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UK Management
Prospectus Direct Purchases
1994
THE ARA GROUP, INC.
ARA OWNERSHIP PROGRAM
Direct Purchases
125,635 Shares
Common Stock, Class B, $.01 Par Value
This Prospectus relates to up to 125,635 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 as direct stock
purchase opportunities 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 May 10, 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
Tax Considerations 17
Description of Equity Securities 18
Experts 19
Incorporation of Certain Documents by Reference 20
Annex A -- Amended and Restated Stockholders'
Agreement A-1
Annex B -- Stock Purchase 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 offered the
opportunity to purchase stock 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.
The ARA Ownership Program
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 direct
stock opportunities to purchase shares of Common Stock. The purchase
price is the current fair market value at the time the direct stock
purchase opportunity is granted, based upon the most recent available
independent appraisal.
Direct stock purchase opportunities are exercisable at any time, until
their expiration date, as long as the 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 direct stock purchase opportunity are set by
the terms of the Plans and your direct stock purchase opportunity
certificate.
How to Purchase Shares
To exercise all or a portion of your direct stock purchase opportunity
and thereby purchase shares, you must deliver to the Company (at the
address set forth on the exercise form) (1) a completed stock purchase
form (included in this Prospectus as Annex B), and (2) payment of the
aggregate purchase price. You may elect to defer payment on a portion of
your purchase price under ARA's Deferred Payment Program.
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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.
By exercising your direct stock purchase opportunity, 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. Currently, management investors directly own
approximately 55% 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 direct stock
purchase opportunity by you is strictly voluntary.
4. Q: What is the purchase price per share?
A: The price per share for your direct stock purchase opportunity
($11.65) is set at the time your direct stock purchase opportunity
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.
5. Q: I am receiving my Management Participation Plan ("MPP")
distribution in pounds sterling (L). What is the purchase price
per share on pounds sterling, and how can I apply my MPP
distribution to pay the purchase price?
A: For purposes of exercising your direct stock purchase opportunity,
ARA has set the exchange rate at L.6592 per dollar, which is the
exchange rate published in The Wall Street Journal on May 3, 1994.
Therefore, the price per share in pounds sterling is L7.68. You
may apply all or a part of your MPP distribution to pay the
purchase price by so indicating on the stock purchase form included
in this Prospectus as Annex B.
6. Q: When can I exercise my direct stock purchase opportunity and
purchase shares?
A: You can exercise your direct stock purchase opportunity (and
thereby purchase shares) at any time prior to its expiration date
of May 31, 1994.
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7. Q: Do my direct stock purchase opportunities have an expiration date?
A: Yes. The expiration date (May 31, 1994) is specified in your stock
purchase certificate. Generally, a direct stock purchase
opportunity expires a short time after it is granted.
8. Q: If I exercise only a portion of my direct stock purchase
opportunity, what happens to the unexercised portion of my direct
stock purchase opportunity?
A: The unexercised portion of your direct stock purchase opportunity
is cancelled.
9. Q: How do I purchase shares of Common Stock?
A: To exercise all or a portion of your direct stock purchase
opportunity and thereby purchase shares, you must deliver to the
Company, at the address which appears on the stock purchase form
included in this Prospectus as Annex B, (1) your completed stock
purchase form and (2) payment of the aggregate purchase price. You
may elect to defer payment on a portion of the total purchase price
under ARA's Deferred Payment Program (see Questions 12 through 22).
10. Q: Can I borrow money to purchase the shares covered by my direct
stock purchase opportunity?
A: Yes. Generally, you must make your own financing arrangements.
However you may elect to defer payment in an amount equal to up to
the amount of UK tax withheld on your MPP distribution under ARA's
Deferred Payment Program (see Questions 12 through 22).
11. 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 participate in ARA's Deferred Payment Program, you
will be required to pledge shares to ARA (see Questions 12 through
22).
12. 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
direct stock purchase opportunity and defer paying a portion of the
total purchase price.
13. Q: Do I have to participate in the Deferred Payment Program?
A: No. Any participation by you is strictly voluntary.
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14. Q: How much of the purchase price payment may I defer under the
Deferred Payment Program?
A: You may defer payment of a portion of the total purchase price for
the shares you are purchasing. The maximum amount eligible to be
deferred is equal to the amount of the UK tax withheld from your
MPP distribution, as shown on the form distributed to you. This
amount of tax withheld is equal to 40% of the gain you realized
upon distribution of your MPP account. This maximum deferral
amount is only available if you exercise all of your direct stock
purchase opportunity. The maximum deferral amount will be reduced
in proportion to the amount of your direct stock purchase
opportunity which you choose not to exercise. The following
hypothetical example clarifies this:
Total distribution from MPP account.................. L5,000
Participant's basis in MPP account .................. 500
-----
Participant's gain................................... 4,500
x40%
-----
Tax withheld and maximum payment amount
that can be deferred.............................. 1,800
Shares under direct purchase opportunity
participant elects to purchase............ 426
Total shares available under direct purchase
opportunity.............................. /639 .. x.6667
---- -----
Payment that can be deferred......................... 1,200
=====
Since the Deferred Payment Obligation must be denominated in U.S.
dollars, this Payment that can be Deferred is converted into
dollars at the same exchange rate described in Question 5, above.
This calculation is done on the Purchase Opportunity Exercise form.
15. 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 direct stock purchase opportunity, you should
indicate the amount to be deferred on the Stock Purchase Form and
also complete the Deferred Payment Obligation form, which is on the
reverse side.
16. Q: What are the terms of the Deferred Payment Program?
A: The deferred payment is due without interest on February 15, 1998.
All of the shares purchased pursuant to the direct stock purchase
opportunity 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. The deferred payment is
denominated in dollars. Therefore, you bear the currency exchange
rate risk from pounds sterling to dollars. (Of course, all sales
of Common Stock to the Company are also dominated in dollars.)
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17. 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, in
total, at the time of such sale.
18. 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.
19. Q: Can I prepay my deferred payment obligation?
A: Yes. You may prepay your deferred payment obligation at any time.
20. Q: Will the pledged shares be subject to the Stockholders' Agreement?
A: Yes.
21. Q: What are the anticipated tax consequences to me for participation
in the Deferred Payment Program?
A: Since you will not be charged interest on the amount of payment you
defer under the Deferred Payment Program, you will be deemed to
receive, each year that you have a balance due in the Program, an
amount of taxable income equal to the imputed interest on your
deferred payment. Inland Revenue presently imputes interest at a
rate of 7.5% on the average annual balance outstanding on notional
loans (such as your deferred payment). The Company is required to
disclose to Inland Revenue the balance of the notional loan
outstanding at the beginning of the tax year and the balance of the
loan outstanding at the end of the tax year on form P11D. This may
form the basis of a tax charge on the notional loan which may be
assessed directly on you by means of an income tax assessment. The
income tax on the beneficial loan would be payable 14 days after
receipt of such an assessment. As each individual's tax situation
is unique, you are urged to discuss this matter with your tax
advisor.
22. 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.
23. Q: Will I receive a stock certificate for the shares of Common Stock
that I purchase?
A: Yes, unless you have elected to participate in ARA's Deferred
Payment Program (see Questions 12 through 22).
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24. 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 Stock
Purchase Form. (Introduction to the Stockholders' Agreement) In
fact, there may be tax benefits to be gained from holding the
shares in joint names. In the UK, a husband and wife are treated
separately for tax purposes and each is entitled to a tax-free
capital gains exemption. Where assets are held jointly this tax-
free element doubles. The single person's allowance for making
tax-free gains is currently L5,800 per year; a couple's, L11,600.
25. 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. Dividends paid to UK shareholders are subject to a 15%
U.S. withholding tax.
26. 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)
27. 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))
28. 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))
29. 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)
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30. Q: Will I be able to sell shares back to the Company?
A: Yes. Primarily you will be able to sell your Common Stock 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 Common Stock shares
that could be utilized. These three methods for realizing
liquidity are described more fully below (see Questions 31, 32 and
33). Of course, the ability of the Company to repurchase shares is
subject to the Company's continued strong operating and financial
performance. (Section 7). All sales of Common Stock to the
Company are dominated in dollars. Therefore, as with all
investments dominated in dollars, your investment includes a
currency rate exchange risk for dollars to pounds sterling.
31. 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 Common Stock. 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 Internal Market Policy for Common Stock 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:
Offering Periods: December 15 to January 15, 1994 and July 15 to
August 16, 1994
Offerees: All management owners
Purchase Price: The most recent available appraised value,
as of December 1, 1993, and as of
June 1, 1994 respectively
Payment Terms: Cash
Individual Generally, up to $50,000 or, if greater, 10% of
Guideline for shares owned (up to a maximum of $150,000);
each Offering requests for larger sales can be made by
Period: contacting one of the persons listed on page 4
of this Prospectus
Required Holding Shares owned for less than six months are not
Period: eligible for resale in the internal market
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32. 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 Common Stock. Each request
will be reviewed individually, taking into account all relevant
circumstances.
33. Q: Will I be able to sell my Common Stock in any other way?
A: The anticipated normal procedure for selling Common Stock is
through the internal market. However, you could also offer a
portion of your Common Stock 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 Common Stock 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 Common Stock or $200,000 in share value, etc. In the event
your Common Stock was not purchased by ARA you could offer to sell
your Common Stock 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 Common Stock (see Question 36), you could offer to sell
your Common Stock 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))
34. 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
36). However, in the event the Company does not Call your shares,
then you could offer to sell the remaining shares (see Question
33). (Section 5)
35. Q: Will the Company inform me prior to the time that I purchase shares
from the Company 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)
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36. 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 Common
Stock 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 Common Stock and any or all of the
Common Stock 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 Common Stock except those acquired shortly
before or after termination. The Company intends to call those
shares approximately six months after they were acquired. (Section
6)
37. Q: How will I be paid for my shares when they are Called?
A: The Company will purchase your 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)
38. 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 3.6% to 6.4%
depending upon the term of the note (Section 1.08).
39. Q: If the Company purchases my shares using, in part, an installment
note, will I have to pay tax on the entire gain in the first year?
A: Yes. ARA understands that the purchase using a note generally will
not qualify for installment treatment under the UK income tax laws.
40. 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 41 through 45), 0may 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.
