with your tax
advisor.
30. Q: Will my obligation to pay the deferred payment be treated as debt for
my personal credit purposes?
A: Any decision regarding your personal credit, whether for a home
mortgage or otherwise, would be made by a lender. The Company
understands that generally the deferred payment obligation would be
treated as debt for personal credit purposes by lenders.
31. Q: Will I receive a stock certificate for the shares of Common Stock that
I purchase?
A: Yes, unless you are eligible and have elected to participate in ARA's
Deferred Payment Program (see Questions 19 through 30).
32. Q: Can I have the shares registered jointly in my name and my spouse's
name?
A: Yes, you can register shares in the names of you and your spouse, as
joint tenants, provided both you and your spouse sign the exercise
form. (Introduction to the Stockholders' Agreement)
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33. Q: Will I receive dividends on the Common Stock?
A: If the Board of Directors declares a dividend, holders of Common Stock
on the dividend record date will be entitled to receive that dividend.
34. Q: Will I be entitled to vote on any matters submitted to a vote of The
ARA Group, Inc. stockholders?
A: Yes, however you will be bound by the terms of the Stockholders'
Agreement. You will generally be free to vote your shares in any
manner you choose on any matters properly presented to the
stockholders. However, you will be required to vote your shares in
favor of the election of directors nominated by the Board of Directors.
This has the effect of granting to the existing directors the right to
select their successors. (Section 2.01)
35. Q: May I transfer my shares of Common Stock?
A: Generally, you may not sell or otherwise transfer your shares of Common
Stock (other than in certain limited instances). (Section 3.02(a))
36. Q: May I transfer my shares of Common Stock for estate or tax planning
purposes?
A: Yes. You may transfer your shares for estate or tax planning purposes
as gifts to your spouse, child, grandchild or parent or a trust for the
benefit of any of them or to a qualifying charitable organization. You
may also make other transfers to your family members, their trusts or
other entities if the transfer is approved by the Company's Board of
Directors. (Section 3.02)(d))
37. Q: Are these permitted transfers subject to any conditions?
A: Yes. The transferee must sign a document confirming that he or she is
acquiring the shares subject to all the terms and conditions of the
Stockholders' Agreement, and such document must be delivered to and
approved by the Company at least five business days before the
transfer. (Section 3.01)
38. Q: Will I be able to sell shares back to the Company?
A: Yes. Primarily you will be able to sell your Class B and Series C
Shares to the Company in the internal market. Secondly, the Company
provides an Emergency Buyback Program to accommodate certain limited
instances when unanticipated emergencies arise. The Company anticipates
that the combination of the internal market and the emergency buyback
program should provide adequate liquidity to all management investors
on an orderly and equitable basis. The Company also provides an offer
to sell procedure for the Class B Shares that could be utilized. These
three methods for realizing liquidity are described more fully below
(see Questions 39, 40 and 41). Of course, the ability of the Company
to repurchase shares is subject to the Company's continued strong
operating and financial performance. (Section 7).
39. Q: What is the internal market?
A: The internal market is a process whereby the Company, on a periodic
basis, offers to purchase some of your Class B and Series C Shares. At
the time of the offer, each management owner will then be able to
decide whether to accept or reject the offer. The internal market
provides a way for management owners to sell some of their stock
holdings.
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In this regard, a management owner can pursue a sale of stock in the
internal market in excess of the guideline stated below by contacting
one of the persons listed on page 4 of this Prospectus.
The initial Internal Market Policy approved for 1994 consists of two
semi-annual repurchase periods, and subject to further review and
approval by the Board of Directors prior to each subsequent annual
offering, is as follows:
<TABLE>
<CAPTION>
Class B Shares Series C Shares
-------------- ---------------
<S> <C> <C>
Offering Periods: December 15 to January 15, 1994 Same as for Class B Shares, except that
and July 15 to August 16, 1994 initial offering period does not
begin until January 1, 1994
Offerees: All management owners All management owners
Purchase Price: The most recent available $1,000 per share plus accrued and
appraised value, as of unpaid dividends
December 1, 1993, and as of
June 1, 1994 respectively
Payment Terms: Cash Cash
Individual Generally, up to $50,000 or Unlimited
Guideline for if greater, 10% of shares
each Offering owned (up to a maximum of
Period: $150,000); requests for larger
sales can be made by contacting
one of the persons listed
on page 4 of this Prospectus
Required Holding Shares owned for less than six None
Period: months are not eligible for
resale in the internal market
</TABLE>
40. Q: What is the Emergency Buyback Program?
A: From time to time there may be compelling circumstances when an
unanticipated emergency arises which may cause a management owner to
request the Company to repurchase Class B or Series C Shares. Each
request will be reviewed individually, taking into account all relevant
circumstances.
