-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VWxZOOHfWs+uVh6NLuvWTNNJVqB5aMpVSoKsl4ZzaZDtQjTJKvZqbCX+/eIaNlFP T18zupPJzBtLnhoC3iPF/g== 0000950130-97-005403.txt : 19971205 0000950130-97-005403.hdr.sgml : 19971205 ACCESSION NUMBER: 0000950130-97-005403 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19971204 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ATC GROUP SERVICES INC /DE/ CENTRAL INDEX KEY: 0000828828 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 460399408 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-39966 FILM NUMBER: 97732332 BUSINESS ADDRESS: STREET 1: 104 E 25TH ST 10TH FLR CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2123538280 MAIL ADDRESS: STREET 1: 104 EAST 25TH STREET STREET 2: 10TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10010 FORMER COMPANY: FORMER CONFORMED NAME: ATC ENVIRONMENTAL INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WPG CORPORATE DEVELOPMENT ASSOCIATES V LP CENTRAL INDEX KEY: 0001048643 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133926620 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: WEISS PECK & GREER PRIVATE EQUITY GROUP STREET 2: ONE NEW YORK PLAZA CITY: NEW YORK STATE: NY ZIP: 10004-1950 BUSINESS PHONE: 2129089500 MAIL ADDRESS: STREET 1: C/O WEISS PECK & GREER PRIVATE EQUITY GR STREET 2: ONE NEW YORK PLAZA CITY: NEW YORK STATE: NY ZIP: 10004-1950 SC 14D1 1 SCHEDULE 14D-1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D (AMENDMENT NO. 1) ATC GROUP SERVICES INC. (Name of Subject Company) ACQUISITION CORP. ACQUISITION HOLDINGS, INC. (Bidders) COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) 0000020671 (CUSIP Number of Class of Securities) STEVEN N. HUTCHINSON ACQUISITION HOLDINGS, INC. C/O WEISS, PECK & GREER, L.L.C. ONE NEW YORK PLAZA NEW YORK, NEW YORK 10004 (212) 908-9500 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Bidder) ---------------- Copy To: DENNIS J. FRIEDMAN, ESQ. DAVID M. WILF, ESQ. CHADBOURNE & PARKE LLP 30 ROCKEFELLER PLAZA NEW YORK, NY 10112 (212) 408-5100 CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE ---------------------- -------------------- $117,247,008 $23,449.40
* Based on the offer to purchase all outstanding shares of Common Stock of the Subject Company at $12.00 cash per share. As of November 12, 1997, as reported to the Offeror by the Subject Company, the number of shares of Common Stock issued and outstanding was 7,930,107, the number of shares of Common Stock reserved for issuance upon the exercise of outstanding options to purchase shares of Common Stock was 750,070 and the number of shares of Common Stock issuable upon the exercise of certain outstanding warrants was 1,090,407. [_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date filed: N/A - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- This statement relates to a tender offer by Acquisition Corp., a Delaware corporation (the "Offeror"), and a wholly owned subsidiary of Acquisition Holdings, Inc., a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Common Stock"), of ATC Group Services Inc., a Delaware corporation (the "Company"), at a purchase price of $12.00 per share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 4, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereof, respectively, and which are incorporated herein by reference, and constitutes Amendment Number 1 to the Schedule 13D filed by the Offeror on October 28, 1997 with respect to the beneficial acquisition of securities of the same class referred to in Item 1 of this statement. Parent has been formed in connection with the Offer and the transactions contemplated thereby, and is currently wholly owned by WPG Corporate Development Associates V, L.P., a Delaware limited partnership (the "WPG Fund"). An affiliate of the WPG Fund, WPG Corporate Development Associates V (Overseas), L.P., a Cayman Islands exempted limited partnership (the "WPG Overseas Fund") will, on or prior to the Merger referred to below, acquire approximately 20% of the equity capital of Parent. The Offeror is wholly owned by the Parent. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is ATC Group Services Inc., a Delaware Corporation, and the address of its principal executive offices is 104 East 25th Street, 10th Floor, New York, New York 10010. (b) The exact title of the class of equity securities being sought in the Offer is Common Stock, par value $0.01 per share, of the Company. The information set forth in the Introduction to the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)--(d); (g) The information set forth in the Introduction and Section 9 ("Certain Information Concerning the WPG Fund, the WPG Overseas Fund, Parent and the Offeror") of the Offer to Purchase, and in Annex I thereto, is incorporated herein by reference. (e)--(f) None of the Offeror, Parent, the WPG Fund, the WPG Overseas Fund, WPG Private Equity Partners II, L.L.C., a Delaware limited liability company (the sole general partner of the WPG Fund), WPG Private Equity Partners II (Overseas), L.L.C., a Delaware limited liability company, WPG CDA V (Overseas), Ltd., a Cayman Islands exempted company (the two general partners of the WPG Overseas Fund), or, to the best of their knowledge, any of the persons listed in Annex I of the Offer to Purchase, has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) None. (b) The information set forth in the Introduction, Section 9 ("Certain Information Concerning the WPG Fund, the WPG Overseas Fund, Parent and the Offeror") and Section 11 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)--(b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. 2 ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)--(e) The information set forth in the Introduction, Section 11 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the Company"), Section 13 ("The Merger Agreement") and Section 14 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (f)--(g) The information set forth in Section 7 ("Certain Effects of the Transaction") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)--(b) The information set forth in the Introduction, Section 9 ("Certain Information Concerning the WPG Fund, the WPG Overseas Fund, Parent and the Offeror") and Section 13 ("The Merger Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 9 ("Certain Information Concerning the WPG Fund, Parent and the Offeror"), Section 10 ("Source and Amount of Funds") and Section 11 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and in Section 17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9 ("Certain Information Concerning the WPG Fund, the WPG Overseas Fund, Parent and the Offeror") of the Offer to Purchase is incorporated herein by reference. The incorporation by reference herein of the above-mentioned financial information does not constitute an admission that such information is material to a decision by a security holder of the Company as whether to sell, tender or hold Shares being sought in the Offer. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the Introduction, Section 9 ("Certain Information Concerning the WPG Fund, WPG Overseas Fund, Parent and the Offeror") and Section 11 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") of the Offer to Purchase is incorporated herein by reference. (b)--(c) The information set forth in Section 16 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7 ("Certain Effects of the Transaction") of the Offer to Purchase is incorporated herein by reference. (e) The information set forth in Section 16 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference in its entirety. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated December 4, 1997. (a)(2) Letter of Transmittal with respect to the Shares. 3 (a)(3) Letter, dated December 4, 1997, from BT Alex. Brown Incorporated, as Dealer Manager, to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(4) Letter to be sent by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to their Clients. (a)(5) Notice of Guaranteed Delivery. (a)(6) IRS Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Press Release issued by the Company on October 17, 1997. (a)(8) Press Release issued by the Company and Weiss, Peck & Greer, L.L.C., dated November 28, 1997. (b)(1) Highly Confident Letter, dated November 25, 1997, from BT Alex. Brown Incorporated. (b)(2) Commitment Letter, dated November 26, 1997, from Bankers Trust Company. (c)(1) Agreement and Plan of Merger, dated as of November 26, 1997, among the Parent, the Offeror and the Company. (c)(2) Stockholders Agreement, dated as of October 17, 1997, among the Parent and George Rubin and Morry F. Rubin. (c)(3) Form of Severance, Consulting and Non-Competition Agreement between the Company and George Rubin. (c)(4) Form of Severance, Consulting and Non-Competition Agreement between the Company and Morry F. Rubin. (d)None. (e)Not applicable. (f)None. 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 4, 1997 WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. By: WPG PRIVATE EQUITY PARTNERS II, L.L.C. Title: General Partner /s/ Steven N. Hutchinson By: _________________________________ NAME: STEVEN N. HUTCHINSON Title:Managing Member ACQUISITION CORP. /s/ Steven N. Hutchinson By: _________________________________ NAME: STEVEN N. HUTCHINSON Title:Director and President 5 EXHIBIT INDEX (a)(1) Offer to Purchase, dated December 4, 1997. (a)(2) Letter of Transmittal with respect to the Shares. (a)(3) Letter, dated December 4, 1997, from BT Alex. Brown Incorporated, as Dealer Manager, to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(4) Letter to be sent by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to their Clients. (a)(5) Notice of Guaranteed Delivery. (a)(6) IRS Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Press Release issued by the Company on October 17, 1997. (a)(8) Press Release issued by the Company and Weiss, Peck & Greer, L.L.C., dated November 28, 1997. (b)(1) Highly Confident Letter, dated November 25, 1997, from BT Alex. Brown Incorporated. (b)(2) Commitment Letter, dated November 26, 1997, from Bankers Trust Company. (c)(1) Agreement and Plan of Merger, dated as of November 26, 1997, among the Parent, the Offeror and the Company. (c)(2) Stockholders Agreement, dated as of October 17, 1997, among the Parent and George Rubin and Morry F. Rubin. (c)(3) Form of Severance, Consulting and Non-Competition Agreement between the Company and George Rubin. (c)(4) Form of Severance, Consulting and Non-Competition Agreement between the Company and Morry F. Rubin. (d) None. (e) Not applicable. (f) None.
EX-99.(A)(1) 2 OFFER TO PURCHASE DATED 12/4/97 EXHIBIT (a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ATC GROUP SERVICES INC. AT $12.00 NET PER SHARE BY ACQUISITION CORP. A CORPORATION FORMED BY WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 21, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE ("SHARES"), OF ATC GROUP SERVICES INC. (THE "COMPANY") CONSTITUTING A MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND ANY OTHER RIGHTS TO ACQUIRE SHARES), (II) EXPIRATION OR TERMINATION OF THE APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, (III) SATISFACTION OF THE FINANCING CONDITION (AS DEFINED BELOW) AND (IV) SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15. THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER, DATED AS OF NOVEMBER 26, 1997, AMONG ACQUISITION HOLDINGS, INC., ACQUISITION CORP. AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT (EACH AS DEFINED BELOW), HAS DETERMINED THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO, ADEQUATE, AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER. --------------------- IMPORTANT Any stockholder desiring to tender Shares should either (i) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal and deliver the Letter of Transmittal with the Shares and all other required documents to the Depositary, or follow the procedure for book-entry transfer set forth in Section 2, or (ii) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the stockholder. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person if they desire to tender their Shares. Any stockholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender such Shares pursuant to the guaranteed delivery procedure set forth in Section 2. Questions and requests for assistance or additional copies of this Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. --------------------- The Dealer Manager for the Offer is: BT ALEX. BROWN DECEMBER 4, 1997 TABLE OF CONTENTS
PAGE ---- INTRODUCTION............................................................. 3 1.Terms Of The Offer.................................................... 4 2.Procedure For Tendering Shares........................................ 7 3.Withdrawal Rights..................................................... 9 4.Acceptance For Payment And Payment For Shares......................... 10 5.Certain Federal Income Tax Consequences............................... 11 6.Price Range Of Shares; Dividends...................................... 12 7.Certain Effects Of The Transaction.................................... 12 8.Certain Information Concerning The Company............................ 13 9.Certain Information Concerning the WPG Fund, the WPG Overseas Fund, Parent and the Offeror.............................................. 17 10.Source And Amount Of Funds............................................ 18 11.Background Of The Offer; Past Contacts, Transactions Or Negotiations With The Company........................................................ 21 12.Purpose Of The Offer and the Merger; Plans For The Company............ 22 13.The Merger Agreement.................................................. 23 14.Dividends And Distributions........................................... 30 15.Certain Conditions Of The Offer....................................... 31 16.Certain Legal Matters................................................. 32 17.Fees And Expenses..................................................... 34 18.Miscellaneous......................................................... 34 ANNEX I. CERTAIN INFORMATION CONCERNING THE MANAGING MEMBERS OF WPG PARTNERS II, THE GENERAL PARTNERS OF THE WPG OVERSEAS FUND AND THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR.............. A-1
2 To The Holders Of Common Stock of ATC Group Services Inc.: INTRODUCTION Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly owned subsidiary of Acquisition Holdings, Inc., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Common Stock"), of ATC Group Services Inc., a Delaware corporation (the "Company"), at a purchase price of $12.00 per Share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Tendering holders of Shares will not be obligated to pay brokerage fees or commissions or, except as set forth in the Letter of Transmittal, transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer. The Offeror will pay all charges and expenses of BT Alex. Brown Incorporated (the "Dealer Manager"), Bankers Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") in connection with the Offer. Parent was formed, and is currently wholly owned, by WPG Corporate Development Associates V, L.P., a Delaware limited partnership (the "WPG Fund"), in connection with the Offer and the transactions contemplated thereby. WPG Corporate Development Associates V (Overseas), L.P., a Cayman Islands exempted limited partnership (the "WPG Overseas Fund") and an affiliate of the WPG Fund, will, on or prior to the Merger referred to below, acquire approximately 13% of the equity capital of Parent. The Offeror is wholly owned by Parent. For information concerning the WPG Fund and the WPG Overseas Fund, see Section 9. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO, ADEQUATE, AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES OF THE COMPANY CONSTITUTING A MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND ANY OTHER RIGHTS TO ACQUIRE SHARES) (THE "MINIMUM CONDITION"), (ii) EXPIRATION OR TERMINATION OF THE APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), (iii) THE OFFEROR HAVING OBTAINED FINANCING IN AMOUNTS SUFFICIENT TO CONSUMMATE THE OFFER AND THE MERGER INCLUDING, WITHOUT LIMITATION (a) TO PAY, WITH RESPECT TO ALL COMMON STOCK IN THE MERGER, THE MERGER CONSIDERATION (AS DEFINED HEREIN), (b) TO REFINANCE CERTAIN OUTSTANDING INDEBTEDNESS OF THE COMPANY, (c) TO PAY ANY FEES AND EXPENSES IN CONNECTION WITH THE OFFER AND THE MERGER OR THE FINANCING THEREOF AND (d) TO PROVIDE FOR THE WORKING CAPITAL NEEDS OF THE COMPANY FOLLOWING THE MERGER, INCLUDING, WITHOUT LIMITATION, IF APPLICABLE, LETTERS OF CREDIT (THE "FINANCING CONDITION") AND (iv) SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15. LEHMAN BROTHERS INC., THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED TO THE SPECIAL COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS ITS WRITTEN OPINION THAT, AS OF THE DATE OF SUCH OPINION, THE CONSIDERATION TO BE OFFERED TO THE STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR TO SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. A COPY OF SUCH OPINION IS CONTAINED IN THE COMPANY'S STATEMENT ON SCHEDULE 14D-9, WHICH IS BEING DISTRIBUTED TO THE COMPANY'S STOCKHOLDERS. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of November 26, 1997 (the "Merger Agreement"), among Parent, the Offeror and the Company pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Offeror will be merged with 3 and into the Company (the "Merger"), with the Company surviving the Merger (as such, the "Surviving Corporation") as a wholly owned subsidiary of Parent. In the Merger, each outstanding Share (other than Shares owned by the Company, any subsidiary of the Company, Parent, the Offeror or any other subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive from the Surviving Corporation the Offer Price in cash, without interest (the "Merger Consideration"). See Section 12. The Merger is subject to a number of conditions, including approval by stockholders of the Company, if such approval is required by applicable law. If the Offeror acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Offeror would be able to effect the Merger pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"), without prior notice to, or any action by, any other stockholder of the Company. See Section 12. The Merger Agreement is more fully described in Section 13. The Company has informed the Offeror that, as of November 12, 1997, there were 7,930,107 Shares issued and outstanding, 750,070 Shares reserved for issuance upon the exercise of outstanding options to purchase Shares ("Options") and 1,090,407 Shares issuable upon the exercise of certain outstanding Warrants (as defined herein). Based upon the foregoing, the Offeror believes that approximately 4,885,293 Shares constitute a majority of the outstanding Shares on a fully diluted basis. Accordingly, the Minimum Condition will be satisfied if at least 4,885,293 Shares, (approximately 50.00% plus one share of the Shares on a fully diluted basis), are validly tendered and not withdrawn prior to the Expiration Date (as defined herein). However, the actual number of Shares that would satisfy the Minimum Condition will depend on the facts as they exist on the date of purchase. If the Minimum Condition is satisfied and the Offeror accepts for payment Shares tendered pursuant to the Offer, the Offeror will be able to elect a majority of the members of the Company's Board of Directors and to effect the Merger without the affirmative vote of any other stockholder of the Company. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer and the conversion of Shares pursuant to the Merger are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Offeror will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 midnight, New York City time, on January 21, 1998, unless and until the Offeror shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Offeror, will expire. THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION AND THE FINANCING CONDITION, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HSR ACT AND THE SATISFACTION OF THE OTHER CONDITIONS SET FORTH IN SECTION 15. In the Merger Agreement the Offeror has agreed that it will not, without the consent of the Company, extend the Offer, except that, without the consent of the Company, the Offeror may extend the Offer (a) if at the scheduled or extended Expiration Date any of the conditions to the Offeror's obligation to accept Shares for payment are not satisfied or waived, until such time as such conditions are satisfied or waived, (b) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "Commission") or the staff thereof applicable to the Offer, (c) from time to time until two business days after 4 the expiration of the waiting period under the HSR Act and (d) for a period of not more than 15 business days, notwithstanding that all conditions to the Offer are satisfied as of such Expiration Date if, immediately prior to such Expiration Date (as it may be extended), the Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of the outstanding Shares (on a fully diluted basis). In addition, the Offeror shall be obligated to extend the Offer, if at the scheduled Expiration Date any of the conditions to the Offeror's obligation to accept shares for payment capable of satisfaction shall not have been satisfied or waived, until the satisfaction or waiver thereof; provided, however, that there shall be no such obligation to extend the Offer beyond the 60th business day after the commencement of the Offer. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). In addition, the Offeror has agreed in the Merger Agreement that it will not, without the consent of the Company, (a) reduce the number of Shares subject to the Offer, (b) reduce the Offer Price, (c) add to or modify (other than waive) the conditions set forth in Section 15, (d) change the form of the consideration payable in the Offer, (e) extend the Offer, except as provided in the Merger Agreement, (f) amend any other term of or add any new term to the Offer in any manner materially adverse to the Company's stockholders or (g) waive the Minimum Condition. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission, the Offeror reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 15 hereof shall have occurred to, (a) extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (b) amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE OFFEROR EXERCISES ITS RIGHT TO EXTEND THE OFFER. If by 12:00 midnight, New York City time, on January 21, 1998 (or any date or time then set as the Expiration Date), any or all of the conditions to the Offer have not been satisfied or waived, the Offeror reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Commission to, (a) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering stockholders, (b) waive any or all of the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (c) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (d) amend the Offer. There can be no assurance that the Offeror will exercise its right to extend the Offer beyond any required extensions. Any extension, waiver, amendment or termination will be followed as promptly as practicable by a public announcement. In the case of an extension, Rule 14e-l(d) under the Exchange Act, requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change) and without limiting the manner in which the Offeror may choose to make any public announcement, the Offeror will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Offeror extends the Offer or if the Offeror is delayed in its acceptance for payment of or payment (whether before or after its acceptance for payment of Shares) for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Offeror's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Offeror, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 3. However, the ability of the Offeror to delay the payment for Shares that the Offeror has accepted for payment is limited by Rule 14e-1(c) 5 under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Offeror makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, with the Company's consent, a waiver of the Minimum Condition), the Offeror will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. Consummation of the Offer is conditioned upon the satisfaction of the Minimum Condition and the Financing Condition, the expiration or termination of all waiting periods imposed by the HSR Act and the other conditions set forth in Section 15. Subject to the terms and conditions contained in the Merger Agreement, the Offeror reserves the right (but shall not be obligated) to waive any or all such conditions. However, if the Offeror waives or amends the Minimum Condition (which action may not be taken without the Company's consent) during the last five business days during which the Offer is open, the Offeror will be required to extend the Expiration Date so that the Offer will remain open for at least five business days after the announcement of such waiver or amendment is first published, sent or given to holders of Shares and may also be required to extend the Offer if other conditions are waived, depending on the materiality of the waiver. The Company has provided the Offeror with the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by the Offeror to record holders of Shares, and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The Offeror is not offering to purchase any of the options or warrants to acquire Shares. The Merger Agreement provides that the Company will amend its Stock Option Plans (as defined herein) to provide that all outstanding, unexercised Options (as defined herein) shall be immediately excercisable and that if the optionees do not exercise their unexercised Options prior to the effectiveness of the Merger, each optionee shall receive, in settlement of each Option held by the optionee, a "cash amount" (less any applicable withholding taxes) with respect to the number of previously unexercised Shares underlying the option immediately prior to the effectiveness of the Merger. The Company shall use its commercially reasonable efforts to amend the Stock Option Plans to provide that each Option shall terminate no later than the effectiveness of the Merger. The cash amount payable for each Option shall equal the product of (i) the Merger Consideration minus the exercise price per Share of each such Option and (ii) the number of previously unexercised Shares covered by each Option. Pursuant to the Merger Agreement, the Company is required to provide notice of the above amendments to the Stock Option Plans to participants in its Stock Option Plans. Except as may otherwise be agreed to by Parent or the Offeror and the Company, the Company shall use its commercially reasonable efforts so that its Stock Option Plans shall terminate as of the effectiveness of the Merger and the provisions of any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its subsidiaries shall be deleted as of the effective time of the Merger (the "Effective Time"). The Company shall use its commercially reasonable efforts so that following the Effective Time of the Merger no holder of Options will have any right to receive Shares upon exercise of an Option. See Section 13, "The Merger Agreement--Options; Warrants." The holders of the Warrants (as defined herein) shall be entitled either to exercise their Warrants for Shares in accordance with the applicable agreement under which such Warrants were issued and tender such Shares in 6 the Offer or upon execution and delivery to the Company of a cancellation agreement in form and substance reasonably satisfactory to the Company, to receive from the Company at the Effective Time a "cash amount" equal to the product of (i) the Merger Consideration minus the exercise price per share of each such Warrant and (ii) the number of unexercised Shares covered by each such Warrant. 2. PROCEDURE FOR TENDERING SHARES. Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined herein), and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure set forth below. In addition, either (i) certificates representing such Shares must be received by the Depositary along with the Letter of Transmittal or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below, and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the guaranteed delivery procedures set forth below must be complied with. No alternative, conditional or contingent tenders will be accepted. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Book-Entry Transfer. The Depositary will make a request to establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in a Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. Although delivery of Shares may be effected through book-entry at a Book-Entry Transfer Facility prior to the Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase or (ii) the guaranteed delivery procedures described below must be complied with. Signature Guarantee. Signatures on the Letter of Transmittal must be guaranteed by a member in good standing of the Securities Transfer Agents Medallion Program, or by any other bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being referred to as an "Eligible Institution" and, collectively, as "Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Delivery Instructions" or the box labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of any Eligible Institution. If the certificates evidencing Shares are registered in the name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made, or delivered to, or certificates evidencing unpurchased Shares are to be issued or returned to, a person other than the registered owner or owners, then the tendered certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be completed 7 on a timely basis, such Shares may nevertheless be tendered if all of the following guaranteed delivery procedures are duly complied with: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Offeror, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal are received by the Depositary within three trading days after the date of such Notice of Guaranteed Delivery. The term "trading day" is any day on which The Nasdaq Stock Market, Inc.'s National Market ("NASDAQ") is open for business. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or by mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND SOLE RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ACCOMPANYING SHARES WILL BE DEEMED EFFECTIVE AND RISK OF LOSS WITH RESPECT TO SUCH LETTER OF TRANSMITTAL AND ACCOMPANYING CERTIFICATE(S) WILL PASS ONLY WHEN SUCH LETTER OF TRANSMITTAL AND ACCOMPANYING CERTIFICATE(S) ARE ACTUALLY RECEIVED BY THE DEPOSITARY. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares or a Book-Entry Confirmation, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with all required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT "BACKUP" FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN HOLDERS MUST SUBMIT A COMPLETED FORM W-8 TO AVOID BACKUP WITHHOLDING. THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE INSTRUCTIONS 8 AND 9 SET FORTH IN THE LETTER OF TRANSMITTAL. Determination of Validity. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Offeror, in its sole discretion, and its determination will be final and binding on all parties. The Offeror reserves the absolute right to reject any or all tenders of any Shares that are determined by it not to be in proper form or the acceptance of or payment for which may, in the opinion of the Offeror, be unlawful. The Offeror also reserves the absolute right to waive any of the conditions of the Offer, subject to the limitations set forth in the Merger Agreement, or any defect or irregularity in the tender of any Shares. Subject to the terms of the Merger Agreement and 8 applicable law, the Offeror's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the Instructions to the Letter of Transmittal) will be final and binding on all parties. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of the Offeror, Parent, the WPG Fund, the WPG Overseas Fund, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Other Requirements. By executing the Letter of Transmittal as set forth above (including through delivery of an Agent's Message), a tendering stockholder irrevocably appoints designees of the Offeror as such stockholder's attorneys-in-fact and proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's right with respect to the Shares tendered by such stockholder and accepted for payment by the Offeror (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after November 26, 1997). All such powers of attorney and proxies shall be considered coupled with an interest in the tendered Shares. This appointment is effective when, and only to the extent that, the Offeror accepts for payment the Shares deposited with the Depositary. Upon acceptance for payment, all prior powers of attorney and proxies given by the stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent proxies may be given or written consent executed (and, if given or executed, will not be deemed effective). The designees of the Offeror will, with respect to the Shares and other securities or rights, be empowered to exercise all voting and other rights of such stockholder as they in their sole judgment deem proper in respect of any annual or special meeting of the Company's stockholders, or any adjournment or postponement thereof. The Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Offeror's payment for such Shares, the Offeror must be able to exercise full voting and other rights with respect to such Shares and the other securities or rights issued or issuable in respect of such Shares, including voting at any meeting of stockholders (whether annual or special or whether or not adjourned) in respect of such Shares. A tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer, as well as the tendering stockholder's representation and warranty that (i) such stockholder has the full power and authority to tender, sell, assign and transfer the tendered Shares (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after November 26, 1997), and (ii) when the same are accepted for payment by the Offeror, the Offeror will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The Offeror's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Offeror upon the terms and subject to the conditions of the Offer. 3. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 3, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time after February 2, 1998. If purchase of or payment for Shares is delayed for any reason or if the Offeror is unable to purchase or pay for Shares for any reason, then, without prejudice to the Offeror's rights under the Offer, tendered Shares may be retained by the Depositary on behalf of the Offeror and may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as set forth in this Section 3, subject to Rule 14e-1(c) under the Exchange Act, which provides that no person who makes a tender offer shall fail to pay the consideration offered or return the securities deposited by or on behalf of security holders promptly after the termination or withdrawal of the Offer. For a withdrawal of Shares tendered pursuant to the Offer to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name in which the 9 certificates representing such Shares are registered, if different from that of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Offeror, in its sole discretion, and its determination will be final and binding on all parties. None of the Offeror, Parent, the WPG Fund, the WPG Overseas Fund, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 2. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Offeror will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3 promptly after the later to occur of (a) the Expiration Date and (b) subject to compliance with Rule 14e-1(c) under the Exchange Act, the satisfaction or waiver of the conditions set forth in Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange Act, the Offeror expressly reserves the right to delay payment for Shares in order to comply in whole or in part with any applicable law. See Sections 1 and 16. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 2, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with all required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Offeror may enforce such agreement against the participant. For purposes of the Offer, the Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Offeror gives oral or written notice to the Depositary of the Offeror's acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Offeror and transmitting such payment to tendering stockholders. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or the Offeror is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to the Offeror's rights under Section 1, the Depositary may, nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering stockholders are entitled to withdrawal rights as described in Section 3 above and as otherwise required by 10 Rule 14e-1(c) under the Exchange Act. Under no circumstances will interest be paid by the Offeror because of any delay in making such payment. If any tendered Shares are not accepted for payment pursuant to the terms and conditions of the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for such unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer to a Book-Entry Transfer Facility, such Shares will be credited to an account maintained within such Book-Entry Transfer Facility), as promptly as practicable after the expiration, termination or withdrawal of the Offer. If, prior to the Expiration Date, the Offeror increases the price being paid for Shares accepted for payment pursuant to the Offer, such increased consideration will be paid to all stockholders whose Shares are purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. The Offeror reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Offeror of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of certain United States federal income tax consequences of the Offer and the Merger to holders whose Shares are purchased pursuant to the Offer or whose Shares are converted to cash in the Merger (including pursuant to the exercise of appraisal rights). The discussion is for general information only and does not purport to consider all aspects of federal income taxation that may be relevant to holders of Shares. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed and temporary regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change. The discussion applies only to holders of Shares in whose hands Shares are capital assets within the meaning of Section 1221 of the Code, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to certain types of holders of Shares (such as insurance companies, tax-exempt organizations and broker-dealers) who may be subject to special rules. This discussion does not discuss the federal income tax consequences to a holder of Shares who, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any foreign, state or local tax laws. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH HOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for federal income tax purposes. In general, for federal income tax purposes, a holder of Shares will recognize gain or loss equal to the difference between the holder's adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash in the Merger and the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss, in the case of an individual, will be taxable at a maximum rate of 28% if the holder held the Shares for more than one year but not more than eighteen months or at a maximum rate of 20% if the holder held the Shares for more than eighteen months, on the date of sale (in the case of the Offer) or the Effective Time (in the case of the Merger). The receipt of cash for Shares pursuant to the exercise of appraisal rights will generally be taxed in the same manner as described above. Payments in connection with the Offer or the Merger may be subject to "backup 11 withholding" at a rate of 31%, unless a holder of Shares (a) is a corporation or comes within certain exempt categories and, when required, demonstrates this fact or (b) provides a correct TIN to the payor, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder who does not provide a correct TIN may be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against the holder's federal income tax liability. Each holder of Shares should consult with his or her own tax advisor as to his or her qualification for exemption from backup withholding and the procedure for obtaining such exemption. Holders tendering their Shares in the Offer may prevent backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. See Section 2. Similarly, holders who convert their Shares into cash in the Merger may prevent backup withholding by completing a Substitute Form W-9 and submitting it to the paying agent for the Merger. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded on NASDAQ under the symbol ATCS. Prior to August 23, 1995, the Shares were listed on the NASDAQ Small Cap Market under the symbol ATCE. The following table sets forth for the periods indicated the high and low sales prices per Share on NASDAQ as reported by the Company in its 1997 Annual Report on Form 10-K with respect to the fiscal years ended February 29, 1996 and February 28, 1997, and as reported by published financial sources with respect to periods after February 28, 1997. Price information with respect to periods prior to August 23, 1995 does not represent actual transactions.