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41. Q: If I terminate before age 55 and my 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.
42. Q: If I terminate at or after age 55 but before Normal Retirement and
my 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.
43. Q: If I terminate through Normal Retirement and my shares are Called
(or if I exercise my Put and the remainder of my 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.
44. Q: If I die or become Completely Disabled and my 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.
45. 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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46. 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)
47. Q: What if ARA cannot repurchase my 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 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)
48. Q: If I voluntarily terminate my employment, the Company has the right
to Call my 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)
49. Q: When will I be able to transfer my 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 April 1, 1994, management employees held installment stock
purchase opportunities for 8,083,696 shares and stock options for an
additional 1,523,820 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 the direct sale of
shares. Under the terms of the Plans, the direct purchase opportunities
are nonqualified 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 April 1, 1994, 1,824,004 options were outstanding
under the Plan and 1,532,906 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 April
1, 1994, 1,616,744 options were outstanding under the Plan and 2,527,732
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
April 1, 1994, 6,166,768 options were outstanding under the Plan and
942,899 shares were available for the grant of future options.
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<PAGE> 16
In accordance with the terms of the Plans, the purchase price for shares
subject to options or stock purchase opportunities 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.
The Committee is authorized to grant stock options or purchase
opportunities 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 or purchase opportunities thereunder. As a result, the
number of employees eligible to participate in the Plans is not
determinable.
Stock purchase opportunities are not transferrable. No stock purchase
opportunity can be subject to attachment, execution or levy of any kind.
Each stock purchase opportunity 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 purchase opportunities 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 purchase opportunity 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 purchase opportunity 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.
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<PAGE> 17
The appraised fair market value of the Common Stock as of March 1, 1994
was $11.65. The appraisal of the fair market value of the shares of
Common Stock was provided by Houlihan, Lokey, Howard & Zukin ("Houlihan"),
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 Houlihan and another
appraiser 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, Houlihan and the other appraiser has
received fees from the Company of approximately $100,000 plus
reimbursement of certain expenses. In addition, the Company has agreed to
indemnify Houlihan 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 is designed to enable employees to take
better advantage of stock purchase opportunities granted to them, by
giving them the alternative to defer payment of a portion of the purchase
price.
The Deferred Payment Program permits the holder of a direct stock
purchase opportunity to defer a portion of the total purchase price for
the shares being purchased. 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 direct stock purchase opportunities 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).
TAX CONSIDERATIONS
The following discussion is not intended to be a complete statement of
the UK income tax consequences of the exercise of ARA stock purchase
opportunities or the disposition of shares acquired upon exercise of such
purchase opportunities. Because of the complexities of the UK income tax
laws, offerees are urged to consult their own tax advisors.
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<PAGE> 18
With respect to the purchase opportunities, ARA believes that under
current UK income tax laws, no taxable income will be recognized by the
employee as a result of the grant or exercise of the opportunities. The
Company understands that Inland Revenue might consider the excess of
market value of Common Stock over the direct stock purchase opportunity
exercise price to be taxable income to the exercising employee. The
Company believes that at any given time, the most recent appraisal value
of Common Stock would be, for all intents and purposes, the market value
of the Common Stock. Your direct stock purchase opportunities can only be
exercised at the current appraisal value of Common Stock. Notwithstanding
that a new appraisal value -- whether higher or lower -- will be
determined shortly after the time for exercising opportunities expires,
the Company does not expect Inland Revenue to take a position that there
is any income recognized by the employee upon exercise of direct stock
purchase opportunities. The Company cannot, however, guarantee this
result, so you are urged to contact your tax advisor regarding any
concerns you may have with this issue. In the event Inland Revenue were
to determine some amount of taxable income arose upon exercise of a direct
stock purchase opportunity, that amount would be added to the employee's
tax basis in the ARA stock and would serve to reduce taxable gain upon
subsequent sale of the stock. Furthermore, the shares received upon
exercise of the purchase opportunities should constitute capital assets in
the employees' hands. Any gain or loss realized upon disposition of such
shares (measured by reference to the price paid to exercise purchase
opportunities to acquire such shares), increased by any capital asset
indexation allowance occurring during the employee's period of ownership
may be treated as capital gain or loss. Capital gains, including those
from the sale of ARA stock, may qualify for capital gains exemption from
tax to the extent of L5,800 per year (L11,600 for couples where assets are
held jointly). The Company is not required to report to Inland Revenue
the amount of gross proceeds or gain realized from sale of such shares,
but the employee is required to report those amounts on his/her tax
return.
If payment of a portion of the exercise price is deferred under the
Deferred Payment Program, any interest paid at the time of making the
deferred payment will not be tax-deductible. Furthermore, to the extent
that interest charged to the employee under the Deferred Payment Program
(if any) is at a rate less than 7.5% or such other rate as may be set from
time to time by Inland Revenue for the purpose of measuring imputed income
from below-market-rate loans, the Company is required to disclose to
Inland Revenue the balance of the notional loan outstanding at the
beginning of the tax year and the balance of the loan outstanding at the
end of the tax year on form P11D. This may form the basis of a tax charge
on the notional loan which may be assessed directly on you by means of an
income tax assessment. The income tax on the beneficial loan would be
payable 14 days after receipt of such an assessment. You are urged to
discuss this matter with your tax advisor.
<PAGE>
<PAGE> 19
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 April 1, 1994, 25,858,508 shares of
Class B Common Stock were issued and outstanding (not including 9,607,516
shares subject to options, installment stock purchase opportunities and
deferred stock units granted and outstanding under the Company's Plans),
21,248,300 shares of Class A Common Stock were issued and outstanding, and
17,823 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 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
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<PAGE> 20
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.
The appraisal of Houlihan, Lokey, Howard & Zukin, 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.
<PAGE>
<PAGE> 21
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> 22
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
OF
THE ARA GROUP, INC.
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of the 7th day
of April, 1988, which amends and restates the Stockholders' Agreement
dated as of December 14, 1984, and amended as of December 1, 1986 (the
"Agreement"), by and among The ARA Group, Inc. (formerly ARA Holding
Company), a Delaware corporation ("ARA"), the parties listed in Schedule I
hereto (hereinafter referred to as the "Management Investors" or their
"Permitted Transferees", as identified on such Schedule), the parties
listed in Schedule II hereto (hereinafter referred to as the "Individual
Investors") and the parties listed in Schedule III hereto (hereinafter
referred to as the "Institutional Investors").
The parties hereto (other than ARA) and any other person who hereafter
acquires equity securities of ARA pursuant to the provisions of, and
subject to the restrictions and rights set forth in, this Agreement are
sometimes hereinafter referred to collectively, as the "Stockholders" or,
individually, as a "Stockholder." The Management Investors and the
Individual Investors are sometimes hereinafter referred to collectively as
the "Investor Group." Unless otherwise explicitly set forth herein, the
term "Management Investors" shall mean only those individuals so specified
in Schedule I hereto, exclusive of such individuals' respective heirs,
Permitted Transferees (as identified on such Schedule or defined in
Section 3.02(d) hereof) or other Transferees (as defined in Section 3.01
hereof); provided that the Board of Directors of ARA may, from time to
time and in its sole discretion, designate any Stockholder then employed
full-time by ARA or its Subsidiaries a "Management Investor." Stockholders
who are Permitted Transferees are identified as such in the foregoing
Schedule, along with the identity of their respective transferors. Where
full-time employees or directors have acquired or acquire equity
securities of ARA in joint tenancy with their spouses or in any other
manner other than sole direct ownership, such employee or director is
deemed to be a Management Investor and such record owner is deemed to be
his or her Permitted Transferee.
RECITALS
Pursuant to a proposed reclassification (the "Reclassification") of
the stock of ARA, at the effective time (the "Effective Time") of the
Reclassification, Management Investors will receive shares of ARA's Class
B Common Stock, par value $.01 per share ("Class B Common Stock") and,
unless they were qualified to and had previously elected to receive
(various combinations of) Class A Common Stock, par value $.01 per share
("Class A Common Stock"), cash and/or installment notes in the
Reclassification, all other stockholders will receive solely cash.
Stockholders who do not receive in the Reclassification either Class A
Common Stock or Class B Common Stock shall cease to be parties to this
Agreement. The Class A Common Stock and the Class B Common Stock are
collectively referred to herein as the "Common Stock," and when so
referred to shall be treated as one class to which all the provisions of
this Agreement apply.
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<PAGE> 23
Pursuant to ARA's Restated Certificate of Incorporation (the
"Certificate of Incorporation"), upon the termination of employment of a
Management Investor, the shares of Class B Common Stock held by such
Management Investor and his Permitted Transferees shall be converted into
shares of Class A Common Stock; and upon any transfer of shares of Class B
Common Stock in accordance with the terms of this Agreement other than to
a Management Investor or Permitted Transferees of a Management Investor,
such shares shall be converted into shares of Class A Common Stock.
For purposes of this Agreement only, the employment of a Management
Investor shall be deemed terminated if he shall cease to be a director or
an active, full-time employee of ARA or its Subsidiaries.
The parties hereto also desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the Common Stock, including
issued and outstanding shares of Common Stock as well as shares of Common
Stock which may be issued hereafter, or which may become issuable pursuant
to the exercise of options, and to provide for certain rights and
obligations with respect thereto as hereinafter provided.
In consideration of the premises and of the terms and conditions
herein contained, the parties hereto mutually agree as follows:
1. Certain Definitions.
1.01 "Affiliate" shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with another Person.
1.02 "Appraiser" shall mean a firm headquartered in the United States
of nationally recognized standing in the business of appraisal or
valuation of securities which does not own any stock of ARA which has been
selected by the Board of Directors to act as an independent appraiser. The
Board of Directors shall review its selection of an Appraiser annually.
1.03 "Call" or "Called" shall mean ARA's option to purchase Common
Stock from the holder thereof referred to in Sections 6 and 9 hereof.
1.04 "Completely Disabled" and "Complete Disability" shall mean a
"permanent and total disability" as now defined in Section 105(d) (9) of
the Internal Revenue Code of 1986.