41. Q: Will I be able to sell my Class B shares in any other way?
A: The anticipated normal procedure for selling Class B Shares is through
the internal market. However, you could also offer a portion of your
Class B Shares to the Company at the current appraised Fair Market
Value of the Common Stock. Annually you could offer to sell up to the
lesser of 10% of your Class B Shares or $100,000 in share value. These
rights are cumulative beginning in 1990. In other words, if you did
not choose to sell in one year, the following year you could offer to
sell up to the lesser of 20% of your Class B Shares or $200,000 in
share value, etc. In the event your Class B Shares were not purchased
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by ARA you could offer to sell your Class B Shares within the next 90
days to a third party who agreed to abide by all the terms of the
Stockholders' Agreement, on the same terms offered to ARA. (Section 4)
Upon termination for any reason, subject to the Company's right to Call
your Class B Shares (see Question 44), you could offer to sell your
Class B Shares as described above. Additionally, if the reason for
termination were death, Complete Disability or Normal Retirement, then
the annual 10%/$100,000 limitation would no longer be applicable.
(Sections 1.04, 1.06 and 3.02(a))
42. Q: Will I be able to require the Company to repurchase shares?
A: Generally no. However, upon your death, Complete Disability or Normal
Retirement, you or your estate as appropriate, subject to the Company's
financing agreements, can require the Company to purchase up to 30% of
your shares. This right to require the Company to purchase shares is
described as a "Put". The Company will be required to purchase these
shares for cash at the current appraised Fair Market Value of the
Common Stock. The Company intends to purchase ("Call") your remaining
shares (see Question 43). However, in the event the Company does not
Call your shares, then you could offer to sell the remaining shares
(see Question 41). (Section 5)
43. Q: Will the Company inform me prior to the time that I purchase from the
Company (through the exercise of an option or otherwise) or sell to the
Company (in the internal market or otherwise) any of my shares of stock
of any pending or potential transaction that could increase or decrease
the value of the stock?
A: No. The Company has no obligation to disclose any pending or potential
transaction in connection with your decision to purchase from or sell
to the Company any shares of Company stock owned by you. The Company
does not disclose publicly its projections or the status of any
transaction that may be under consideration. This information is
generally confidential, and the Company could be adversely affected if
such information should become publicly known. (Section 8)
44. Q: If my employment with the Company and its subsidiaries is terminated
for any reason, does the Company have the right to require me to sell
my shares to the Company?
A: Yes. This right of the Company to require you to sell your Class B
Shares is described as a "Call". At any time during the 10 years
following the termination of your employment, the Company has the right
to Call any or all of your Class B Shares and any or all of the Class B
shares of all of your permitted transferees. The Company's intention
is to promptly exercise this right if you are terminated for any reason
for all Class B Shares except those acquired by exercising stock
options shortly before or after termination. The Company intends to
call those Class B Shares approximately six months after they were
acquired. (Section 6)
45. Q: How will I be paid for my Class B Shares when they are Called?
A: The Company will purchase your Class B Shares at the lesser of the
appraised Fair Market Value of the Common Stock at the time of the
exercise of the Call or the appraised Fair Market Value at the time of
termination plus 8% simple interest to the date of the exercise of the
Call. Under the terms of the Stockholders' Agreement, payment will be
in cash up to the least of 10% of shares called, $100,000 or your
highest base salary, with the remainder paid in installment notes.
(Section 6.02)
<PAGE>
<PAGE> 13
46. Q: What are the terms of the installment notes?
A: The Stockholders' Agreement provides for the following terms for the
installment notes. Annual cash payments will equal the least of 10% of
the principal, $100,000 or your highest base salary. At the end of the
10th year following termination, any remaining balance on the notes
will be paid in cash. Interest will be paid semi-annually and the rate
will be fixed at the Applicable Federal Rate which currently varies
from approximately 4.3% to 7.2% depending upon the term of the note
(Section 1.08).
47. Q: If the Company purchases my Class B Shares using, in part, an
installment note, will I have to pay tax on the entire gain in the
first year?
A: Generally, no. The purchase using a note usually will qualify for
installment treatment under the federal income tax laws. You should be
able to recognize taxable gain in proportion to the cash payments of
principal you will receive over the years. You should consult with
your tax advisor to determine if installment sale treatment is
advantageous to you and how you should report it on your tax returns.
48. Q: What is the Stock Repurchase Policy?
A: The Company's Stock Repurchase Policy provides for payment terms that
are generally more favorable to you than the payment terms provided for
in the Stockholders' Agreement. This Policy, which is described below
(see Questions 49 through 51), may be amended, discontinued or varied
for all repurchase transactions generally or for any specific
repurchase transaction at any time by the Company without notice. The
Policy does not affect the total repurchase price which you will be
paid for your shares.
49. Q: If I terminate before age 55 and my Class B Shares are Called, what
does the Stock Repurchase Policy currently provide?
A: The initial cash payment will be a minimum of $50,000 and each annual
principal installment on the promissory note will be a minimum of
$25,000.
50. Q: If I terminate at or after age 55 but before Normal Retirement and my
Class B Shares are Called, what does the Stock Repurchase Policy
currently provide?