HIGH LOW ------ ------ Fiscal Year Ended February 29, 1996: First Quarter............................................... $18.38 $ 8.88 Second Quarter (through August 22, 1995).................... $15.75 $13.25 Second Quarter (August 23 through August 31, 1995).......... $15.13 $13.75 Third Quarter............................................... $17.00 $12.00 Fourth Quarter.............................................. $13.50 $10.50 Fiscal Year Ended February 28, 1997: First Quarter............................................... $15.88 $11.88 Second Quarter.............................................. $15.38 $12.25 Third Quarter............................................... $13.75 $10.38 Fourth Quarter.............................................. $10.63 $ 7.25 Year Ending February 28, 1998: First Quarter............................................... $11.50 $ 7.88 Second Quarter.............................................. $12.00 $10.63 Third Quarter (through November 26, 1997)................... $13.06 $10.56
On October 16, 1997, the last full day of trading prior to the public announcement by the Company of the Offeror's offer to purchase all outstanding Shares at $12.00 per Share, the closing price per Share as reported on NASDAQ was $12.00. On November 26, 1997, the last full day of trading prior to the commencement of the Offer, the closing price per Share as reported on NASDAQ was $11.06. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 7. CERTAIN EFFECTS OF THE TRANSACTION. Market for the Shares. The purchase of the Shares by the Offeror pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which will adversely affect the liquidity and market value of the remaining Shares held by stockholders other than the Offeror. 12 NASDAQ Listing. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued inclusion in NASDAQ, which require that an issuer have at least 100,000 publicly held shares with a market value of at least $200,000, held by at least 300 shareholders, and have at least two registered market makers. If these standards are not met, the Shares might nevertheless continue to be quoted in the over-the-counter "additional list" or in one of the "local lists", but if the number of holders of the Shares falls below 300, or if the number of publicly held Shares falls below 100,000 or there are not at least two registered and active market makers for the Shares, the Shares would no longer be "qualified" for NASDAQ reporting and NASDAQ would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. In the event the Shares were no longer eligible for NASDAQ quotation, quotations might still be available from other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend on the number of holders of Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act, as described below, and other factors. According to the Company, as of November 12 , 1997, there were approximately 583 holders of record of Shares and 7,083 beneficial owners of Shares and as of November 12, 1997, there were 7,930,107 Shares outstanding. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of Shares. It is the intention of the Offeror to seek to cause an application for such termination to be made as soon after consummation of the Offer as the requirements for termination of registration of the Shares are met. If such registration were terminated, the Company would no longer legally be required to disclose publicly in proxy materials distributed to stockholders the information which it now must provide under the Exchange Act or to make public disclosure of financial and other information in annual, quarterly and other reports required to be filed with the Commission under the Exchange Act; and the officers, directors and 10% stockholders of the Company would no longer be subject to the "short-swing" insider trading reporting and profit recovery provisions of the Exchange Act. Furthermore, if such registration were terminated, persons holding "restricted securities" of the Company may be deprived of their ability to dispose of such securities under Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"). If the registration of the Shares is not terminated prior to the Merger, then the Shares will be delisted from all stock exchanges and the registration of the shares under the Exchange Act will be terminated following the consummation of the Merger. Margin Regulations. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Although neither the Offeror nor Parent has any knowledge that would indicate that statements contained herein based upon such documents are untrue, neither the Offeror, any affiliate of the Offeror nor the Dealer Manager or Information Agent assumes any responsibility for the accuracy or completeness of the information concerning the Company, furnished by the Company, or contained in such documents and records or for any failure by the Company to disclose events which may have 13 occurred or may affect the significance or accuracy of any such information but which are unknown to the Offeror or its affiliates. The Company is a corporation organized under the laws of Delaware with its principal executive offices located at 104 East 25th Street, New York, New York 10010. The Company is a specialized provider of technical and project management services, primarily including environmental consulting and engineering services and information technology services to businesses and governmental agencies at the federal, state and local levels. Recent Developments. The Offeror has been advised by the Company of the following: (i) On November 26, 1997, the Company completed the purchase of all of the outstanding stock of Bing Yen & Associates ("Bing Yen") for a total purchase price of $5.4 million. Bing Yen provides geotechnical and forensic structural services to a wide variety of clients in the western United States; (ii) On November 4, 1997, the Company purchased for approximately $1.5 million all the outstanding stock of Environmental Warranty, Inc. ("EWI"), a managing general agent for a major insurance company. EWI sells insurance products covering environmental liabilities to large property owners and municipal government clients; and (iii) On August 20, 1997, the Company purchased certain assets and assumed certain liabilities of the environmental consulting and engineering services of Smith Technology Corporation, which operated primarily as BCM Engineers, Inc. ("BCM") for a purchase price of $12.5 million. Set forth below is certain summary consolidated financial data with respect to the Company excerpted or derived from financial information contained in the Company's 1997 Form 10-K. More comprehensive financial information is included in such Form 10-K and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such Form 10-K and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "--Available Information." 14 ATC GROUP SERVICES INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR YEARS ENDED FEBRUARY 28 (29), ------------------------------------ 1997 1996 1995 ------------ ----------- ----------- STATEMENT OF OPERATIONS DATA Revenues............................. $ 113,855 $ 44,965 $ 36,272 Income before income taxes........... 10,398 5,671 5,301 Net income........................... 6,308 3,866 3,257 Net earnings (loss) per share........ .74 .54 .56 AS OF FEBRUARY 28 (29), ------------------------ 1997 1996 ------------ ----------- BALANCE SHEET DATA Total current assets................. 45,444 31,312 Total assets......................... 86,294 46,685 Total current liabilities............ 17,743 6,335 Long-term debt (less current maturi- ties)............................... 22,123 362 Total stockholders' equity........... 45,439 39,192
Certain Projections. To the knowledge of Parent and the Offeror, the Company does not as a matter of course make public forecasts as to its future financial performance. However, in connection with a proposed sale of the Company, certain employees of the Company prepared certain financial projections in early fiscal 1997 and furnished copies thereof to Parent and the Offeror in September 1997. Neither Parent, the Offeror nor the Company verified the accuracy of such financial forecasts and neither the Parent nor the Offeror relied on them in evaluating whether or not to proceed with the Offer. The projections presented in the tables below (the "Projections") are derived or excerpted from the financial forecasts provided to Parent and the Offeror in September 1997 by certain employees of the Company and are based on numerous assumptions concerning future events. The Projections have not been adjusted to reflect the effects of the Offer or the Merger or the incurrence of indebtedness in connection therewith. The Projections should be read together with the other information contained in this Section 8. PRELIMINARY FORECASTS PREPARED EXCLUSIVELY BY CERTAIN EMPLOYEES OF THE COMPANY (1) WITHOUT FUTURE ACQUISITIONS (2) (DOLLARS IN MILLIONS)
FOR YEARS ENDED FEBRUARY 28 (29), ----------------------------------- 1997 1998P 1999P ----------- ----------- ----------- Sales.................................... $ 113.9 $ 133.5 $ 140.8 Net income............................... 6.3 6.0 6.8
- -------- (1) Preliminary forecasts were prepared in early fiscal 1997 by certain employees of the Company and were not independently verified by Parent or the Offeror. (2) Only includes acquisitions completed as of February 1997. Does not include subsequent acquisitions such as BCM, EWI or Bing Yen. 15 PRELIMINARY FORECASTS PREPARED EXCLUSIVELY BY CERTAIN EMPLOYEES OF THE COMPANY (1) WITH FUTURE ACQUISITIONS (2) (DOLLARS IN MILLIONS)
FOR YEARS ENDED FEBRUARY 28 (29), ----------------------------------- 1997 1998P 1999P ----------- ----------- ----------- Sales.................................... $ 113.9 $ 151.7 $ 206.4 Net income............................... 6.3 8.5 14.1
- -------- (1) Preliminary forecasts were prepared in early fiscal 1997 by certain employees of the Company and were not independently verified by the Company, Parent or the Offeror. (2) For fiscal 1998, projections assume BCM is acquired as of October 1, 1997, Bing Yen is acquired as of July 1, 1997 and EWI is acquired as of June 1, 1997. In fiscal 1999, projections reflect the assumed financial impact of two hypothetical acquisitions, including an assumed $25 million increase in sales. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT AND THE OFFEROR. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY CERTAIN EMPLOYEES OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING HYPOTHETICAL ACQUISITION ASSUMPTIONS AND ASSUMED INTEREST EXPENSE AND EFFECTIVE TAX RATES, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR THE OFFEROR. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE OFFEROR, THE COMPANY OR THEIR RESPECTIVE FINANCIAL ADVISORS CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE OFFEROR, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. NONE OF PARENT, THE OFFEROR, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. Available Information. The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street (Suite 400), Chicago, Illinois 60661. Copies of such material may also be obtained by mail, at prescribed rates, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be accessed electronically by means of the Commission's World Wide Web site on the internet at http://www.sec.gov. Such material should also be available for inspection at the offices of NASDAQ, 1735 K Street, N.W., Washington, D.C. 20006. 16 9. CERTAIN INFORMATION CONCERNING THE WPG FUND, THE WPG OVERSEAS FUND, PARENT AND THE OFFEROR The Offeror, a Delaware corporation, is a wholly owned subsidiary of Parent. To date, the Offeror has not conducted any business other than that incident to its formation, the execution and delivery of the Merger Agreement and the commencement of the Offer. It is not anticipated that, prior to the consummation of the Offer and the Merger, the Offeror or Parent will have any significant assets or liabilities or will engage in any activities other than those incident to the Offer and the Merger and the financing thereof. The principal executive office of the Offeror is located c/o Weiss, Peck & Greer, L.L.C., One New York Plaza, 30th Floor, New York, New York 10004. Parent, a Delaware corporation, is a holding company and has not conducted any business other than that incident to its formation and the execution and delivery of the Merger Agreement. The common stock of Parent is currently owned 100% by the WPG Fund, but it is anticipated that the WPG Overseas Fund will purchase approximately 13% of the equity of Parent prior to the Merger. The principal executive office of Parent is located c/o Weiss, Peck & Greer, L.L.C., One New York Plaza, 30th Floor, New York, New York 10004. The WPG Fund, a Delaware limited partnership, is a private investment fund headquartered in New York. The sole general partner of the WPG Fund is WPG Private Equity Partners II, L.L.C., a Delaware limited liability company ("WPG Partners II"). The offices of each of the WPG Fund and WPG Partners II are located c/o Weiss, Peck & Greer, L.L.C., One New York Plaza, 30th Floor, New York, New York 10004. The WPG Overseas Fund, a Cayman Islands exempted limited partnership, is a private investment fund headquartered in Grand Cayman Islands, British West Indies. The general partners of the WPG Overseas Fund are WPG Private Equity Partners II (Overseas), L.L.C., a Delaware limited liability company ("WPG Partners II (Overseas)"), and WPG CDA V (Overseas), Ltd., a Cayman Islands limited corporation ("WPG CDA V (Overseas)"). The offices of each of the WPG Overseas Fund and its general partners are located c/o BankAmerica Trust and Banking Corporation (Cayman) Limited, BankAmerica House, Fort Street, Georgetown, Grand Cayman Island, British West Indies. The name, citizenship, business address, present principal occupation and material positions held during the past five years of the (i) managing members of WPG Partners II and WPG Partners II (Overseas) and (ii) the directors and executive officers of Parent, the Offeror and WPG CDA V (Overseas) are set forth in Annex I to this Offer to Purchase. The WPG Fund and the WPG Overseas Fund intend to offer members of the management buyout team from the Company, led by Nicholas J. Malino and Christopher P. Vincze (the "Management Team"), an opportunity to acquire an equity interest in Parent or in the Surviving Corporation. While general discussions have been held with certain members of the Management Team, and it is expected that senior executive and operating management will be offered equity ownership in an aggregate amount of approximately $2.5 million, no decisions have been made at this time, either as to the identity of the persons who may be offered the opportunity to invest in Parent or in the Surviving Corporation or as to the precise nature of any equity interest any members of the Management Team may be offered. If and to the extent members of the Management Team are given the opportunity to, and do, invest in such equity, the equity interests of the WPG Fund and the WPG Overseas Fund in Parent or in the Surviving Corporation would be reduced on a pro rata basis. Pursuant to the Stockholders Agreement, dated as of October 17, 1997, among Parent and the stockholders who are parties thereto, granting Parent an irrevocable proxy with respect to the voting of 1,170,030 Shares in favor of the Merger, Parent may be deemed beneficially to own such Shares, representing 14.99% of the issued and outstanding Shares. Each of the Offeror, Parent, the WPG Fund and the WPG Overseas Fund disclaims beneficial ownership of such shares. Except as described in this Offer to Purchase, none of the Offeror, Parent, the WPG Fund, the WPG Overseas Fund or, to the best knowledge of the Offeror, any of the persons listed in Annex I to this Offer to Purchase owns or has any right to acquire any Shares and none of them has effected any transaction in the Shares during the past 60 days. 17 Pursuant to the Stockholders Agreement, Parent has agreed to cause the Company, on the one hand, and each of George Rubin, Chairman of the Board of Directors of the Company, and Morry F. Rubin, President, Chief Executive Officer and a director of the Company, on the other hand (together, the "Rubins"), have agreed to enter into a Severance, Consulting and Non- Competition Agreement (collectively, the "Severance Agreements") at the time of the Merger pursuant to which the Rubins would resign as employees of the Company on and as of the effectiveness of the Merger. The Rubins will resign as directors of the Company at the time of the completion of the Offer. Under the Severance Agreements the Rubins would be required, for a period of three years following the effective date of the Merger, to perform consulting services as requested by the Company. The Severance Agreements would also restrict the Rubins, for periods ranging from three to four years, from (i) competing in any aspect of the Company's business as conducted on the effective date of the Merger anywhere in the United States; (ii) requesting or causing any employee of the Company to terminate employment with the Company; (iii) competing with ATC InSys Inc. or 3D Information Services, Inc. anywhere in the State of the New Jersey or soliciting certain customers of ATC InSys Inc. within New York City. In consideration for these agreements, the Company would be required to pay to each of the Rubins $1,550,000 upon the effective date of the Merger and $276,715 on the first day of each calendar quarter thereafter, commencing on the first such day that occurs at least one month following the effective date of the Merger and terminating with the sixth such payment; and to continue for an agreed-upon time certain benefits currently provided by the Company. Except as set forth in this Offer to Purchase, none of the Offeror, Parent, the WPG Fund, the WPG Overseas Fund or, to the best knowledge of the Offeror, any of the persons listed in Annex I hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between the WPG Fund, the WPG Overseas Fund, the Offeror or Parent, or, to the best of their knowledge, any of the persons listed in Annex I hereto, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of assets. Except as described in this Offer to Purchase, none of the WPG Fund, the WPG Overseas Fund, the Offeror, Parent or, to the best knowledge of Parent or the Offeror, any of the persons listed in Annex I hereto, has had any transaction with the Company or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the Commission applicable to the Offer. 10. SOURCE AND AMOUNT OF FUNDS. The Offer is conditioned upon, among other things, the Offeror receiving the proceeds of financing pursuant to the Commitment Letter and as described in the Highly Confident Letter (both as defined below) or involving such other financing sources as Parent and the Company shall reasonably agree and are not materially more onerous, in amounts sufficient to consummate the Offer and the Merger, including without limitation, (i) to pay the Merger Consideration with respect to all Shares in the Offer and the Merger, (ii) to refinance certain outstanding indebtedness of the Company, (iii) to pay for any fees and expenses in connection with the Offer and the Merger or the financing thereof and (iv) to provide for the working capital needs of the Company following the Merger, including, without limitation, if applicable, letters of credit. Parent and the Offeror estimate that the total amount of funds required by the Purchaser to (i) purchase all of the Shares pursuant to the Offer and finance the Merger Consideration, (ii) refinance certain existing indebtedness of the Company, (iii) pay fees and expenses incurred in connection with the Offer and the Merger and (iv) provide additional working capital for the Company will be approximately $157 million. Of these funds, it is anticipated that (i) approximately $2.5 million will be obtained from an equity contribution by the Management Team and certain Company employees (including the rollover of the Offer proceeds with respect to Shares and options to acquire Shares owned by certain members of the Management Team into capital stock of the Surviving Corporation) (the "Management Equity Contribution"), (ii) approximately $22 million will be 18 obtained from an equity contribution from the WPG Fund and approximately $3 million will be obtained from an equity contribution from the WPG Overseas Fund (both equity contributions, together with the Management Equity Contribution, the "Equity Contributions"), (iii) approximately $100 million will be obtained from the proceeds of an offering (the "Note Offering") of Senior Subordinated Notes Due 2008 of the Offeror (the "Notes") pursuant to Rule 144A of the Securities Act, to become obligations of the Surviving Corporation, the anticipated principal terms of which are described below, (iv) approximately $9.0 million will be financed through a $30 million revolving credit facility (the "Revolving Credit Facility"), the principal terms of which are described below, and (v) approximately $20 million will be available pursuant to a term loan facility (the "Term Loan Facility"), the terms of which are described below. The Revolving Credit Facility and Term Loan Facility are referred to collectively as the "Senior Secured Financing." The WPG Fund has received a letter from BT Alex. Brown Incorporated ("BTAB") dated November 25, 1997 (the "Highly Confident Letter") indicating that, based upon market conditions existing at the time of delivery of the Highly Confident Letter and subject to certain terms and conditions, BTAB was highly confident of its ability to sell or place the Notes. The Highly Confident Letter is filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 of the Offeror filed on December 4, 1997 and is available for inspection and copying by any Stockholder of the Company, or representative of such Stockholder who has been so designated in writing, at the principal executive offices of the Company. Additionally, the WPG Fund has received a letter dated November 26, 1997 (the "Commitment Letter") from Bankers Trust Company ("BTCo") stating that, subject to the conditions set forth in such letter, BTCo has committed to provide the Senior Secured Financing. The Note Offering. In connection with the Offer and the Merger, the Offeror will issue and sell at least $100 million aggregate principal amount of debt securities of the Offeror through the Note Offering. The following description of the Highly Confident Letter is qualified in its entirety by reference to the actual terms of the Highly Confident Letter. The interest rate on the Notes, and the other terms of the Notes, will depend upon interest rate and market conditions at the time the Notes are placed. However, it is anticipated that the Notes will have the following features: (i) a maturity of ten years from issue date, (ii) be subordinated to all senior indebtedness of the Company, including the Senior Secured Financing, and senior to any subordinated indebtedness of the Company (in each case after consummation of the Merger and assumption of the obligations under the Notes by the Surviving Corporation), (iii) have semiannual interest payment dates beginning in 1998, (iv) have non-call and redemption provisions to be determined, (v) have subsequent registration rights and (vi) have such other or different terms as the Offeror agrees. The Notes will also contain covenants that are customary for similar transactions and financings including restrictions on dividends, stock repurchases, liens, indebtedness, affiliate transactions, asset sales and mergers. The Highly Confident Letter states that BTAB's conclusion is subject to specified customary conditions. Revolving Credit Facility. The WPG Fund has obtained a commitment from BTCo to make available to the Company the Revolving Credit Facility. The final maturity of the Revolving Credit Facility will be five years from the closing date of the Merger, with all loans made thereunder to be repaid as a bullet payment on such date and with all letters of credit issued thereunder to terminate by such date. The Revolving Credit Facility is expected to be used in the future for general working capital purposes and general corporate purposes, although a portion may be used to effect the refinancing of certain existing indebtedness and to pay fees and expenses incurred in connection with the Offer and the Merger and related financings. Parent and each direct and indirect subsidiary of the Company (collectively, the "Guarantors") will provide unconditional guaranties of all amounts owing under the Revolving Credit Facility. Additionally, the Revolving Credit Facility will be secured by (i) a first priority perfected pledge of all (a) notes owned by the Company and the Guarantors and (b) all capital stock owned by the Company and the Guarantors (excluding all Shares purchased pursuant to the Offer, it being understood that all shares of capital stock of the Surviving Corporation shall be required to be pledged only from and after the consummation of the Merger) and (ii) a first priority perfected security interest in all other assets owned by the Company and the Guarantors, subject to certain exceptions (collectively, the "Collateral"). Loans made under the Revolving Credit Facility may be maintained from time to time as (i) base rate loans, which will bear interest at the Applicable Margin (as defined below) plus the base rate in effect from time to time or (ii) reserve adjusted Eurodollar ("RAE") loans, which will bear interest at the Applicable Margin (as defined below) plus the Eurodollar rate (adjusted for maximum reserves) as determined by BTCo for the respective interest 19 period. A commitment fee will be paid with respect to the unutilized total commitment under the Revolving Credit Facility in an amount equal to 50 basis points per annum, payable quarterly and upon the termination of the Revolving Credit Facility. The Company will also pay customary funding and letter of credit fees. "Applicable Margin" shall mean a percentage per annum equal to (i) in the case of base rate loans, 1.25% and (ii) in the case of RAE loans, 2.25%. The Applicable Margin will be adjusted quarterly based on a leverage formula to be agreed upon. Loans made under the Revolving Credit Facility may be prepaid voluntarily by the Company at any time without premium or penalty, subject to customary breakage costs associated with RAE loans. The Company will be required to repay loans made under the Revolving Credit Facility with (i) 100% of the net proceeds from asset dispositions, (i) 100% of the net proceeds of issuances of indebtedness, (iii) 100% of the net proceeds from insurance recovery and condemnation events, (iv) 50% of the net proceeds from equity issuances and capital contributions and (v) 75% of annual excess cash flow in respect of the first year of the Senior Secured Financing and 50% of annual excess cash flow for each year thereafter, in each case with certain customary exceptions. In addition, to the extent the aggregate principal amount of all outstanding loans made under the Revolving Credit Facility exceeds the total Revolving Credit Facility commitment, the Company will be required to make a prepayment in the amount of such excess. The Revolving Credit Facility will contain certain affirmative and negative covenants customary for this type of facility. The covenants will impose limitations upon, among other things, the ability of the Company and its subsidiaries to (i) incur liens; (ii) merge, consolidate or acquire or dispose of assets; (iii) incur other indebtedness; (iv) engage in certain transactions with affiliates and form subsidiaries; (v) make investments or enter into joint ventures and partnerships; (vi) enter into sale-leaseback transactions or make lease payments; (vii) pay dividends; (viii) make voluntary prepayments of or amend other debt; (ix) make capital expenditures and (x) amend their organizational documents. The covenants also will include certain financial covenants customary for a transaction of this type. The Revolving Credit Facility will include representations and warranties from the Offeror, Parent and the Company that are customary for this type of financing. The Revolving Credit Facility will include conditions precedent typical for this type of credit facility, including, without limitation, (i) for the initial loans, (a) the consummation of the Merger, (b) the receipt by Parent of at least $27.5 million from the Equity Contributions and the contribution of the Equity Contributions to the Offeror in exchange for 100% of the common stock of the Offeror, (c) the receipt by the Offeror of gross cash proceeds of either $100 million from the issuance of the Notes, (d) receipt by BTCo of customary opinions of counsel, (e) the absence of any occurrence which has, or could reasonably be expected to have, a material adverse effect on the business, property, assets, operations, liabilities, condition (financial or otherwise) or prospects of the Offeror, Parent, the Company or the Company and its subsidiaries taken as a whole, and (ii) for all loans, (a) the absence of any default or event of default under the Revolving Credit Facility or the Term Loan Facility and (b) the continued material accuracy of the representations and warranties. The Revolving Credit Facility will include customary events of default typical for this type of financing, including, without limitation, a default on a change in control of the Offeror, Parent or the Company. The Revolving Credit Facility will include certain other customary provisions, including, without limitation, indemnification rights for the Indemnified Parties (as defined in the Commitment Letter), expense payment undertakings and other terms as agreed upon by the parties. All commitments in respect of the Revolving Credit Facility will terminate on February 28, 1998, unless (i) definitive documents for the Revolving Credit Facility and the Term Loan Facility have been executed and delivered and (ii) the Offer, the Merger and the refinancing of certain indebtedness of the Company have been consummated, in each case before such date. Term Loan Facility. The WPG Fund has obtained a commitment from BTCo to make available to the Company the Term Loan Facility, which will be in the amount of $20 million. The Term Loan Facility will mature on the fifth anniversary after the closing of the Merger. The Term Loan Facility is expected to be used to 20 refinance certain existing indebtedness of the Company. The Guarantors will provide unconditional guaranties of all amounts owing under the Term Loan Facility. Additionally, the Term Loan Facility (and all obligations of the Guarantors) will be secured by the Collateral. Loans made under the Term Loan Facility may be maintained from time to time as (i) base rate loans, which will bear interest at the Applicable Margin plus the base rate in effect from time to time or (ii) RAE loans, which will bear interest at the Applicable Margin plus the Eurodollar rate (adjusted for maximum reserves) as determined by BTCo for the respective interest period. The Term Loan Facility will also include voluntary and mandatory pre-payment and repayment terms, commitment termination provisions, representations and warranties, the conditions precedent, covenants, events of default and additional provisions that are substantially similar to those in the Revolving Credit Facility. 11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE COMPANY. On August 5, 1997, the management of the WPG Fund received an inquiry, through Chadbourne & Parke LLP, counsel to the WPG Fund, as to the interest of the WPG Fund in meeting with the Management Team. The WPG Fund expressed a willingness to meet with members of the Management Team to discuss a possible transaction. On September 3, 1997, the Management Team contacted the management of the WPG Fund to engage in preliminary discussions regarding a possible transaction. The parties met on September 8, 1997 and on a number of days subsequent thereto to discuss the Company's operations, strategy and prospects. During this period and up until the execution of the Merger Agreement, the WPG Fund conducted certain due diligence investigations. On September 19, 1997, the Management Team and management of the WPG Fund met with two stockholders of the Company, George Rubin and Morry F. Rubin, who, in the aggregate, own approximately 24 percent of the Shares on a fully diluted basis, in their capacity as stockholders of the Company (the "Stockholders"), to discuss the terms of a potential transaction and to discuss a possible stockholders agreement (the "Stockholders Agreement"), pursuant to which, for a period of time ending upon the earlier of the date of the consummation of the Merger and the date that would be one year from the date of the Stockholders Agreement, (i) the Stockholders would grant Parent an irrevocable proxy to vote that number of the Stockholders' Shares that equals 14.99 percent of the outstanding Shares of the Company (the "Proxy Shares") in favor of the potential transaction contemplated by the WPG Fund, (ii) the Stockholders would give Parent the right to receive all consideration above $12.00 per Share received by the Stockholders with respect to all of the Stockholders' Shares and options or other rights to acquire Shares in the event that the Company is acquired by a party other than the WPG Fund or its affiliates at a price above $12.00 per Share, (iii) the Stockholders would enter into severance agreements on and as of the date of the Merger (which severance agreements are more fully described in Section 9), and (iv) Parent would negotiate a merger agreement in good faith and use its commercially reasonable efforts to consummate the Merger on mutually acceptable terms. A number of other meetings and discussions took place among the Management Team, the Stockholders and the management of the WPG Fund from September 22, 1997 through October 16, 1997. On October 17, 1997, the Stockholders entered into the Stockholders Agreement with Parent. On the same day, the WPG Fund delivered to the Board of Directors of the Company its proposal (the "WPG Proposal") to purchase all outstanding Shares for $12.00 per Share, and the Company publicly announced that it had received an offer relating to an acquisition of all outstanding Shares of the Company at $12.00 per Share. On October 20, 1997, the Board of Directors of the Company appointed a special committee (the "Special Committee") comprised of the two independent directors, Julia S. Heckman and Richard S. Greenberg, and empowered the Special Committee to, among other things, evaluate and review the WPG Proposal, to negotiate the terms of the WPG Proposal with the WPG Fund and to recommend action to the full Board of Directors of the Company, all on behalf of, and in furtherance of the best interests of, the non-affiliated stockholders of the Company. The Board of Directors of the Company also empowered the Special Committee to engage such advisors (including legal and financial advisors) as it deemed necessary, and reaffirmed the previously granted 21 indemnity agreement in favor of Ms. Heckman and Mr. Greenberg. The Special Committee commenced review and analysis of the proposed form of merger agreement initially prepared by legal counsel for the WPG Fund and the terms of the merger as well as the terms of the Stockholders Agreement and the Severance Agreements. On October 23, 1997, the Special Committee orally retained its independent legal counsel. Such retention was subsequently confirmed by written agreement dated October 27, 1997. During the week of October 27, 1997, in consultation with its legal counsel, the Special Committee initiated discussions and negotiations concerning the terms of the proposed merger agreement and on October 28 and 29, 1997, interviewed several prospective financial advisors. On October 31, 1997, the Special Committee orally engaged Lehman Brothers Inc. ("Lehman Brothers") to render an opinion with respect to the fairness, from a financial point of view, to the Company's stockholders of the consideration to be offered to such stockholders by affiliates of the WPG Fund and to assist in the Special Committee's negotiations with respect to the proposed transaction. The Special Committee's engagement of Lehman Brothers was subsequently formalized by a written engagement letter dated November 12, 1997. During the week of November 3, 1997, the Special Committee, in consultation with its legal and financial advisors, prepared its initial comments concerning the terms and conditions of the proposed merger agreement. Negotiations with respect thereto began during the week of November 10 and continued through the date of the execution of the Merger Agreement on November 26, 1997. The Special Committee took note of the fact that the Rubins desired to terminate their investment in the Company and that the Management Team wished to assume a more significant role in the management of the Company. On November 12, 1997, the Special Committee met with Lehman Brothers to discuss Lehman Brothers' preliminary analysis and assessment of the financial aspects of the WPG Proposal and the draft merger agreement proposed by the WPG Fund's legal advisors. During the week of November 17, 1997, the Special Committee conferred on numerous occasions with its legal counsel and Lehman Brothers concerning the WPG proposal and the terms of the draft merger agreement initially proposed by legal counsel to the WPG Fund and, through its legal advisors and Lehman Brothers, negotiated with the WPG Fund's legal advisors. At a meeting of the Special Committee held on November 26, 1997, the Special Committee, with the assistance of its independent legal counsel, considered and discussed the terms and conditions of the Merger Agreement which reflected changes made in response to their negotiations with the WPG Fund and its legal counsel and received the final report of Lehman Brothers. At the November 26 meeting, the Special Committee (i) received the opinion of Lehman Brothers to the effect that, as of the date of such opinion and based upon and subject to the matters set forth in such opinion, the consideration to be received by the Company's stockholders pursuant to the Offer and the Merger Agreement is fair to the Company's stockholders from a financial point of view, and (ii) resolved to recommend to the full Board of Directors that the Company enter into a transaction with the WPG Fund on the terms set forth in the Merger Agreement. At a meeting of the Board of Directors of the Company held immediately after the Special Committee meeting, the Special Committee gave its report to the full Board of Directors and made its recommendation to approve the transaction with the WPG Fund on the terms set forth in the Merger Agreement. On November 26, 1997, by unanimous vote, after disclosure by the Stockholders of their interests in the Offer and the Merger, including the Stockholders Agreement and the Severance Agreements contemplated thereby, and the receipt of the positive recommendation of the Special Committee, the full Board of Directors of the Company adopted resolutions approving the Merger Agreement, Offer and the Merger. The Company's Board of Directors also adopted resolutions (i) determining that the terms of the Offer and the Merger are fair to, adequate, and in the best interest of the Company's stockholders and (ii) recommending that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and adopt the Merger Agreement. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. Purpose. The purpose of the Offer is to enable Parent to acquire control of, and the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of all the Shares. Parent currently intends, as soon as practicable following consummation of the Offer, to propose and seek to consummate the Merger. The purpose of the Merger is to acquire all Shares not 22 tendered and purchased pursuant to the Offer. Pursuant to the Merger, each then outstanding Share (other than Shares owned by the Offeror, Parent or any of their subsidiaries, Shares held in the treasury of the Company and Shares owned by the stockholders who properly perfect any appraisal rights under the DGCL) would be converted into the right to receive an amount in cash equal to the price per Share paid by the Offeror pursuant to the Offer. Upon the acceptance for payment of 50.1% of the Shares by the Offeror, the Offeror will have certain rights to designate a majority of the directors on the Company's Board of Directors. See "The Merger Agreement--Board of Directors" in Section 13. The Company has agreed that, upon the acceptance for payment of 50.1% of the Shares, the directors comprising the Special Committee will remain on the Company's Board of Directors and the Offeror will designate three additional directors to sit on the Board. Additionally, pursuant to the Severance Agreements, on and as of the date of the Merger, the Stockholders will resign their positions as officers of the Company. Further, the Offeror, Parent and the WPG Fund intend that, from the date of the Merger, the members of the Management Team will remain employed by and serve as officers of the Company and that certain members of the Management Team will be entitled to purchase equity in the Surviving Corporation. Appraisal Rights. Holders of Shares do not have appraisal rights as a result of the Offer. However, if the Merger is consummated, holders of Shares at the Effective Time will have certain rights pursuant to the provisions of Section 262 of the DGCL ("Section 262") to dissent and demand appraisal of their Shares. Under Section 262, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger. The foregoing summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. Going Private Transactions. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions. The Offeror does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the fairness of the Merger and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to the consummation of the Merger. Except as otherwise described in this Offer to Purchase, the Offeror and Parent have no current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 13. THE MERGER AGREEMENT. The Merger Agreement. The Merger Agreement provides that following the satisfaction or waiver of the conditions described below under "Conditions to the Obligations of the Parties to Effect the Merger," the Offeror will be merged with and into the Company, and each then outstanding Share (other than Shares owned by the Company, any subsidiary of the Company, Parent, the Offeror, any other subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer, without interest. Vote Required To Approve Merger. The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company must be approved by the Board of Directors and generally by the 23 holders of the Company's outstanding voting securities. The Board of Directors of the Company has unanimously approved the Offer and the Merger; consequently, the only additional action of the Company that may be necessary to effect the Merger is approval by the Company's stockholders if the "short- form" merger procedure described below is not available. Under the DGCL, the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Offeror) is generally required to approve the Merger. If the Offeror acquires, through the Offer or otherwise, voting power with respect to a majority of the outstanding Shares (which would be the case if the Minimum Condition were satisfied and the Offeror were to accept for payment Shares tendered pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. The DGCL also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, such parent company can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if, as a result of the Offer or otherwise, the Offeror owns at least 90% of the outstanding Shares, the Offeror could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. Conditions to the Obligations of the Parties to Effect the Merger. The Merger Agreement provides that the obligation of the parties to effect the Merger is subject to the satisfaction of certain conditions, including the following: (a) if required by applicable law, the Merger Agreement and the transactions contemplated thereby shall have been approved by the affirmative vote of the holders of a majority of the Shares; (b) no statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, domestic, foreign or supranational (a "Governmental Entity") or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that each of the Company, the Offeror and Parent shall have used reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered; (c) the Offeror shall have previously accepted for payment and paid for Shares pursuant to the Offer; and (d) the applicable waiting period under the HSR Act shall have expired or been terminated. Termination of the Merger Agreement. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the terms of the Merger Agreement by the stockholders of the Company: (1) by mutual written consent of Parent and the Company, by action of their respective Boards of Directors; (2) by Parent or the Company if (i) the Merger shall not have been consummated on or before June 30, 1998; provided; however, that neither Parent nor the Company may terminate the Merger Agreement under the foregoing clause (2)(i) if such party shall have materially breached the Agreement or (ii) if any court of competent jurisdiction in the United States or other United States Governmental Entity has issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; provided; however, that the party seeking to terminate the Merger Agreement shall have used its reasonable best efforts to remove or lift such order, decree, ruling or other action; (3) by the Company if, prior to the consummation of the Offer, any person has made a bona fide proposal relating to an Acquisition Proposal (as defined below), or has commenced a tender or exchange offer for the Shares, and the Board of Directors of the Company concludes, consistent with its fiduciary duties and after the receipt of advice from such Delaware counsel as may be appointed by the Board of Directors, that such proposal if consummated would be a Superior Proposal (as defined below); (4) by Parent if, prior to the consummation of the Offer, the Board of Directors of the Company shall have (i) failed to recommend to the stockholders of the Company that they accept the Offer, tender their Shares pursuant to the Offer and approve and adopt the Merger Agreement (the "Stockholder Acceptance"), (ii) withdrawn or materially modified its approval or recommendation of the Merger Agreement, the Offer or the Merger, (iii) shall have approved or recommended a Superior Proposal (as 24 defined below), (iv) shall have resolved to effect any of the foregoing or (v) shall have otherwise taken steps to impede the Stockholder Acceptance; (5) by Parent, if prior to the consummation of the Offer, there has been a material violation or breach by the Company of any representation, warranty, covenant or agreement contained in the Merger Agreement (which violation or breach is not cured by the Company, within ten days after written notice reasonably describing such breach); or (6) by the Company, if prior to the consummation of the Offer, there has been a material violation or breach by Parent or the Offeror of any representation, warranty, covenant or agreement contained in the Merger Agreement (which violation or breach is not cured by Parent or the Offeror within ten days after written notice reasonably describing such breach; provided, however, that the obligation under the Offer and the Merger Agreement pursuant to which the Offeror shall, and Parent shall cause the Offeror to accept for payment, and pay for, all shares validly tendered and not withdrawn pursuant to the Offer that the Offeror becomes obligated to accept for payment, and pay for, pursuant to the Offer promptly (and in no event later than five days) after the expiration of the Offer, shall have no cure period). Acquisition Proposals. The Merger Agreement provides that, from the date thereof until such time as Parent's designees shall constitute a majority of the members of the Board of Directors of the Company, the Company shall not, and shall not permit any of its subsidiaries, or any of its or their officers, directors, employees, representatives, agents or affiliates (including, without limitation, any investment banker, attorney or accountant retained by the Company or any of its subsidiaries) to, directly or indirectly, solicit or initiate any discussions or negotiations with any corporation, partnership, person or other entity or group (each, a "Person"), concerning any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal as defined below. Information may be provided in response to a bona fide inquiry subject to the confidentiality agreement referred to below, and negotiations may be conducted in response to such inquiry. Upon having received a bona fide proposal that the Board of Directors of the Company, consistent with its fiduciary duties and after the receipt of advice from such Delaware counsel as may be appointed by the Board of Directors concludes if consummated would be a Superior Proposal, the Board of Directors of the Company may withdraw or modify its approval or recommendation of the Offer, the Merger Agreement or the Merger, approve or recommend the Superior Proposal or terminate the Merger Agreement pursuant to clause 3 under "Termination of the Merger Agreement" above and shall promptly notify Parent in writing of any such determination. For five (5) business days after Parent has been informed of the above conclusion with respect to such Superior Proposal, Parent shall have the right to match (the "Counterproposal") the economic value of any such Superior Proposal. The Company shall negotiate in good faith with respect to such Counterproposal. Any information furnished to any Person in connection with an Acquisition Proposal shall be provided pursuant to a confidentiality agreement in customary form on terms not more favorable to such Person than the terms contained in the confidentiality agreement, dated as of November 5, 1997, between Parent and the Company. Subject to all of the foregoing requirements, the Company will immediately notify Parent orally and in writing if any discussions or negotiations are sought to be initiated, any inquiry or proposal is made, or any information is requested by any Person with respect to any Acquisition Proposal or which could lead to an Acquisition Proposal and immediately notify Parent of all material terms of any proposal which it may receive in respect of any such Acquisition Proposal, including the identify of the Person making the Acquisition Proposal or the request for information, if known, and thereafter shall inform Parent on a timely, ongoing basis of the status and content of any discussions or negotiations with such a third party, including immediately reporting any material changes to the terms and conditions thereof. The Merger Agreement defines "Acquisition Proposal" as any inquiry, proposal or offer from any person relating to any direct or indirect acquisition or purchase of 15% or more of any class of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of the Company or any of its subsidiaries, any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement, or any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Offer and/or the 25 Merger or which would reasonably be expected to dilute materially the benefits to Parent of the transactions contemplated thereby. For purposes of the Merger Agreement, "Superior Proposal" means any bona fide written offer made by a third party that is either fully financed or with respect to which a highly confident and/or a commitment letter from a financial institution of adequate sophistication and capitalization has been issued to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the Shares then outstanding or all or substantially all the assets of the Company and otherwise on terms which the Board of Directors of the Company determines (after consultation with a nationally recognized investment bank) to be economically superior to the transaction contemplated by the Merger Agreement. The Merger Agreement provides that nothing contained therein shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the good faith judgment of the Board of Directors of the Company, after consultation with outside counsel, failure so to disclose would be inconsistent with its fiduciary duties to the Company's stockholders under applicable law; provided, however, that neither the Company nor its Board of Directors nor any committee thereof shall, except as permitted by the Merger Agreement and as described above, withdraw or modify, or propose to withdraw or modify its position with respect to the Merger or approve or recommend, or propose to approve or recommend, an Acquisition Proposal. Fees and Expenses. The Merger Agreement provides that, in the event that (i) the Merger Agreement is terminated pursuant to clause 3 or 4 under "Termination of the Merger Agreement" above, or (ii) any person (other than Parent or any of its affiliates) shall have consummated an Acquisition Proposal within twelve months following the termination of the Offer at a value at or above $12 per share, then the Company shall pay to Parent, in the case of an event under clause (i) above, promptly upon any such termination, and, in the case of an event under clause (ii) above, at the time of any such consummation, a termination fee of $4.5 million (the "Termination Fee"); provided, that in no event shall the aggregate payment by the Company of fees and expenses as described below and of the Termination Fee under such clause of the Merger Agreement exceed $6.0 million. The Merger Agreement also provides that, in addition to any other amounts which may be payable or become payable pursuant to the above paragraph, in the event that the Merger Agreement is terminated for any reason other than a material breach by Parent or the Offeror, the Company shall promptly reimburse Parent or the Offeror, as the case may be, upon receipt of reasonably satisfactory supporting documentation, for all out-of-pocket expenses and fees (including, without limitation, fees and expenses payable to all Governmental Entities, banks, investment banking firms and other financial institutions, and their respective agents and counsel, and all fees and expenses of counsel, accountants, financial printers, proxy solicitors, exchange agents, experts and consultants to Parent and its affiliates), whether incurred prior to, on or after the date thereof, in connection with the Merger and the consummation of all transactions contemplated by the Merger Agreement, and the financing thereof up to a maximum of $2.5 million. Except as otherwise specifically provided for in the Merger Agreement, whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement shall be paid by the party incurring such expenses. The Merger Agreement provides that the prevailing party in any legal action undertaken to enforce the Merger Agreement or any provision thereof shall be entitled to recover from the other party the costs and expenses (including attorneys' and expert witness fees and expenses) incurred in connection with such action. Conduct of Business by the Company. The Merger Agreement provides that, except as contemplated by the Merger Agreement or as expressly agreed to in writing by Parent, during the period from the date of the Merger Agreement until such time as Parent's designees shall constitute a majority of the members of the Board of Directors of the Company, the Company will, and will cause each of its subsidiaries to, conduct its operations according to its ordinary and usual course of business and consistent with past practice and, subject to its obligations under clause (d) under "--Options; Warrants" below, use its and their respective reasonable best efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, advertisers, 26 distributors and others having business dealings with them and to preserve goodwill. Without limiting the generality of the foregoing, and except as (x) otherwise expressly provided in the Merger Agreement, (y) required by law, or (z) set forth on Schedule 6.01 to the Merger Agreement, the Company will not, and will cause its subsidiaries not to, without the consent of Parent, which shall not be unreasonably withheld: (i) except with respect to annual bonuses made in the ordinary course of business consistent with past practice, adopt or amend in any material respect any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, pension, retirement, employment or other employee benefit agreement, trust, plan or other arrangement for the benefit or welfare of any director, officer or employee of the Company or any of its subsidiaries or increase in any manner the compensation or fringe benefits of any director, officer or employee of the Company or any of its subsidiaries (except, in each case, for normal annual salary increases and cost of living increases for the benefit of officers and employees of the Company with positions below the level of vice president) or pay any benefit not required by any existing agreement or place any assets in any trust for the benefit of any director, officer or employee of the Company or any of its subsidiaries (in each case, except with respect to employees and directors in the ordinary course of business consistent with past practice); (ii) incur any indebtedness for borrowed money in excess of $500,000, other than in consultation with Parent; (iii) expend funds for individual capital expenditures in excess of $50,000 or $2,000,000 in the aggregate for any 12-month period (to be apportioned pro-rata over any period less than 12 months), other than in consultation with Parent; (iv) sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its properties or assets other than immaterial properties or assets (or immaterial portions of properties or assets), except in the ordinary course of business consistent with past practice; (v) (1) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (2) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (3) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (vi) other than in connection with options and warrants outstanding as of the date hereof, authorize for issuance, issue, deliver, sell or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise), pledge or otherwise encumber any shares of its capital stock or the capital stock of any of its subsidiaries, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or any other securities or equity equivalents (including without limitation stock appreciation rights) other than issuances upon exercise of Options or Warrants (as defined herein); (vii) amend its Certificate of Incorporation, By-Laws or equivalent organizational documents or alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any material subsidiary of the Company; (viii) make or agree to make any acquisition of assets which is material to the Company and its subsidiaries, taken as a whole, except for (1) purchases of inventory in the ordinary course of business, (2) pursuant to purchase orders entered into in the ordinary course of business which do not call for payments in excess of $50,000 per annum or (3) project-related expenditures which, individually, do not exceed $250,000; or (ix) settle or compromise any shareholder derivative suits arising out of the transactions contemplated hereby or any other litigation (whether or not commenced prior to the date of the Merger Agreement) or settle, pay or compromise any claims not required to be paid. Board of Directors. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment for, 50.1% of the Shares by the Offeror pursuant to the Offer, the Offeror shall be entitled to designate, subject to compliance with Section 14(f) of the Exchange Act, a majority of the directors on the Company's Board of Directors, and the Company shall, at such time, take all such action needed to cause the Offeror's designees to be so elected by its existing Board of Directors. Subject to applicable law, the Company has agreed to take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Options; Warrants. The Merger Agreement provides that (a) the Company shall amend its (i) ATC Group Services Inc. 1988 Incentive and Non-Statutory Stock Option Plan, ATC Group Services Inc. 1993 Incentive 27 and Non-Statutory Stock Option Plan, ATC Group Services Inc. 1995 Nonqualified Stock Option Plan, and any other program pursuant to which there are holders of Options to purchase Shares granted by the Company (collectively, the "Stock Option Plans") to provide that all outstanding, unexercised Options shall be immediately exercisable and that if the optionees do not exercise their unexercised Options, each optionee shall receive, in settlement of each Option held by such optionee, a "cash amount" (less any applicable withholding taxes) with respect to the number of previously unexercised Shares underlying the Option immediately prior to the effectiveness of the Merger. The Company shall use its commercially reasonable efforts to amend the Stock Option Plans to provide that each Option shall terminate as of the effectiveness of the Merger. The cash amount payable for each Option shall equal the product of (i) the Merger Consideration minus the exercise price per Share of each such Option and (ii) the number of previously unexercised Shares covered by each such option; (b) except as may be otherwise agreed to by Parent or the Offeror and the Company, the Company's Stock Option Plans shall terminate as of the effectiveness of the Merger and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its Subsidiaries shall be deleted as of the effectiveness of the Merger; and (c) the Company shall use its commercially reasonable efforts so that following the effectiveness of the Merger no holder of Options will have any right to receive Shares upon exercise of an Option. Pursuant to the terms of (i) the Warrant Agreement, dated October 15, 1990, relating to 568,207 Class C Redeemable Common Stock Purchase Warrants, (ii) warrant agreements relating to 490,500 warrants issued pursuant to the merger between the Company and Aurora Environmental Inc. and (iii) the Consulting Agreement, dated March 14, 1997, relating to 35,000 warrants issued to First Montauk Securities Corp., the Company has issued Warrants (collectively, the "Warrants") to certain persons. The holders of the Warrants shall be entitled either to exercise their Warrants for Shares in accordance with the applicable agreement under which such Warrants were issued and tender such Shares in the Offer or upon execution and delivery to the Company of a cancellation agreement in form and substance reasonably satisfactory to the Company, to receive from the Company at the Effective Time a cash amount equal to the product of (i) the Merger Consideration minus the exercise price per share of each such Warrant and (ii) the number of unexercised Shares covered by each such Warrant. The Merger Agreement, however, provides that, notwithstanding anything to the contrary in clauses (a) through (d), if it is determined that compliance with any of the actions described in such clauses would cause any individual subject to Section 16 of the Exchange Act to become subject to the profit recovery provisions thereof, any Options or Warrants held by such individual will be canceled or purchased, as the case may be, at the Effective Time or at such later time as may be necessary to avoid application of such profit recovery provisions and such individual will be entitled to receive from the Company or the Surviving Corporation an amount equal to the excess, if any, of the Merger Consideration over the per Share exercise price of such Option or Warrant multiplied by the number of Shares subject thereto, and the parties to the Merger Agreement will cooperate so as to achieve the intent of the foregoing without giving rise to such profit recovery. Indemnification and Insurance. In the Merger Agreement, Parent and the Offeror have agreed that all rights to indemnification for acts or omissions occurring prior to the effectiveness of the Merger that are in existence as of the date of the Merger Agreement in favor of the current or former directors, officers, employees, fiduciaries or agents (the "Indemnified Parties") of the Company and its subsidiaries as provided in their respective certificates of incorporation or by-laws or contractual arrangements shall survive the Merger and shall continue in full force and effect in accordance with their terms. In the Merger Agreement, Parent and Offeror have agreed that the Company shall, and from and after the Effective Time, the Surviving Corporation and Parent shall, indemnify, defend and hold harmless the Indemnified Parties against all losses, claims, damages, costs, expenses (including attorneys' fees and expenses), liabilities or judgments, fines or amounts that are paid in settlement in connection with any pending, threatened or actual claim, action, suit, proceeding or investigation based in whole or in part or arising in whole or part out of the fact that such person is or was a director, officer, employee or agent of the Company or any of its subsidiaries or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, 28 trust or other enterprise or by reason of anything done or not done by such person in any such capacity whether pertaining to any matter existing or occurring at or prior to the Effective Time or any acts or omissions occurring or existing at or prior to the Effective Time and whether asserted or claimed prior to, or at or after, the Effective Time ("Indemnified Liabilities"), including all Indemnified Liabilities based in whole or in part on, or arising in whole or in part out of, or pertaining to the Merger Agreement or the transactions contemplated thereby, in each case to the fullest extent permitted by applicable law (and the Company, the Surviving Corporation, and Parent, as the case may be, shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent permitted by applicable law). The Merger Agreement provides that in determining whether an Indemnified Party is entitled to indemnification, if requested by such Indemnified Party such determination shall be made by special, independent counsel selected by the Surviving Corporation and Parent and reasonably approved by the Indemnified Party, and who has not otherwise performed services for the Surviving Corporation, Parent or their respective affiliates within the last three years. Without limiting the foregoing, in the event any such claim, action, suit, proceeding or investigation is brought against any Indemnified Parties (whether arising before or after the Effective Time), (i) the Indemnified Parties may retain Squadron, Ellenoff, Plesent & Sheinfeld, LLP or other counsel reasonably satisfactory to the Company (or the Surviving Corporation after the Effective Time), and the Company (or, after the Effective Time, the Surviving Corporation and Parent) shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties as promptly as statements therefor are received; and (ii) the Company (or, after the Effective Time, the Surviving Corporation and Parent) will use all reasonable best efforts to assist in the vigorous defense of any such matter; provided, that none of the Company, the Surviving Corporation or Parent shall be liable for any settlement effected without its prior written consent, which consent shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under the relevant provisions of the Merger Agreement, upon learning of any such claim, action, suit, proceeding or investigation, shall notify the Company (or, after the Effective Time, the Surviving Corporation and Parent) (but the failure so to notify shall not relieve a party from any liability which it may have under such provisions except to the extent such failure prejudices such party's position with respect to such claims) and shall deliver to the Company (or, after the Effective Time, the Surviving Corporation and Parent) the undertaking contemplated by Section 145(e) of the DGCL, but without any requirement for the posting of the bond. The Indemnified Parties as a group may retain one law firm (plus local counsel, if necessary) to represent them with respect to each such matter unless the use of the counsel chosen to represent the Indemnified Parties would present such counsel with a conflict of interest, or the representation of all of the Indemnified Parties by the same counsel would be inappropriate due to actual or potential differing interests between them, in which case such additional counsel as may be required (as shall be reasonably determined by the Indemnified Parties and the Company, the Surviving Corporation or Parent, as the case may be) and satisfactory to the Company, the Surviving Corporation or Parent, as the case may be, may be retained by the Indemnified Parties at the cost and expense of the Company, the Surviving Corporation or Parent, as the case may be. The Merger Agreement provides that the Company and the Offeror agree that the foregoing rights to indemnification, (including provisions relating to advances of expenses) incurred in defense of any action or suit existing in favor of the Indemnified Parties with respect to matters occurring through the Effective Time, shall survive the Merger and shall continue in full force and effect for a period of not less than six years after the Effective Time; provided, however that all rights to indemnification, including rights relating to advances of expenses, in respect of any Indemnified Liabilities asserted or made within such period shall continue until the disposition of such Indemnified Liabilities. Furthermore, the Merger Agreement provides that the provisions with respect to indemnification set forth in the Certificate of Incorporation or Bylaws of the Surviving Corporation shall not be amended for a period of six years following the Effective Time to the extent that such amendment would adversely affect the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers, employees or agents of the Company in respect of actions or omissions occurring at or prior to the Effective Time. Pursuant to the Merger Agreement, the Company (or, after the Effective Time, the Surviving Corporation and Parent) shall indemnify any Indemnified Party against all reasonable costs and expenses (including attorneys' fees and expenses), such amounts to be payable in advance upon request as provided in the Merger Agreement relating to the enforcement of such Indemnified Party's rights under the Merger Agreement or under the 29 documents referred to above, but only to the extent that such Indemnified Party is ultimately determined to be entitled to indemnification under the Merger Agreement and other documents referred to above. Any amounts due pursuant to the preceding sentence shall be payable upon request by the Indemnified Party. Pursuant to the Merger Agreement, Parent will, for a period of six years from the effectiveness of the Merger, unless Parent agrees in writing to guarantee the indemnification obligations set forth above, maintain in effect the Company's current directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy except that, to the extent that such coverage is not obtainable at less than or equal to 225% of the current per annum cost, Parent will be obligated to purchase only so much coverage as may then be obtained for such amount. The Merger Agreement provides that in the event the Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation of such consolidation or merger, or (ii) transfers all or substantially all of its properties to any person, then, and in each case, proper provision shall be made so that the successors and assigns of the Company and the Surviving Corporation, as the case may be, shall assume the indemnification obligations set forth in the Merger Agreement. Representations and Warranties. The Merger Agreement contains various customary representations and warranties. Procedure for Termination, Amendment, Extension or Waiver. The Merger Agreement provides that in the event the Offeror's designees are appointed or elected to the Board of Directors of the Company as described above under "Board of Directors", after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time, the affirmative vote of the directors of the Company not designated by Parent or Offeror is required for the Company to amend or terminate the Merger Agreement, exercise or waive any of its rights or remedies under the Merger Agreement, or extend the time for performance of the Offeror's and Parent's respective obligations under the Merger Agreement. 14. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the two succeeding paragraphs, and nothing herein shall constitute a waiver by the Offeror or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Offeror or Parent for any breach of the Merger Agreement, including termination thereof. If, on or after November 26, 1997, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire or otherwise cause a reduction in the number of outstanding Shares or other securities or (c) issue or sell additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire any of the foregoing, other than Shares issued pursuant to the exercise of outstanding Company stock options or warrants, then, subject to the provisions of Section 15, the Offeror, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after November 26, 1997, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Offeror or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 15, (a) the Offer Price may, in the sole discretion of the Offeror, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering 30 stockholders will (i) be received and held by the tendering stockholders for the account of the Offeror and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Offeror, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Offeror, be exercised for the benefit of the Offeror, in which case the proceeds of such exercise will promptly be remitted to the Offeror. Pending such remittance and subject to applicable law, the Offeror will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Offeror in its sole discretion. 15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer or the Merger Agreement, the Offeror shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Offeror's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any Shares tendered pursuant to the Offer unless (i) the Minimum Condition and the Financing Condition shall have been satisfied and (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, the Offeror shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of the Merger Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be any action or proceeding commenced by any Governmental Entity which has a reasonable likelihood of success and which if decided adversely to the Company, would have a material adverse effect on the Company (i) challenging the acquisition by Parent or the Offeror of any Shares under the Offer, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement, or seeking to obtain from the Company, Parent or the Offeror any damages that are material in relation to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit or impose any material limitations on Parent's or the Offeror's ownership or operation (or that of any of their respective Subsidiaries or affiliates) of all or a material portion of the Company's businesses or assets, or to compel Parent or the Offeror or their respective Subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company and its Subsidiaries taken as a whole, (iii) seeking to impose material limitations on the ability of the Offeror, or render the Offeror unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (iv) seeking to impose material limitations on the ability of the Offeror or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's stockholders, or (v) which otherwise is reasonably likely to have a material adverse effect on the Company; (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity or court, other than the application to the Offer or the Merger of any applicable waiting period under the HSR Act that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred any events after the date of the Merger Agreement that, either individually or in the aggregate, have caused or are reasonably likely to cause a material adverse change with respect to the Company other than a change resulting from the announcement of the Offer or the Merger; (d) (i) the Board of Directors of the Company or any committee thereof shall have publicly (including by amendment of its Schedule 14D-9) withdrawn or modified in a manner adverse to Parent or the Offeror its approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or 31 recommended any Acquisition Proposal, (ii) the Company shall have entered into any agreement with respect to any Superior Proposal in accordance with the Merger Agreement or (iii) the Board of Directors of the Company or any committee thereof shall have resolved to take any of the foregoing actions (see "The Merger Agreement--Acquisition Proposals" in Section 13); (e) any of the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct in any material respect, in each case at the date of the Merger Agreement and at the scheduled or extended expiration of the Offer except for such breaches that would not have, individually or in the aggregate, a material adverse effect on the Company; (f) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement except for such breaches that would not have, individually or in the aggregate, a material adverse effect on the Company; (g) the Merger Agreement shall have been terminated in accordance with its terms; (h) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange or on NASDAQ, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war, armed hostilities or other international or national calamity directly involving the armed forces of the United States that materially and adversely affects the financial markets in the United States, (iv) any material limitation (whether or not mandatory) by any governmental authority on the extension of credit by banks or other lending institutions, or (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; (i) the Company shall fail to receive the proceeds of financing pursuant to the financing letters set forth on Schedule 5.06 of the Merger Agreement or involving such other financing sources, as Parent and the Company shall reasonably agree and are not materially more onerous, in amounts sufficient to consummate the transactions contemplated by this Agreement, including, without limitation (i) to pay, with respect to all Common Stock in the Merger, the Offer Price pursuant to the Merger Agreement, (ii) to refinance certain outstanding indebtedness of the Company, (iii) to pay any fees and expenses in connection with the transactions contemplated by this Agreement or the financing thereof and (iv) to provide for the working capital needs of the Company following the Merger, including, without limitation, if applicable, letters of credit. The foregoing conditions are for the sole benefit of Parent and the Offeror, may be asserted by Parent or the Offeror regardless of the circumstances giving rise to such condition (including any action or inaction by Parent or the Offeror not in violation of the Merger Agreement) and may be waived by Parent or the Offeror in whole or in part at any time and from time to time in the sole discretion of Parent or the Offeror, subject in each case to the terms of the Agreement. The failure by Parent or the Offeror at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 16. CERTAIN LEGAL MATTERS. On or about November 5, 1997, a summons and complaint were filed in the Court of Chancery of the State of Delaware in and for New Castle County (the "Delaware Court") on behalf of Irv Richter, as plaintiff (the "Richter Complaint"). The Richter Complaint names the Company and the members of the Company's Board of Directors as defendants. On or about November 12, 1997, another summons and complaint were filed in the Delaware Court on behalf of Joseph I. Peters, as plaintiff (the "Peters Complaint" and, together with the Richter Complaint, the "Complaints"). The Peters Complaint names the Company, the members of the Company's Board of Directors, Weiss, Peck & Greer LLC and WPG Fund as defendants. Both complaints challenge the Offer. Both complaints seek class action status on behalf of the stockholders of the Company and contain essentially the same allegations that the Offer Price is inadequate and unfair and that the defendants have breached their fiduciary duties to the plaintiffs and other stockholders of the Company. The plaintiffs seek among 32 other things, to enjoin or set aside the transactions contemplated by the Offer or compensatory damages. The defendants have received extensions of time from the plaintiffs to respond to the Complaints. The Company believes the allegations contained in both Complaints are meritless and intends to defend both actions vigorously. Except as set forth in this Section, the Offeror is not aware of any approval or other action by any governmental or administrative agency which would be required for the acquisition or ownership of Shares by the Offeror as contemplated herein. Should any such approval or other action be required, it will be sought, but the Offeror has no current intention to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any such matter, subject, however, to the Offeror's right to decline to purchase Shares if any of the conditions specified in Section 15 shall have occurred. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions, or that adverse consequences might not result to the Company's business or that certain parts of the Company's business might not have to be disposed of if any such approvals were not obtained or other action taken. U. S. Antitrust. Under the provisions of the HSR Act applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-day waiting period following the filing by the WPG Fund of a Premerger Notification and Report Form with respect to the Offer, unless the WPG Fund receives a request for additional information or documentary material from the Department of Justice, Antitrust Division (the "Antitrust Division") or the Federal Trade Commission (the "FTC") or unless early termination of the waiting period is granted. The WPG Fund made such a filing on December 4, 1997 and, accordingly, the initial waiting period will expire at 11:59 P.M. on December 19, 1997. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC request additional information or documentary material concerning the Offer, the waiting period will be extended through the tenth day after the date of substantial compliance by all parties receiving such requests. Complying with a request for additional information or documentary material can take a significant amount of time. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Offeror's proposed acquisition of the Company. At any time before or after the Offeror's acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger, or seeking the divestiture of Shares acquired by the Offeror or the divestiture of substantial assets of the Company or its subsidiaries or Parent or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer or to the consummation of the Merger on antitrust grounds will not be made, or, if such a challenge is made, of the result thereof. If any applicable waiting period under the HSR Act has not expired or been terminated prior to the Expiration Date, the Offeror will not be obligated to proceed with the Offer or the purchase of any Shares not theretofore purchased pursuant to the Offer. See Section 15. Section 203 of the DGCL. Section 203 of the DGCL, in general, prohibits a Delaware corporation such as the Company from engaging in a "Business Combination" (defined as a variety of transactions, including mergers) with an "Interested Stockholder" (defined generally as a person that is the beneficial owner of 15% or more of a corporation's outstanding voting stock) for a period of three years following the date that such person became an Interested Stockholder unless, among other things, prior to the date such person became an Interested Stockholder, the board of directors of the corporation approved either the Business Combination or the transaction that resulted in the stockholder becoming an Interested Stockholder. Neither the Offeror nor any of its affiliates (as such term is defined in Section 203 of the DGCL) became an Interested Stockholder prior to approval of the transaction by the Board of Directors of the Company. Therefore, Section 203 of the DGCL is inapplicable to the Merger. Other State Takeover Laws. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, stockholders, 33 principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects in such states. In Edgar v. MITE Corp., in 1982, the Supreme Court of the United States (the "U.S. Supreme Court") invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However in 1987, in CTS Corp. v. Dynamics Corp. of America, the U.S. Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the U.S. Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. The Offeror does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, the Offeror will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Offeror might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Offeror might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, the Offeror may not be obligated to accept for payment any Shares tendered. See Section 15. 17. FEES AND EXPENSES. Neither the Offeror nor Parent, nor any officer, director, stockholder, agent or other representative of the Offeror or Parent, will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and the Depositary) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by the Offeror for customary mailing and handling expenses incurred by them in forwarding materials to their customers. BTAB is acting as Dealer Manager in connection with the Offer and has provided certain financial advisory services to Parent and the Offeror in connection with the proposed acquisition of the Shares. BTAB will not receive a fee for its services as Dealer Manager in connection with the Offer. Parent and the WPG Fund have jointly and severally agreed to reimburse BTAB for its out-of-pocket expenses related to its engagement, including the fees and expenses of its counsel, and have jointly and severally agreed to indemnify BTAB against certain liabilities and expenses, including under the federal securities laws. The Offeror has retained MacKenzie Partners, Inc. as Information Agent, and Bankers Trust Company, as Depositary, in connection with the Offer. The Information Agent and the Depositary will receive reasonable and customary compensation for their services hereunder and reimbursement for their reasonable out-of-pocket expenses. The Information Agent and the Depositary will also be indemnified by the Offeror against certain liabilities in connection with the Offer. The Information Agent may contact holders of Shares by mail, telex, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners of Shares. 18. MISCELLANEOUS. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares residing in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the 34 Offeror by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or make any representation on behalf of the Offeror other than as contained in this Offer to Purchase or in the Letter of Transmittal and, if any such information or representation is given or made, it should not be relied upon as having been authorized by the Offeror or Parent. The Offeror and Parent have filed with the Commission a Schedule 14D-1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated thereunder, furnishing certain information with respect to the Offer. Such Schedule 14D-1 and any amendments thereto, including exhibits, may be examined and copies may be obtained at the same places and in the same manner as set forth with respect to the Company in Section 8 (except that they will not be available at the regional offices of the Commission). Acquisition Corp. December 4, 1997 35 ANNEX I CERTAIN INFORMATION CONCERNING THE MANAGING MEMBERS OF WPG PARTNERS II, THE GENERAL PARTNERS OF THE WPG OVERSEAS FUND AND THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR 1. MANAGING MEMBERS OF WPG PARTNERS II. Set forth below are the name, current business address, citizenship, present principal occupation or employment and five-year employment history of each managing member of WPG Partners II. Each person was designated in April 1997. Each person named below is a citizen of the United States of America. Each persons' business address is c/o Weiss Peck & Greer, L.L.C., One New York Plaza, New York, New York, 10004.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, NAME AGE POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS ---- --- ---------------------------------------------------------- Steven N. Hutchinson.... 48 Managing Member. Steven N. Hutchinson has been a principal of WPG, an investment management company that sponsors the WPG Fund and the WPG Overseas Fund, since 1993. Prior to that time, Mr. Hutchinson served in numerous positions, including vice president and director, at The Hillman Company, a privately-owned investment firm. Mr. Hutchinson serves as a director of Centennial Resources, Inc., CoreSource, Inc. and Michael Alan Designs. Wesley W. Lang.......... 40 Managing Member. Wesley W. Lang has been a principal of WPG since 1985. Prior to joining WPG, Mr. Lang was employed by Manufacturers Hanover Trust Company, where he specialized in acquisition financing. He serves as a director of Chyron Corporation, Color Associates, Inc., Dollar Financial Group, Meridian Aggregates Company, Powell Plant Farms, Inc. and Tire Kingdom, Inc.
2. MANAGING MEMBERS OF WPG PARTNERS II (OVERSEAS). Unless otherwise indicated, for each person identified below all information concerning the citizenship, current business address, present principal occupation or employment and five-year employment history of such person is the same as the information given above. Each person was designated in April 1997.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, NAME AGE POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS ---- --- ---------------------------------------------------------- Steven N. Hutchinson.... 48 Managing Member. Wesley W. Lang.......... 40 Managing Member.
3. DIRECTORS AND EXECUTIVE OFFICERS OF WPG CDA V (OVERSEAS). Unless otherwise indicated, for each person identified below all information concerning citizenship, current business address, present principal occupation or employment and five-year employment history of such person is the same as the information given above. Each person was elected in April 1997. A-1
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, NAME AGE POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS ---- --- ---------------------------------------------------------- Patrick Keating......... 30 Director. Patrick Keating has been employed BankAmerica Trust and since April 1995 as a Trust Officer at Banking Corporation BankAmerica Trust and Banking Corporation (Cayman) Limited, Box (Cayman) Limited ("BankAmerica). BankAmerica is 192, Grand Cayman a Cayman Islands corporation which provides Island, British West trust and administration services to WPG CDA V Indies (Overseas) pursuant to a contract. Prior to joining BankAmerica, Mr. Keating was an Accountant at Irish Life Assurance PLC from June 1994 to April 1995 and a Senior Auditor at Coopers & Lybrand in Ireland from October 1990 to May 1994. Mr. Keating is a citizen of Ireland. Philip Greer............ 61 Director. Philip Greer co-founded WPG in 1970 c/o Weiss, Peck & and is currently its Senior Managing Principal. Greer, L.L.C., One New He currently serves as a director of Federal York Plaza, New York, Express Corporation, Network Computing Devices, New York 10004 Robert Mondavi Corporation, Precept Software, Inc. and Newstar Inc. Mr. Greer is a citizen of the United States of America. Wesley W. Lang.......... 40 President. Steven N. Hutchinson.... 48 Secretary.
4. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Unless otherwise indicated, for each person identified below all information concerning the citizenship, current business address, present principal occupation or employment and five- year employment history for such person is the same as the information given above. Each person was elected in October 1997.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, NAME AGE POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS ---- --- ---------------------------------------------------------- Steven N. Hutchinson.... 48 Director and President. Nora E. Kerppola........ 32 Director and Secretary. Nora E. Kerppola has been a principal of WPG Private Equity Partners II, L.P., an affiliate of WPG Partners II, since January 1994. Prior to that time, Ms. Kerppola was employed as a private equity investor at Investor International (U.S.), a subsidiary of Sweden's Wallenberg Group since January 1990. Prior to that time, Ms. Kerppola was an associate in the Investment Banking Department of Credit Suisse First Boston Corporation. Ms. Kerppola serves as a director of Dollar Financial Group and Powell Plan Farms, Inc. Ms. Kerppola is a citizen of Finland. Tania R. Cochran........ 25 Director and Treasurer. Tania R. Cochran has been an associate at Weiss, Peck & Greer, L.L.C. since August 1997. Prior to that time, Ms. Cochran was employed as an analyst at J.P. Morgan & Co., Inc. since July 1994. Ms. Cochran is a citizen of the United States of America.
5. DIRECTORS AND EXECUTIVE OFFICERS OF THE OFFEROR. Unless otherwise indicated, for each person identified below all information concerning the age, citizenship, current business address, present principal occupation or employment and five-year employment history for such person is the same as the information given above. Each person was elected in October 1997.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, NAME AGE POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS ---- --- ---------------------------------------------------------- Steven N. Hutchinson.... 48 Director and President. Nora E. Kerppola........ 32 Director and Secretary. Tania R. Cochran........ 25 Director and Treasurer
A-2 Facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: BANKERS TRUST COMPANY By Mail: By Overnight or By Hand: Courier: BT Services Tennessee, BT Services Tennessee, Bankers Trust Company Inc. Inc. Corporate Trust & Reorganization Unit Corporate Trust & Agency Group P.O. Box 292737 Agency Group Attn: Reorganization Nashville, Tennessee Reorganization Unit Department 37229-2737 648 Grassmere Park Road Receipt & Delivery Nashville, Tennessee Window 37211 123 Washington Street, 1st Floor New York, New York 10006 Facsimile Transmission Confirm by Telephone: Information: Number: (615) 835-3572 (800) 735-7777 (615) 835-3701 Any questions or requests for assistance or additional copies of the Offer to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations listed below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Dealer Manager for the Offer is: BT ALEX. BROWN INCORPORATED 130 LIBERTY STREET, 30TH FLOOR NEW YORK, NEW YORK 10006 (212) 250-2500 (CALL COLLECT) The Information Agent for the Offer is: [LOGO] MACKENZIE PARTNERS, INC. 156 FIFTH AVENUE NEW YORK, NEW YORK 10010 (212) 929-5500 (CALL COLLECT) (800) 322-2885 (TOLL-FREE) EX-99.(A)(2) 3 LETTER OF TRANSMITTAL EXHIBIT (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF ATC GROUP SERVICES INC. PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 4, 1997 BY ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 21, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary: BANKERS TRUST COMPANY By Mail: By Overnight or Courier: By Hand: BT Services Tennessee, BT Services Tennessee, Inc. Bankers Trust Company Inc. Corporate Trust & Agency GroupCorporate Trust & Agency Reorganization Unit Reorganization Unit Group P.O. Box 292737 648 Grassmere Park Road Attn: Reorganization Nashville, Tennessee Nashville, Tennessee 37211 Department 37229-2737 Receipt & Delivery Window 123 Washington Street, 1st Floor New York, New York 10006 Facsimile Transmission Confirm by Telephone: Information: Number: (615) 835-3572 (800) 735-7777 (615) 835-3701 --------------- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. DESCRIPTION OF SHARES TENDERED - -------------------------------------------------------------------------------
NAME(S) AND ADDRESSES OF REGISTERED HOLDER(S) SHARES TENDERED (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST, IF NECESSARY) - ------------------------------------------------------------------------------------------------ NUMBER OF SHARE SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- TOTAL SHARES
- ------------------------------------------------------------------------------- * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. This Letter of Transmittal is to be completed by stockholders of ATC Group Services Inc. if certificates are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery of Shares (as defined below) is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (hereinafter collectively referred to as the "Book- Entry Transfer Facilities") pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. Stockholders whose certificates for Shares are not immediately available or who cannot deliver their Shares and all other documents required hereby to the Depositary by the Expiration Date (as defined in the Offer to Purchase), or who cannot comply with the book-entry transfer procedures on a timely basis, may nevertheless tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. [_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________________ Account No. _____________________________________________________________ at [_] The Depository Trust Company [_] Philadelphia Depository Trust Company Transaction Code No. _______________________________________________________ [_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Tendering Stockholder(s) ________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Window Ticket Number (if any) ______________________________________________ Name of Institution which Guaranteed Delivery ______________________________ If delivery is by book-entry transfer ______________________________________ Name of Tendering Institution ______________________________________________ Account No. _____________________________________________________________ at [_] The Depository Trust Company [_] Philadelphia Depository Trust Company Transaction Code No. _______________________________________________________ 2 Ladies and Gentlemen: The undersigned hereby tenders to Acquisition Corp., a Delaware corporation (the "Offeror"), a wholly owned subsidiary of Acquisition Holdings, Inc., a Delaware corporation ("Parent"), which is wholly owned by WPG Corporate Development Associates V, L.P., a Delaware limited partnership (the "WPG Fund") the above-described shares of Common Stock, par value $0.01 per share (the "Shares"), of ATC Group Services Inc., a Delaware corporation (the "Company"), pursuant to the Offeror's offer to purchase all of the outstanding Shares at a purchase price of $12.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 4, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together with the Offer to Purchase constitute the "Offer"). The Offer is being made in connection with the Agreement and Plan of Merger, dated as of November 26, 1997 (the "Merger Agreement"), among Parent, the Offeror and the Company. Subject to and effective upon acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to or upon the order of the Offeror all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof on or after November 26, 1997) and appoints the Depositary the true and lawful agent and attorney- in-fact of the undersigned with respect to such Shares (and all such other Shares or securities), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and all such other Shares or securities), or transfer ownership of such Shares (and all such other Shares or securities) on the account books maintained by any of the Book-Entry Transfer Facilities, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, (b) present such Shares (and all such other Shares or securities) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and all such other Shares or securities), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints each designee of the Offeror as the attorney-in-fact and proxy of the undersigned, each with full power of substitution, to exercise all voting and other rights of the undersigned in such manner as each such attorney and proxy or his substitute shall in his sole judgment deem proper, with respect to all of the Shares tendered hereby which have been accepted for payment by the Offeror prior to the time of any vote or other action (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after November 26, 1997) at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting) or otherwise. This proxy is irrevocable, shall be coupled with an interest, and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by the Offeror in accordance with the terms of the Offer. Such acceptance for payment shall revoke any other proxy or written consent granted by the undersigned at any time with respect to such Shares (and all such other Shares or other securities or rights), and no subsequent proxies will be given or written consents will be executed by the undersigned (and if given or executed, will not be deemed effective). The undersigned hereby represents and warrants (and if more than one, each undersigned hereby represents and warrants jointly and severally) that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and that when the same are accepted for payment by the Offeror, the Offeror will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and all such other Shares or other securities or rights). All authority herein conferred or agreed to be conferred shall survive the death, bankruptcy or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. 3 The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the instructions hereto will constitute an agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and return any Shares not tendered or not purchased, in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased and return any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the purchase price of any Shares purchased and return any Shares not tendered or not purchased in the name(s) of, and mail said check and any certificates to, the person(s) so indicated. The undersigned recognizes that the Offeror has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder(s) thereof if the Offeror does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the To be completed ONLY if the check for the purchase price of check for the purchase price of Shares purchased or certificates Shares purchased or certificates for Shares not tendered or not for Shares not tendered or not purchased are to be issued in purchased are to be mailed to the name of someone other than someone other than the under- the undersigned. signed or to the undersigned at an address other than that shown below the undersigned's signa- ture(s). Issue check and/or certifi- cate(s) to: Name ____________________________ Mail check and/or certificate(s) (PLEASE PRINT) to: _________________________________ Name_____________________________ Address _________________________ (PLEASE PRINT) _________________________________ _________________________________ (ZIP CODE) Address _________________________ _________________________________ _________________________________ (TAXPAYER IDENTIFICATION NO.) (ZIP CODE) (SEE SUBSTITUTE FORM W-9) 4 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, signatures on all Letters of Transmittal must be guaranteed by a member in good standing of the Securities Transfer Agents Medallion Program or by any other bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing constituting an "Eligible Institution"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 5. If the certificates evidencing Shares are registered in the name of a person or persons other than the signer of this Letter of Transmittal, or if payment is to be made or delivered to, or certificates evidencing unpurchased Shares are to be issued or returned to, a person other than the registered owner or owners, then the tendered certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates or stock powers, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as provided herein. See Instruction 5. 2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if the delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any other documents required by this Letter of Transmittal or an Agent's Message in the case of a book-entry delivery, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal by the Expiration Date. Stockholders who cannot deliver their Shares and all other required documents to the Depositary by the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such procedures: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror, must be received by the Depositary prior to the Expiration Date; and (c) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by this Letter of Transmittal must be received by the Depositary within three trading days after the date of such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase. The term "trading day" is any day on which NASDAQ is open for business. The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through a Book-Entry Transfer Facility, is at the election and sole risk of the tendering stockholder. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. Delivery of this Letter of Transmittal and accompanying certificate(s) will pass only when such Letter of Transmittal and accompanying certificate(s) are actually received by the Depositary. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. By executing this Letter of Transmittal (or a manually signed facsimile thereof), the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal unless 5 otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or Shares not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the certificate must be endorsed or accompanied by, appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Offeror of the authority of such person so to act must be submitted. 6. Stock Transfer Taxes. The Offeror will pay any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), then the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 7. Special Payment and Delivery Instruction. If the check for the purchase price of any Shares purchased is to be issued, or any Shares not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account at any of the Book-Entry Transfer Facilities as such stockholder may designate under "Special Payment Instructions." If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facilities designated above. 8. Substitute Form W-9. The tendering stockholder is required to provide the Depositary with such stockholder's correct TIN on Substitute Form W-9, which is provided below, unless an exemption applies. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to a $50 penalty and to 31% federal income tax backup withholding on the payment of the purchase price for the Shares. 6 9. Foreign Holders. Foreign holders must submit a completed IRS Form W-8 to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the Depositary at one of the addresses on the face of this Letter of Transmittal. 10. Requests for Assistance or Additional Copies. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent or the Dealer Manager at their respective addresses or telephone numbers set forth below. 11. Waiver of Conditions. The conditions of the Offer may be waived by Offeror (subject to certain limitations in the Merger Agreement), in whole or in part, at any time or from time to time, in Offeror's sole discretion. Important: This letter of Transmittal or a manually signed facsimile copy hereof (together with certificates or confirmation of book-entry transfer and all other required documents) or a Notice of Guaranteed Delivery must be received by the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase). IMPORTANT TAX INFORMATION Under federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct TIN on the Substitute Form W-9. If such stockholder is an individual, the TIN is such stockholder's social security number. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements may be obtained from the Depositary. All exempt recipients (including foreign persons wishing to qualify as exempt recipients) should see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup federal income tax withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of such stockholder's correct TIN by completing the form certifying that the TIN provided on the Substitute Form W-9 is correct. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. 7 SIGN HERE (Complete Substitute Form W-9 on reverse) ____________________________________________________________________________ ____________________________________________________________________________ Signature(s) of Owner(s) ____________________________________________________________________________ Name(s) ____________________________________________________________________ ____________________________________________________________________________ Capacity (full title) ______________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number _____________________________________________ Taxpayer Identification Number _____________________________________________ Dated: _______________________________________________________________, 199 (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by the person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5). GUARANTEE OF SIGNATURE(S) (See Instructions 1 and 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized signature(s) ____________________________________________________ Name _______________________________________________________________________ Name of Firm _______________________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number _____________________________________________ Dated: _______________________________________________________________, 199 8 PAYER'S NAME: BANKERS TRUST COMPANY - ------------------------------------------------------------------------------- PART I--PLEASE PROVIDE YOUR SUBSTITUTE TIN IN THE BOX AT THE RIGHT TIN: _______________ FORM W-9 AND CERTIFY BY SIGNING AND Social Security DATING BELOW. Number or Employer Identification Number DEPARTMENT OF THE TREASURY ------------------------------------------------------ INTERNAL PART II--For Payees exempt from backup withholding, REVENUE see the enclosed Guidelines for Certification of SERVICE Taxpayer Identification Number on Substitute Form W-9 and complete as instructed therein. ------------------------------------------------------ Certification--Under penalties of perjury, I certify that: PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFICATION (1) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me); and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------ Signature: __________________________ Date: ______ CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that you were no longer subject to backup withholding, do not cross out item (2). (Also see the instructions in the enclosed Guidelines.) NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social Security Administration Officer or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments pursuant to the Offer made to me thereafter will be withheld until I provide a number. Signature: ____________________________________________ Date: ___________ 9 The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 Call Collect: (212) 929-5500 Call Toll-Free: (800) 322-2885 The Dealer Manager for the Offer is: BT ALEX. BROWN INCORPORATED 130 Liberty Street, 30th Floor New York, New York 10006 Call Collect: (212) 250-2500 EX-99.(A)(3) 4 LETTER TO BROKERS & DEALERS EXHIBIT (a)(3) BT ALEX. BROWN INCORPORATED 130 LIBERTY STREET, 30TH FLOOR NEW YORK, NEW YORK 10006 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ATC GROUP SERVICES INC. AT $12.00 NET PER SHARE BY ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 21, 1998, UNLESS THE OFFER IS EXTENDED. December 4, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Acquisition Corp., a Delaware corporation (the "Offeror"), a wholly owned subsidiary of Acquisition Holdings, Inc., a Delaware Corporation ("Parent"), which is wholly owned by WPG Corporate Development Associates V, L.P., a Delaware limited partnership (the "WPG Fund") to act as Dealer Manager in connection with the Offeror's offer to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of ATC Group Services Inc., a Delaware corporation (the "Company"), at a purchase price of $12.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 4, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of November 26, 1997, among Parent, the Offeror and the Company (the "Merger Agreement"). Holders of Shares whose certificates for such Shares (the "Certificates") are not immediately available or who cannot deliver their Certificates and all other required documents to the Depository or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase, dated December 4, 1997. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender Shares. 3. The Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company and mailed to the stockholders of the Company. 4. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if neither of the two procedures for tendering Shares set forth in the Offer to Purchase can be completed on a timely basis. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to the Depository. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE, PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 21, 1998 UNLESS THE OFFER IS EXTENDED. Please note the following: 1. The tender price is $12.00 per Share, net to the seller in cash without interest. 2. The Offer is being made for all of the outstanding Shares. 3. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on January 21, 1998, unless the Offer is extended (the "Expiration Date"). 4. The Offer is conditioned upon, among other things (i) there being validly tendered and not withdrawn prior to the Expiration Date that number of Shares constituting a majority of the outstanding Shares (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares); (ii) the Offeror having received financing in amounts sufficient to consummate the Offer and the Merger (as defined in the Offer to Purchase), including, without limitation, (a) to pay, with respect to all common stock in the Merger, the Merger Consideration (as defined in the Offer to Purchase), (b) to refinance the outstanding indebtedness of the Company, (c) to pay any fees and expenses in connection with the Offer and the Merger or the financing thereof and (d) to provide for the working capital needs of the Company following the Merger, including, without limitation, if applicable, letters of credit; (iii) the expiration or termination of the applicable waiting period under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended and (iv) the satisfaction of certain other terms and conditions. See Section 15 of the Offer to Purchase. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer of Shares pursuant to the Offer. In order to take advantage of the Offer, (i) a duly executed and properly completed Letter of Transmittal (or a manually signed facsimile thereof) and any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) or other required documents should be sent to the Depositary and (ii) Certificates representing the tendered Shares or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) should be delivered to the Depositary in accordance with the instructions set forth in the Offer. If holders of Shares wish to tender, but it is impracticable for them to forward their Certificates or other required documents or complete the procedures for book-entry transfer prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 2 of the Offer to Purchase. Neither the Offeror, the Parent nor any officer, director, stockholder, agent or other representative of the Offeror will pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager, 2 the Depositary and the Information Agent as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Offeror will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Offeror will pay or cause to be paid any transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to MacKenzie Partners, Inc., the Information Agent for the Offer, 156 Fifth Avenue, New York, New York 10010, (800) 322-2885 (toll-free) or BT Alex. Brown Incorporated, the Dealer Manager for the Offer, at 130 Liberty Street, 30th Floor, New York, New York 10006, (212) 250-2500 (call collect). Requests for additional copies of the enclosed materials may be directed to the Information Agent at the above address and telephone number. Very truly yours, BT Alex. Brown Incorporated NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PARENT, THE OFFEROR, THE DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(4) 5 LETTER TO CLIENTS EXHIBIT (a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ATC GROUP SERVICES INC. AT $12.00 NET PER SHARE BY ACQUISITION CORP. AN INDIRECT SUBSIDIARY OF WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 21, 1998, UNLESS THE OFFER IS EXTENDED. December 4, 1997 To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated December 4, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), relating to an offer by Acquisition Corp., a Delaware corporation (the "Offeror"), a wholly owned subsidiary of Acquisition Holdings, Inc., a Delaware Corporation (the "Parent"), which is wholly owned by WPG Corporate Development Associates V, L.P., a Delaware limited partnership (the "WPG Fund"), to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of ATC Group Services Inc., a Delaware corporation (the "Company"), at a purchase price of $12.