1.05 "Fair Market Value" of shares of Common Stock shall mean the fair
market value of such shares, as determined by an Appraiser according to
the most recent existing appraisal of shares of Common Stock, which
appraisal shall be as of a date not more than six months prior to the use
thereof; provided, however, that, after such time as any shares of Common
Stock are traded on a national securities exchange or quoted on NASDAQ,
"Fair Market Value" of shares of Common Stock shall be based upon the
"Average Market Price" (as such term is defined in Article Sixth of the
Company's Certificate of Incorporation) of such publicly traded stock.
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<PAGE> 24
1.06 "Normal Retirement" shall mean voluntary termination of employment
after attaining the age of 60, on at least ninety days prior written
notice of such termination, where the retiree does not intend to, at the
time of termination, and in fact does not, engage in full-time employment
following such termination other than employment that is with a
governmental or a charitable, non-profit organization and that is not
competitive with ARA.
1.07 "Person" shall mean a corporation, an association, a partnership,
an organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
1.08 "Promissory Note" shall mean a subordinated installment note of
ARA substantially in the form of Exhibit A to this Agreement, with a
stated annual rate of interest equal to the Applicable Federal Rate (as
such term is defined in the Internal Revenue Code of 1986, as amended (the
"Code")) as of the issue date of the Promissory Note, as determined by
ARA; with equal annual installments of principal equal in amount to the
least of (1) 10% of the original principal amount of the Promissory Note,
(2) the Management Investor's highest annual base salary as an employee of
ARA, or (3) $100,000; and with the final installment of principal equal to
the outstanding balance and due at the final maturity; and with the first
installment of principal due on the April 15 or October 15 occurring
closest to the first anniversary of the issue date of the Promissory Note;
and with the final maturity no later than the tenth anniversary of the
Management Investor's termination of employment; and with such other
insertions as ARA shall reasonably make.
1.09 "Put" shall mean the option of the holder to cause ARA to purchase
Common Stock referred to in Section 5 hereof.
1.10 "Subsidiary" shall mean any corporation or other entity of which
ARA shall, directly or indirectly, own 50% or more of the equity, as
determined for purposes of this Agreement by the ARA Board of Directors
and any other corporation or other entity in which ARA shall directly or
indirectly have an equity investment and which the ARA Board of Directors
shall in its sole discretion designate.
1.11 "Supermajority" shall have the meaning as defined in ARA's
Certificate of Incorporation, as it may be restated or amended from time
to time.
SECTION 2 IN ITS ENTIRETY SHALL NOT APPLY TO ANY HOLDER OF SECURITIES
OF ARA HOLDING COMPANY WHICH IS EITHER (A) A "BANK", A "BANK HOLDING
COMPANY" OR ANY "AFFILIATE" THEREOF (AS SUCH TERMS ARE DEFINED UNDER THE
BANK HOLDING COMPANY ACT OF 1956) OR (B) A TRANSFEREE OF A HOLDER
SPECIFIED IN CLAUSE (A) AND ANY SUCH HOLDER IS NOT A PART OF THIS SECTION
2. SECTION 2 MAY BE AMENDED, WAIVED OR TERMINATED WITHOUT THE CONSENT OF
ANY OF THE HOLDERS SPECIFIED IN THE PRECEDING SENTENCE.
____________________________
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<PAGE> 25
2. Corporate Governance.
2.01 Board of Directors-ARA
(a) Number of Directors. ARA shall be governed by a Board of
Directors consisting of not less than nine but not more than
nineteen members, as set forth in the Certificate of Incorporation
and in the By-Laws of ARA.
(b) Management Directors. The number of the members of the Board of
Directors who are Management Investors and active, full-time
employees of ARA or its Subsidiaries (such persons and their
successors as provided in this Section 2 are, collectively,
referred to herein as the "Management Directors") shall not exceed
(A) the number of directors as last fixed by resolution of the
Board of Directors and otherwise increased in accordance with
paragraph 7(b) of Part 4A of ARA's Certificate of Incorporation,
plus (B) one, minus (C) a Supermajority (such maximum number of
Management Directors is referred to herein as the "Maximum Number
of Management Directors").
(c) Nominations. The entire Board of Directors, acting by a
Supermajority vote, shall nominate and recommend to holders of
Common Stock entitled to vote the proposed members of the Board of
Directors for the succeeding year; provided, however, that up to
the Maximum Number of Management Directors shall be as designated
by the majority vote of the Management Directors then in office. If
the incumbent Management Directors shall fail to select any of
their nominees by majority vote, then the nominees shall be
selected by the Chief Executive Officer of ARA. At such time as a
Management Director shall cease for any reason to be a stockholder
of ARA, such Management Director shall immediately tender his
resignation from the Board of Directors (or, if he does not resign,
shall be removed by the vote of a majority of the votes of the
outstanding shares of Common Stock of ARA entitled to vote in the
election of directors). If none of the Management Directors any
longer serves on the Board, then, the Chief Executive Officer of
ARA shall be elected by the vote of a Supermajority of the then
members of the Board to fill the place of one of the Management
Directors and he shall nominate the other Management Directors.
Under all other circumstances, the Chief Executive Officer shall be
selected by the vote of a Supermajority of the members of the
Board.
(d) Covenant to Vote. Each of the Management Investors and their
Permitted Transferees shall vote the shares of Common Stock owned
by him at any annual or special meeting of stockholders of ARA
called for the purpose of voting on the election of directors or by
consensual action of stockholders with respect to the election of
directors, in favor of the election of the directors nominated in
accordance with this Section 2.01. In addition, each Stockholder
agrees to vote the shares of Common Stock owned by him upon any
matter submitted to a vote of the stockholders in a manner so as to
be consistent and not in conflict with, and to implement, the terms
of this Agreement.
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<PAGE> 26
(e) Filling Vacancies. As provided for in Part 5C of ARA's
Certificate of Incorporation, if at any time a vacancy is created
on the Board of Directors by the death, removal or resignation of
any one of the directors, no action shall be taken by the Board of
Directors except by a Supermajority vote of the directors, until
the Board of Directors is reconstituted with the appropriate number
of directors in accordance with this Section 2.01, other than
actions to so reconstitute the Board of Directors. In the event of
any such death, removal or resignation, the remaining directors
shall meet within ten days for the purpose of approving and
appointing a director nominated to fill such vacancy.
(i) If a vacancy is created by the death, removal or
resignation of a Management Director, the incumbent Management
Directors shall have the right to select a nominee to fill such
vacancy within ten business days of the occurrence thereof. If
the incumbent Management Directors shall fail to select a
nominee by majority vote, such nominee shall be selected by the
Chief Executive Officer of ARA within the three following
business days. If the Management Directors or the Chief
Executive Officer shall not have nominated a person to fill
such vacancy within such ten days, or three day period, as the
case may be, the Board of Directors shall meet on the 14th day
following the creation of such vacancy or as soon thereafter as
is practicable and a new director or directors shall be
appointed by action of a majority of the remaining directors,
which action shall be the first action to be taken at such
meeting. In the event the Board shall fail to act to fill such
vacancy as provided herein at two consecutive meetings of the
Board following the creation of such vacancy, such vacancy may
be filled by the vote of a majority of the votes of the
outstanding shares of Common Stock entitled to vote in the
election of directors.
(ii) If a vacancy is created by the death, removal or
resignation of any of the directors who is not a Management
Director, the remaining directors, acting by a Supermajority
vote, shall select a nominee to fill such vacancy until the
next annual meeting of Stockholders. In the event the Board
shall fail to act to fill such vacancy as provided herein at
two consecutive meetings of the Board to be held within thirty
days following the creation of such vacancy, such vacancy may
be filled by the vote of a majority of the votes of the
outstanding shares of Common Stock entitled to vote in the
election of directors.
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3. Transfer of Common Stock-General.
3.01 Shares of Common Stock Subject to this Agreement. Unless
otherwise explicitly provided herein, and except in connection with a sale
of shares included in a registered public offering under the Securities
Act of 1933, as amended (the "Securities Act"), no Stockholder shall sell,
assign, pledge, encumber or otherwise transfer any shares of Common Stock
to any person (regardless of the manner in which such Stockholder
initially acquired such shares of Common Stock) nor shall ARA issue, sell
or otherwise transfer any shares of ARA Common Stock to any person (all
such persons, regardless of the method of transfer, shall be referred to
collectively as "Transferees" and individually as a "Transferee") unless
(a) such shares bear legends as provided in Section 14 to the effect that
such shares are not registered under the Securities Act and to the effect
that such shares are subject to the terms of this Agreement, (b) such
Transferee shall have executed, as a condition to its acquisition of
shares (or, in the case of a Transferee by will or the laws of descent,
record ownership on the books of ARA) of Common Stock, an appropriate
document confirming that such Transferee takes such shares subject to all
the terms and conditions of this Agreement and (c) (other than Transferees
by will or the laws of descent) such document shall have been delivered to
and approved by ARA prior to such Transferee's acquisition of shares (or,
in the case of a Transferee by will or the laws of descent, record
ownership on the books of ARA) of Common Stock. ARA shall not unreasonably
withhold or delay its approval of any such document. ARA shall not
transfer upon its books any shares of Common Stock held or owned by any of
the Stockholders to any person except in accordance with this Agreement. A
Transferee who is not already a party to this Agreement, by executing the
document referred to in clause (b) above, shall thereby become entitled to
the benefits of this Agreement and shall be deemed to be an "Institutional
Investor," except if such Transferee is an employee of the Company, in
which case he shall be deemed to be a "Management Investor," or except if
such Transferee is an Individual Investor or a Permitted Transferee of an
Individual Investor, in which case he shall be deemed to be an "Individual
Investor," or except if such Transferee is a Permitted Transferee of a
Management Investor, in which case he shall be deemed to be such
"Permitted Transferee".
3.02 Certain Restrictions.
(a) Notwithstanding anything to the contrary set forth herein,
except as provided in Section 3.02(d) (certain permitted
transfers), Sections 5 and 6 (transfers by Management Investors in
the event of death or termination of employment), Section 7
(transfers approved by the Board of Directors) and Section 9
(options to purchase involuntarily transferred shares) (i) no
Stockholder shall transfer any shares of Common Stock at any time,
unless any such sale, assignment, pledge or encumbrance or other
transfer shall have been effected in accordance with the terms of
this Agreement; and (ii) no Management Investor or any of such
Management Investor's Permitted Transferees shall directly or
indirectly sell, assign, pledge or encumber or otherwise transfer
(except, in accordance with Section 3.02(e) hereof pledges or
encumbrances for the benefit of ARA, a commercial bank, a savings
and loan association or other lending institution) any shares of
Common Stock, other than Limited Transfers, as defined in the
following sentence.