A: The total repurchase price will be paid in an initial cash payment and
subsequent annual principal installments on the promissory note in
equal amounts, so that the entire repurchase price will have been paid
before you reach age 66. Each such payment is subject to a minimum of
$50,000 and a maximum of $300,000, with any remaining balance paid in
the final installment.
51. Q: If I terminate through Normal Retirement and my Class B Shares are
Called (or if I exercise my Put and the remainder of my Class B Shares
are Called), what does the Stock Repurchase Policy currently provide?
A: Generally, Normal Retirement means you are at least age 60 and you
retire from active employment. The initial cash payment will be 30% of
the total repurchase price. The remainder of the total repurchase
price will be paid in equal annual principal installments on the
promissory note so that the entire repurchase price will have been paid
before you reach 66 (or if you are 63 or over, in 3 equal annual
principal installments). Each such payment is subject to a minimum of
$50,000 and a maximum of $300,000, with any remaining balance paid in
the final installment.
<PAGE>
<PAGE> 14
52. Q: If I die or become Completely Disabled and my Class B Shares are Called
(or if my estate exercises its Put and the remainder of my shares are
Called), what does the Stock Repurchase Policy currently provide?
A: The initial cash payment will be 30% of the total repurchase price.
The remainder of the total repurchase price will be paid in three equal
annual principal installments on the promissory note. Each such
payment is subject to a minimum of $50,000 and a maximum of $300,000,
with any remaining balance paid in the final installment.
53. Q: Does the Stock Repurchase Policy provide for an alternative interest
rate on the promissory note?
A: Yes. In lieu of a fixed interest rate (equal to the Applicable Federal
Rate at the time of the repurchase) for the entire life of the
promissory note, you may make a one-time irrevocable election at the
time of repurchase for the rate to reset annually on the date of each
principal payment to the Applicable Federal Rate then in effect.
54. Q: Do the Call rights apply to a termination of my employment with ARA and
its subsidiaries which is beyond my control?
A: Yes. The Call rights apply to all terminations of employment with ARA
and its subsidiaries without regard to cause, including death,
permanent and complete disability, voluntary or involuntary termination
of employment and retirement. For example, if ARA were to sell the
division or subsidiary in which you work, then the Call rights would
apply even though you were continuing to work in the same organization.
(Section 6)
55. Q: What if ARA cannot repurchase my Class B Shares pursuant to the
exercise of a Put or a Call because it would cause a default under one
of ARA's loan agreements or would violate applicable law?
A: Your Class B Shares would be repurchased on the earliest practicable
date when such repurchase could be effected in compliance with such
loan agreement and applicable law. The price to be paid could be
affected because of such delay. (Section 12)
56. Q: If I voluntarily terminate my employment, the Company has the right to
Call my Class B Shares. Will the Company inform me prior to the time I
terminate my employment of any pending or potential transaction that
could increase the value of the Common Stock?
A: No. The Company has no obligation to disclose any pending or potential
transaction in connection with your decision to terminate your
employment (or in connection with your decision to exercise a Put or in
any other circumstance). The Company does not disclose publicly its
projections or the status of any transaction that may be under
consideration. This information is generally confidential, and the
Company could be adversely affected if such information should become
publicly known. (Section 8)
57. Q: When will I be able to transfer my Class B Shares freely without having
to comply with the restrictions on transfer contained in the
Stockholders' Agreement?
A: Generally, the Stockholders' Agreement will continue in force unless
the stockholders who are parties to the Agreement and the Company vote
to terminate or change it. (Section 15)
<PAGE>
<PAGE> 15
THE ARA OWNERSHIP PROGRAM
The ARA Ownership Program (the "Program") is designed to provide an
opportunity for selected management employees of the Company and its
subsidiaries to acquire an ownership interest in the Company and thereby give
them a more direct and continuing interest in the future success of the
Company's business.
Under the Program, the direct ownership in the Company has increased from 62
original management investors in 1984 to approximately 900 management
investors today owning approximately 55% of the equity. In addition, at
February 1, 1994, management employees held installment stock purchase
opportunities for 8,281,160 shares and stock options for an additional
1,567,856 shares.
The Company's senior management believes that management ownership has
significantly contributed to the Company's success, and intends to continue to
use the Program to expand both the number of management investors and their
percentage ownership.
The Program uses the 1984 Stock Option Plan, the 1987 Stock Option Plan and
the 1991 Stock Ownership Plan. These Plans allow the Company to offer, and
under the Program the Company has offered, stock purchase opportunities to
selected employees in three different ways: the direct sale of shares, the
grant of installment stock purchase opportunities, and the grant of stock
options. In choosing the form of stock ownership opportunity to be offered,
the Company considers, among other factors, the number of offerees and their
ability generally to finance an investment.
This Prospectus relates to the grant and exercise of stock options.
The 1984 Option Plan was adopted by the Board of Directors and approved by
the stockholders in December 1984 in connection with the management buyout.