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of November 26, 1997, among the Parent, the Offeror and the Company (the "Merger Agreement"). This material is being forwarded to you as the beneficial owner of Shares carried by us in your account but not registered in your name. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. Accordingly, we request instructions as to whether you wish to tender any or all of the Shares held by us for your account, upon the terms and conditions set forth in the Offer. Please note the following: 1. The tender price is $12.00 per Share, net to the seller in cash without interest. 2. The Offer is being made for all of the outstanding Shares. 3. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on January 21, 1998, unless the Offer is extended (the "Expiration Date"). 4. The Offer is conditioned upon, among other things (i) there being validly tendered and not withdrawn prior to the Expiration Date that number of Shares constituting a majority of the outstanding Shares (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares); (ii) the Offeror having received financing in amounts sufficient to consummate the Offer and the Merger (as defined in the Offer to Purchase), including, without limitation, (a) to pay, with respect to all common stock in the Merger, the Merger Consideration (as defined in the Offer to Purchase), (b) to refinance the outstanding indebtedness of the Company, (c) to pay any fees and expenses in connection with the Offer and the Merger or the financing thereof and (d) to provide for the working capital needs of the Company following the Merger, including, without limitation, if applicable, letters of credit; (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and (iv) the satisfaction of certain other terms and conditions. See Section 15 of the Offer to Purchase. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer of Shares pursuant to the Offer. If you wish to have us tender any or all of the Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form contained in this letter. An envelope to return your instruction to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise indicated in such instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and any supplements or amendments thereto. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the securities laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Offeror by BT Alex. Brown Incorporated or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ATC GROUP SERVICES INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated December 4, 1997, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by Acquisition Corp., a Delaware corporation (the "Offeror"), a wholly owned subsidiary of Acquisition Holdings, Inc., a Delaware Corporation, a wholly owned subsidiary of WPG Corporate Development Associates V, L.P., a Delaware limited partnership, to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of ATC Group Services Inc., a Delaware corporation. This will instruct you to tender to the Offeror the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered:* SIGN HERE ------------------------------------- ------------------------------------- Account Number: Signature(s) ------------------------------------- Date: ------------------------------------- (Print Name(s)) Date: ------------------------------------- ------------------------------------- (Print Address(es)) ------------------------------------- (Area Code and Telephone Number(s)) ------------------------------------- (Taxpayer Identification orSocial Security Number(s)) - -------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.(A)(5) 6 NOTICE OF GUARANTEED DELIVERY EXHIBIT (a)(5) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF ATC GROUP SERVICES INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 21, 1998, UNLESS THE OFFER IS EXTENDED. This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for shares of Common Stock, par value $0.01 per share (the "Shares"), of ATC Group Services Inc., a Delaware corporation (the "Company"), are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase). Such form may be delivered by hand, facsimile transmission, or mail to the Depositary. See Section 3 of the Offer to Purchase, dated December 4, 1997 (the "Offer to Purchase"). The Depositary for the Offer is: BANKERS TRUST COMPANY By Mail: By Overnight or Courier By Hand: BT Services Tennessee, BT Services Tennessee, Inc. Bankers Trust Company Inc. Corporate Trust & Agency GroupCorporate Trust & Agency Reorganization Unit Reorganization Unit Group P.O. Box 292737 648 Grassmere Park Road Attn: Reorganization Nashville, Tennessee Nashville, Tennessee 37211 Department 37229-2737 Receipt & Delivery Window 123 Washington Street, 1st Floor New York, New York 10006 Facsimile Transmission Confirm by Telephone: Information: Number: (615) 835-3572 (800) 735-7777 (615) 835-3701 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent's Message and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. Ladies and Gentlemen: The undersigned hereby tenders to Acquisition Corp., a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, and the related Letter of Transmittal, receipt of which are hereby acknowledged, Shares of the Company, pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Number of Shares: ___________________ Certificate No(s). (if available): SIGN HERE _____________________________________ Name(s) _____________________________________ _____________________________________ If securities will be tendered by book-entry transfer__________________ _____________________________________ (Please Print) Name of Tendering Institution: Address: ____________________________ _____________________________________ _____________________________________ (Zip Code) Account Number: __________________ at [_] Bankers Trust Company Area Code and Telephone No.: _____________________________________ Signature(s): _______________________ _____________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees the delivery to the Depositary of the Shares tendered hereby, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile(s) thereof) and any other required documents, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery of Shares, all within three New York Stock Exchange trading days of the date hereof. Name of Firm: _______________________ Title: ______________________________ _____________________________________ Name: _______________________________ (Authorized Signature) (Please Print or Type) Address: ____________________________ Area Code and Telephone No: _________ DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES SHOULD BE SENT WITH LETTER OF TRANSMITTAL Date: , 1997 2 EX-99.(A)(6) 7 IRS GUIDELINES (W-9) EXHIBIT (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. - -------------------------------------------------------------------------------
GIVE THE TAXPAYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- - ---------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals (joint The actual owner account) of the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, committee for a designated ward, or minor, or incompetent person(3) incompetent(3) 7. a. The usual revocable savings trust The grantor- account (grantor is also trustee) trustee(1) b. So-called trust account that is not a The actual legal or valid trust under State law owner(1) 8. Sole proprietorship account The owner(4)
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GIVE THE TAXPAYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- - -------------------------------------------------------------------------------- 9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or educational organization The organization 12. Partnership account held in the name of the business The partnership 13. Association, club, or other tax-exempt organization The organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of Agriculture in the name of The public a public entity (such as a State or local government, entity school district, or prison) that receives agricultural program payments
- ------------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number or employer identification number. (4) Show your individual name. You may also enter your business name. You may use your social security number or employer identification number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Se- curity Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a) of the Internal Reve- nue Code of 1986, as amended (the "Code"), or an individual retirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a) of the Code. . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. . A futures commission merchant registered with the Commodity Futures Trading Commission. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441 of the Code. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to an appropriate nominee. . Section 404(k) payments made by an ESOP. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by indi- viduals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not pro- vided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852 of the Code). . Payments described in section 6049(b)(5) of the Code to non-resident al- iens. . Payments on tax-free covenant bonds under section 1451 of the Code. . Payments made by certain foreign organizations. . Payments of mortgage interest to you. . Payments made to an appropriate nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDEN- TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN EN- TITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, inter- est, or other payments to give correct taxpayer identification numbers to pay- ers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not re- cipients are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a correct taxpayer identification number to a payer. Certain pen- alties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includable payment for interest, dividends, or pat- ronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 20% on any portion of an underpayment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certi- fications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(A)(7) 8 PRESS RELEASE ISSUED BY THE COMPANY 10/17/97 Exhibit (a)(7) [ATC LOGO] FOR IMMEDIATE RELEASE - --------------------- Company Contact NASDAQ: Symbol - --------------- -------------- Morry F. Rubin Common Stock - ATCS President and Chief Executive Officer Class C Warrants - ATCSL ATC Group Services, Inc. Tel: (212) 353-8280 Fax: (212) 598-4283 ATC GROUP SERVICES INC. NEW YORK, NY, OCTOBER 17, 1997. ATC Group Services, Inc., (NASDAQ-NMS: "ATCS"), announced today that it had received an offer for the acquisition of the company at $12 per share from a group lead by senior members of management and a financial investor group, WPG Corporate Development Associates V, L.P., an affiliate of Weiss, Peck & Greer, L.L.C. The offer is supported by ATC shareholders who hold in the aggregate approximately 28% of the outstanding common stock of ATC on a fully diluted basis. The Company said that its board will form a special committee of independent directors to consider the proposed transactions. The offer contemplates a cash tender offer for all outstanding shares of ATC common stock followed by a second-step merger with an acquisition corporation. The tender offer is conditioned, among other things, on obtaining financing, as is customary for transactions of this nature, and a minimum of 50.1% of the outstanding ATC shares being tendered. The offer is supported by a "highly confident" letter from a nationally recognized financing institution. ATC is a specialized national provider of technical and project management services to a large, diverse customer base of Fortune 500 corporations, other businesses and federal, state, and government agencies. The Company's technical and project management services consist primarily of environmental and consulting engineering services and information technology services. Weiss, Peck & Greer, L.L.C. is a private investment firm, founded in 1970, which manages in excess of $14 billion in public equities and fixed-income securities for institutional and individual clients worldwide. In addition to its money management activities, the firm has a twenty-seven year history as an investor of equity capital in over 200 venture capital and private equity transactions. Investments of the Private Equity Group are made through a $230 million fund of committed capital, WPG Corporate Development Associates V, L.P. 104 E. 25th St., Tenth Floor . New York, NY 10010 . (212) 353-8280 . FAX (212) 353-8306 EX-99.(A)(8) 9 PRESS RELEASE BY THE CO. & WEISS, PECK 11/28/97 EXHIBIT (a)(8) FOR IMMEDIATE RELEASE - --------------------- ATC Group Services Inc. Contact - ------------------------------- Morry F. Rubin President and Chief Executive Officer ATC Group Services Inc. Tel: (212) 353-8220 Weiss, Peck & Greer Contact NASDAQ:SYMBOL - --------------------------- ------------- Daniel H. Burch Common Stock - ATCS President Class C Warrants - ATCSL MacKenzie Partners, Inc. Tel: (212) 929-5748 ATC GROUP SERVICES INC. WEISS, PECK & GREER, L.L.C. NEW YORK, NY, November 28, 1997. ATC Group Services Inc., (NASDAQ-NMS: "ATCS"), announced today that it had entered into a definitive agreement with a group led by senior members of management and a financial investor group, WPG Corporate Development Associates V, L.P., an affiliate of Weiss, Peck & Greer, L.L.C. to merge in an all-cash transaction valued at approximately $150 million, including assumed debt of ATC. WPG Corporate Development Associates V, L.P., through an indirect subsidiary, will commence an all-cash tender offer for all outstanding shares of ATC Group Services Inc. at a price of $12 per share, to be followed by a second-step merger with an acquisition corporation. A special committee established by the Board of Directors of ATC to consider the offer has been advised by Lehman Brothers Inc. that the transaction is fair to ATC's stockholders from a financial point of view. The offer is supported by ATC stockholders who hold in the aggregate approximately 24% of the outstanding common stock of ATC on a fully diluted basis. The expiration date of the tender offer is to be January 21, 1998, unless extended pursuant to the terms of the offer. The tender offer is conditioned, among other things, on obtaining financing, a minimum of 50.1% of the outstanding ATC shares being tendered and the expiration of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, related to the acquisition. The offer is supported by a "highly confident" letter supporting the placement by BT Alex. Brown incorporated of up to $100 million of senior subordinated notes and a commitment letter from Bankers Trust Company with respect to a loan of up to $50 million of senior secured debt. ATC is a specialized national provider of technical and project management services to a large, diverse customer base of Fortune 500 corporations, other businesses and federal, state, and government agencies. The company's technical and project management services consist primarily of environmental and consulting engineering services and information technology services. Weiss, Peck & Greer, L.L.C. is a private investment firm, founded in 1970, which manages in excess of $14 billion in public equities and fixed-income securities for institutional and individual clients worldwide. In addition to its money management activities, the firm has a twenty-seven year history as an investor of equity capital in over 200 venture capital and private equity transactions. Investments of the private equity group are made through a $230 million fund of committed capital, WPG Corporate Development Associates V, L.P. 2 EX-99.(B)(1) 10 HIGHLY CONFIDENT LETTER DATED 11/25/97 EXHIBIT (b)(1) BT ALEX. BROWN INCORPORATED 130 LIBERTY STREET NEW YORK, NEW YORK 10006 November 25, 1997 Weiss, Peck & Greer, L.L.C. One New York Plaza New York, NY 10004 Attention: Mr. Steven N. Hutchinson Principal Gentlemen: You have advised BT Alex. Brown Incorporated ("BTAB") of your intention to enter into a transaction (the "Transaction") in which a company ("Newco") formed by you would acquire all of the outstanding capital stock or all or substantially all of the assets of ATC Group Services Inc. (the "Acquired Business"). You have asked us to assist you in raising a portion of the funds required to consummate the Transaction through the sale or placement of senior subordinated debt securities (the "Notes") to be issued by Newco and the arrangement of senior bank financing (the "Bank Debt", and together with the Notes, the "Acquisition Financing"). The aggregate principal amount of Acquisition Financing to be funded on the closing of the Transaction will be approximately $125 million, with undrawn revolving debt capacity of approximately $25 million. We understand that the cash proceeds to be paid to the sellers of the Acquired Business in connection with the Transaction will be approximately $103.1 million and the total amount of funds necessary to effect the Transaction, to refinance existing debt of the Acquired Business and to pay all fees and expenses incurred in connection therewith will be provided through (i) the Acquisition Financing, (ii) at least $25,000,000 from the issuance of capital stock of Newco and (iii) at least $2,500,000 of equity contributed by management. It is our understanding that other than the Acquisition Financing, Newco will have no other indebtedness for money borrowed after giving effect to the consummation of the Transaction. We are pleased to inform you that, based upon our understanding of the Transaction as summarized above and current -2- market conditions and subject to the conditions set forth below, we are highly confident of our ability to sell or place the Notes and arrange the Bank Debt, in each case in connection with the Transaction. The structure, covenants and terms of the Acquisition Financing will be as determined by BTAB in consultation with you, on terms mutually acceptable to both parties based on market conditions at the time of the sale or placement and on the structure and documentation of the Transaction. Our confidence in our ability to consummate the sale, placement or arrangement of the Acquisition Financing is subject to (i) there not having occurred any material adverse change in the financial condition, results of operations, business or prospects of the Acquired Business since February 28, 1997, (ii) there not existing any pending or threatened claim, suit or proceeding by any governmental or regulatory authority which BTAB shall reasonably determine could have a materially adverse effect on the business, property, assets, liabilities, condition (financial or otherwise) or prospects of Newco or the Acquired Business, (iii) the receipt of all necessary governmental, regulatory or third party approvals or consents in connection with the Transaction, (iv) the execution and delivery of documentation for the Transaction and related transactions in form and substance reasonably satisfactory to BTAB and such documentation being in full force and effect, (v) agreement on the terms of the Notes and negotiation and execution of satisfactory documentation with respect to the Notes and the offering and sale thereof, (vi) the terms and structure of the Bank Debt being reasonably acceptable to BTAB (including but not limited to the availability of working capital borrowing in a satisfactory amount) and the execution of documentation relating thereto reasonably satisfactory in form and substance to BTAB, (vii) BTAB and its representatives shall have completed and be satisfied with the results of its continuing financial, business, environmental and legal due diligence, (viii) the receipt and review (to our reasonable satisfaction) of independent third party reports as to certain matters customarily so reported upon in transactions of this type, including, without limitation, solvency, (ix) the availability of audited and unaudited historical and pro forma financial statements of the Acquired Business, in each case reasonably acceptable to BTAB and in form and presentation as required by the Securities Act of 1933, as amended, and the rules and regulations thereunder applicable to registration statements filed thereunder, (x) no change or proposed change in law having occurred that could reasonably be expected to adversely affect in a material way the economic consequences that Newco or its stockholders contemplate deriving from, or with respect to, the Transaction, (xi) there not having been any disruption or material adverse -3- change in the market for new issues of high yield securities or the financial or capital markets in general, in the judgment of BTAB and (xii) BTAB having a reasonable time to market the Notes and arrange the Bank Debt based on BTAB's experience in comparable transactions. This letter is not intended to be and should not be construed as a commitment with respect to the underwriting, sale or placement of the Acquisition Financing. Except as otherwise required by law or unless BTAB has otherwise consented in writing, you are not authorized to show or circulate this letter to any other person or entity (other than your legal or financial advisors in connection with your evaluation hereof and the sellers of the Acquired Business and its legal and financial advisors). If this letter is not accepted by you by 5:00 p.m. on November 26, 1997 you are to immediately return this letter (and any copies hereof) to the undersigned. Very truly yours, BT ALEX. BROWN INCORPORATED By: /s/ Daniel D. McCready ------------------------- Name: Daniel D. McCready Title: Vice President AGREED TO AND ACCEPTED as of the date first written above: WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. BY WPG PRIVATE EQUITY PARTNERS II, L.L.C., ITS GENERAL PARTNER By: /s/ Steven N. Hutchinson --------------------------- NAME: Steven N. Hutchinson TITLE: Managing Member EX-99.(B)(2) 11 COMMITMENT LETTER DATED 11/26/97 EXHIBIT (b)(2) BANKERS TRUST COMPANY 130 LIBERTY STREET NEW YORK, NEW YORK 10006 November 26, 1997 WPG Corporate Development Associates V, L.P. c/o Weiss, Peck & Greer, L.L.C. One New York Plaza New York, New York 10004 Attention: Steven N. Hutchinson, Principal re Bank Commitment Letter - ------------------------- Gentlemen: You have advised Bankers Trust Company ("BTCo") that (i) Weiss, Peck & Greer, L.L.C. ("WPG") is considering a negotiated acquisition pursuant to which Acquisition Holdings, Inc. ("Holdings"), a company formed by WPG Corporate Development Associates V, L.P. ("WPG Corporate Development") and other investors reasonably acceptable to BTCo would acquire, through Acquisition Corp. ("Acquisition Corp."), a newly-formed wholly-owned subsidiary of Holdings, all of the issued and outstanding shares of common stock (the "Shares") of ATC Group Services Inc. ("ATC") by way of (x) a cash tender offer for any and all of the Shares, subject to the minimum tender condition referenced in the summary of terms below (the "Tender Offer"), and (y) as soon as practicable after the purchase of the Shares pursuant to the Tender Offer, a merger of Acquisition Corp. and ATC (the "Merger" and, together with the Tender Offer, the "Acquisition"), with ATC as the surviving corporation of the Merger, and (ii) concurrently with the consummation of the Merger, ATC will effect a refinancing of $42.0 million of existing debt of ATC and its subsidiaries (the "Refinancing," and together with the Acquisition and the incurrence of the financing described below, the "Transaction"). BTCo understands that the purchase price in respect of the Acquisition will be $104 million (net of cash proceeds received from the exercise of options and warrants) and that the fees and expenses incurred in connection with the Transaction will not exceed $10 million. BTCo further understands that the funding needed to effect the Acquisition and the Refinancing, to pay fees and expenses owing in connection with the Transaction and to provide working capital to ATC and its subsidiaries shall be provided solely as follows: (i) the issuance by Acquisition Corp. of unsecured senior subordinated notes (the "Senior Subordinated Notes"), which shall generate $100 million of gross cash proceeds, (ii) an equity contribution (the "Equity Funds") by WPG Corporate Development and existing management of ATC consisting of $25 million of new cash common equity by WPG and/or its affiliates and an equity investment by management of ATC of $2.5 million of common equity and (iii) the incurrence by ATC of the Senior Secured Financing as defined below. BTCo further understands that the senior bank financing (the "Senior Secured Financing") will be in the form of (i) a term loan facility (the "Term Loan Facility") in the amount of $20 million to be made available to ATC on the date of the consummation of the Merger (the "Closing Date") to effect the Refinancing and (ii) a revolving credit facility (the "Revolving Credit Facility", and together with the Term Loan Facility, the "Credit Facilities") in the amount of $30 million to be made available to ATC from and after the Closing Date (it being understood that no more than $9 million of the Revolving Credit Facility may be utilized to make payments owing in connection with the Refinancing and that no portion of the Revolving Credit Facility may be utilized to effect the Acquisition), as more fully described below. BTCo is pleased to confirm that it is committed to provide, on, and subject to, the terms and conditions set forth herein, all of the Senior Secured Financing. If BTCo discovers information not previously known to it which BTCo reasonably believes is materially negative information with respect to the Transaction or the condition (financial or otherwise), business, operations, assets, liabilities or prospects of Holdings, Acquisition Corp., ATC or any of their subsidiaries, BTCo may, in its sole discretion, suggest alternative financing amounts or structures that assure adequate protection for it or decline to provide or participate in the proposed financing. BTCo reserves the right, prior to or after execution of the definitive credit documentation for the Credit Facilities, to syndicate all or part of its commitment for the Credit Facilities to one or more financial institutions reasonably acceptable to you (together with BTCo, the "Banks") that will become parties to such definitive credit documentation pursuant to a syndication to be managed by BTCo as agent (the "Agent"). Such syndication will be accomplished by a variety of means, including direct contact during the syndication between senior management and advisors of WPG, ATC and its subsidiaries and the proposed syndicate members. To assist us in our syndication efforts, you hereby agree (a) to provide to us and the other syndicate members upon request with all reasonable information reasonably deemed necessary by us to complete syndication, including, but not limited to, information and evaluations prepared by WPG, ATC or its subsidiaries or on their behalf relating to the transactions contemplated hereby and (b) to assist us upon request in the preparation of an Information Memorandum to be used in connection with the syndication of the Senior Secured Financing, including making available, upon reasonable advance notice, the officers of WPG, ATC and its subsidiaries from time to time and to attend and make presentations regarding the business and prospects of ATC and its subsidiaries, as -2- appropriate, at a meeting or meetings of Banks or prospective Banks. We will provide you with a copy of the Information Memorandum for your review prior to the distribu tion thereof to prospective Banks. Certain of the terms of the Credit Facilities are set forth below: SUMMARY OF CERTAIN TERMS ------------------------ I. DESCRIPTION OF CREDIT FACILITIES -------------------------------- A. TERM LOAN FACILITY ------------------ AMOUNT: $20 million Term Loan Facility. MATURITY: The Term Loan Facility will mature on the fifth anniversary of the Closing Date. AMORTIZATIONS: The loans under the Term Loan Facility (the "Term Loans") shall amortize quarterly in amounts to be determined. USE OF PROCEEDS: The Term Loans shall only be utilized (x) to finance the Refinancing and (y) to pay fees and expenses incurred in connection with the Credit Facilities. AVAILABILITY: Term Loans may only be incurred on the Closing Date. No amount of Term Loans once repaid may be reborrowed. B. Revolving Credit Facility ------------------------- AMOUNT: $30 million Revolving Credit Facility, with a letter of credit sublimit to be agreed upon for the issuance of standby letters of credit (the "Letters of Credit"). MATURITY: The final maturity of the Revolving Credit Facility shall be five years from the Closing Date, with all of the loans made pursuant to the Revolving Credit Facility (the "Revolving Loans", and together with the Term Loans, the "Loans") to be repaid as a bullet on such date and all Letters of Credit to terminate by such date. -3- USE OF PROCEEDS: Revolving Loans shall be utilized for the Borrower's and its subsidiaries' working capital and general corporate purposes (including permitted acquisitions), provided that up to $9 million of Revolving Loans may be used to finance the Refinancing and to pay fees and expenses incurred in connection with the Credit Facilities. AVAILABILITY: Revolving Loans may be borrowed, repaid and reborrowed on or after the Closing Date. II. TERMS APPLICABLE TO THE ENTIRE SENIOR SECURED FINANCING ------------------------------------------------------- AGENT: Bankers Trust Company ("BTCo"). LENDERS: BTCo and/or a syndicate of lenders formed by BTCo and reasonably acceptable to the Borrower (the "Banks"). BORROWER: ATC. GUARANTIES: Holdings and each direct and indirect subsidiary of the Borrower (each a "Guarantor") shall be required to pro vide unconditional guaranties of all amounts owing under the Credit Facilities (the "Guaranties"). SECURITY: The Credit Facilities (and all obligations under the Guaranties) will be secured by (i) a first priority perfected pledge of (x) all notes owned by the Borrower and the Guarantors and (y) all capital stock owned by the Borrower and the Guarantors (excluding all Shares purchased pursuant to the Tender Offer, it being understood, however, that all shares of capital stock of the Borrower shall be required to be pledged only from and after the consummation of the Merger) and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, inventory, equipment, real estate, copyrights, patents and trademarks) owned by the Borrower and the Guarantors, subject to (i) customary exceptions for transactions of this type, (ii) the existing junior and subordinated security interest in favor of American Testing and Engineering Corporation and (iii) such other exceptions as are reasonably acceptable to BTCo. INTEREST RATES: At the Borrower's option, Loans may be maintained from -4- time to time as (x) Base Rate Loans which shall bear interest at the Applicable Margin plus the Base Rate in effect from time to time or (y) Reserve Adjusted Eurodollar Loans which shall bear interest at the Applicable Margin plus the Eurodollar Rate (adjusted for maximum reserves) as determined by the Agent for the respective interest period. "Base Rate" shall mean the higher of (x) the rate that BTCo announces from time to time as its prime lending rate, as in effect from time to time and (y) 1/2 of 1% in excess of the overnight federal funds rate. "Applicable Margin" shall mean a percentage per annum equal to (i) in the case of Base Rate Loans, 1.25% and (ii) in the case of Reserve Adjusted Eurodollar Loans, 2.25%. The Applicable Margin shall be adjusted on a quarterly basis based on a leverage formula to be agreed upon. Interest periods of 1, 2, 3 and 6 months shall be available in the case of Reserve Adjusted Eurodollar Loans. The Credit Facilities shall include customary protective provisions for such matters as defaulting banks, capital adequacy, increased costs, funding losses, illegality and withholding taxes. Interest in respect of Base Rate Loans shall be payable quarterly in arrears on the last business day of each quarter. Interest in respect of Reserve Adjusted Eurodollar Loans shall be payable in arrears at the end of the applicable interest period and every three months in the case of interest periods in excess of three months. Interest will also be payable at the time of repayment of any Loans and at maturity. All interest and commitment fees and other fee calculations shall be based on a 360-day year and actual days elapsed, provided that interest on Base Rate Loans shall be calculated on a 365/366 day year and actual days elapsed. Overdue principal, interest and other overdue amounts shall bear interest at a rate per annum equal to the greater of (i) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans from time to time and (ii) the rate which is 2% in excess of the rate then borne by such borrowings. Such interest shall be payable on demand. -5- VOLUNTARY PREPAYMENTS AND COMMITMENT REDUCTIONS: Voluntary prepayments of Loans under the Credit Facilities, and voluntary reductions to the unutilized por tion of the Revolving Credit Facility, may be made by the Borrower at any time without premium or penalty, provided that voluntary prepayments of Reserve Adjusted Eurodollar Loans made on any day other than the last day of an interest period applicable thereto shall be accompanied by customary breakage costs. MANDATORY REPAYMENTS AND COMMITMENT REDUC- TIONS: Mandatory repayments of Term Loans (and after all Term Loans have been repaid in full, mandatory commitment reductions to the Revolving Credit Facility) shall be required with (i) 100% of the net proceeds from asset dispositions, (ii) 100% of the net proceeds of issuances of indebtedness, (iii) 100% of the net proceeds from insurance recovery and condemnation events, (iv) 50% of the net proceeds from equity issuances and capital contributions and (v) 75% of annual excess cash flow in respect of the first year of the Credit Facilities and 50% of annual excess cash flow for each year thereafter, in each case with customary exceptions to be agreed upon. In addition, Revolving Loans shall be required to be prepaid (and Letters of Credit cash collateralized) if at any time the aggregate principal amount thereof exceeds the total Revolving Credit Facility commitments, with such prepayment (and/or cash collateralization) to be in an amount equal to such excess. All voluntary and mandatory prepayments and repayments of Term Loans will be applied to reduce future scheduled amortization payments on a pro rata basis (after giving --- ---- effect to all prior reductions thereto). AGENT/LENDER FEES: The Agent and the Banks shall receive such fees as have been separately agreed upon with the Borrower. COMMITMENT FEES: 1/2 of 1% per annum of the unutilized total commitment under the Revolving Credit Facility, as in effect from time to time, commencing on the Closing Date to and including the termination of the Revolving Credit Facility and -6- payable quarterly in arrears and upon the termination of the Revolving Credit Facility; provided that such commitment fee -------- may be adjusted on a quarterly basis based on a leverage formula to be agreed upon. LETTER OF CREDIT FEES: Applicable Margin for Loans maintained as Reserve Adjusted Eurodollar Loans on the outstanding stated amounts of Letters of Credit, plus a facing fee for the account of the letter of credit issuer of 1/4 of 1% on such outstanding stated amounts. ASSIGNMENTS AND PARTICIPATIONS: The Borrower may not assign its rights or obligations under the Credit Facilities without the prior written consent of the Banks. Any Bank may assign, and may sell participations in, its rights and obligations under the Credit Facilities, subject (x) in the case of participations, to customary restrictions on voting rights of the participants and (y) in the case of assignments, to such limitations as may be established by BTCo, including the consent of the Agent and, so long as no payment or bankruptcy default then exists, and no event of default then exists, in each case under the Credit Facilities, the consent of the Borrower (each of which consents shall not be unreasonably withheld or delayed). COMMITMENT TERMINA- TION: All commitments under the Credit Facilities shall terminate on February 28, 1998 unless (i) definitive documents for the Credit Facilities have been executed and delivered and (ii) the Transaction has been consummated. In addition, unless otherwise consented to by the Banks holding a majority of the Revolving Credit Facility commitments and outstanding Term Loans (the "Required Banks"), all Loans shall be required to be repaid in full, and all commitments under the Revolving Credit Facility shall terminate, upon the occurrence of a change of control of Holdings, Acquisition Corp. or the Borrower (to be defined in a manner satisfactory to BTCo). DOCUMENTATION: The Banks' commitments for the Senior Secured Financing will be subject to the negotiation, execution and delivery of definitive financing agreements (and related security documentation, Guaranties, etc.) consistent with -7- the terms of this letter, in each case prepared by White & Case. All documentation (except security documentation that BTCo determines should be governed by local law) shall be governed by New York law. CONDITIONS PRECEDENT: In addition to conditions precedent typical for these types of credit facilities and any other conditions appropriate in the context of the proposed transaction, the following conditions precedent shall apply: A. TO THE INITIAL LOANS -------------------- (i) The Tender Offer and the Merger shall be made as contemplated by the Merger Agreement to be entered into by and between Acquisition Corp. and ATC prior to the Closing Date (the "Merger Agreement") and all documentation therefor (and the terms thereof) shall be reasonably satisfactory to the Agent and the Required Banks. All material conditions to the consummation of the Tender Offer and the Merger as provided in the Merger Agree ment and the other documents related thereto shall be satisfied and not waived except with the consent of the Agent and the Required Banks (which consent shall not be unreasonably withheld or delayed). Each State anti-takeover law, if any, regulating the Tender Offer or the Merger shall have been complied with or shall be inapplicable to the Tender Offer and the Merger. At the time of the consummation of the Tender Offer, no fair price provisions nor provisions of ATC's charter shall require a higher price to be paid for each Share in the Merger than in the Tender Offer. ATC shareholders rights program, if any, shall have been revoked or shall be inapplicable to the Tender Offer and the Merger. Each component of the Transaction shall have been consummated in all material respects in accordance with the documentation therefor and all applicable law. (ii) Holdings shall have received gross cash proceeds of at least $27.5 million from the Equity Funds (of which $2.5 million may be in the form of rollover equity by existing management of ATC). The terms and conditions of the capital stock of Holdings and -8- Acquisition Corp. issued in connection with the Equity Funds shall be reasonably satisfactory to the Agent and the Required Banks. Additionally, Holdings shall have contributed all of the cash proceeds of the Equity Funds to the capital of Acquisition Corp. in