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<PAGE> 28
"Limited Transfers" shall mean transfers made after January 31,
1990 (or after any earlier termination of employment of such
Management Investor) (A) that are effected in accordance with this
Agreement including, without limitation, the provisions of Section
4 hereof (rights of first offer and reoffer) and (B) that are
limited for any Management Investor and his Permitted Transferees
in any one fiscal year of ARA to the lesser of (I) the number of
shares with a fair market value at the time of such transfers (as
determined by the Board of Directors) of $100,000 or (II) 10% of
the greatest number of shares previously held at any time by such
Management Investor and his Permitted Transferees; provided,
however, that the limitation in clause (B) shall not apply to
transfers made after December 19, 1999 (or if earlier after the
death, Complete Disability or Normal Retirement of such Management
Investor). For purposes of clause (B) of the definition of "Limited
Transfers", the ability to transfer shares which could have been,
but were not, so transferred in any fiscal year, may be "carried
over" in any subsequent fiscal year.
(b) No Stockholder shall sell, assign, pledge, encumber or
otherwise transfer any shares of Common Stock at any time if such
action would constitute a violation of any federal or state
securities or blue sky laws or a breach of the conditions to any
exemption from registration of the Common Stock under any such laws
or a breach of any undertaking or agreement of such Stockholder
entered into pursuant to such laws or in connection with obtaining
an exemption thereunder. Each Stockholder agrees that any shares of
Common Stock to be purchased by such Stockholder shall bear
appropriate legends to be determined by the Company, in addition to
the legend provided for in Section 14 hereof with respect to the
Securities Act, restricting the sale or other transfer of such
stock in accordance with applicable state securities or blue sky
laws. Any Stockholder who proposes to sell, assign, pledge,
encumber or transfer any shares of Common Stock may deliver to ARA
an opinion of counsel that such action would not result in any such
violation or breach. The delivery of such opinion shall be deemed
to establish compliance with the provisions of this Section 3.02(b)
unless, within ten days after the receipt by ARA of such opinion,
counsel for ARA shall deliver an opinion that such action would
result in any such violation or breach (such opinion to state the
basis of the legal conclusions reached therein).
(c) No Stockholder shall grant any proxy or enter into or agree to
be bound by any voting trust with respect to Common Stock nor shall
any Stockholder enter into any stockholder agreement or arrangement
of any kind with any person with respect to Common Stock
inconsistent with the provisions of this Agreement (whether or not
such agreement and arrangement is with other Stockholders or
holders of Common Stock that are not parties to this Agreement),
including but not limited to, any agreement or arrangement with
respect to the acquisition, disposition or voting of shares of
Common Stock, or act, for any reason, as a member of a group or in
concert with any other persons in connection with the acquisition,
disposition or voting of shares of Common Stock in any manner which
is inconsistent with the provisions of this Agreement.
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<PAGE> 29
(d) Other than the restrictions set forth in Section 3.02(b) and
Section 4.06, none of the restrictions contained in this Agreement
with respect to transfers of shares of Common Stock shall apply to
the following transfers: (A) if made for nominal consideration or
as gifts: (i) any transfer or assignment to any one or more of the
following relatives of the Stockholder - spouse, child, grandchild,
parent - or to a trust of which there are and continue to be,
during the term of this Agreement no principal beneficiaries other
than one or more of such relatives; (ii) any transfer to any
charitable organization which qualifies as such under Section 5.01
(c) (3) or any successor provision of the Code; (iii) any transfer
to a legal representative in the event any Stockholder becomes
mentally incompetent; (iv) any transfer of record title to any
nominee or custodian, provided that the Stockholder so transferring
such shares remains the beneficial owner thereof; (B) any transfer
among members of a family, their trusts or other entities, if
approved by the Board of Directors; (C) any transfer among
Institutional Investors which became Stockholders in December 1984;
and (D) with respect to a corporate or partnership Stockholder,
transfers between an Affiliate and such corporate or partnership
Stockholder (it being understood with respect to such Affiliate
that the later sale of such Affiliate as part of a sale or series
of sales of substantial assets other than Common Stock would not
constitute an indirect sale of Common Stock by such corporate or
partnership Stockholder, and need not be made within the terms of
this Agreement, provided that an officer of such institution
certifies that such sale is not being undertaken to evade the
transfer restrictions herein); provided, however, that in each of
cases (A) through (D), each transferee, donee or distributee (the
"Permitted Transferees") agrees to take subject to and to comply
with the provisions of this Agreement. "Permitted Transferees"
include the persons identified as such on the Schedules hereto.
(e) A Stockholder shall be entitled to pledge his shares of Common
Stock to ARA, a commercial bank, savings and loan institution or
any other lending or financial institution as security for any
indebtedness of such Stockholder to such lender; provided that such
lender shall first agree not to dispose of such shares except in
compliance with the provisions of this Agreement; and further
provided that the lender shall agree upon the realization of its
security the same shall be subject to all of the terms and
conditions of this Agreement (except those prohibiting transfers by
Management Investors under Section 3.02(a)).
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<PAGE> 30
4. Rights of First Offer and Reoffer.
4.01 Transfers by Management Investors.
(a) Except as provided in Sections 3.02(d) and (e), if any
Management Investor or Permitted Transferee of a Management
Investor at any time desires to sell or otherwise transfer any
shares of Common Stock, the selling Management Investor shall first
give written notice (a "Management Investor's Notice") to ARA
stating such selling Management Investor's desire to make such
transfer, the number of shares of Common Stock to be transferred
(the "Offered Management Shares"), and the price which the selling
Management Investor proposes to be paid for the Offered Management
Shares, which proposed price shall not be greater than the Fair
Market Value of (an equivalent number of) shares of Class B Common
Stock (the "First Offer Price").
(b) Upon receipt of the Management Investor's Notice, ARA shall
have the irrevocable and exclusive option to buy up to all of the
Offered Management Shares at the First Offer Price; provided,
however, that ARA shall not have the right to purchase any of the
Offered Management Shares unless either (i) ARA purchases all such
Offered Management Shares, or (ii) such selling Management Investor
consents to the purchase of less than all of the Offered Management
Shares. ARA's option under this Section 4.01(b) shall be
exercisable by a written notice to such Selling Management
Investor, given within forty-five days from the date of the
Management Investor's Notice.
4.02 Transfers by Outside Investors.
(a) Except as provided in Sections 3.02(d) and (e), if any
Individual Investor or Institutional Investor (collectively, an
"Outside Investor") at any time desires to sell or otherwise
transfer any shares of Common Stock, including pursuant to the
registration rights under Section 2.1 of ARA's Amended and Restated
Registration Rights Agreement amended and restated as of April 7,
1988 (the "Registration Rights Agreement"), the selling Outside
Investor shall first give written notice (a "Seller's Notice") to
ARA stating such selling Outside Investor's desire to make such
transfer, the number of shares of Common Stock to be transferred
(the "Offered Investors' Shares"), and the price which the selling
Outside Investor proposes to be paid for the Offered Investors'
Shares (the "First Offer Investors' Price").
(b) Upon receipt of the Seller's Notice, ARA shall have the
irrevocable and exclusive option to buy up to all of the Offered
Investors' Shares at the First Offer Investors' Price; provided,
however, that ARA shall not have the right to purchase any of the
Offered Investors' Shares unless either (i) ARA purchases all such
Offered Investors' Shares, or (ii) such selling Outside Investor
consents to the purchase of less than all of the Offered Investors'
Shares. ARA's option under this Section 4.02(b) shall be
exercisable by a written notice to such selling Outside Investor,
given within forty-five days from the date of the Seller's Notice.
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<PAGE> 31
4.03 Transfer of Offered Shares to Third Parties. If the Management
Investor's Notice or the Seller's Notice (collectively, the "Notice")
required to be given pursuant to Section 4.01 or 4.02, as the case may be,
has been duly given, and ARA determines not to exercise its option to
purchase the Offered Management Shares or the Offered Investors' Shares
(collectively, the "Offered Shares") or determines (with the consent of
the Stockholder who has made the First Offer) to exercise its option to
purchase less than all the Offered Shares, then the Stockholder who has
made such First Offer shall be free, for a period of ninety days from the
earlier of (i) the expiration of the option period with respect to such
First Offer pursuant to Section 4.01 or 4.02, as the case may be, or (ii)
the date such Stockholder shall have received written notice from ARA
stating that ARA intends not to exercise in whole or in part the option
granted under Section 4.01 or 4.02, as the case may be, to sell to any
third-party Transferees the remaining Offered Shares, at a price equal to
or greater than the First Offer Price, in the case of Management Investors
or their Permitted Transferees, and the First Offer Investors' Price, in
the case of Outside Investors; provided, however, that the Transferee
complies with the provisions of Section 3.01 and provided further that, in
the case where such selling Stockholder is a Management Investor or a
Management Investor's Permitted Transferee, (i) such Transferee shall have
been approved by ARA as a suitable investor in a privately-owned services
management company and (ii) if any of such Offered Shares shall be shares
of Class B Common Stock, then, upon any such transfer, such shares of
Class B Common Stock shall, in accordance with the terms of the
Certificate of Incorporation, convert into and become shares of Class A
Common Stock and shall continue to be subject to the terms and provisions
of this Agreement. ARA shall not unreasonably withhold or delay such
approval. Anything herein to the contrary notwithstanding, the 90-day
period described in this Section 4.03 shall be extended until the
completion of all sales pursuant to a registration statement, a request
for which was made substantially concurrently with the Notice.
4.04 Reoffers. In the event the proposed purchase price of a third-
party Transferee for the Offered Shares is less than the First Offer Price
or the First Offer Investors' Price, as the case may be, the Stockholder
desiring to sell at such lesser price shall not sell or otherwise transfer
any of the Offered Shares unless such selling Stockholder shall first
reoffer the Offered Shares at such lesser price to ARA by giving written
notice (the "Reoffer Notice") to ARA of such selling Stockholder's
intention to make such transfer at such lower price (the "Reoffer Price").