Amendments to the Plan were approved by the stockholders in February 1987.
The Plan provides for the issuance of up to 14,643,192 shares of Common Stock
through the granting of incentive stock options and/or nonqualified options.
Under the terms of the Plan, a specified number of the options are reserved
for issue in connection with promotions or to new hires. On February 1, 1994,
1,883,448 options were outstanding under the Plan and 1,501,506 shares were
available for the grant of future options under the Plan.
The 1987 Option Plan was adopted by the Board of Directors in May 1987 and
was approved by stockholders in February 1988. The Plan provides for the
issuance of up to 8,357,956 shares of Common Stock through the granting of
incentive stock options and/or nonqualified options. On February 1, 1994,
1,750,228 options were outstanding under the Plan and 2,396,188 shares were
available for the grant of future options.
The 1991 Ownership Plan was adopted by the Board of Directors in November
1991. The Plan provides for the issuance of up to 8,513,372 shares of Common
Stock through the granting of nonqualified options. On February 1, 1994,
6,215,340 options were outstanding under the Plan and 897,677 shares were
available for the grant of future options.
In accordance with the terms of the Plans, the purchase price for shares
subject to stock options granted under the Plans will not be less than the
fair market value of the shares (based upon the most recent available
independent appraisal) on the date of the grant. Shares issued pursuant to
the Plans are subject to the Stockholders' Agreement. The Plans provide that
the terms of options and purchase opportunities outstanding under the Plans
and the number of shares authorized under the Plans will be appropriately
adjusted upon the declaration of stock dividends and upon the occurrence of
certain other events.
<PAGE>
<PAGE> 16
The Plans grant certain authority to the Human Resources, Compensation and
Public Affairs Committee (the "Committee") which consists of six members of
the Board.
The Committee is authorized to grant stock options and to determine the
number of shares to be offered thereby to each selected key employee. The
term "key employee" is not defined in the Plans, and subject to the express
provisions of the Plans, the Committee has complete authority to determine the
employees who receive stock options thereunder. As a result, the number of
employees eligible to participate in the Plans is not determinable.
Stock options are not transferrable. No stock option can be subject to
attachment, execution or levy of any kind. Each stock option shall be
exercisable only by the employee to whom it is granted and only while an
employee of ARA or a subsidiary (or any entity in which ARA continues to own
an equity interest and which the board of directors designates).
ARA will use the net proceeds from the sale of shares pursuant to exercises
of stock options for general corporate purposes.
The Plans are not subject to any provisions of the Employee Retirement
Income Security Act of 1974 and are not "qualified" within the meaning of
Section 401(a) of the Internal Revenue Code.
The Board of ARA or the Committee may establish such procedures as it deems
appropriate for the administration of the Plans. It may also include at the
time a stock option is granted such additional terms and conditions as it
deems desirable to the extent such are not inconsistent with the Plans. The
opinion of the Committee, or the Board for certain matters described in the
Plans, shall be final and binding upon all persons in interest, including
employees, ARA and its stockholders.
The Board may amend the Plans from time to time as it deems desirable,
except that certain amendments to the 1984 Option Plan or the 1987 Option Plan
require stockholder approval.
Neither the Plans nor any stock option granted under the Plans gives any
employee the right to continue in the employ of ARA or its subsidiaries or
limits in any respect the right of ARA or any subsidiary to terminate such
employee.
The appraised fair market value of the Common Stock as of December 1, 1993
was $11.20. The appraisal of the fair market value of the shares of Common
Stock was provided by Willamette Management Associates, Inc. ("Willamette"), a
professional independent appraiser. Such appraisal was based on the financial
condition and results of operations of ARA, a comparison of ARA with other
companies with similar characteristics, and other factors prevailing at the
time such determination was made.
In connection with the services rendered by Willamette with respect to the
preparation of the appraisal referred to above and other appraisals of Company
securities within the 12 months prior to the date of this Prospectus,
Willamette has received fees from the Company of approximately $100,000 plus
reimbursement of certain expenses. In addition, the Company has agreed to
indemnify Willamette against certain liabilities which it might incur in
connection with the preparation of the appraisal referred to above or
otherwise as a result of the services rendered by such firm.
THE DEFERRED PAYMENT PROGRAM
The Deferred Payment Program was adopted in 1992 and is designed to enable
employees to take better advantage of stock options granted to them, by giving
them the alternative to defer payment of a portion of the purchase price.
<PAGE>
<PAGE> 17
The Company anticipates that the Deferred Payment Program will continue to
be offered. However, the Program is subject to cancellation or modification
at the discretion of the Board of Directors at any time without notice.
