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Stock Options
Prospectus 1994A
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 June 15, 1994.<PAGE>
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TABLE OF CONTENTS
Page
----
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).
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"),
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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).
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
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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
June 1994, the deferred payment is due on February 15, 1998.
Interest accrues at an interest rate to be established at
the time the option is exercised, 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.
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.
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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)
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)
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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.
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:
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Class B Shares Series C Shares
-------------- ---------------
Offering Periods: December 15 to January Same as for Class B
- ---------------- 15, 1994 and July 15 to Shares, except that
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
- -------------- appraised value, as of plus accrued and
December 1, 1993, and as unpaid dividends
of June 1, 1994
respectively
Payment Terms: Cash Cash
- -------------
Individual Guideline for Generally, up to $50,000 Unlimited
- ------------------------ or, if greater, 10% of
each Offering Period: shares owned (up to a
- -------------------- maximum of $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 None
- ---------------- six months are not eligible
Period: for resale in the internal
- ------ market
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
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
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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
44). 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)
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?
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<PAGE> 13
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 53), 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.
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.
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<PAGE> 14
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)
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<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.
The Plans grant certain authority to the Human Resources, Compensation
and Public Affairs Committee (the "Committee") which consists of six
members of the Board.
<PAGE>
<PAGE> 16
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.
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)
<PAGE>
<PAGE> 17
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 (to be established at the time
the option is exercised) and 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.
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
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<PAGE> 18
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.
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
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<PAGE> 19
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.
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.
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<PAGE> 20
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.
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<PAGE> 21
NON-QUALIFIED STOCK OPTION
Instructions to Non-Qualified Stock Option Exercise Form
READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING
THE NON-QUALIFIED STOCK OPTION EXERCISE FORM
Date Stock Option was Granted. Insert the effective date of your Stock
Option that you are exercising. The effective date is printed on back
of your Stock Option Certificate, near the bottom.
Name(s). The shares must be registered initially either in your name
or in the names of you and your spouse, as joint tenants. If you wish
the shares to be registered in the name of both you and your spouse, as
joint tenants, you must print both names in this space.
1. Purchase Price Per Share. Insert the exercise price per share
specified in your stock option certificate.
2. Number of Shares Being Purchased. Insert the number of shares
being purchased.
3. Total Purchase Price. Multiply the Purchase Price Per Share (1)
by the Number of Shares Being Purchased (2).
4. Current Price Per Share. Insert the most recent appraised value.
If you do not know the appraised value, you can obtain it by
calling one of the persons listed on page 4 of the Prospectus.
5. Purchase Price Per Share. Insert the same Purchase Price Per
Share you entered on Line 1.
6. Appreciation Per Share. Subtract the Purchase Price Per Share (5)
from the Current Price Per Share (4).
7. Number of Shares Being Purchased. Insert the same Number of
Shares Being Purchased you entered on Line 2.
8. Total Appreciation Subject to Taxes. Multiply the Appreciation
Per Share (6) by the Number of Shares Being Purchased (7).
9. Estimated Withholding Tax Rate. This 38% rate is an estimate of
the federal income tax withholding rate, the social security tax
(FICA) withholding rate and state income tax or state unemployment
tax which may be required to be withheld by certain states.
10. Total Estimated Withholding Tax Due. Multiply the Total
Appreciation Subject to Taxes (8) by the Estimated Withholding Tax
Rate (9).
11. Total Amount Due. Add the Total Purchase Price (3) plus the Total
Estimated Withholding Tax Due (10).
12. Maximum Amount Eligible to be Deferred. Insert 50% of Total
Amount Due (11).
13. Amount of Payment to be Deferred. You may elect to defer any
amount up to the Maximum Amount Eligible to be Deferred (12). IF
YOU ELECT TO DEFER ANY PART OF THE PAYMENT, YOU MUST COMPLETE AND
SIGN THE REVERSE SIDE OF THE EXERCISE FORM.
14. Amount of Check Enclosed. Subtract Amount of Payment to be
Deferred (13) from Total Amount Due (11). Payment of this amount
should be made by check payable to "The ARA Group, Inc."
Signature(s). Sign the form exactly as you printed your name above.
If the shares are to be registered in the names of both you and your
spouse, then you both must sign the form. By signing the form, your
spouse joins in the representations, warranties and agreement you are
making, including your agreement to be bound by the Amended and
Restated Stockholders' Agreement as a Management Investor.
Delivery of Form. The method of delivery of the Stock Option Exercise
Form and check for the Amount of Check Enclosed is your decision and at
your risk.
<PAGE>
<PAGE> 22
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 June 15, 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> 23
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 ____% per year. 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. Please contact one of the individuals on Page 4 for the interest rate
to be inserted.
3. Insert the Number of Shares Being Purchased (Line 2 on the Exercise Form)
in the second paragraph.
4. 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.
<PAGE>
<PAGE> 24
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 June 15, 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> 25
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 _____% 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. Please contact one of the individuals on Page 4 for the interest rate
to be inserted.
3. Insert the Number of Shares Being Purchased (Line 2 on the Exercise Form)
in the second paragraph.
4. 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.
<PAGE>