ARA shall then have an irrevocable and exclusive option to purchase all or
part of the Offered Shares at the Reoffer Price, exercisable in the same
manner as provided in Section 4.01 or 4.02, as the case may be. In the
event ARA does not then elect to purchase all the remaining Offered
Shares, or ARA elects (with the consent of the Stockholder desiring to
sell) to purchase less than all the remaining Offered Shares, the
remaining Offered Shares may be sold by such selling Stockholder within
thirty days following the earlier of (i) the expiration of the option
period with respect to such Reoffer pursuant to Section 4.01 or 4.02, as
the case may be, or (ii) the last date on which such selling Stockholder
shall have received written notice from ARA stating that ARA intends not
to exercise in whole or in part the option granted in this Section 4.04,
at a price equal to or greater than the Reoffer Price; provided, however,
that the Transferee complies with the provisions of Section 3.01; and
provided further that, in the case where such selling Stockholder is a
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<PAGE> 32
Management Investor or a Management Investor's Permitted Transferee, such
Transferee shall have been approved by ARA as a suitable investor in a
privately-owned services management company. ARA shall not unreasonably
withhold or delay such approval.
4.05 Waiting Period With Respect to Subsequent Transfers. In the event
that ARA does not exercise its option to purchase any or all of the
Offered Shares at the First Offer Price or the First Offer Investors'
Price, as the case may be, or at the Reoffer Price, and the Stockholder
desiring to sell shall not have sold the remaining Offered Shares to any
Transferee for any reason before the expiration of the thirty-day period
described in Section 4.04 in the event of a Reoffer, or, if no Reoffer
Notice is given, the ninety-day period described in Section 4.03, then
such selling Stockholder shall not sell any shares of Common Stock to any
Transferee or other Stockholder (other than Permitted Transferees) at any
price for a period of three months from the last day of such thirty- or
ninety-day period, as the case may be.
4.06 No Sales of Control.
(a) Subject to Section 4.06(b) and except as provided in Section 7
(transfers approved by the Board of Directors), no Person or group
of Persons, as defined in Section 13 (d) (3) of the Securities
Exchange Act of 1934 (the "Exchange Act"), including for the
purposes of this paragraph as part of such Person's group,
Transferees pursuant to Sections 3.02(d) and (e), shall become
(whether through the purchase of shares pursuant to this Agreement
or otherwise or through any other action) the holder, directly or
indirectly, of 10% or more of either the outstanding shares of
Class A Common Stock or the outstanding shares of Class B Common
Stock. Any transaction resulting in a violation of this Section
4.06(a) shall be void, and of no effect against ARA, and ARA shall
not record any such purported transfer in its stock transfer books.
Two or more Stockholders owning in the aggregate 10% or more of
such outstanding shares shall not be deemed to be a group of
Persons for the purposes of this Section 4.06 solely because such
Stockholders are parties to this Agreement or because such
Stockholders are related by blood or marriage and/or because such
Stockholders are officers or directors of ARA.
(b) The provisions of Section 4.06(a) shall not apply to the
acquisition by ARA, directly or indirectly, of shares of Common
Stock, notwithstanding that as a result of such acquisition any
Person or group of Persons acting in concert would own 10% or more
of such outstanding shares subsequent to such an acquisition, but
shall apply to any subsequent acquisition or other action by such
Person or group of Persons.
(c) Except as provided in Section 7 (transfers approved by the
Board of Directors), to the extent an Institutional or Individual
Investor (together in each case with any Transferees), shall, at
any time prior to April 30, 1988, hold more shares of Class A
Common Stock than one-half the aggregate number of shares of
Special Participating Stock, Class B or Class C, that he held on
February 26, 1988 (which date was prior to the effective time of
the Reclassification), subject to adjustment for stock dividends,
stock splits, reclassification or the like occurring subsequent to
the Effective Time, ARA shall have the right to Call such shares.
The purchase price for such shares purchased hereunder shall be
$2,650 per share, payable in cash at the Closing Date.
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<PAGE> 33
4.07 Form of Consideration for Shares. No offer to purchase or to sell
shares of Common Stock shall be deemed to be a valid offer under this
Section 4 unless the purchase price of such offer is payable in cash or
securities that can be readily valued by reference to quoted trading
prices. The purchase price of shares upon exercise of an option under this
Section 4 in respect of a Notice which specifies only cash as the form of
consideration shall be payable only in cash.
4.08 Merger Transaction. Subject to any applicable provisions of the
Certificate of Incorporation or any loan agreement or instruments to which
ARA is a party, ARA may enter into any agreement of merger to merge with
or into any other corporation; and, in such event, Sections 4.01 through
4.07 of this Agreement shall not be applicable to such merger and all
shares may be transferred for such consideration as approved by the Board
of Directors and the Stockholders in accordance with applicable law.
4.09 Transfers in a Public Offering. In the event a request is made
under Section 2.1 of the Registration Rights Agreement for a demand
registration, then the procedures set forth in Sections 4.02 through 4.05
shall be modified in the following respects:
(a) Such request shall also provide the information required to be
stated in a Seller's Notice, and shall also constitute a Seller's
Notice.
(b) Prior to the expiration of the twenty-one day period under the
Registration Rights Agreement within which the Company is to file a
registration statement covering the shares the holder of which
requested a demand registration, ARA shall have the irrevocable and
exclusive option to buy all (and only all) of the Offered
Investors' Shares at the First Offer Investors' Price, which shall
be the proposed public offering price after reduction for
commissions, discounts and the like.
(c) In the event the public offering price (after reduction for
commissions, discounts and the like) is more than 10% lower than
the First Offer Investors' Price, or the number of shares included
in the offering is reduced to less than 75% of the shares as to
which the Seller's Notice was delivered (otherwise than by reason
of a cut down by the Underwriter) then Section 4.04 shall apply,
but such section shall not otherwise apply to any sale pursuant to
a registration statement.
(d) In the event all of the Offered Investors' Shares are elected
to be purchased, the demand registration shall be held in abeyance
pending the closing of such purchase in accordance with this
Agreement.
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5. Put of Shares upon Death, Complete Disability or Normal Retirement.
5.01 Put in Event of Death, Complete Disability or Normal Retirement.
Subject to any financing agreements in connection with the
Reclassification or any other instruments or agreements of ARA from time
to time in effect restricting or otherwise governing the repurchase or
retirement of shares of ARA's capital stock (the "Loan Agreements") and to
applicable law, unless a Call pursuant to Section 6.01 shall have been
exercised by ARA, upon the death, Complete Disability or Normal Retirement
of any Investor Group member, at the option of such Investor Group member,
such Investor Group member's estate, heirs or personal representative, and
such Investor Group member's Permitted Transferees (other than Permitted
Transferees specified in Section 3.02(d) (ii)) (collectively, the
"Holders" of such Investor Group member's shares) and within thirty days
of receipt by ARA of a Seller's Notice from such Holders, which notice
must be given within thirty days from the date of the appointment of a
personal representative of such Investor Group member, the date he became
Completely Disabled, or the date of his Normal Retirement, ARA shall
purchase from such Holders' the shares of Common Stock held by such
Holders specified in such Seller's Notice up to 30% of such shares so held
at a purchase price determined in accordance with Section 5.02. ARA shall
be under no obligation to purchase such shares unless it shall have
received a Seller's Notice from such Holders in accordance with this
Section 5.01.
5.02 Purchase Price of Put Shares. The purchase price for the shares
of Common Stock purchased pursuant to Section 5.01 shall be the Fair
Market Value of (an equivalent number of) shares of Class B Common Stock,
for the shares of a Holder of a Management Investor's shares, and shall be
the Fair Market Value of shares of Class A Common Stock for the shares of
a Holder of an Individual Investor's shares. ARA shall satisfy its
obligation to purchase shares upon the exercise of any Put granted under
Section 5.01 with cash.
6. Call upon Termination of Employment.
6.01 Call in Event of Termination. Unless the shares of Common Stock
held by the Holders of any Management Investor's shares have been earlier
sold pursuant to Section 4 (rights of first offer and reoffer), including
the transfer on the books of the Company pursuant to Section 3.01, ARA
shall have an exclusive and irrevocable option, at any time and from time
to time during the period of ten years following the termination of
employment of such Management Investor for any reason whatsoever
(including without limitation death, Complete Disability or Normal
Retirement) to make a purchase or purchases of up to all of the shares of
Common Stock owned by such Management Investor and his Permitted
Transferees, at a purchase price, with respect to any such exercise,
determined in accordance with Section 6.02.
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<PAGE> 35
6.02 Purchase Price. The purchase price per share for any shares of
Common Stock purchased pursuant to Section 6.01 shall be the lesser of (i)
the Fair Market Value of (an equivalent number of) shares of Class B
Common Stock at the time the option is exercised and (ii) the Fair Market
Value of (an equivalent number of) shares of Class B Common Stock at the
date of termination of employment, plus 8% simple interest on such amount
from the date of termination of employment through the date the option is
exercised and the shares of Common Stock thereunder are purchased. ARA
shall satisfy its obligations to purchase shares upon the exercise of such
Calls with cash up to the least of $100,000, or the Management Investor's
highest annual base salary as an employee of ARA, or 10% of the aggregate
purchase price for such Called shares and, at the Company's option, with
cash and/or Promissory Notes valued at their principal amount for the
remainder.
6.03 Sale of ARA Following Call. In the event that any entity, person,
or any group of persons acting in concert (excluding the Management
Investors as a group), acquires in any manner shares of Common Stock with
50% of the ordinary voting rights of the outstanding shares of Common
Stock or in the event of the redemption or repurchase of all the shares of
Common Stock in connection with a sale of all or substantially all the
assets of ARA, or the winding up, dissolution or liquidation of ARA,
within ninety days from the date of a sale pursuant to Section 6.01 then,
subject to the Loan Agreements, ARA and/or the purchaser of such shares of
Common Stock with 50% of the ordinary voting rights of the outstanding
shares of Common Stock shall pay to the Holders whose shares have been so
purchased the excess, if any, of the amount per share realized by ARA's
stockholders upon such acquisition, redemption, repurchase, winding up,
dissolution or liquidation over the purchase price per share paid to such
Holders pursuant to Section 6 less the interest paid on any Promissory
Notes paid as consideration for such stock and less a financing cost for
carrying such stock for any cash received, based on an interest rate equal
to the rate paid by ARA under the Loan Agreements at the date of payment
hereunder, for the period from the date of payment to such Holders
pursuant to Section 6 to the date of such acquisition, redemption,
repurchase, winding up, dissolution or liquidation, for each share
purchased by ARA.