The Deferred Payment Program currently in effect will permit the holder of a
non-qualified stock option to defer payment of up to one-half of the total
purchase price (including required withholding taxes) for the shares being
purchased. Accordingly, payment may be deferred for up to 47 months in some
cases. (In order to comply more clearly with certain laws which may be
applicable, ARA has the right to require the payment on demand. However, ARA
has no intention of exercising such right.) Interest will accrue on any
deferred payment at a fixed annual rate (currently 6% compounded annually),
and will be payable at the time the deferred payment is due. ARA may from
time to time select a different interest rate for use in future deferred
payment obligations. However, the interest rate at the time a deferred
payment obligation is entered into is fixed for the entire term of the
obligation. The Company will hold as collateral all shares purchased in which
any portion of the purchase price is financed under the Deferred Payment
Program until the deferred payment is received by the Company. Deferred
payment obligations may be prepaid at any time at the election of the employee
and will become due immediately in the event any shares securing the deferred
payment obligation are sold or otherwise transferred by the stockholder
(whether pursuant to a call of such shares by ARA upon termination of
employment or otherwise). Holders of stock options are not required to use
the Deferred Payment Program. If you have any questions about the Deferred
Payment Program, you should call Liza Cartmell at the ARA Corporate Treasury
Department (telephone: 215-238-3187).
INCOME TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
FEDERAL INCOME TAX CONSEQUENCES OF THE GRANTING AND EXERCISE OF STOCK OPTIONS
PURSUANT TO THE PLANS OR THE DISPOSITION OF SHARES ACQUIRED UPON EXERCISE OF
SUCH STOCK OPTIONS. BECAUSE OF THE COMPLEXITIES OF THE FEDERAL INCOME TAX
LAW, OPTION HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS.
Stock options granted pursuant to the Plans are intended to be either
incentive stock options or non-qualified stock options for federal income tax
purposes. Incentive stock options are identified as such on your stock option
certificate. However, stock options held by employees of former subsidiaries
of ARA (regardless of any statement in the stock option certificate) are non-
qualified stock options. All other stock options are non-qualified stock
options.
Incentive Stock Options
With respect to incentive stock options, ARA understands that under current
federal income tax laws, if shares purchased pursuant to the exercise of an
incentive stock option are not disposed of by the employee within one year
after the exercise of the option, then (i) no income subject to regular
taxation will be recognized to the employee either at the time of grant or at
the time of exercise of the option; (ii) any gain or loss (calculated with
reference to the option exercise price) will be recognized to the employee
only upon the ultimate disposition of the shares and, assuming the shares
constitute capital assets in the employee's hands, will be treated as
long-term capital gain or loss; and (iii) the difference between the option
exercise price and the fair market value of the shares at the time of exercise
will be treated as an "item of tax preference", subject to AMT.
ARA further understands that if the employee disposes of the shares acquired
by exercise of an incentive stock option before the expiration of the required
holding period, the employee must treat as ordinary income in the year of such
disposition an amount equal to the difference between the option exercise
price and the lesser of the fair market value at the time of exercise or the
selling price. The balance of the employee's gain on such disposition, if
any, may be taxed as capital gain. None of the gain on such a disposition
would be an item of tax preference subject to AMT.
<PAGE>
<PAGE> 18
Non-Qualified Stock Options
With respect to the non-qualified stock options, ARA understands that, under
current federal income tax laws, (i) no income will be recognized to the
employee at the time of grant; (ii) upon exercise of a stock option, the
employee must treat as ordinary income the difference, if any, between the
exercise price and any higher fair market value of the Common Stock on the
date of exercise, and (iii) assuming the shares received upon exercise of such
stock options constitute capital assets in the employee's hands, any gain or
loss upon disposition of shares (measured by reference to the fair market
value of the shares on the date of exercise) may be treated as capital gain or
loss. None of the income from exercise of non-qualified options or gain from
the sale of stock acquired through exercise of such options would be an item
of tax preference subject to AMT.
ARA further understands that income recognized upon the exercise of a non-
qualified stock option is subject to tax withholding and that it is obligated
to withhold or collect an amount equal to a portion of the tax applicable to
such income. Consequently, ARA requires the exercising employee to deposit
with ARA the amount of the taxes required to be withheld or collected. The
Company is required to report to the IRS the amount of ordinary income
generated by the exercise of a purchase opportunity by including that amount
as compensation in the employee's form W-2, and the employee is required to
report that amount in his/her tax return.
If payment of a portion of the exercise price is deferred under the Deferred
Payment Program, the interest paid at the time of making the deferred payment
would be treated as "investment interest". Accordingly, it may be deductible,
but only to the extent of investment income received during the year the
interest is paid. The 1993 tax law changes have limited the types of income
that can be included in "investment income" and now exclude from that category
any income taxed at the favorable capital gains rate. As a result, you may
not be able, or wish, to deduct deferred payment interest when you pay it.
However, investment interest that is not deducted can be carried forward and
be deductible in future years to the extent of the holder's investment income
in such years. You are urged to discuss this matter with your tax advisor.
Similarly, to the extent that stock options are exercised using other borrowed
funds, the interest incurred on such borrowing may also be treated as
"investment interest". You are urged to discuss this matter as well with your
tax advisor.
DESCRIPTION OF EQUITY SECURITIES
General
The authorized capital of the Company consists of 185,000,000 shares, which
includes 150,000,000 shares of Common Stock, Class B, par value $.01 per share
("Common Stock" or "Class B Common Stock") 25,000,000 shares of Common Stock,
Class A, par value $.01 per share ("Class A Common Stock"); and 10,000,000
shares of Series Preferred Stock, par value $1.00 per share ("Series Preferred
Stock"). As of February 1, 1994, 26,139,143 shares of Class B Common Stock
were issued and outstanding (not including 9,967,555 shares subject to
options, installment stock purchase opportunities and deferred stock units
granted and outstanding under the Company's Plans), 2,100,761 shares of Class
A Common Stock were issued and outstanding, and 19,873 shares of Series
Preferred Stock were outstanding.
Management investors (approximately 900 persons at the date of this
Prospectus) hold all of the shares of outstanding Class B Common Stock of the
Company. There is no established public trading market for the Class A or
Class B Common Stock or the Series C Preferred Stock of the Company.
The following is a summary of certain provisions of the Restated Certificate
of Incorporation of the Company (the "Certificate of Incorporation") and the
By-Laws of the Company, as amended. The summary is qualified in its entirety
by reference to such documents filed as exhibits to the Registration Statement
of which this Prospectus is a part.
<PAGE>
<PAGE> 19
The Class A Common Stock and the Class B Common Stock
Voting. Each share of Class A Common Stock and each share of Class B Common
Stock entitles the holder thereof to one vote on all matters submitted to the
stockholders.
All actions submitted to a vote of stockholders are voted upon by holders of
Class A Common Stock and Class B Common Stock voting together except that the
holders of Class A Common Stock and Class B Common Stock vote separately as
classes with respect to amendments to the Company's Certificate of
Incorporation that may alter or change the powers, preferences or special
rights, of their respective classes of stock so as to affect them adversely,
and such other matters as may require class votes under the Delaware General
Corporation Law.
There is no provision in the Certificate of Incorporation permitting
cumulative voting.
Dividends and Other Distributions (including Distributions upon Liquidation
of the Company). Dividends on the Class A Common Stock and the Class B Common
Stock are paid when, as and if declared by the Board of Directors and
permitted under the Company's loan agreements. In respect of rights to
dividends and other distributions in cash, stock or property of the Company
(including distributions upon liquidation of the Company, after provision for
creditors of the Company and any shares of the Company's capital stock having
a preference on liquidation, dissolution or winding up of the Company) each
share of Class A Common Stock is entitled to ten times the dividends and other
distributions payable on each share of Class B Common Stock when, as and if
such dividends or distributions may be declared and/or paid provided, however,
that in the case of dividends or other distributions payable on the Class A
Common Stock and the Class B Common Stock in capital stock of the Company
other than Preferred Stock, including distributions pursuant to split-ups or
divisions of the Class A Common Stock or the Class B Common Stock, only Class
A Common Stock is distributed with respect to Class A Common Stock and only
Class B Common Stock is distributed with respect to Class B Common Stock. In
no event may either Class A Common Stock or Class B Common Stock be split,
divided or combined unless the other is split, divided or combined equally.
Convertibility. The Class A Common Stock is not convertible. Subject to
the prior approval of the Board of Directors, the Class B Common Stock is
convertible at all times, in whole or in part, and without cost to the
stockholder, into Class A Common Stock on the basis of ten shares of Class B
Common Stock for each share of Class A Common Stock. Only full-time employees
and directors of the Company (and their Permitted Transferees while the
transferor is a full-time employee or director) may hold Class B Common Stock.
Upon any holder of Class B Common Stock ceasing to be a full-time employee or
director of the Company, such holder's Class B Common Stock automatically
converts into Class A Common Stock, on the basis of ten shares of Class B
Common Stock for each share of Class A Common Stock. The Board of Directors,
by a majority of the Board plus one additional director, may at any time order
the conversion of all the Class B Common Stock into Class A Common Stock on a
ten-for-one basis. No fractions of shares of Class A Common Stock would be
issued on such conversion, but rather such amounts would be paid in cash based
on the market value (or, if the Company is not publicly traded, the last
appraised value) of the Class B Common Stock.
Other. The Class A Common Stock and Class B Common Stock do not carry any
preemptive rights enabling a holder to subscribe for or receive shares of
stock of the Company of any class or any other securities convertible into
shares of stock of the Company.