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<PAGE> 36
7. Authority of Board of Directors to Approve Transfers; Actions by
Board of Directors. Notwithstanding any other provision of this
Agreement, the Board of Directors shall have the authority to approve any
transfer, or class, category or type of transfer, of Common Stock, and any
such transfer that shall have been so specifically approved by the Board
of Directors shall not be prohibited by this Agreement. Such authority of
the Board of Directors shall extend to, among other things, (i) the
authority to create an internal market for shares of the Company's stock
pursuant to which Management Investors would be offered the opportunity to
sell a portion of their shares at the times and on the terms set by the
Board of Directors, and (ii) the authority to waive entirely the
restrictions (including, without limitation, restrictions relating to
rights of first offer and reoffer, calls upon termination of employment
and sales, transfers and other dispositions of shares) set forth in this
Agreement which relate to Management Investors and which do not relate to
Outside Investors. Any such approval may be revoked by the Board at any
time without notice and such revocation shall be effective with respect to
any action, including any or all transfers or proposed transfers, unless,
prior to such revocation, the shares have been presented to the transfer
agent for the purpose of registering such transfer, in proper form and
satisfying the requirements of Section 8-401 of the Uniform Commercial
Code or such other applicable law relating to the duty of an issuer to
register securities transfers.
The Board of Directors may delegate any and all authority it has under
this Agreement to any committee thereof and/or to any authorized officer
or agent.
8. No Access to Information. Each of the parties to this Agreement
acknowledges that, at the time of a sale by a Stockholder of shares of
Common Stock pursuant to this Agreement, there may have occurred or be
proposed or pending an event or a transaction that could affect the fair
market value of the Common Stock, and that the fair market value of the
Common Stock as of a prior date in all likelihood will vary substantially
from the fair market value as of the current date, and further
acknowledges that ARA may have valid business reasons not to, and in any
case shall not be required to, disclose any event or transaction that may
have occurred or be proposed or pending at the time of any such sale.
9. Involuntary Transfer of Shares.
9.01 Certain Involuntary Transfers; Seller's Notice. Except for
involuntary transfers (by foreclosure or otherwise) to ARA of shares of
Common Stock pledged to ARA by any Management Investor or other
Stockholder employed by ARA or by such Management Investor's or other
employed Stockholder's personal representative, estate or heirs or
Permitted Transferees, in the event a Stockholder shall involuntarily
transfer directly or indirectly any or all of his shares, for any reason
other than as a result of those events specified in Section 5 or 6, such
Stockholder shall give written notice within thirty days of such
involuntary transfer (the "Stockholder Notice") to ARA, with a copy to the
Transferee, stating the fact that the involuntary transfer occurred, the
reason therefor, the date of the transfer, the name and address of the
Transferee and the number of shares acquired by the Transferee (the
"Acquired Shares"). For purposes of this Section 9 an involuntary transfer
shall include, without limitation, a court-ordered transfer, constructive
trust or other device designed to transfer economic benefit of share
ownership.
<PAGE>
<PAGE> 37
9.02 Right to Repurchase. For a period of sixty days from the date of
receipt of the Stockholder Notice or, failing receipt of such notice,
sixty days from the date ARA sends written notice to the Transferee that
the transfer is deemed to be an involuntary transfer subject to repurchase
under this Agreement, ARA shall have an irrevocable and exclusive option
to buy all of the Acquired Shares, exercisable in the same manner as
provided in Section 4.01, and the provisions of such applicable Section
shall be followed in their entirety except that the purchase price shall
be as provided in Section 9.03.
9.03 Purchase Price. The purchase price for shares purchased pursuant
to Section 9.02 shall be payable in cash and shall be equal to the Fair
Market Value of (an equivalent number of) shares of Class B Common Stock.
10. No Right to Continued Employment. Neither this Agreement nor the
ownership of Common Stock by a Management Investor shall confer upon any
Management Investor any right to continue in the employ of ARA or any of
its Subsidiaries or limit in any respect the right of ARA or its
Subsidiaries to terminate his employment at any time.
11. Avoidance of SEC Registration. Notwithstanding any other provision
of this Agreement that may be to the contrary, unless ARA's Board of
Directors shall have given its prior approval, no transfer of shares of
Common Stock subject to this Agreement shall be permitted if (i) at the
time of such proposed transfer ARA does not have a class of equity
securities registered, or required to be registered, under Section 12 of
the Exchange Act, and (ii) such transfer, in the determination of the
Board of Directors, shall create a significant risk that such registration
would be required in the future. In making such determination, the Board
shall consider, among other things, the possible requirements of ARA to
issue shares in the future. For purposes of this Section 11, any increase
in the number of holders of record of a class of ARA's equity securities
at a time when the number of record holders exceeds 450 shall be deemed to
create a significant risk that registration of such class of equity
securities under Section 12 of the Exchange Act would be required in the
future. Any transaction resulting in the violation of this Section 11
shall be void and of no effect against ARA, and ARA shall not record any
such proported transfer on its stock record books.
12. Closing; Purchase Price. Any selling Stockholder and ARA, as
purchaser, of shares of Common Stock pursuant to Section 4, 5, 6 or 9
shall mutually determine a closing date (the "Closing Date") which, unless
this Agreement otherwise explicitly provides, shall be not more than five
business days, subject to any applicable regulatory waiting periods, after
the expiration of the option period described in the Section pursuant to
which such shares may be sold in accordance with this Agreement, or if any
such day is not a business day, then the first business day thereafter.
Notwithstanding anything in this Agreement to the contrary, the Closing
Date may be delayed in any case in which ARA cannot, in compliance with
the Loan Agreements or applicable law, purchase any shares of Common Stock
that it is otherwise obligated to purchase until the earliest practicable
date when such closing may be effected in compliance with such Loan
Agreements or applicable law. The closing shall be held at 11:00 a.m.,
local time, at the offices of ARA or at such other time or place as the
parties may agree.
<PAGE>
<PAGE> 38
The most recent existing appraisal of fair market value as determined
by an Appraiser shall be determined, for purposes of Sections 5, 6 and 9,
at the time the written notice exercising the Put is received by ARA or
the written notice exercising the Call is received by the Stockholder, as
the case may be. The determination date of the fair market value shall be
appropriately changed if the Closing Date is delayed in accordance with
the foregoing paragraph.
13. Deliveries at Closing; Method of Payment of Purchase Price. On the
Closing Date, any selling Stockholder shall deliver certificates with
appropriate transfer tax stamps affixed and with stock powers endorsed in
blank, representing the shares of Common Stock to be purchased, and ARA,
as purchaser shall deliver to such Stockholder the purchase price which is
payable in cash (or by wire transfer or certified check payable in New
York or Philadelphia Clearing House funds) and the other consideration, if
any, to be given in exchange for such shares. In addition, if the person
selling shares is the personal representative of a deceased Stockholder,
the personal representative shall also deliver to the purchaser or
purchasers (i) copies of letters testamentary or letters of administration
evidencing his appointment and qualification, (ii) a certificate issued by
the Internal Revenue Service pursuant to Section 6325 of the Code
discharging the shares being sold from liens imposed by the Code and (iii)
an estate tax waiver issued by the state of the decedent's domicile.
14. Endorsement of Stock Certificates. A copy of this Agreement shall
be filed with the Secretary of ARA and kept with the records of ARA. Each
of the Stockholders hereby agrees that each outstanding certificate
representing shares of Common Stock shall bear endorsements reading
substantially as follows:
(a) The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be transferred, sold or otherwise disposed of except while such
a registration is in effect or pursuant to an exemption from
registration under said Act.
(b) The securities represented by this certificate are subject to
the right of the Corporation and the Stockholders of the
Corporation to repurchase such securities and the right of the
registered holder to sell such securities to the Corporation on the
terms and conditions set forth in a Stockholders' Agreement dated
as of December 14, 1984, as the same may be amended from time to
time, a copy of which may be obtained from the Corporation or from
the holder of this instrument. No transfer of such securities will
be made on the books of the Corporation unless accompanied by
evidence of compliance with the terms of such Agreement.
Such certificate shall bear any additional endorsement which may be
required for compliance with state securities or blue sky laws.
<PAGE>
<PAGE> 39
15. Term. The terms and provisions of this Agreement which relate to
Management Investors shall terminate on the 20th anniversary of the
Effective Time. The terms and provisions of this Agreement which relate to
Outside Investors shall terminate on the 20th anniversary of the Effective
Time or, if earlier, on the closing date of the first to occur of (i) any
merger or other business combination of ARA with or into any other
corporations, except a merger with or into ARA Services, Inc. or a merger
or other business combination in which the stockholders of ARA immediately
prior thereto constitute more than a majority of the stockholders (by
value of equity securities held) following such merger, and (ii) the sale
of shares of Class A Common Stock to the public pursuant to a registered
public offering under the 1933 Act, as a result of which offering the
public (including for this purpose all purchasers in the underwriting
irrespective of any relationship with the Company) owns 10% or more of the
outstanding shares of Class A Common Stock, provided such shares have a
fair market value equal to at least $25,000,000 at the time of the
offering.
Notwithstanding the foregoing, the restrictive terms and provisions
set forth herein with respect to the rights and obligations of Management
Investors shall terminate, effective upon or after the occurrence of a
public offering pursuant to clause (ii) above, to the extent the existence
of such terms and provisions would impair the ability of ARA to list its
Common Stock on the New York Stock Exchange or, in the written opinion of
the lead underwriter, significantly impair the value of the Common Stock
proposed to be sold in a public offering.
16. Registration of Common Stock. In the event of any registration
under the Securities Act and public offering of Common Stock, each
Stockholder shall, at a meeting convened for the purpose of amending the
Certificate of Incorporation, vote to increase the authorized number of
shares of Common Stock and, if necessary, to subdivide the outstanding
shares of Common Stock of ARA, in both instances as recommended by a
majority of the members of the Board in order to effectuate such public
offering.