<PAGE>
<PAGE> 20
EXPERTS
The audited consolidated financial statements and related notes and
schedules included in the Company's Annual Report on Form 10-K for the year
ended October 1, 1993 incorporated by reference herein have been audited by
Arthur Andersen & Co., independent public accountants, as set forth in their
report also incorporated herein by reference. In their report, that firm
states that with respect to amounts included for Versa Services Ltd., the
Company's Canadian subsidiary, its opinion is based on the report of other
auditors, namely Ernst & Young, Chartered Accountants, whose report is also
incorporated herein by reference. The financial statements referred to above
have been incorporated by reference herein in reliance upon the reports of
said firms and upon the authority of said firms as experts in accounting and
auditing. Subsequent audited financial statements of the Company and the
reports thereon of the Company's independent public accountants, to the extent
incorporated herein by reference, have been so incorporated in reliance upon
the reports of those accountants and upon the authority of those accountants
as experts in accounting and auditing to the extent such accountants have
audited those financial statements and consented to the use in this Prospectus
of their reports thereon.
The appraisal of Willamette Management Associates, Inc., independent
securities appraisers, and references thereto included in this Prospectus have
been included herein in reliance upon the authority of said firm as an expert
in securities valuations.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, if filed by the Company with the Commission prior
to the termination of the offering of the shares, are incorporated herein by
reference:
1. The Company's latest annual report on Form 10-K filed pursuant to Section
13(a) or 15(d) of the Exchange Act.
2. All other reports filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act since the end of the fiscal year of the annual report
referred to in Item 1 above.
3. All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein or in a supplement hereto modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
<PAGE>
<PAGE> 21
NON-QUALIFIED STOCK OPTION
Please Review Instructions Before You Fill Out This Form
THE ARA GROUP, INC.
Non-Qualified Stock Option Exercise Form
I hereby exercise a Stock Option granted to me on____________________________,
19_______.
I hereby represent, warrant and agree as follows:
1. I have received and read copies of (a) the Prospectus dated March 1, 1994
including the Amended and Restated Stockholders' Agreement by and among The
ARA Group, Inc. ("ARA") certain of its stockholders, and (b) ARA's annual
report on Form 10-K.
2. I have full power and authority to enter into the Amended and Restated
Stockholders' Agreement.
3. By signing below, I hereby execute and deliver and agree to be bound by the
Amended and Restated Stockholders' Agreement as a Management Investor.
4. I will, upon request, execute any additional documents necessary or
desirable for me to become a party to the Amended and Restated
Stockholders' Agreement.
Name(s):_____________________________________________________________________
Home Address:________________________________________________________________
Home Telephone:____ -_____ -________ Business Telephone:____-_____-________
ARA Company:__________________________ Component Number:_____________________
Social Security No:___________________
1. Purchase Price Per Share................................. $______
2. Number of Shares Being Purchased......................... X______
3. Total Purchase Price (Line 1 x Line 2)................... $______
4. Current Price Per Share.................................. $______
5. Purchase Price Per Share................................. -______
6. Appreciation Per Share (Line 4 - Line 5)................. $______
7. Number of Shares Being Purchased......................... X______
8. Total Appreciation Subject to Taxes (Line 6 x Line 7).... $______
9. Withholding Tax Rate (38%)............................... X__.38_
10. Total Withholding Tax Due (Line 8 x Line 9)............... $______
11. Total Amount Due (Line 3 + Line 10)....................... $______
12. Maximum Amount Eligible to be Deferred (50% of Line 11)... $______
13. Amount of Payment to be Deferred (May not exceed Line 12). $______
14. Amount of Check Enclosed (Line 11 - Line 13).............. $______
_______________________________________ _______________________________
Signature Date
_______________________________________ _______________________________
Signature Date
______________________________________________________________________________
IF THE AMOUNT ON LINE 13 IS NOT ZERO, YOU MUST ALSO
COMPLETE AND SIGN THE REVERSE SIDE OF THIS EXERCISE FORM.*
--------
______________________________________________________________________________
Please complete and return with your check for the amount listed in Line 14 to:
The ARA Group, Inc.
1101 Market Street
Philadelphia, Pennsylvania 19107
Attention: Annette Nedd
For Transfer agent use only:
Check Number_________________________________ Check Amount $______________
HID# ________________________________________ Deferred Amount $______________
____________________________
*PLEASE TURN OVER.
____________________________
<PAGE>
<PAGE> 22
Deferred Payment Obligation
For value received, I/we promise to pay to the order of The ARA Group,
Inc. (referred to as the "Company") $______________, and to pay interest at
the rate of 6.0% per year compounded annually. Payment of both the deferred
obligation and interest shall be due on February 15, 1997 or on such earlier
date as the Company may make demand. The obligation and appropriate interest
may be prepaid at any time.
I/We grant to the Company a security interest in _______________ shares
of The ARA Group, Inc. common stock, Class B (the "Pledged Shares") and agree
that the Pledged Shares shall be held as collateral by the Company until the
amount is paid in full. In the event the amount is not paid when due, the
Company shall be entitled to exercise the legal remedies available under
applicable law. If any of the Pledged Shares shall be sold or otherwise
transferred, then the amount shall become due immediately.
This Agreement may be assigned by the Company at any time and shall be
governed by the laws of the Commonwealth of Pennsylvania.
Print Name(s):_____________________________________________________________
______________________________________ ____________________________________
Signature Date
______________________________________ ____________________________________
Signature Date
INSTRUCTIONS
1. Insert the Amount of Payment to be Deferred (Line 13 on the Exercise
Form) in the first paragraph.
2. Insert the Number of Shares Being Purchased (Line 2 on the Exercise Form)
in the second paragraph.
3. Print and sign your name exactly as on the Exercise Form (on the reverse
side). If your spouse signed the Exercise Form, he/she must also sign
the Deferred Payment Obligation form. By signing the form, your spouse
joins in the agreement you are making to pay the amount of the deferred
payment obligation.
B-2
<PAGE>
<PAGE> 23
NON-QUALIFIED STOCK OPTION
Please Review Instructions Before You Fill Out This Form
THE ARA GROUP, INC.
Non-Qualified Stock Option Exercise Form
I hereby exercise a Stock Option granted to me on____________________________,
19_______.
I hereby represent, warrant and agree as follows:
1. I have received and read copies of (a) the Prospectus dated March 1, 1994
including the Amended and Restated Stockholders' Agreement by and among The
ARA Group, Inc. ("ARA") certain of its stockholders, and (b) ARA's annual
report on Form 10-K.
2. I have full power and authority to enter into the Amended and Restated
Stockholders' Agreement.
3. By signing below, I hereby execute and deliver and agree to be bound by the
Amended and Restated Stockholders' Agreement as a Management Investor.
4. I will, upon request, execute any additional documents necessary or
desirable for me to become a party to the Amended and Restated
Stockholders' Agreement.
Name(s):_____________________________________________________________________
Home Address:________________________________________________________________
Home Telephone:____ -_____ -________ Business Telephone:____-_____-________
ARA Company:__________________________ Component Number:_____________________
Social Security No:___________________
1. Purchase Price Per Share.................................. $______
2. Number of Shares Being Purchased.......................... X______
3. Total Purchase Price (Line 1 x Line 2).................... $______
4. Current Price Per Share................................... $______
5. Purchase Price Per Share.................................. -______
6. Appreciation Per Share (Line 4 - Line 5).................. $______
7. Number of Shares Being Purchased.......................... X______
8. Total Appreciation Subject to Taxes (Line 6 x Line 7)..... $______
9. Withholding Tax Rate (38%)................................ X__.38_
10. Total Withholding Tax Due (Line 8 x Line 9)............... $______
11. Total Amount Due (Line 3 + Line 10)....................... $______
12. Maximum Amount Eligible to be Deferred (50% of Line 11)... $______
13. Amount of Payment to be Deferred (May not exceed Line 12). $______
14. Amount of Check Enclosed (Line 11 - Line 13).............. $______
_______________________________________ _______________________________
Signature Date
_______________________________________ _______________________________
Signature Date
______________________________________________________________________________
IF THE AMOUNT ON LINE 13 IS NOT ZERO, YOU MUST ALSO
COMPLETE AND SIGN THE REVERSE SIDE OF THIS EXERCISE FORM.*
--------
______________________________________________________________________________
Please complete and return with your check for the amount listed in Line 14 to:
The ARA Group, Inc.
1101 Market Street
Philadelphia, Pennsylvania 19107
Attention: Annette Nedd
For Transfer agent use only:
Check Number_________________________________ Check Amount $______________
HID# ________________________________________ Deferred Amount $______________
____________________________
*PLEASE TURN OVER.
____________________________
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Deferred Payment Obligation
For value received, I/we promise to pay to the order of The ARA Group,
Inc. (referred to as the "Company") $______________, and to pay interest at
the rate of 6.0% per year compounded annually. Payment of both the deferred
obligation and interest shall be due on February 15, 1997 or on such earlier
date as the Company may make demand. The obligation and appropriate interest
may be prepaid at any time.
I/We grant to the Company a security interest in _______________ shares
of The ARA Group, Inc. common stock, Class B (the "Pledged Shares") and agree
that the Pledged Shares shall be held as collateral by the Company until the
amount is paid in full. In the event the amount is not paid when due, the
Company shall be entitled to exercise the legal remedies available under
applicable law. If any of the Pledged Shares shall be sold or otherwise
transferred, then the amount shall become due immediately.
This Agreement may be assigned by the Company at any time and shall be
governed by the laws of the Commonwealth of Pennsylvania.
Print Name(s):_____________________________________________________________
______________________________________ ____________________________________
Signature Date
______________________________________ ____________________________________
Signature Date
INSTRUCTIONS
1. Insert the Amount of Payment to be Deferred (Line 13 on the Exercise
Form) in the first paragraph.
2. Insert the Number of Shares Being Purchased (Line 2 on the Exercise Form)
in the second paragraph.
3. Print and sign your name exactly as on the Exercise Form (on the reverse
side). If your spouse signed the Exercise Form, he/she must also sign
the Deferred Payment Obligation form. By signing the form, your spouse
joins in the agreement you are making to pay the amount of the deferred
payment obligation.
B-4
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