17. Injunctive Relief. It is acknowledged that it will be impossible
to measure in money the damages that would be suffered if the parties fail
to comply with any of the obligations herein imposed on them and that in
the event of any such failure, an aggrieved person will be irreparably
damaged and will not have an adequate remedy at law. Any such person
shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be
brought in equity to enforce any of the provisions of this Agreement, none
of the parties hereto shall raise the defense that there is an adequate
remedy at law.
18. Notices. All notices, statements, instructions or other documents
required to be given hereunder, shall be in writing and shall be given
either personally, or by mailing the same in a sealed envelope, first-
class mail, postage prepaid and either certified or registered, return
receipt requested, addressed to ARA at its principal offices and to the
other parties at their addresses reflected in the stock records of ARA, or
sent by telegram, telex, telecopy or similar form of telecommunication.
Each Stockholder, by written notice given to ARA in accordance with this
Section 18 may change the address to which notices, statements,
instructions or other documents are to be sent to such Stockholder. All
notices, statements, instructions and other documents hereunder that are
mailed shall be deemed to have been given on the date of mailing.
<PAGE>
<PAGE> 40
19. Cooperation. ARA agrees that it will use all reasonable efforts
under the circumstances to help any Stockholder desiring to dispose of its
Common Stock pursuant to the provisions of this Agreement to do so.
20. Miscellaneous.
20.01 Successor and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties, and their respective successors
and assigns. The provisions of this Agreement are for the sole benefit of
the parties hereto and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed
as conferring any rights on any other persons. If any Transferee of any
Stockholder shall acquire any shares of Common Stock, in any manner,
whether by operation of law or otherwise, such shares shall be held
subject to all of the terms of this Agreement, and by taking and holding
such shares such person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement.
ARA may assign to any other Person its rights with respect to any
specific transaction pursuant to Section 4, 5, 6 or 9, provided that
Person complies with the provisions of Section 3.01.
20.02 Governing Law. Regardless of the place of execution, this
Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware applicable to agreements made and to be wholly
performed in such State.
20.03 Headings. Paragraph headings are inserted herein for
convenience only and do not form a part of this Agreement.
20.04 Entire Agreement; Amendment. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions
contemplated herein, supersedes all prior written agreements and
negotiations and oral understandings, if any, and may not be amended,
supplemented or discharged except by performance or by an instrument in
writing signed by the holders of at least three-fourths of the Common
Stock held by the Institutional and Individual Investors (taken as a
whole), and by Management Investors who hold (in combination with their
Permitted Transferees) at least a majority of the Common Stock held by
Management Investors and their Permitted Transferees, and by ARA. In the
event of the amendment or modification of this Agreement in accordance
with its terms, the Stockholders shall cause the Board of Directors of ARA
to meet within thirty days following such amendment or modification or as
soon thereafter as is practicable for the purpose of amending the
Certificate of Incorporation and By-Laws of ARA, as may be required as a
result of such amendment or modification, and proposing such amendments to
the stockholders of ARA entitled to vote thereon, and such action shall be
the first action to be taken at such meeting.
20.05 Inspection. So long as this Agreement shall be in effect, this
Agreement shall be made available for inspection by any stockholder of ARA
at the principal offices of ARA.
20.06 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature Pages and Schedules Omitted]
<PAGE>
<PAGE> 41
EXHIBIT A
(to Amended and Restated
Stockholders' Agreement)
THIS NOTE IS NOT TRANSFERABLE UNLESS AS A CONDITION
PRECEDENT TO THE EFFECTIVENESS OF ANY TRANSFER THE
PAYEE HAS OBTAINED THE WRITTEN CONSENT OF THE
COMPANY AS TO THE PROPOSED TRANSFER.
$__________ Philadelphia, Pennsylvania
_________________, 19___
SUBORDINATED INSTALLMENT NOTE
1. For value received, THE ARA GROUP, INC. (formerly ARA Holding
Company), a Delaware corporation (the "Company"), hereby promises to pay
to (the "Payee") the sum of $ in equal,
annual installments of $and one final installment of $ on each
[April/October] 15 commencing on [April/October] 15, 19 , and to pay
simple interest at the rate of % per annum on the unpaid
balance thereof, semi-annually in arrears on each April 15 and October 15.
2. The Payee may not sell, assign or otherwise transfer or encumber any
portion of this Note or interest herein without first procuring the
written consent of the Company, which consent the Company is under no
obligation to provide. No transfer of this Note shall be effective unless
such transfer is in compliance with the foregoing, including the
requirements set forth in the legend provided for above.
3. Both the principal of this Note and interest thereon are payable in
lawful money of the United States of America at 1101 Market Street,
Philadelphia, PA 19107, or such address of any subsequent principal
executive office of the Company within the United States of America as the
Company shall designate in writing to the Payee, or at the option of the
Company, by check mailed to the Payee at such address for the Payee as is
indicated on the books of the Company.
4. This Note may be prepaid in full, or in part, any time, without
premium or penalty. All prepayments shall be applied first to accrued
interest and then to installments of principal in the order of their
maturities.
5. The indebtedness evidenced by this Note and the payment of the
principal of and interest on this Note are hereby expressly subordinated,
to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Indebtedness.
<PAGE>
<PAGE> 42
5.1 "Senior Indebtedness" means the principal of, premium, if any,
interest and any other amounts due on (1) all Indebtedness incurred,
assumed or guaranteed by the Company, either before or after the date
hereof, (excluding any debt which by the terms of the instrument creating
or evidencing the same is not superior in right of payment to this Note),
including, without limitation, (a) any amount payable with respect to any
lease, conditional sale or installment sale agreement or other financing
instrument or agreement which in accordance with generally accepted
accounting principles is, at the date hereof or at the time the lease,
conditional sale or installment sale agreement or other financing
instrument or agreement is entered into, or assumed or guaranteed by,
directly or indirectly, the Company, required to be reflected as a
liability on the face of the balance sheet of the Company, (b) any amounts
payable in respect to any interest rate exchange agreement, currency
exchange agreement or similar agreement and (c) any subordinated
indebtedness of a corporation merged with or into or acquired by the
Company; and (2) any renewals or extensions or refunding of any such
Senior Indebtedness or evidences of indebtedness issued in exchange for
such Senior Indebtedness.
5.2 "Indebtedness" means (a) all items, except items of capital stock or
of surplus or of general contingency reserves or of reserves for deferred
income taxes, which in accordance with generally accepted accounting
principles in effect on the date hereof should be included in determining
total liabilities as shown on the liability side of a balance sheet of the
Company as at the date of which Indebtedness is to be determined, (b) all
indebtedness secured by any mortgage, pledge, lien or conditional sale or
other title retention agreement existing on any property or asset owned or
held by the Company, whether or not such indebtedness shall have been
assumed, and (c) all indebtedness of others which the Company has directly
or indirectly guaranteed, endorsed, discounted or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, or in respect
of which the Company has agreed to supply or advance funds or otherwise to
become liable directly or indirectly with respect thereto, including,
without limitation, indebtedness arising out of the sale or transfer of
accounts or notes receivable or any moneys due or to become due.
6. In the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether voluntary or involuntary and
whether in bankruptcy, insolvency or receivership proceedings, or upon an
assignment for the benefit of creditors or any readjustment of debt,
arrangement or composition among creditors or any other marshalling of the
assets and liabilities of the Company or otherwise), then holders of
Senior Indebtedness shall first be paid in full, or provision made for
such payment, before any payment or distribution, directly or indirectly
(including by way of set off) is made upon the principal of or interest on
this Note, and to that end the holders of Senior Indebtedness shall be
entitled to receive in payment thereof any payment or distribution of
assets of the Company, whether in cash or property or securities, which
may be payable or deliverable in any such proceeding in respect of this
Note. The Payee irrevocably authorizes, empowers and directs all
receivers, custodians, trustee, liquidators, conservators and others
having authority in the premises to effect all such payments and
<PAGE>
<PAGE> 43
deliveries. Notwithstanding any statute, including without limitation the
Federal Bankruptcy Code, any rule of law or bankruptcy procedures to the
contrary, the right of the holders of the Senior Indebtedness to have all
of the Senior Indebtedness paid and satisfied in full prior to the payment
of any amounts due the payee under this Note shall include, without
limitation, the right of the holders of the Senior Indebtedness to be paid
in full all interest accruing on the Senior Indebtedness due them after
the filing of any petition by or against the Company in connection with
any bankruptcy or similar proceeding or any other proceeding referred to
in paragraph 6 hereof, prior to the payment of any amounts in respect of
the Note, including, without limitation, any interest due to the Payee
accruing after such date.
7. No payment, directly or indirectly (including by way of set off),
shall be made by the Company with respect to the principal of or interest
on this Note if (i) an event of default has happened with respect to any
Senior Indebtedness, as defined therein or in the instrument under which
the same is outstanding which if occurring prior to the stated maturity of
such Senior Indebtedness, permits holders thereof upon the giving of
notice or passage of time, or both, to accelerate the maturity thereof
("Senior Indebtedness Default") and has not been cured, (ii) a payment by
the Company to or for the benefit of Payee would, immediately after giving
effect thereto, result in a Senior Indebtedness Default, or (iii) full
payment of all amounts then due for principal of (or premium, if any),
interest or any other amounts due on Senior Indebtedness shall not then
have been made or duly provided for. Upon the occurrence of any events
described in (i), (ii) or (iii) described above, notwithstanding any event
of default under this Note by the Company, the Payee may not accelerate
the maturity of all or any portion of this Note, or take any action
towards collection of all or any portion of this Note or enforcement of
any rights, powers or remedies under this Note, or applicable law until
the earlier of the date on which a Senior Indebtedness Default (or in the
case of (iii) required payments shall have been duly provided for) have
been cured or such Senior Indebtedness has been paid in full.
8. In the event that, notwithstanding the foregoing, the Company shall
make any payment prohibited by Section 6 or 7, then, except as hereinafter
in this Section otherwise provided, unless and until any such Senior
Indebtedness Default shall have been cured or waived or shall cease to
exist, such payment shall be held in trust for the benefit of and shall be
paid over to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instrument evidencing the Senior Indebtedness may have been
issued, as their respective interests may appear, to the extent necessary
to pay in full all Senior Indebtedness then due, after giving effect to
any concurrent payment to the holders of such Senior Indebtedness.
9. Subject to the payment in full of all Senior Indebtedness at the
time outstanding, the Payee shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness until this
Note shall be paid in full, and no payments or distributions to the
holders of Senior Indebtedness by or on behalf of the Company from the
proceeds that would otherwise be payable to the Payee, or by or on behalf
of the Payee, shall as between the Company and the Payee, be deemed to be
a payment by the Company to or for the account of holders of Senior
Indebtedness.
<PAGE>
<PAGE> 44
10. No holder of Senior Indebtedness shall be prejudiced in his right to
enforce subordination of this Note by any act on the part of the Company.
The above provisions in regard to subordination are intended solely for
the purpose of defining the relative rights of the Payee on the one hand,
and the holders of Senior Indebtedness, on the other hand, and nothing
contained in this Note is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness and
the Payee, the obligation of the Company, which is absolute and
unconditional, to pay to the Payee, subject to the rights of the holders
of Senior Indebtedness, the principal of and interest on this Note as and
when the same shall become due and payable in accordance with its terms,
subject to the rights, if any, under the above subordination provisions,
of holders of Senior Indebtedness to receive cash, property or securities
of the Company payable in respect thereof.
11. The principal of this Note and accrued unpaid interest thereon shall
(if not already due and payable) upon written demand by the Payee become
due and payable forthwith, if there shall have been a default in the
payment of any interest on, or principal of, this Note when it becomes due
and payable (but only if such payment is not prohibited by the provisions
of this Note), and such default shall have continued for a period of 30
days after written notice of such default shall have been given to the
Company and shall be continuing at the time of such written demand.
12. No course of dealing between the Company and the Payee or any delay
on the part of the Payee in exercising any rights under this Note shall
operate as a waiver of any rights of the Payee.
13. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given when delivered, or deposited in the
mails, first-class, postage prepaid, or delivered to a telegraph office
for transmission, if to the Payee, at such address for the Payee as is
indicated on the books of the Company or if to the Company, at the address
of the principal executive offices of the Company as provided above.
14. This Note shall be governed by the laws of the State of Delaware.
THE ARA GROUP, INC.
By: ______________________________
Treasurer
<PAGE>
<PAGE> 45
Instructions to Direct Purchase Opportunity Exercise Form
READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING
THE DIRECT PURCHASE OPPORTUNITY EXERCISE FORM
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. The exercise price per share
denominated in dollars is $11.65. For purposes of exercising
your direct stock purchase opportunity, ARA has set the exchange
rate at L.6592 per dollar, which is the exchange rate published
in The Wall Street Journal on May 3, 1994. Therefore, the price
per share in pounds sterling is L7.68.
2. Maximum number of shares available under direct purchase
opportunity. The maximum number of shares which can be
purchased is set forth in your direct stock purchase opportunity
certificate.
3. Number of shares being purchased. Insert the number of shares
being purchased. May not exceed the maximum number of shares
available under your direct purchase opportunity. The minimum
number is 100.
4. Total purchase price. Multiply the Purchase price per share
(Line 1) by the Number of shares being purchased (Line 3).
5. Maximum amount eligible to be deferred. The maximum amount of
purchase price that can be deferred (if you exercise the maximum
number of shares available under your direct purchase
opportunity) is equal to the taxes withheld as set forth on the
Notice of Plan Termination and Release accompanying your direct
stock purchase opportunity certificate.
6. Amount eligible to be deferred in this purchase. Divide Number
of shares being purchased (Line 3) by Maximum number of shares
available under direct purchase opportunity (Line 2) and
multiply the result by Maximum amount eligible to be deferred
(Line 5).
7. Amount of payment to be deferred. You may elect to defer any
amount up to the Amount eligible to be deferred in this purchase
(Line 6). IF YOU ELECT TO DEFER ANY PART OF THE PAYMENT, YOU
AND YOUR SPOUSE, IF APPLICABLE , MUST COMPLETE AND SIGN THE
REVERSE SIDE THE EXERCISE FORM.
8. Amount of Current Payment Required. Subtract Amount of Payment
to be Deferred (Line 7) from Total Purchase Price (Line 4).
<PAGE>
<PAGE> 46
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 and Check. To exercise your Purchase Opportunity,
the Exercise Form, personal check (if any) and signed stock
certificates for shares you are selling must be received by ARA on
or before May 31, 1994. The method of delivery is your decision and
at your risk.
Delivery of Stock Certificate(s). Your stock certificate(s) will be
mailed approximately four (4) to six (6) weeks after the expiration
of the exercise period. However, if you have elected to defer any
part of the payment due, your stock certificate(s) will be held by
ARA as collateral.
<PAGE>
<PAGE> 47
Please Review Instructions Before You Fill Out This Form
THE ARA GROUP, INC.
Purchase Opportunity Exercise Form
I hereby exercise a Purchase Opportunity granted to me on May 9, 1994.
I hereby represent, warrant and agree as follows:
A. I have received and read copies of (a) the Prospectus dated May 10,
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.
B. I have full power and authority to enter into the Amended and
Restated Stockholders' Agreement.
C. By signing below, I hereby execute and deliver and agree to be bound
by the Amended and Restated Stockholders' Agreement as a Management
Investor.
D. 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: _________________
<PAGE>
<PAGE> 48
1. Purchase price per share . . . . . . . . . . . . . . . . . . . . L7.68
-----
2. Maximum number of shares available under direct
purchase opportunity* . . . . . . . . . . . . . . . . __________*
3. Number of shares being purchased (may not
exceed Line 2) . . . . . . . . . . . . . . . . . . . x
------
4. Total purchase price (Line 1 x Line 3) . . . . . . ______
5. Maximum amount eligible to be deferred . . . . . . . __________**
6. Amount eligible to be deferred in this purchase
(Line 3 divided by Line 2 x Line 5) . . . . .. . . __________
7. Amount of payment to be deferred (may not exceed Line 6) . . . . . L
-----
8. Amount of current payment required (Line 4 - Line 7) . . . . . . . L
=====
9. Manner of Payment
a) / / If you wish to apply your MPP distribution to pay the amount of
current payment required (Line 8), please mark the indicated box.
Your distribution will be applied to the current payment required at
the exchange rate of .6592, and the remainder, if any, will be paid to
you.
b) Amount of check enclosed, if any (Line 8) . . . . L
----------
* From direct stock purchase opportunity certificate.
** From notice of plan termination and release
__________________________________________ _________________________________
Signature Date
__________________________________________ _________________________________
Signature Date
IF THE AMOUNT ON LINE 7, 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 9b to:
The ARA Group, Inc.
ARA House
Honey End Lane
Tilehurst
Reading, Berks
R63 4QL England
Attention: William McCall
- ------------------------------------------------------------------------------
For Transfer Agent use only: Check Number________________________
Check Amount $______________________
HID# _______________________________
Deferred Amount $___________________
*PLEASE TURN OVER.
<PAGE>
<PAGE> 49
Deferred Payment Obligation
For value received, I/we promise to pay to the order of ARA CD Company
(a subsidiary of The ARA Group, Inc. and referred to as the "Company")
$______________. Payment of the deferred obligation shall be due on
February 15, 1998. The obligation 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. The amount of your deferred payment obligation must be stated in U.S.
dollars. To determine this amount in dollars, divide the Amount of
payment to be deferred (Line 7 on the Exercise Form) denominated in
pounds sterling by the exchange rate of L.6592 per dollar.
2. Insert the Number of Shares Being Purchased (Line 3 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.
<PAGE>
<PAGE> 50
Please Review Instructions Before You Fill Out This Form
THE ARA GROUP, INC.
Purchase Opportunity Exercise Form
I hereby exercise a Purchase Opportunity granted to me on May 9, 1994.
I hereby represent, warrant and agree as follows:
A. I have received and read copies of (a) the Prospectus dated May 10,
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.
B. I have full power and authority to enter into the Amended and
Restated Stockholders' Agreement.
C. By signing below, I hereby execute and deliver and agree to be bound
by the Amended and Restated Stockholders' Agreement as a Management
Investor.
D. 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: _________________
<PAGE>
<PAGE> 51
1. Purchase price per share . . . . . . . . . . . . . . . . . . . . L7.68
-----
2. Maximum number of shares available under direct
purchase opportunity* . . . . . . . . . . . . . . . . __________*
3. Number of shares being purchased (may not
exceed Line 2) . . . . . . . . . . . . . . . . . . . x
------
4. Total purchase price (Line 1 x Line 3) . . . . . . ______
5. Maximum amount eligible to be deferred . . . . . . . __________**
6. Amount eligible to be deferred in this purchase
(Line 3 divided by Line 2 x Line 5) . . . . . . . __________
7. Amount of payment to be deferred (may not exceed Line 6) . . . . . L
-----
8. Amount of current payment required (Line 4 - Line 7) . . . . . . . L
=====
9. Manner of Payment
a) / / If you wish to apply your MPP distribution to pay the amount of
current payment required (Line 8), please mark the indicated box.
Your distribution will be applied to the current payment required at
the exchange rate of .6592, and the remainder, if any, will be paid to
you.
b) Amount of check enclosed, if any (Line 8) . . . . L
----------
* From direct stock purchase opportunity certificate.
** From notice of plan termination and release
__________________________________________ _________________________________
Signature Date
__________________________________________ _________________________________
Signature Date
IF THE AMOUNT ON LINE 7, 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 9b to:
The ARA Group, Inc.
ARA House
Honey End Lane
Tilehurst
Reading, Berks
R63 4QL England
Attention: William McCall
- ------------------------------------------------------------------------------
For Transfer Agent use only: Check Number________________________
Check Amount $______________________
HID# _______________________________
Deferred Amount $___________________
*PLEASE TURN OVER.
<PAGE>
<PAGE> 52
Deferred Payment Obligation
For value received, I/we promise to pay to the order of ARA CD Company
(a subsidiary of The ARA Group, Inc. and referred to as the "Company")
$______________. Payment of the deferred obligation shall be due on
February 15, 1998. The obligation 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. The amount of your deferred payment obligation must be stated in U.S.
dollars. To determine this amount in dollars, divide the Amount of
payment to be deferred (Line 7 on the Exercise Form) denominated in
pounds sterling by the exchange rate of L.6592 per dollar.
2. Insert the Number of Shares Being Purchased (Line 3 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.
<PAGE>