return for 100% of the shares of common stock of Acquisition Corp. (iii) Acquisition Corp. shall have received gross cash proceeds of $100 million from the issuance of a like principal amount of Senior Subordinated Notes. The Senior Subordinated Notes shall be unsecured. All terms and conditions (and the documentation) of the Senior Subordinated Notes (including, without limitation, amortization, maturities, interest rates, covenants, defaults, remedies, sinking fund provi sions, subordination provisions and limitations on cash interest payable) shall be reasonably satisfactory to the Agent and the Required Banks. (iv) All necessary governmental (domestic and foreign) and third party approvals in connection with the Transaction, the transactions contemplated by the Credit Facilities and otherwise referred to herein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents, or imposes materially adverse conditions upon, the consummation of the Transaction or the transactions contemplated by the Credit Facilities. Additionally, there shall not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon the Transaction or the transactions contemplated by the Credit Facilities. (v) The Agent shall have received an opinion from an independent valuation firm, in form and substance reasonably acceptable to the Agent and the Required Banks, setting forth the conclusions that, after giving effect to the Transaction and the incurrence of all the financings contemplated herein, Holdings and its subsidiaries, Acquisition Corp. and its subsidiaries and ATC and its subsidiaries, each taken as a whole, are not insolvent and will not be -9- rendered insolvent by the indebtedness incurred in connection therewith, and will not be left with unreasonably small capital with which to engage in their businesses and will not have incurred debts beyond their ability to pay such debts as they mature. (vi) Each of the Guaranties shall have been executed and delivered. The security agreements required as described under the heading "Security" above, shall have been executed and delivered, and the Banks shall have a first priority perfected security interest in all assets of the Borrower and the Guarantors as required above subject to customary permitted liens and other permitted liens as discussed above. (vii) After giving effect to the Transaction (including the Refinancing) and the financings incurred in connection therewith, Holdings and its subsidiaries shall have no outstanding indebtedness or preferred stock other than (i) the Senior Secured Financing, (ii) the Senior Subordinated Notes, (iii) up to approximately $6.5 million of seller notes, (iv) up to approximately $2 million of capitalized lease obligations, (v) up to approximately $505,000 of letters of credit, (vi) up to approximately $3.3 million of severance, non-compete and consulting payments payable as part of the Acquisition and (vii) such other indebtedness, if any, as is acceptable to the Agent and the Required Banks. (viii) No litigation by any entity (private or governmental) shall be pending or threatened with respect to the Transaction or the Credit Facilities or any documentation executed in connection therewith, or which the Agent or the Required Banks shall determine could reasonably be expected to have a materially adverse effect on the Transaction or on the business, property, assets, operations, liabilities, condition (financial or otherwise) or prospects of Holdings, Acquisition Corp., ATC or ATC and its subsidiaries taken as a whole. (ix) Nothing shall have occurred (and neither the Agent nor the Banks shall have become aware of any fact -10- or event not previously known) which the Agent or the Required Banks shall determine has had, or could reasonably be expected to have, a material adverse effect on the rights or remedies of the Agent or the Banks, or on the ability of Holdings or any of its subsidiaries to perform their obligations to the Agent or the Banks or which has had, or could reasonably be expected to have, a materially adverse effect on the business, property, assets, operations, liabilities, condition (financial or otherwise) or prospects of Holdings, Acquisition Corp., ATC or ATC and its subsidiaries taken as a whole. (x) There shall not have occurred and be continuing a disruption of, or an adverse change in, financial, banking or capital markets that would have a material adverse effect on the syndication of the Credit Facilities, in each case as determined by the Agent in its reasonable discretion. (xi) The Agent shall have received customary legal opinions from counsel, and covering matters, reasonably acceptable to the Agent and the Required Banks. (xii) All Loans and other financing to Holdings and its subsidiaries (including Acquisition Corp. and ATC) shall be in full compliance with all applicable requirements of the margin regulations. (xiii) The Agent and the Banks shall have completed their business, accounting, financial and legal due diligence analysis and review of the Transaction and of Holdings, Acquisition Corp., ATC and their subsidiaries and shall be satisfied with the results thereof. (xiv) The Agent shall have received, and the Agent and the Required Banks shall be satisfied with, an opening pro --- forma balance sheet and income statement of Holdings and ----- its subsidiaries, after giving effect to the Transaction. In addition, the Agent and the Required Banks shall be satisfied that, as of the Closing Date, ATC's pro forma consolidated adjusted EBITDA for the --- ----- twelve month -11- period ending February 28, 1997 is at least $25.0 million (with such pro forma consolidated adjusted --- ----- EBITDA to include any acquisitions consummated by ATC on or prior to the Closing Date). (xv) All costs, fees, expenses (including, without limitation, legal fees and expenses) and other compensation contemplated hereby payable to the Agent or the Banks shall have been paid to the extent due. B. CONDITIONS TO ALL LOANS ----------------------- Absence of any default or event of default under the Credit Facilities and continued material accuracy of representations and warranties. REPRESENTATIONS WARRANTIES: The Credit Facilities and related documentation shall contain representations and warranties typical for this type of facility, as well as any additional ones appropriate in the context of the proposed transaction. COVENANTS: "Special Purpose Company" covenants shall apply at all times to Holdings and, prior to the Merger, Acquisition Corp., and those typical for this type of facility shall apply to ATC and its subsidiaries and any additional covenants appropriate in the context of the proposed transaction. Although the covenants have not yet been specifically determined, we anticipate that the covenants shall in any event include: (i) Restrictions on other indebtedness. (ii) Restrictions against mergers, consolidations and acquisitions and dispositions of assets. (iii) Restrictions on sale-leaseback transactions and lease payments. (iv) Restrictions on dividends. (v) Restrictions on voluntary prepayments of other debt and amendments thereto. -12- (vi) Restrictions on transactions with affiliates and formation of subsidiaries. (vii) Restrictions on investments, joint ventures and partnerships. (viii) Restrictions on liens. (ix) Various financial covenants customary for a transaction of this type. (x) Adequate insurance coverage. (xi) ERISA covenants. (xii) Limitations on capital expenditures. (xiii) Restrictions on material amendments of organization documents. EVENTS OF DEFAULT: Those typical for this type of facility and any additional ones appropriate in the context of the proposed transaction, including, without limitation, a default in the event of a change of control of Holdings, Acquisition Corp. or ATC. You hereby agree to pay all reasonable costs and expenses (including the reasonable fees and expenses of White & Case and local counsel and BTCo's reasonable out-of-pocket expenses) arising in connection with the preparation, execution and delivery of this letter and the definitive financing agreements (and BTCo's due diligence and syndication efforts in connection therewith), whether or not the Transaction is consummated, the Credit Facilities are made available or definitive credit documents are executed. In addition, you hereby agree to pay when and as due the fees described in the enclosed fee letter (the "Fee Letter"). You further agree to indemnify and hold harmless each of the Banks (including in any event BTCo), each affiliate thereof and each director, officer, employee, agent or representative thereof (each an "indemnified person") in connection with any losses, claims, damages, liabilities or other reasonable expenses (whether asserted by you or any third party) to which such indemnified persons may become subject, insofar as such losses, claims, damages, liabilities (or actions or other proceedings commenced or threatened in respect thereof) or other expenses arise out of or in any way relate to or result from the Transaction or this letter or the extension of the Senior Secured Financing contemplated by this letter, or in any way arise from any use or intended use of this letter or the proceeds of any of the Senior Secured Financing contemplated by this letter, and you agree to reimburse each -13- indemnified person for any reasonable legal or other expenses incurred in connection with investigating, defending or participating in any such loss, claim, damage, liability or action or other proceeding (whether or not such indemnified person is a party to any action or proceeding out of which indemnified expenses arise), provided that you shall have no obligation hereunder to indemnify any indemnified person for any loss, claim, damage, liability or expense to the extent that same resulted primarily from the gross negligence or willful misconduct of such indemnified person. This letter is furnished for your benefit only, and may not be relied upon by any other person or entity. Neither BTCo nor any of the Banks shall be responsible or liable to you or any other person for consequential damages which may be alleged as a result of this letter. BTCo reserves the right to employ the services of its affiliates, including BT Alex. Brown Incorporated ("BTAB"), in providing the services contemplated by this letter and to allocate, in whole or in part, to such affiliates (including BTAB) certain fees payable to BTCo in such manner as BTCo and its affiliates (including BTAB) may agree in their sole discretion. You acknowledge that BTCo may share with any of its affiliates (including BTAB), and such affiliates may share with BTCo, any information relating to Holdings, Acquisition Corp., ATC or any of their subsidiaries (including, without limitation, any non-public information regarding the creditworthiness of Holdings, Acquisition Corp., ATC or any of their subsidiaries) or the Transaction. BTCo agrees to treat, and cause any such affiliate to treat, all non-public information provided to it by you and identified as confidential, as confidential information in accordance with the terms and conditions of the confidentiality letter dated November 11, 1997 between BTCo and the Borrower. The provisions of the immediately preceding two paragraphs shall survive any termination of this letter; provided, however, that upon the execution, delivery and effectiveness of definitive documentation for the Senior Secured Financing, you shall be released from all obligations under this letter. THIS LETTER AND THE FEE LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND ANY RIGHT TO TRAIL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS LETTER AND/OR THE FEE LETTER IS HEREBY WAIVED. THE PARTIES HERETO HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS LETTER AND/OR THE FEE LETTER OR ANY MATTERS CONTEMPLATED HEREBY OR THEREBY. If you are in agreement with the foregoing, please sign and return to BTCo the enclosed copy of this letter, together with an executed copy of the Fee Letter. This offer shall terminate at 5:30 P.M., New York time, on December 1, 1997 unless a signed copy of this letter and the Fee Letter have been delivered to us (including by way -14- of telecopier) by such time. -15- You are not authorized to show or circulate this letter or to disclose the terms hereof to any other person or entity (other than to your legal and financial advisors in connection with your evaluation hereof) without our prior consent until such time as you have accepted this letter as provided in the immediately preceding paragraph. If this letter is not accepted by you as provided in the immediately preceding paragraph, you are directed to immediately return this letter (and any copies hereof) to the undersigned. Very truly yours, BANKERS TRUST COMPANY By /s/ Victoria T. Page ----------------------------- Name: Victoria T. Page Title: Managing Director Agreed to and Accepted this 26th day of November, 1997. WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P. By: WPG Private Equity Partners II, L.L.C., its general partner By: /s/ Steven N. Hutchinson --------------------------- NAME: Steven N. Hutchinson TITLE: Managing Member -16- EX-99.(C)(1) 12 AGREEMENT & PLAN OF MERGER DATED 11/26/97 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT (c)(1) AGREEMENT AND PLAN OF MERGER AMONG ACQUISITION HOLDINGS, INC., ACQUISITION CORP. AND ATC GROUP SERVICES INC. DATED AS OF NOVEMBER 26, 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE I THE OFFER............................................... 1 Section 1.01. The Offer............................................... 1 Section 1.02. Company Actions......................................... 2 ARTICLE II THE MERGER.............................................. 4 Section 2.01. The Merger.............................................. 4 Section 2.02. Closing................................................. 4 Section 2.03. Effective Time.......................................... 4 Section 2.04. Effects of the Merger................................... 4 Section 2.05. Certificate of Incorporation and By-laws................ 4 Section 2.06. Directors............................................... 4 Section 2.07. Officers................................................ 4 ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES...... 5 Section 3.01. Effect on Capital Stock................................. 5 Section 3.02. Exchange of Certificates................................ 5 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY........... 6 Section 4.01. Organization............................................ 7 Section 4.02. Subsidiaries............................................ 7 Section 4.03. Capitalization.......................................... 7 Section 4.04. Authority............................................... 7 Section 4.05. Consents and Approvals; No Violations................... 8 Section 4.06. SEC Reports and Financial Statements.................... 8 Section 4.07. Absence of Certain Changes or Events.................... 9 Section 4.08. No Undisclosed Liabilities.............................. 9 Section 4.09. Information Supplied.................................... 10 Section 4.10. Benefit Plans........................................... 10 Section 4.11. Other Compensation Arrangements......................... 11 Section 4.12. Litigation.............................................. 11 Section 4.13. Compliance with Applicable Law.......................... 11 Section 4.14. Tax Matters............................................. 12 Section 4.15. State Takeover Statutes................................. 13 Section 4.16. Brokers; Fees and Expenses.............................. 13 Section 4.17. Opinion of Financial Advisor............................ 13 Section 4.18. Intellectual Property................................... 13 Section 4.19. Labor Relations and Employment.......................... 13 Section 4.20. Change of Control....................................... 14 Section 4.21. Environmental Matters................................... 14 Section 4.22. Material Contracts...................................... 16 Section 4.23. Property................................................ 16 Section 4.24. Insurance............................................... 17 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........ 17 Section 5.01. Organization............................................ 17 Section 5.02. Authority............................................... 17 Section 5.03. Consents and Approvals; No Violations................... 17 Section 5.04. Information Supplied.................................... 18 Section 5.05. Interim Operations of Sub............................... 18
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PAGE ---- Section 5.06. Financing............................................... 18 Section 5.07. Brokers................................................. 18 ARTICLE VI COVENANTS............................................... 18 Section 6.01. Conduct of Business of the Company...................... 18 Section 6.02. No Solicitation......................................... 20 Section 6.03. Other Actions........................................... 21 Section 6.04. Notice of Certain Events................................ 21 ARTICLE VII ADDITIONAL AGREEMENTS................................... 21 Section 7.01. Stockholder Approval; Preparation of Proxy Statement.... 21 Section 7.02. Access to Information................................... 22 Section 7.03. Reasonable Efforts; Financing........................... 22 Section 7.04. Options; Warrants....................................... 22 Section 7.05. Directors............................................... 24 Section 7.06. Fees and Expenses....................................... 24 Section 7.07. Indemnification; Insurance.............................. 24 Section 7.08. Certain Litigation...................................... 26 Section 7.09. Solvency Opinion........................................ 26 ARTICLE VIII CONDITIONS.............................................. 26 Conditions to Each Party's Obligation To Effect the Section 8.01. Merger.................................................. 26 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER....................... 27 Section 9.01. Termination............................................. 27 Section 9.02. Effect of Termination................................... 28 Section 9.03. Amendment............................................... 28 Section 9.04. Extension; Waiver....................................... 28 ARTICLE X MISCELLANEOUS........................................... 28 Section 10.01. Nonsurvival of Representations and Warranties........... 28 Section 10.02. Notices................................................. 28 Section 10.03. Interpretation.......................................... 29 Section 10.04. Counterparts............................................ 30 Section 10.05. Entire Agreement; Third Party Beneficiaries............. 30 Section 10.06. Governing Law........................................... 30 Section 10.07. Publicity............................................... 30 Section 10.08. Assignment.............................................. 30 Section 10.09. Enforcement............................................. 30 EXHIBITS Exhibit A--Conditions of the Offer...................................... 32
ii This Agreement and Plan of Merger (this "Agreement") dated as of November 26, 1997, is among ACQUISITION HOLDINGS, INC., a Delaware Corporation ("Parent"), ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and ATC GROUP SERVICES INC., a Delaware corporation (the "Company"). Whereas the respective Boards of Directors of Parent, Sub and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement; Whereas, in furtherance of such acquisition, Parent proposes to cause Sub to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the "Offer") to purchase all the outstanding shares of Common Stock, par value $0.01 per share, of the Company (the "Company Common Stock"; all the outstanding shares of Company Common Stock being hereinafter collectively referred to as the "Shares" and each holder thereof, a "Company Stockholder") at a purchase price of $12 per share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Agreement; and the Board of Directors of the Company has adopted resolutions approving the Offer and the Merger (as defined below), recommending that the Company's stockholders accept the Offer and approving the acquisition of Shares by Sub pursuant to the Offer; Whereas the respective Boards of Directors of Parent, Sub and the Company have each approved the merger of Sub into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby each share of Company Common Stock, other than shares of Company Common Stock owned directly or indirectly by Parent or the Company and Dissenting Shares (as defined in Section 3.01(d)), will be converted into the right to receive the price per share paid in the Offer; and Whereas Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. Now, Therefore, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Sub and the Company hereby agree as follows: ARTICLE I The Offer Section 1.01. The Offer. (a) Subject to the provisions of this Agreement, as promptly as practicable but in no event later than five business days after the date of the public announcement by Parent and the Company of the execution and delivery of this Agreement, Sub shall, and Parent shall cause Sub to, commence the Offer. The obligation of Sub, and of Parent to cause Sub, to commence the Offer and accept for payment, and pay for, any Shares tendered pursuant to the Offer shall be subject to the conditions set forth in Exhibit A (the "Offer Conditions") and to the terms and conditions of this Agreement; provided, however, that paragraph (i) of the Offer Conditions shall apply only to the obligation of Sub, and of Parent to cause Sub, to consummate the Offer. Sub expressly reserves the right to modify the terms of the Offer, except that, without the prior written consent of the Company, Sub shall not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) add to or modify (other than waive) the Offer Conditions, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer, (vi) amend any other term of or add any new term to the Offer in any manner materially adverse to the holders of the Shares or (vii) waive the Minimum Condition (as defined in Exhibit A). (a) extend the Offer, if at the scheduled or extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (b) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof 1 applicable to the Offer, (c) extend the Offer from time to time until two business days after the expiration of the waiting period under the HSR Act and (d) extend the Offer for a period not to exceed 15 business days, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer, if, immediately prior to such expiration date (as it may be extended), the Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of the outstanding Shares (on a fully diluted basis). In addition, Sub shall be obligated to extend the Offer, if at the scheduled expiration date of the Offer any of the Offer Conditions capable of satisfaction shall not have been satisfied or waived, until the satisfaction or waiver thereof; provided, however, that there shall be no such obligation to extend the Offer beyond the 60th business day after the commencement of the Offer. Subject to the terms and conditions of the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept for payment, and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer promptly after the expiration of the Offer; provided, however, that in no event shall the Offer expire prior to January 21, 1998. (b) Parent and Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer acceptable in form and substance to the Company and within the time period set forth in subsection (a) above, which shall contain an offer to purchase and a related letter of transmittal (the "Letter of Transmittal") and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "Offer Documents"). The Offer Documents shall be consistent with this Agreement, shall add no conditions to the consummation of the Offer not set forth in Exhibit A and shall add no provisions to the Offer materially adverse to the Company Stockholders. Parent and Sub agree that the Offer Documents shall comply as to form in all material respects with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder and the Offer Documents, on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Parent or Sub with respect to written information supplied by the Company or any of its stockholders specifically for inclusion or incorporation by reference in the Offer Documents. Parent, Sub and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and Parent and Sub further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable securities laws. The Company and its counsel shall be given reasonable opportunity to review and comment upon the Offer Documents prior to their filing with the SEC or dissemination to the stockholders of the Company. Parent and Sub agree to provide the Company and its counsel any comments Parent, Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. Parent and Sub shall also provide the Company and its counsel with copies of all written responses filed by Parent or Sub with the SEC and a reasonable opportunity to review and comment upon such responses prior to filing with the SEC. (c) Parent shall provide or cause to be provided to Sub on a timely basis the funds necessary to accept for payment, and pay for, all Shares that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. (d) The Company agrees that neither the Offer nor purchases of Shares thereunder breach the terms of the Confidentiality Agreement (as defined in Section 7.02 below). Section 1.02. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that (i) the Board of Directors of the Company (the "Board"), at a meeting duly called and held, upon recommendation of a duly constituted special committee (the "Special Committee") of independent directors, duly adopted resolutions approving this Agreement, the Offer and the Merger, determining that the terms of the Offer and the Merger are fair to, adequate and in the best interests of, the Company's stockholders 2 and recommending that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt this Agreement, and (ii) Lehman Brothers Inc. (the "Financial Advisor") has delivered to the Board its opinion (the "Fairness Opinion") to the effect that, as of the date thereof and based upon and subject to the matters set forth in such Fairness Opinion, the consideration to be received by the Company Stockholders in the Offer and the Merger is fair to the Company Stockholders from a financial point of view. The Company represents that such approval constitutes approval of the Offer, this Agreement and the transactions contemplated hereby, including the Merger, for purposes of Section 203 of the Delaware General Corporation Law, as amended (the "DGCL"), such that Section 203 of the DGCL will not apply to the transactions contemplated by this Agreement. (b) As promptly as practicable after the commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") containing the recommendation described in paragraph (a) and shall mail the Schedule 14D-9 to the stockholders of the Company. The Company will use its reasonable best efforts to cause the Schedule 14D-9 to be filed on the same date as Sub's Tender Offer Statement on Schedule 14D-1 is filed and mailed together with the Offer Documents; provided that in any event the Schedule 14D-9 shall be filed and mailed no later than 10 business days following the commencement of the Offer. The Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied by Parent or Sub specifically for inclusion in the Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's stockholders, in each case as and to the extent required by applicable Federal securities laws. Parent and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to stockholders of the Company. The Company agrees to provide Parent and its counsel any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) In connection with the Offer and the Merger, the Company shall furnish or cause its transfer agent to furnish Sub as promptly as practicable with mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Shares, and shall furnish to Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Sub and their agents shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will, upon request, deliver, and will use their best efforts to cause their agents to deliver, to the Company all copies of such information then in their possession or control. 3 ARTICLE II The Merger Section 2.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Sub shall be merged with and into the Company at the Effective Time (as defined in Section 2.03). Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL. At the election of Parent, any direct or indirect wholly owned subsidiary (as defined in Section 10.03) of Parent may be substituted for Sub as a constituent corporation in the Merger. In such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing. Section 2.02. Closing. The closing of the Merger (the "Closing") will take place at 10:00 a.m. (New York City time) on a date to be specified by Parent or Sub, which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VIII (the "Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, New York 10112, unless another date, time or place is agreed to in writing by the parties hereto. Section 2.03. Effective Time. Subject to the provisions of this Agreement, as soon as practicable on or after the Closing Date, the parties shall file with the Secretary of State of Delaware a certificate of merger or other appropriate documents as provided in Section 251 of the DGCL (in any such case, the "Certificate of Merger") executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State, or at such other time as Sub and the Company shall agree should be specified in the Certificate of Merger (the time the Merger becomes effective being hereinafter referred to as the "Effective Time"). Section 2.04. Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. Section 2.05. Certificate of Incorporation and By-laws. (a) The Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time so that ARTICLE FOURTH of such certificate of incorporation reads in its entirety as follows: "The total number of shares of all classes of stock which the corporation shall have authority to issue is 10,000 shares of Common Stock, par value $.01 per share" and, as so amended, such certificate of incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The By-Laws of the Company as in effect immediately prior to the Effective Time shall be the By-Laws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law. Section 2.06. Directors. The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be, and the Company shall procure, prior to and as a condition to the Closing, the resignation of each of its directors effective as of the Closing. Section 2.07. Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. 4 ARTICLE III Effect of the Merger on the Capital Stock of theConstituent Corporations; Exchange of Certificates Section 3.01. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares or any shares of capital stock of Sub: (a) Capital Stock of Sub. Each issued and outstanding share of capital stock of Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Surviving Corporation. (b) Cancellation of Treasury Stock and Parent Owned Stock. Each share of Company Common Stock that is owned by the Company or by any subsidiary of the Company and each Share that is owned by Parent, Sub or any other subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Company Common Stock. Subject to Section 3.01(d), each Share issued and outstanding (other than Shares to be canceled in accordance with Section 3.01(b)) shall be converted into the right to receive from the Surviving Corporation in cash, without interest, the price paid in the Offer (the "Merger Consideration"). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (d) Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Shares held by a person (a "Dissenting Stockholder") who complies with all the provisions of Delaware law concerning the right of holders of Company Common Stock to dissent from the Merger and require appraisal of their Shares ("Dissenting Shares") shall not be converted as described in Section 3.01(c) but shall become the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the laws of the State of Delaware. If, after the Effective Time, such Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or otherwise loses his right of appraisal, in any case pursuant to the DGCL, his Shares shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration. The Company shall give Parent (i) prompt notice of any demands for appraisal of Shares received by the Company and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands. (e) Withholding Tax. Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Common Stock outstanding immediately prior to the Effective Time such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of state, local or foreign tax law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Common Stock outstanding immediately prior to the Effective Time in respect of which such deduction and withholding was made. Section 3.02. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a federally insured bank or trust company with assets of not less than $1,000,000,000 satisfactory to the Company to act as paying agent in the Merger (the "Paying Agent"), and, from time to time on, prior to or after the Effective Time, Parent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent funds in amounts and at the times necessary for the payment of the Merger Consideration upon surrender of certificates representing 5 Shares as part of the Merger pursuant to Section 3.01 (it being understood that any and all interest earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent). (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented Shares (the "Certificates"), (i) a letter of transmittal in a form mutually agreed upon by the Parent and Surviving Corporation (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, Parent or the Surviving Corporation shall pay or cause to be paid to the holder of such Certificate in exchange therefor the amount of cash into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.01, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.01. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. (c) No Further Ownership Rights in Company Common Stock. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such Certificates. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article III. (d) Termination of Fund; No Liability. At any time following six months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. ARTICLE IV Representations and Warranties of the Company Except as set forth in the schedules delivered to Parent in connection with the execution of this Agreement setting forth exceptions to the Company's representations and warranties set forth herein (the "Company Disclosure Schedules"), the Company represents and warrants to Parent and Sub as set forth below. The Company Disclosure Schedules will be arranged in sections corresponding to sections of this Agreement to be modified by such disclosure schedule. As used in this Agreement, "knowledge" means with respect to matters 6 relating to the Company, actual knowledge of any executive officer of the Company or any individual in an equivalent position of the Company, or, in the reasonable exercise of duty in the ordinary course of business of any such officer, reason to know. Section 4.01. Organization. The Company and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not have a material adverse effect (as defined in Section 10.03) on the Company. The Company and each of its subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. The Company has made available to Parent complete and correct copies of its Certificate of Incorporation and By-laws and the certificates of incorporation and By-Laws (or similar organizational documents) of its subsidiaries. Section 4.02. Subsidiaries. The subsidiaries of the Company are as set forth on Schedule 4.02. All the outstanding shares of capital stock of each such subsidiary, other than director qualifying shares of foreign subsidiaries, are owned by the Company, by another wholly owned subsidiary of the Company or by the Company and another wholly owned subsidiary of the Company, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens"), except for immaterial Liens on outstanding shares of capital stock of foreign subsidiaries of the Company, and are duly authorized, validly issued, fully paid and nonassessable. Except for the capital stock of its subsidiaries, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, joint venture or other entity. Section 4.03. Capitalization. The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock. At the close of business on November 12, 1997, (i) 7,930,107 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Common Stock were held by the Company in its treasury, (iii) except as set forth on Schedule 4.03, 750,070 shares of Company Common Stock were reserved for issuance upon exercise of outstanding Options (as defined in Section 7.04) and (iv) 1,090,407 shares of Company Common Stock were reserved for issuance upon the exercise of certain outstanding warrants. Except as set forth above and except for Shares issued upon the exercise of Options or warrants, as of the date of this Agreement, no shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company are, and all shares which may be issued will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above, and except for obligations to grant options, subject to the approval of the Board of Directors of the Company, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of its subsidiaries is a party or by which any of them is bound obligating the Company or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or of any of its subsidiaries or obligating the Company or any of its subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are not any outstanding contractual obligations (i) of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or (ii) of the Company to vote or to dispose of any shares of the capital stock of any of its subsidiaries. Section 4.04. Authority. The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby (other than, with respect to the 7 Merger, the approval and adoption of the terms of this Agreement by the holders of a majority of the Shares (the "Company Stockholder Approval")). The execution, delivery and performance of this Agreement and the consummation by the Company of the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (in each case, other than, with respect to the Merger, the Company Stockholder Approval). This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of Parent and Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. Section 4.05. Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act (including the filing with the SEC of the Schedule 14D-9 and a proxy statement relating to any required approval by the Company's stockholders of this Agreement (the "Proxy Statement")), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), Section 203 of the DGCL and the laws of other states in which the Company is qualified to do or is doing business, state takeover laws and foreign laws, neither the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws of the Company or of the similar organizational documents of any of its subsidiaries, (ii) require any filing with, or permit, authorization, consent or approval of, any Federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, domestic, foreign or supranational (a "Governmental Entity") (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger), (iii) except as set forth on Schedule 4.05, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound; provided, however, that certain contracts and agreements, the material ones of which have been made available to Parent by the Company, (A) provide for their termination or require consent upon a change of control of the Company or (B) contain provisions restricting their assignment pursuant to a merger, or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company, any of its subsidiaries or any of their properties or assets, except in the case of clauses (iii) or (iv) for violations, breaches or defaults that would not have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. Section 4.06. SEC Reports and Financial Statements. The Company has filed with the SEC, and has heretofore made available to Parent true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1994, under the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act") (such forms, reports, schedules, statements and other documents, including any financial statements or schedules included therein, are referred to as the "Company SEC Documents"). The Company SEC Documents, at the time filed, (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. Except to the extent revised or superseded by a subsequently filed Company Filed SEC Document (as defined in Section 4.07) (a copy of which has been made available to Parent prior to the date hereof), the Company SEC Documents, considered as a whole as of their date, do not contain an untrue statement of a material fact or omit to state a material fact required to 8 be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that the foregoing does not cover future events resulting from public announcement of the Offer and the Merger). The financial statements of the Company included in the Company SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Forms 10-Q and 8-K of the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, recurring audit adjustments) the consolidated financial position of the Company and its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. Section 4.07. Absence of Certain Changes or Events. Except as disclosed in the Company SEC Documents filed and publicly available prior to the date of this Agreement (the "Company Filed SEC Documents"), and except as disclosed in the Company's financial statements dated as of February 28, 1997 audited by Deloitte & Touche LLP (the "Company Fiscal Year 1997 Financial Statements") (a copy of which has been made available to Parent by the Company), and except as disclosed on Schedule 4.07, since February 28, 1997, the Company and its subsidiaries have conducted their respective businesses only in the ordinary course, and there has not been any material adverse change (as defined in Section 10.03) with respect to the Company. Except as disclosed in the Company Filed SEC Documents or the Company Fiscal Year 1997 Financial Statements, and except as disclosed on Schedule 4.07, since February 28, 1997, there has not been (i) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock or any redemption, purchase or other acquisition of any of its capital stock, (ii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) (w) any granting by the Company or any of its subsidiaries to any officer of the Company or any of its subsidiaries of any increase in compensation, except in the ordinary course of business (including in connection with promotions) consistent with past practice, (x) any granting by the Company or any of its subsidiaries to any such officer of any increase in severance or termination pay, except as part of a standard employment package to any person promoted or hired (but not including the five most senior officers) (y) except employment arrangements in the ordinary course of business consistent with past practice with employees other than any executive officer of the Company, any entry by the Company or any of its subsidiaries into any employment, severance or termination agreement with any such employee or executive officer or (z) any increase in or establishment of any bonus, insurance, deferred compensation, pension, retirement, profit-sharing, stock option (including the granting of stock options, stock appreciation rights, performance awards or restricted stock awards or the amendment of any existing stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan or agreement or arrangement, except in the ordinary course of business consistent with past practice, (iv) any damage, destruction or loss, whether or not covered by insurance, that has or reasonably could be expected to have a material adverse effect on the Company, (v) any material payment to an affiliate of the Company or any of its subsidiaries other than in the ordinary course of business consistent with past practice, (vi) any revaluation by the Company of any of its material assets, (vii) mortgage, lien, pledge, encumbrance, charge, agreement, claim or restriction placed upon any of the material properties or assets of the Company or any of its subsidiaries, (viii) any material change in accounting methods, principles or practices by the Company or (ix) (A) any licensing or other agreement with regard to the acquisition or disposition of any material Intellectual Property Right (as defined in Section 4.18) or rights thereto other than licenses or other agreements in the ordinary course of business consistent with past practice or (B) any amendment or consent with respect to any licensing agreement filed, or required to be filed, by the Company with the SEC. Section 4.08. No Undisclosed Liabilities. Except as set forth on Schedule 4.08 and except as and to the extent set forth in the Company Fiscal Year 1997 Financial Statements, as of February 28, 1997, and as disclosed in Company Filed SEC Documents, neither the Company nor any of its subsidiaries had any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by generally 9 accepted accounting principles to be reflected on a consolidated balance sheet of the Company and its subsidiaries (including the notes thereto). Since February 28, 1997, except as and to the extent set forth in the Company Filed SEC Documents and Schedule 4.08, neither the Company nor any of its subsidiaries has incurred any liabilities of any nature, whether or not accrued, contingent or otherwise, that would have a material adverse effect on the Company. The consolidated indebtedness on the date hereof of the Company and its subsidiaries is as set forth on Schedule 4.08. Section 4.09. Information Supplied. None of the written information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or (iv) the Proxy Statement, will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting (as defined in Section 7.01), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9, the Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Sub specifically for inclusion or incorporation by reference therein. Section 4.10. Benefit Plans. (a) Each "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (a "Pension Plan"), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) (a "Welfare Plan") and each other plan, pension or welfare arrangement or policy (written or oral) relating to stock options, stock purchases, compensation, deferred compensation, bonuses, severance, fringe benefits or other employee benefits, in each case maintained or contributed to, or required to be maintained or contributed to, by the Company or its subsidiaries for the benefit of any present or former employee, officer or director (each of the foregoing, a "Benefit Plan") has been administered in all material respects in accordance with its terms. The Company and its subsidiaries and all the Benefit Plans are in compliance in all material respects with the applicable provisions of ERISA, the Code, and all other applicable laws. (b) Schedule 4.10 attached hereto sets forth a complete list of each Benefit Plan as well as each material employment, termination and severance agreement, contract, binding arrangement and understanding (whether written or oral) with employees of the Company and its subsidiaries. (c) None of the Pension Plans is subject to Title IV of ERISA or Section 412 of the Code and none of the Company or any other person or entity that, together with the Company, is treated as a single employer under Section 414 (b), (c), (m) or (o) of the Code (each, including the Company, a "Commonly Controlled Entity"): (i) currently has an obligation to contribute to, or during any time during the last six years had an obligation to contribute to, a Pension Plan subject to Title IV of ERISA or Section 412 of the Code, or (ii) has incurred any liability to the Pension Benefit Guaranty Corporation, which liability has not been fully paid. All contributions and other payments required to be made by the Company to any Pension Plan with respect to any period ending before the Closing Date have been made or reserves adequate for such contributions or other payments have been or will be set aside therefor and have been or will be reflected in financial statements. (d) Neither the Company nor any Commonly Controlled Entity is required to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such withdrawal has resulted or would result in any "withdrawal liability" (within the meaning of Section 4201 of ERISA) or "mass withdrawal liability" within the meaning of PBGC Regulation 4219.2 that has not been fully paid. 10 (e) Each Benefit Plan (and its related trust) that is intended to be qualified under Sections 401 and 501(a) of the Code has been determined by the IRS to qualify under such sections and, to the knowledge of the Company, nothing has occurred to cause the loss of such qualified status. (f) Each Benefit Plan that is a Welfare Plan may be amended or terminated, upon thirty (30) days notice, at any time after the Effective Time without material liability to the Company or its subsidiaries. (g) Except as set forth in Schedule 4.10, or as required under Section 4980B of the Code, the Company does not have any obligation to provide post- retirement health benefits. (h) The Company has heretofore made available to Parent correct and complete copies of each of the following: (1) All written, and descriptions of all binding oral, employment, termination and severance agreements, contracts, arrangements and understandings listed on Schedule 4.10; (2) Each Benefit Plan and all amendments thereto; the trust instrument and/or insurance contracts, if any, forming a part of such Benefit Plan and all amendments thereto; (3) The most recent IRS Form 5500 and all schedules thereto, if any; (4) The most recent determination letter issued by the IRS regarding the qualified status of each such Pension Plan; (5) The most recent accountant's report, if any; and (6) The most recent summary plan description, if any. Section 4.11. Other Compensation Arrangements. Except as disclosed in the Company Filed SEC Documents or on Schedule 4.11, or except as provided in this Agreement, as of the date of this Agreement, neither the Company nor any of its subsidiaries is a party to any oral or written (i) consulting agreement not terminable on not more than 60 calendar days notice (except for third party agreements for the development of, and assignment to, the Company of Intellectual Property in the ordinary course of business) and involving the payment of more than $100,000 per annum, (ii) agreement with any executive officer or other key employee of the Company or any of its subsidiaries (x) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature contemplated by this Agreement or (y) providing any term of employment or compensation guarantee extending for a period longer than two years or the payment of more than $100,000 per annum or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 4.12. Litigation. Except as set forth on Schedule 4.12, there is no suit, claim, action, proceeding or investigation pending before any Governmental Entity or, to the best knowledge of the Company, threatened against the Company or any of its subsidiaries that could reasonably be expected to have a material adverse effect on the Company. Neither the Company nor any of its subsidiaries is subject to any outstanding order, writ, injunction or decree that could reasonably be expected to have a material adverse effect on the Company. Section 4.13. Compliance with Applicable Law. Except as set forth on Schedule 4.13, the Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "Company Permits"), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals that would not have a material adverse effect on the Company. Except as set forth on Schedule 4.13, the Company and its subsidiaries are in compliance with the terms of the Company Permits, except where the failure so to comply would not have a material adverse effect on the Company. Except as disclosed in the Company Filed SEC Documents, and except as set forth on Schedule 4.13, to the best knowledge of the Company, the businesses of the Company and 11 its subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations that would not have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. Except as set forth on Schedule 4.13, as of the date of this Agreement, no investigation or review by any Governmental Entity with respect to the Company or any of its subsidiaries is pending or, to the best knowledge of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct any such investigation or review, other than, in each case, those the outcome of which would not be reasonably expected to have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. Section 4.14. Tax Matters. (a) Except as set forth on Schedule 4.14, the Company and each of its subsidiaries (and any affiliated group of which the Company or any of its subsidiaries is now or has ever been a member) has timely filed all Federal income tax returns and all other material tax returns and reports required to be filed by it. All such returns are complete and correct in all material respects. Except as set forth on Schedule 4.14, each of the Company and its subsidiaries (i) has paid (or the Company has paid on its subsidiaries' behalf) to the appropriate authorities all taxes that are not immaterial and that are required to be paid by it (without regard to whether a tax return is required), except taxes for which an adequate reserve has been established on the financial statements contained in the Company Filed SEC Documents or the Company Fiscal Year 1997 Financial Statements, and (ii) has withheld and paid to the appropriate authorities all material withholding taxes required to be withheld by it. The most recent financial statements contained in the Company Filed SEC Documents reflect an adequate reserve (in accordance with generally accepted accounting principles consistently applied) for all taxes payable by the Company and its subsidiaries for all taxable periods and portions thereof through the date of such financial statements. (b) Except as disclosed in the Company Filed SEC Documents or Schedule 4.14, no Federal income tax return or other material tax return of the Company or any of its subsidiaries is under audit or examination by any taxing authority, and no written or unwritten notice of such an audit or examination has been received by the Company or any of its subsidiaries. Each material deficiency resulting from any audit or examination relating to taxes by any taxing authority has been paid, except for deficiencies being contested in good faith. No material issues relating to taxes were raised in writing by the relevant taxing authority in any completed audit or examination that can reasonably be expected to recur in a later taxable period. The Federal income tax returns of the Company and each of its subsidiaries do not contain any positions that could give rise to a material substantial understatement penalty within the meaning of Section 6662 of the Code. (c) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes and no power of attorney with respect to any taxes has been executed or filed with any taxing authority. (d) No material liens for taxes exist with respect to any assets or properties of the Company or any of its subsidiaries, except for liens for taxes not yet due. (e) None of the Company or any of its subsidiaries is a party to or is bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any taxing authority). (f) None of the Company or any of its subsidiaries shall be required to include in a taxable period ending after the Effective Time taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or comparable provisions of state, local or foreign tax law. (g) Neither the Company nor any of its subsidiaries (i) is a party to a safe harbor lease within the meaning of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982, (ii) is a "consenting corporation" under Section 341(f) of the 12 Code, (iii) has agreed or is obligated to make any payments for services which would not be deductible pursuant to Sections 162(a)(1), 162(m) or 280G of the Code, (iv) has participated in an international boycott as defined in Section 999 of the Code, (v) is required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise, (vi) owns any assets which directly or indirectly secure any debt the interest on which is tax-exempt under Section 103(a) of the Code, or (vii) owns any asset which is tax-exempt use property within the meaning of Section 168(h) of the Code. (h) None of the Company or any of its subsidiaries is a party to any joint venture, partnership or other arrangement or contract which is treated as a partnership for tax purposes, or has elected to be treated as a branch or a partnership pursuant to Treasury Regulation Section 301.7701-3. (i) Each of the Company and its subsidiaries is a United States person within the meaning of Section 7701(a)(30) of the Code. (j) As used in this Agreement, "taxes" shall include all Federal, state, local and foreign income, property, sales, excise, withholding and other taxes, tariffs or governmental charges of any nature whatsoever. Section 4.15. State Takeover Statutes. The Board of Directors of the Company has approved the Offer, the Merger, this Agreement and the acquisition of Shares by Sub pursuant to the Offer and such approval is sufficient to render inapplicable to the Offer, the Merger, this Agreement and the transactions contemplated by this Agreement the provisions of Section 203 of the DGCL. To the actual knowledge of the Company without investigation, no other state takeover statute or similar statute or regulation applies or purports to apply to the Offer, the Merger, this Agreement, or any of the transactions contemplated by this Agreement. Section 4.16. Brokers; Fees and Expenses. No broker, investment banker, financial advisor or other person, other than Lehman Brothers Inc., the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The estimated fees and expenses incurred and to be incurred by the Company in connection with this Agreement and the transactions contemplated by this Agreement (including the fees of the Company's legal counsel, legal counsel for the Special Committee and the legal counsel for its financial advisor) are set forth in a letter dated November 26, 1997 from the Company to Parent. Section 4.17. Opinion of Financial Advisor. The Special Committee has received the opinion of Lehman Brothers Inc., dated November 26, 1997, to the effect that, as of that date, the consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to such holders from a financial point of view, and a complete and correct signed copy of such opinion has been, or promptly upon receipt thereof will be, delivered to Parent for inclusion in the Offer Documents. Section 4.18. Intellectual Property. Except as set forth on Schedule 4.18, the Company and its subsidiaries own or possess adequate licenses or other rights to use all Intellectual Property Rights necessary to conduct the Business, except where failure to own or possess such licenses or rights, individually or in the aggregate, has not had, and would not have a material adverse effect on the Company. Except as set forth on Schedule 4.18, to the knowledge of the Company, the Intellectual Property Rights of the Company and its subsidiaries do not conflict with or infringe upon any Intellectual Property Rights of others to the extent that, if sustained, such conflict or infringement, individually or in the aggregate, would have a material adverse effect on the Company. For purposes hereof, "Intellectual Property Right" means any trademark, service mark, trade name, copyright, patent, software license, other date base, invention, trade secret, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right. Section 4.19. Labor Relations and Employment. (a) Except as set forth on Schedule 4.19, (i) there is no labor strike, dispute, slowdown, stoppage or lockout actually pending, or, to the best knowledge of the Company, threatened against the Company or any of its 13 subsidiaries, and during the past three years there has not been any such action; (ii) no union claims to represent the employees of the Company or any of its subsidiaries; (iii) neither the Company nor any of its subsidiaries is a party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of the Company or any of its subsidiaries; (iv) none of the employees of the Company or any of its subsidiaries is represented by any labor organization and the Company does not have any knowledge of any current union organizing activities among the employees of the Company or any of its subsidiaries, nor are there representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal; (v) the Company and its subsidiaries are, and have at all times been, in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, and are not engaged in any unfair labor practices as defined in the National Labor Relations Act or other applicable law, ordinance or regulation except where the failure to be in compliance would not have a material adverse effect on the Company; (vi) there is no unfair labor practice charge or complaint against the Company or any of its subsidiaries pending or, to the knowledge of the Company, threatened before the National Labor Relations Board or any similar state or foreign agency; (vii) there is no grievance with respect to or relating to the Company or any of its subsidiaries arising out of any collective bargaining agreement or other grievance procedure; (viii) no charges with respect to or relating to the Company or any of its subsidiaries are pending before the Equal Employment Opportunity Commission or any other agency responsible for the prevention of unlawful employment practices; (ix) neither the Company nor any of its subsidiaries has received notice of the intent of any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to the Company or any of its subsidiaries and no such investigation is in progress; and (x) there are no complaints, lawsuits or other proceedings pending or to the knowledge of the Company threatened in any forum by or on behalf of any present or former employee of the Company or any of its subsidiaries alleging breach of any express or implied contract of employment, any law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship. (b) To the knowledge of the Company, since the enactment of the Worker Adjustment and Retraining Notification ("WARN") Act, there has not been (i) a "plant closing" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any of its subsidiaries; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of the Company or any of its subsidiaries; nor has the Company or any of its subsidiaries been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local law. Except as set forth in Schedule 4.19, to the knowledge of the Company, none of the employees of the Company or any of its subsidiaries has suffered an "employment loss" (as defined in the WARN Act) since three months prior to the date of this Agreement. Section 4.20. Change of Control. Except as set forth on Schedule 4.20, the transactions contemplated by this Agreement will not constitute a "change of control" under, require the consent from or the giving of notice to a third party pursuant to, permit a third party to terminate or accelerate vesting, repayment or repurchase rights, or create any other detriment under the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound, except where the adverse consequences resulting from such change of control or where the failure to obtain such consents or provide such notices would not, individually or in the aggregate, have a material adverse effect on the Company. Section 4.21. Environmental Matters. (a) Except as set forth on Schedule 4.21, the Company and its subsidiaries have been and are in compliance with all applicable Environmental Laws (as this term and the other terms in this section are defined below), except for such violations and defaults as would not, individually or in the aggregate, have a material adverse effect on the Company. 14 (b) Except as set forth on Schedule 4.21, the Company and its subsidiaries possess all required Environmental Permits; all such Environmental Permits are in full force and effect; there are no pending or threatened proceedings to revoke such Environmental Permits and the Company and its subsidiaries are in compliance with all terms and conditions thereof, except where the failure to possess or comply with such Environmental Permits or the failure for such Environmental Permits to be in full force and effect would not, individually or in the aggregate, have a material adverse effect on the Company. (c) Except as set forth on Schedule 4.21, and except for matters which would not, individually or in the aggregate, have a material adverse effect on the Company, neither the Company nor any of its subsidiaries has received any written notification that the Company or any subsidiary as a result of any of the current or past operations of the Business, or any property currently or formerly owned or leased or used in connection with the Business, is or may be adversely affected by any proceeding, investigation, claim, lawsuit or order by any Governmental Entity or other person relating to whether (i) any Remedial Action is or may be needed to respond to a Release or threat of Release into the environment of Hazardous Substances arising out of or caused by any current or past operations of the Company or any of its subsidiaries, (ii) any Environmental Liabilities and Costs imposed by, under or pursuant to Environmental Laws as in effect on or prior to the date hereof shall be sought, or proceeding commenced, arising from the current or past operations of the Business or (iii) the Company or any subsidiary is or may be a "potentially responsible party" for a Remedial Action, pursuant to any Environmental Law for the costs of investigating or remediating Releases or threatened Releases into the environment of Hazardous Substances, whether or not such Release or threatened Release has occurred or is occurring at properties currently or formerly owned or operated by the Company and its subsidiaries; (d) Except as set forth on Schedule 4.21 and except for Environmental Permits, none of the Company or its subsidiaries has entered into any written agreement with any entity of persons including any Governmental Entity by which the Company or any of its subsidiaries has assumed the responsibility, either directly or by services rendered or as a guarantor or surety, to pay for the remediation of any condition arising from or relating to a Release of Hazardous Substances as defined under Environmental Laws as in effect on or prior to the date hereof into the environment in connection with the Business, including for cost recovery by third parties with respect to such Releases or threatened Releases; (e) Except as set forth on Schedule 4.21, there is not now and, to the Company's knowledge, has not been at any time in the past, a Release in connection with the current or former conduct of the Business of substances that would constitute Hazardous Substances as regulated under Environmental Laws as in effect on or prior to the date hereof for which the Company or any of its subsidiaries is required or is reasonably likely to be required to perform, at its own expense, or to pay for a Remedial Action pursuant to Environmental Laws as currently in effect, or will incur Environmental Liabilities and uncompensated costs that would, individually or in the aggregate, have a material adverse effect on the Company. (f) For purposes of hereof: (i) "Business" means the current and former businesses of the Company and its subsidiaries including, but not limited to, businesses or subsidiaries that have been previously sold by the Company, its subsidiaries or any predecessors thereto. (ii) "Environmental Laws" means all Laws relating to the protection of human health or the environment, or to any emission, discharge, generation, processing, storage, holding, abatement, existence, Release, threatened Release or transportation of any chemical or substance, including, but not limited to, (i) CERCLA, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, property transfer statutes or requirements and (ii) all other requirements pertaining to reporting, licensing, permitting, investigation or remediation of Hazardous Substances in the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport or handling of Hazardous Substances or relating to human health or safety from exposure to Hazardous Substances. 15 (iii) "Environmental Liabilities and Costs" means all damages, natural resource damages, claims, losses, expenses, costs, obligations, and liabilities (collectively, "Losses"), whether direct or indirect, known or unknown, current or potential, past, present or future, imposed by, under or pursuant to Environmental Laws, including, but not limited to, all Losses related to Remedial Actions, and all fees, capital costs, disbursements, penalties, fines and expenses of counsel, experts, contractors, personnel and consultants and the value of any services that might be provided by the Company or any of its subsidiaries in lieu thereof and expenditures necessary to cause any such property or the Company or any subsidiary to be in compliance with requirements of Environmental Laws. (iv) "Environmental Permits" means any federal, state, provincial or local permit, license, registration, consent, order, administrative consent order, certificate, approval or other authorization necessary for the conduct of the Business as currently conducted, and wherever it is currently conducted, under any applicable Environmental Law. (v) "Governmental Entity" means any government or subdivision thereof, domestic, foreign or supranational or any administrative, governmental or regulatory authority, agency, commission, tribunal or body, domestic, foreign or supranational. (vi) "Hazardous Substances" means any substance that (a) is defined, listed or identified or otherwise regulated under any Environmental Law (including, without limitation, radioactive substances, polycholorinated- biphenyls, petroleum and petroleum derivatives and products) or (b) requires investigation, removal or remediation under applicable Environmental Law. (vii) "Laws" means all (A) constitutions, treaties, statutes, laws (including, but not limited to, the common law), rules, regulations, ordinances or codes of any Governmental Entity, (B) Environmental Permits, and (C) orders, decisions, injunctions, judgments, awards and decrees of any Governmental Entity. (viii) "Release" means as defined in CERCLA. (ix) "Remedial Action" means all actions required by any Governmental Entity pursuant to Environmental Law or otherwise taken as necessary to comply with Environmental Law to (i) clean up, remove, treat or in any other way remediate any Hazardous Substances; (ii) prevent the release of Hazardous Substances so that they do not migrate or endanger or threaten to endanger public health or welfare or the environment; or (iii) perform studies, investigations or monitoring in respect of any such matter. Section 4.22. Material Contracts. (a) The Company has provided or made available to Parent (i) true and complete copies of all written contracts and agreements to which the Company or any subsidiary is a party and which are material to the Company ("Material Contracts"), and (ii) with respect to such Material Contracts that have not been reduced to writing, a written description thereof which is listed on Schedule 4.22. Neither the Company nor any of its subsidiaries is, or has received any notice or has any knowledge that any other party is, in default in any respect under any such Material Contract, except for those defaults which would not reasonably be likely, either individually or in the aggregate, to have a material adverse effect with respect to the Company; and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a material default. (b) Except as set forth on Schedule 4.22, no officer or director of the Company, no shareholder of the Company related to any such officer or director, and no "associate" (as defined in Rule 14a-1 under the Exchange Act) of any of them, has any interest in any material contract or agreement of, or other business arrangement with, the Company, or in any material property (including any real property and any material personal property, tangible or intangible), used in or pertaining to the business of the Company. Section 4.23. Property. Schedule 4.23 accurately identifies all real property, leases and other rights in real property, structures and other buildings of the Company and its subsidiaries. All properties and assets of the Company and its subsidiaries, real and personal, material to the conduct of their respective businesses are, except for changes in the ordinary course of business since February 28, 1997, reflected in the balance sheet, and except as set forth on Schedule 4.23, the Company and its subsidiaries have good and marketable title to their respective 16 real and personal property reflected on the balance sheet or acquired by them since the date of the balance sheet, free and clear of all mortgages, liens, pledges, encumbrances, charges, agreements, claims, restrictions and defects of title. All real property, structures and other buildings and material equipment of each of the Company and its subsidiaries are currently used in the operation of the Business, are adequately maintained and are in satisfactory operating condition and repair for the requirements of the Business as presently conducted. Section 4.24. Insurance. Schedule 4.24 accurately identifies each material insurance policy (including policies providing property, casualty, environmental liability, liability, malpractice and workers compensation insurance) and all other material types of insurance maintained by the Company and its subsidiaries, together with carriers and liability limits for each such policy. Each such policy is duly in force and no notice has been received by the Company or any of its subsidiaries from any insurance carrier purporting to cancel or reduce coverage under any such policy. The Company and its subsidiaries are current in all premiums or other payments due thereunder and no notice has been received by the Company or any of its subsidiaries from any insurance carrier purporting to increase any such premiums in any material respect. All insurance coverage held for the benefit of the Company or its subsidiaries is adequate to cover risks customarily insured against by similar companies in their industry. ARTICLE V Representations and Warranties of Parent and Sub Parent and Sub jointly and severally represent and warrant to the Company as follows: Section 5.01. Organization. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not be reasonably expected to prevent or materially delay the consummation of the Offer and/or the Merger. Section 5.02. Authority. Parent and Sub have requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Sub and no other corporate proceedings on the part of Parent and Sub are necessary to authorize this Agreement or to consummate such transactions. No vote of Parent shareholders is required to approve this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Sub, as the case may be, and, assuming this Agreement constitutes a valid and binding obligation of the Company, constitutes a valid and binding obligation of each of Parent and Sub enforceable against them in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. Section 5.03. Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act (including the filing with the SEC of the Offer Documents), the HSR Act, the DGCL, the laws of other states in which Parent is qualified to do or is doing business, state takeover laws and foreign laws, neither the execution, delivery or performance of this Agreement by Parent and Sub nor the consummation by Parent and Sub of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the respective certificate of incorporation or By- Laws of Parent and Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not be reasonably expected to prevent or materially delay the consummation of the Offer and/or the Merger), (iii) result in a violation or breach of, or constitute (with or 17 without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Parent or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent, any of its subsidiaries or any of their properties or assets, except in the case of clauses (iii) and (iv) for violations, breaches or defaults which would not, individually or in the aggregate, be reasonably expected to prevent or materially delay the consummation of the Offer and/or the Merger. Section 5.04. Information Supplied. None of the information supplied or to be supplied by Parent or Sub specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Parent or Sub with respect to statements made or incorporated by reference therein based on information supplied by the Company specifically for inclusion or incorporation by reference therein. Section 5.05. Interim Operations of Sub. Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. Section 5.06. Financing. The Parent, through its affiliate, WPG Corporate Development Associates V., L.P., has received a "highly confident" letter from BT Alex. Brown Incorporated and a letter of commitment from Bankers Trust Company with respect to the debt financing for the transactions contemplated hereby (the "Financing Letters"). Executed copies of such letters are attached hereto as Schedule 5.06. Assuming that the financing contemplated by the Financing Letters is consummated in accordance with the terms thereof, the funds to be borrowed and/or provided for thereunder, together with the equity to be provided by Parent, its affiliates and management, will provide sufficient funds to pay the Offer Price upon consummation of the Offer, the Merger Consideration, the refinancing of certain indebtedness for borrowed money of the Company which is required to be refinanced pursuant to the terms of such indebtedness in connection with the Offer or the Merger, and all related fees and expenses. As of the date of this Agreement, Parent is not aware of any facts or circumstances that create a reasonable basis for Parent to believe that Parent will not be able to obtain financing in accordance with the terms of the Financing Letters. Parent agrees promptly to notify the Company if the statements in the immediately preceding sentence are no longer true and correct. Section 5.07. Brokers. None of Parent, Sub, or any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any broker or finder in connection with the transactions contemplated herein. ARTICLE VI Covenants Section 6.01. Conduct of Business of the Company. Except as contemplated by this Agreement or as expressly agreed to in writing by Parent, during the period from the date of this Agreement until such time as Parent's designees shall constitute a majority of the members of the Board of Directors of the Company, the 18 Company will, and will cause each of its subsidiaries to, conduct its operations according to its ordinary and usual course of business and consistent with past practice and, subject to its obligations under Section 7.04(d), use its and their respective reasonable best efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, advertisers, distributors and others having business dealings with them and to preserve goodwill. Without limiting the generality of the foregoing, and except as (x) otherwise expressly provided in this Agreement, (y) required by law, or (z) set forth on Schedule 6.01, the Company will not, and will cause its subsidiaries not to, without the consent of Parent, which shall not be unreasonably withheld: (i) except with respect to annual bonuses made in the ordinary course of business consistent with past practice, adopt or amend in any material respect any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, pension, retirement, employment or other employee benefit agreement, trust, plan or other arrangement for the benefit or welfare of any director, officer or employee of the Company or any of its subsidiaries or increase in any manner the compensation or fringe benefits of any director, officer or employee of the Company or any of its subsidiaries (except, in each case, for normal annual salary increases and cost of living increases for the benefit of officers and employees of the Company with positions below the level of vice president) or pay any benefit not required by any existing agreement or place any assets in any trust for the benefit of any director, officer or employee of the Company or any of its subsidiaries (in each case, except with respect to employees and directors in the ordinary course of business consistent with past practice); (ii) incur any indebtedness for borrowed money in excess of $500,000, other than in consultation with Parent; (iii) expend funds for individual capital expenditures in excess of $50,000 or $2,000,000 in the aggregate for any 12-month period (to be apportioned pro-rata over any period less than 12 months), other than in consultation with Parent; (iv) sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its properties or assets other than immaterial properties or assets (or immaterial portions of properties or assets), except in the ordinary course of business consistent with past practice; (v) (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (z) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (vi) other than in connection with Options and warrants outstanding as of the date hereof, authorize for issuance, issue, deliver, sell or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise), pledge or otherwise encumber any shares of its capital stock or the capital stock of any of its subsidiaries, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or any other securities or equity equivalents (including without limitation stock appreciation rights) other than issuances upon exercise of Options or Warrants; (vii) amend its Certificate of Incorporation, By-Laws or equivalent organizational documents or alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any material subsidiary of the Company; (viii) make or agree to make any acquisition of assets which is material to the Company and its subsidiaries, taken as a whole, except for (x) purchases of inventory in the ordinary course of business, (y) pursuant to purchase orders entered into in the ordinary course of business which do not call for payments in excess of $50,000 per annum or (z) project-related expenditures which, individually, do not exceed $250,000; or 19 (ix) settle or compromise any shareholder derivative suits arising out of the transactions contemplated hereby or any other litigation (whether or not commenced prior to the date of this Agreement) or settle, pay or compromise any claims not required to be paid. Section 6.02. No Solicitation. (a) From the date hereof until such time as Parent's designees shall constitute a majority of the members of the Board of Directors of the Company, the Company shall not, and shall not permit any of its subsidiaries, or any of its or their officers, directors, employees, representatives, agents or affiliates (including, without limitation, any investment banker, attorney or accountant retained by the Company or any of its subsidiaries) to, directly or indirectly, solicit or initiate any discussions or negotiations with, any corporation, partnership, person or other entity or group (each, a "Person"),concerning any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal (as defined below). Information may be provided in response to a bona fide inquiry subject to the confidentiality agreement referred to below, and negotiations may be conducted in response to such inquiry. Upon having received a bona fide proposal that the Board of Directors, consistent with its fiduciary duties and after the receipt of advice from such Delaware counsel as may be appointed by the Board of Directors concludes if consummated would be a Superior Proposal, the Board of Directors may withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger, approve or recommend the Superior Proposal or terminate this Agreement pursuant to Section 9.01(d) hereof and shall promptly notify Parent in writing of any such determination. For five (5) business days after Parent has been informed by the Company of the above conclusion with respect to such Superior Proposal, Parent shall have the right to match (the "Counterproposal") the economic value of any such Superior Proposal. The Company shall negotiate in good faith with respect to such Counterproposal. Any information furnished to any Person in connection with an Acquisition Proposal shall be provided pursuant to a confidentiality agreement in customary form on terms not more favorable to such Person than the terms contained in the Confidentiality Agreement (as defined in Section 7.02). Subject to all of the foregoing requirements, the Company will immediately notify Parent orally and in writing if any discussions or negotiations are sought to be initiated, any inquiry or proposal is made, or any information is requested by any Person with respect to any Acquisition Proposal or which could lead to an Acquisition Proposal and immediately notify Parent of all material terms of any proposal which it may receive in respect of any such Acquisition Proposal, including the identify of the Person making the Acquisition Proposal or the request for information, if known, and thereafter shall inform Parent on a timely, ongoing basis of the status and content of any discussions or negotiations with such a third party, including immediately reporting any material changes to the terms and conditions thereof. (b) For purposes hereof: (i) "Acquisition Proposal" means any inquiry, proposal or offer from any person relating to any direct or indirect acquisition or purchase of 15% or more of any class of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of the Company or any of its subsidiaries, any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by this Agreement, or any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Offer and/or the Merger or which would reasonably be expected to dilute materially the benefits to Parent of the transactions contemplated hereby; and (ii) "Superior Proposal" means any bona fide written offer made by a third party that is either fully financed or with respect to which a highly confident and/or a commitment letter from a financial institution of adequate sophistication and capitalization has been issued to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the shares of Company Common Stock then outstanding or all or substantially all the assets of the Company and otherwise on terms which the Board of Directors of the Company determines (after consultation with a nationally recognized investment bank) to be economically superior to the transaction contemplated by this Agreement. 20 (c) Nothing contained in this Section 6.02 shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e- 2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the good faith judgment of the Board of Directors of the Company, after consultation with outside counsel, failure so to disclose would be inconsistent with its fiduciary duties to the Company's stockholders under applicable law; provided, however, neither the Company nor its Board of Directors nor any committee thereof shall, except as permitted by Section 6.02(a), withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer, this Agreement or the Merger or approve or recommend, or propose to approve or recommend, an Acquisition Proposal. Section 6.03. Other Actions. The Company shall not, and shall not permit any of its subsidiaries to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the Offer Conditions not being satisfied (subject to the Company's right to take actions specifically permitted by Section 6.02). Section 6.04. Notice of Certain Events. The Company and Parent shall promptly notify each other of: (i) any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication from any Government Entity in connection with the transactions contemplated by this Agreement; (iii) any action, suits, claims, investigations or proceedings commenced or, to the actual knowledge of the executive officers of the notifying party, threatened against, relating to or involving or otherwise affecting such party or any of its subsidiaries; (iv) an administrative or other order or notification relating to any material violation or claimed violation of law; (v) the occurrence or non-occurrence of any event the occurrence or non- occurrence of which would cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Closing Date; and (vi) any material failure of any party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.04 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. ARTICLE VII Additional Agreements Section 7.01. Stockholder Approval; Preparation of Proxy Statement. (a) If the Company Stockholder Approval is required by law, the Company will, at Parent's request, as soon as practicable following the acceptance for payment of, and payment for, any Shares by Sub pursuant to the Offer and the expiration of the Offer, duly call, give notice of, convene and hold a meeting of its stockholders (the "Stockholders Meeting") for the purpose of obtaining the Company Stockholder Approval. The Company will, through its Board of Directors, recommend to its stockholders that the Company Stockholder Approval be given. Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall acquire at least 90% of the outstanding Shares, the parties shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a Stockholders Meeting in accordance with Section 253 of the DGCL. 21 (b) If the Company Stockholder Approval is required by law, the Company will, at Parent's request, as soon as practicable following the acceptance for payment of, and payment for, any Shares by Sub pursuant to the Offer and the expiration of the Offer, prepare and file a preliminary Proxy Statement with the SEC and will use its best efforts to respond to any comments of the SEC or its staff and to cause the Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. The Company will notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Stockholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company will promptly prepare and mail to its stockholders such an amendment or supplement. The Company will not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects. (c) Parent agrees to cause all Shares purchased pursuant to the Offer and all other Shares owned by Parent or any subsidiary of Parent to be voted in favor of the Company Stockholder Approval. Section 7.02. Access to Information. From the date hereof until such time as Parent's designees shall constitute a majority of the members of the Board of Directors of the Company, the Company shall give Parent and Sub, their counsel, financial advisors, auditors and other authorized representatives full access to the offices, properties, books and record of the Company and its subsidiaries during normal business hours, will furnish to Parent and Sub, their counsel, financial advisors, financial institutions auditors and other authorized representatives such financial and operating data and other information as such may be reasonably requested and will instruct the employees of the Company and its subsidiaries, their counsel and financial advisors to cooperate with Parent and Sub in their investigation of the Business; provided, that no investigation pursuant to this Section 7.02 shall affect any representation or warranty given by the Company to Parent and Sub hereunder; and provided, further, that any information provided to Parent and/or Sub pursuant to this Section 7.02 shall be subject to the confidentiality agreement, dated as of November 5, 1997 (the "Confidentiality Agreement"), the terms of which shall continue to apply, except as otherwise agreed by the Company, unless and until Parent and Sub shall have purchased a majority of the outstanding Shares pursuant to the Offer and notwithstanding termination of this Agreement. Section 7.03. Reasonable Efforts; Financing. (a) Each of the Company, Parent and Sub agree to use its reasonable best efforts to take, or cause to be taken, all actions necessary to comply promptly with all legal requirements which may be imposed on itself with respect to the Offer and the Merger (which actions shall include furnishing all information required under the HSR Act and in connection with approvals of or filings with any other Governmental Entity) and will promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them or any of their subsidiaries in connection with the Offer and the Merger. Each of the Company, Parent and Sub will, and will cause its subsidiaries to, use its reasonable best efforts to take all reasonable actions necessary to obtain (and will cooperate with each other in obtaining) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private third party required to be obtained or made by Parent, Sub, the Company or any of their subsidiaries in connection with the Offer and the Merger or the taking of any action contemplated thereby or by this Agreement, except that no party need waive any substantial rights or agree to any substantial limitation on its operations or to dispose of any assets. (b) Parent shall use reasonable efforts to cause the financing necessary for satisfaction of the condition in subsection (i) of the Conditions of the Offer on Exhibit A. Section 7.04. Options; Warrants. (a) The Company shall amend (i) ATC Group Services Inc. 1988 Incentive and Non-Statutory Stock Option Plan, (ii) ATC Group Services Inc. 1993 Incentive and Non-Statutory Stock Option Plan, (iii) ATC Group Services Inc. 1995 Nonqualified Stock Option Plan, and any other program pursuant to which there are holders of options (the "Options") to purchase Shares granted by the Company 22 (collectively, the "Stock Option Plans") to provide that all outstanding, unexercised Options shall be immediately exercisable and that if the optionees do not exercise their unexercised Options, each optionee shall receive, in settlement of each Option held by such optionee, a "Cash Amount" (less any applicable withholding taxes) with respect to the number of previously unexercised Shares underlying the Option immediately prior to the Effective Time. The Company shall use its commercially reasonable efforts to amend the Stock Option Plans to provide that each Option shall terminate as of the Effective Time. The Cash Amount payable for each Option shall equal the product of (i) the Merger Consideration minus the exercise price per Share of each such Option and (ii) the number of previously unexercised Shares covered by each such Option. (b) The Company shall provide notice to participants in the Stock Option Plans and other holders of Options to purchase Shares granted by the Company that the Company proposes to merge into another corporation; that the Optionee under the plans or program may exercise his Options in full for all shares not theretofore purchased by him prior to the Effective Time; and that the plans and program have been amended to provide that to the extent an optionee does not exercise such Options prior to the Effective Time, the optionee shall receive, in settlement of each Option held by the optionee, a "Cash Amount" (less any applicable withholding taxes) with respect to the number of previously unexercised Shares underlying the Option immediately prior to the Effective Time; that each Option shall terminate as of the Effective Time; and that the Cash Amount payable for each Option shall equal the product of (i) the Merger Consideration minus the exercise price per Share of each such Option and (ii) the number of previously unexercised Shares covered by each such Option. (c) Except as may be otherwise agreed to by Parent or Sub and the Company, the Company's Stock Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its Subsidiaries shall be deleted as of the Effective Time. (d) The Company shall use its commercially reasonable efforts so that following the Effective Time no holder of employee stock options will have any right to receive Shares upon exercise of an employee stock option. (e) Pursuant to the terms of (i) the warrant agreement, dated October 15, 1990, relating to 568,207 Class C Redeemable Common Stock Purchase Warrants, (ii) warrant agreements relating to 490,500 warrants issued pursuant to the merger between the Company and Aurora Environmental Inc. and (iii) the consulting agreement, dated March 14, 1997, relating to 35,000 warrants issued to First Montauk Securities Corp., the Company has issued warrants (collectively, the "Warrants") to certain persons. The holders of the Warrants shall be entitled either to exercise their Warrants for Shares in accordance with the applicable agreement under which such Warrants were issued and tender such Shares in the Offer or upon execution and delivery to the Company of a cancellation agreement in form and substance reasonably satisfactory to the Company, to receive from the Company at the Effective Time a Cash Amount equal to the product of (i) the Merger Consideration minus the exercise price per share of each such Warrant and (ii) the number of unexercised Shares covered by each such Warrant. (f) Notwithstanding anything to the contrary herein, if it is determined that compliance with any of the foregoing would cause any individual subject to Section 16 of the Exchange Act to become subject to the profit recovery provisions thereof, any Options or Warrants held by such individual will be canceled or purchased, as the case may be, at the Effective Time or at such later time as may be necessary to avoid application of such profit recovery provisions and such individual will be entitled to receive from the Company or the Surviving Corporation an amount in cash or other consideration satisfactory to the Surviving Corporation and such individual equal to the excess, if any, of the Merger Consideration over the per Share exercise price of such Option or Warrant multiplied by the number of Shares subject thereto (less any applicable withholding taxes), and the parties hereto will cooperate and take any and all necessary actions so as to achieve the intent of the foregoing without giving rise to such profit recovery. 23 Section 7.05. Directors. Promptly upon the acceptance for payment of, and payment for, 50.1% of the Shares by Sub pursuant to the Offer, Sub shall be entitled to designate such number of directors on the Board of Directors of the Company as will give Sub, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and the Company shall, at such time, cause Sub's designees to be so elected by its existing Board of Directors; provided, however, that in the event that Sub's designees are elected to the Board of Directors of the Company, until the Effective Time such Board of Directors shall have at least two directors who are directors on the date of this Agreement and who are not officers of the Company (the "Independent Directors"); and provided, further, that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Directors then remain, the other directors shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers or affiliates of Parent or any of its subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable law, the Company shall take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to the Company on a timely basis all information required to be included in the Information Statement with respect to Sub's designees). In connection with the foregoing, the Company will promptly, at the option of Parent, either increase the size of the Company's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Sub's designees to be elected or appointed to, and to constitute a majority of, the Company's Board of Directors as provided above. Section 7.06. Fees and Expenses. (a) In addition to any other amounts which may be payable or become payable pursuant to any other paragraph of this Section 7.06, in the event that this Agreement is terminated for any reason other than a material breach by Parent or Sub, the Company shall promptly reimburse the Parent or Sub, as the case may be, upon receipt of reasonably satisfactory back-up documentation, for all out-of-pocket expenses and fees (including, without limitation, fees and expenses payable to all Governmental Entities, banks, investment banking firms and other financial institutions, and their respective agents and counsel, and all fees and expenses of counsel, accountants, financial printers, proxy solicitors, exchange agents, experts and consultants to Parent and its affiliates), whether incurred prior to, on or after the date hereof, in connection with the Merger and the consummation of all transactions contemplated by this Agreement, and the financing thereof, up to a maximum of $2.5 million. Except as otherwise specifically provided for herein, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. (b) In the event that (i) this Agreement is terminated pursuant to Section 9.01(d) or (e), or (ii) any Person (other than Parent or any of its affiliates) shall have consummated an Acquisition Proposal within twelve months following the termination of the Offer at a value at or above $12 per share, then the Company shall pay to Parent, in the case of an event under (i) above, promptly upon any such termination, and, in the case of an event under (ii) above, at the time of any such consummation, a termination fee of $4.5 million (the "Termination Fee"); provided that in no event shall the aggregate payment by the Company of fees and expenses and of the Termination Fee under this Section 7.06 exceed $6.0 million. (c) The prevailing party in any legal action undertaken to enforce this Agreement or any provision hereof shall be entitled to recover from the other party the costs and expenses (including attorneys' and expert witness fees and expenses) incurred in connection with such action. Section 7.07. Indemnification; Insurance. (a) Parent and Sub agree that all rights to indemnification for acts or omissions occurring prior to the Effective Time now existing in favor of the current or former directors, officers, employees, fiduciaries or agents (the "Indemnified Parties") of the Company and its subsidiaries as provided in their respective certificates of incorporation or by-laws (or similar organizational documents) or 24 existing indemnification contracts shall survive the Merger and shall continue in full force and effect in accordance with their terms. (b) It is understood and agreed that the Company shall, and from and after the Effective Time, the Surviving Corporation and the Parent shall, indemnify, defend and hold harmless the Indemnified Parties against all losses, claims, damages, costs, expenses (including attorneys' fees and expenses), liabilities or judgments, fines or amounts that are paid in settlement in connection with any pending, threatened or actual claim, action, suit, proceeding or investigation based in whole or in part or arising in whole or part out of the fact that such person is or was a director, officer, employee or agent of the Company or any of its subsidiaries or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise or by reason of anything done or not done by such person in any such capacity whether pertaining to any matter existing or occurring at or prior to the Effective Time or any acts or omissions occurring or existing at or prior to the Effective Time and whether asserted or claimed prior to, or at or after, the Effective Time ("Indemnified Liabilities"), including all Indemnified Liabilities based in whole or in part on, or arising in whole or in part out of, or pertaining to this Agreement or the transactions contemplated hereby, in each case to the fullest extent permitted by applicable law (and the Company, the Surviving Corporation, and Parent, as the case may be, shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent permitted by applicable law). In determining whether an Indemnified Party is entitled to indemnification under this Section 7.07(b), if requested by such Indemnified Party such determination shall be made by special, independent counsel selected by the Surviving Corporation and the Parent and reasonably approved by the Indemnified Party, and who has not otherwise performed services for the Surviving Corporation, Parent or their respective affiliates within the last three years. Without limiting the foregoing, in the event any such claim, action, suit, proceeding or investigation is brought against any Indemnified Parties (whether arising before or after the Effective Time), (i) the Indemnified Parties may retain Squadron, Ellenoff, Plesent & Sheinfeld, LLP or other counsel reasonably satisfactory to the Company (or the Surviving Corporation after the Effective time), and the Company (or, after the Effective Time, the Surviving Corporation and Parent) shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties as promptly as statements therefor are received; and (ii) the Company (or, after the Effective Time, the Surviving Corporation and the Parent) will use all reasonable best efforts to assist in the vigorous defense of any such matter; provided, that none of the Company, the Surviving Corporation or Parent shall be liable for any settlement effected without its prior written consent, which consent shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under this Section 7.07(b), upon learning of any such claim, action, suit, proceeding or investigation, shall notify the Company (or, after the Effective Time, the Surviving Corporation and Parent) (but the failure so to notify shall not relieve a party from any liability which it may have under this Section 7.07(b) except to the extent such failure prejudices such party's position with respect to such claims) and shall deliver to the Company (or, after the Effective Time, the Surviving Corporation and the Parent) the undertaking contemplated by Section 145(e) of the DGCL, but without any requirement for the posting of the bond. The Indemnified Parties as a group may retain one law firm (plus local counsel, if necessary) to represent them with respect to each such matter unless the use of the counsel chosen to represent the Indemnified Parties would present such counsel with a conflict of interest, or the representation of all of the Indemnified Parties by the same counsel would be inappropriate due to actual or potential differing interests between them, in which case such additional counsel as may be required (as shall be reasonably determined by the Indemnified Parties and the Company, the Surviving Corporation or Parent, as the case may be) and satisfactory to the Company, the Surviving Corporation or Parent, as the case may be, may be retained by the Indemnified Parties at the cost and expense of the Company, the Surviving Corporation or Parent, as the case may be. The Company and Sub agree that the foregoing rights to indemnification, including provisions relating to advances of expenses incurred in defense of any action or suit, existing in favor of the Indemnified Parties with respect to matters occurring through the Effective Time, shall survive the Merger and shall continue in full force and effect for a period of not less than six years after the Effective Time; provided, however that all rights to indemnification (including rights relating to advances of expenses) in respect of any Indemnified Liabilities asserted or made within such period shall continue until the disposition of such Indemnified Liabilities. Furthermore, the provisions with respect to indemnification set forth in the Certificate of Incorporation or Bylaws 25 of the Surviving Corporation shall not be amended for a period of six years following the Effective Time to the extent that such amendment would adversely affect the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers, employees or agents of the Company in respect of actions or omissions occurring at or prior to the Effective Time. (c) The Company (or, after the Effective Time, the Surviving Corporation and Parent) shall indemnify any Indemnified Party against all reasonable costs and expenses (including attorneys' fees and expenses), such amounts to be payable in advance upon request as provided in Section 7.07(b), relating to the enforcement of such Indemnified Party's rights under this Section 7.07 or under the documents referred to in this Section 7.07, but only to the extent that such Indemnified Party is ultimately determined to be entitled to indemnification hereunder or thereunder. Any amounts due pursuant to the preceding sentence shall be payable upon request by the Indemnified Party. (d) For six years from the Effective Time, Parent shall, unless Parent agrees in writing to guarantee the indemnification obligations set forth in Section 7.07(a), maintain in effect the Company's current directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy (a copy of which has been heretofore delivered to Parent); provided, however, that in no event shall Parent be required to expend in any one year an amount in excess of 225% of the annual premiums currently paid by the Company for such insurance (which the Company represents is currently not more than $98,250); and, provided, further, that if the annual premiums of such insurance coverage exceed such amount, Parent shall be obligated only to obtain a policy with the greatest coverage available for a cost not exceeding such amount. (e) This Section 7.07 shall survive the consummation of the Merger at the Effective Time, is intended to benefit the Company, Parent, the Surviving Corporation and the Indemnified Parties, and shall be binding on all successors and assigns of Parent and the Surviving Corporation. (f) In the event the Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation of such consolidation or merger, or (ii) transfers all or substantially all of its properties to any person, then, and in each case, proper provision shall be made so that the successors and assigns of the Company and the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 7.07. Section 7.08. Certain Litigation. The Company agrees that it will not settle any litigation commenced after the date hereof against the Company or any of its directors by any stockholder of the Company relating to the Offer, the Merger or this Agreement, without the prior written consent of Parent. In addition, the Company will not voluntarily cooperate with any third party which may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and will cooperate with Parent and Sub to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger, unless the Board of Directors of the Company determines in good faith, after consultation with outside counsel, that failing so to cooperate with such third party or cooperating with Parent or Sub, as the case may be, would constitute a breach of the director's fiduciary duties under applicable law. Section 7.09. Solvency Opinion. Parent shall deliver to the Board any solvency letter from any third party appraisal or similar form that Parent provides to the providers of financing under the Financing Commitment. ARTICLE VIII Conditions Section 8.01. Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction prior to the Closing Date of the following conditions: 26 (a) Company Stockholder Approval. If required by applicable law, the Company Stockholder Approval shall have been obtained. (b) No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that each of the parties shall have used reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered. (c) Purchase of Shares. Sub shall have previously accepted for payment and paid for Shares pursuant to the Offer. (d) HSR Approvals. The applicable waiting periods under the HSR Act shall have expired or been terminated. ARTICLE IX Termination, Amendment and Waiver Section 9.01. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the terms of this Agreement by the stockholders of the Company: (a) by mutual written consent of Parent and the Company, by action of their respective Boards of Directors; (b) by Parent or the Company if the Merger shall not have been consummated on or before June 30, 1998; provided, however, that neither Parent nor the Company may terminate this Agreement pursuant to this Section 9.01(b) if such party shall have materially breached this Agreement; (c) by Parent or the Company if any court of competent jurisdiction in the United States or other United States Governmental Entity has issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; provided, however, that the party seeking to terminate this Agreement shall have used its reasonable best efforts to remove or lift such order, decree, ruling or other action; (d) by the Company if, prior to the consummation of the Offer, any person has made a bona fide proposal relating to an Acquisition Proposal, or has commenced a tender or exchange offer for the Shares, and the Company Board concludes, consistent with its fiduciary duties and after the receipt of advice from such Delaware counsel as may be appointed by the Board of Directors, that such proposal if consummated would be a Superior Proposal; (e) by Parent, if prior to the consummation of the Offer the Company Board shall have (i) failed to recommend to the stockholders of the Company that they accept the Offer, tender their Shares pursuant to the Offer and approve and adopt this Agreement (the "Stockholder Acceptance"), (ii) withdrawn or materially modified its approval or recommendation of this Agreement, the Offer or the Merger, (iii) shall have approved or recommended a Superior Proposal, (iv) shall have resolved to effect any of the foregoing or (v) shall have otherwise taken steps to impede the Stockholder Acceptance; (f) by the Parent, if prior to consummation of the Offer, there has been a material violation or breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement (which violation or breach is not cured by the Company within ten days after written notice reasonably describing such breach); or 27 (g) by the Company, if prior to the consummation of the Offer, there has been a material violation or breach by Parent or Sub of any representation, warranty, covenant or agreement contained in this Agreement (which violation or breach is not cured by Parent or Sub within ten days after written notice reasonably describing such breach, other than the obligations contained in the last sentence of Section 1.01(a), which shall have no cure period). Section 9.02. Effect of Termination. In the event of a termination of this Agreement pursuant to Section 9.01, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or their respective officers or directors, except with respect to the last sentence of Section 1.02(c), Section 4.16, Section 5.07, the last clause of Section 7.02, Section 7.06, this Section 9.02 and Article X; provided, however, that nothing herein shall relieve any party for liability for any breach hereof. Section 9.03. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after obtaining the Company Stockholder Approval (if required by law), but, after any such approval, no amendment shall be made which by law requires further approval by such shareholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Following the election or appointment of the Sub's designees pursuant to Section 7.05 and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors then in office shall be required by the Company to (i) amend or terminate this Agreement by the Company, (ii) exercise or waive any of the Company's rights or remedies under this Agreement or (iii) extend the time for performance of Parent and Sub's respective obligations under this Agreement. Section 9.04. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of this Agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party hereto to assert any of its rights hereunder or otherwise shall not constitute a waiver of those rights. ARTICLE X Miscellaneous Section 10.01. Nonsurvival of Representations and Warranties. The representations and warranties in this Agreement or in any instrument delivered pursuant hereto shall terminate at the Effective Time or, in the case of the Company, shall terminate upon the acceptance for payment of, and payment for, Shares by Sub pursuant to the Offer, unless the survival thereof is provided for by their terms. Section 10.02. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: Weiss, Peck & Greer One New York Plaza New York, New York 10004 Attention: Steven N. Hutchinson Telecopy No.: (212) 908-0112 28 with a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Dennis J. Friedman, Esq. Telecopy No.: (212) 489-5303 and (b) if to the Company, to: ATC Group Services Inc. 104 East 25th Street, 10th Floor New York, New York 10010 Attention: President Telecopy No.: (212) 598-4283 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Lawrence A. Larose, Esq. Telecopy No.: (212) 504-6666 with a copy to: Squadron, Ellenoff, Plesent & Sheinfeld LLP 551 Fifth Avenue New York, NY 10176 Attention: Joel I. Papernik, Esq. Section 10.03. Interpretation. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. As used in this Agreement, the term "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person. As used in this Agreement, "material adverse change" or "material adverse effect" means, when used in connection with the Company, any change or effect (or any development that, insofar as can reasonably be foreseen, is likely to result in any change or effect) that, individually or in the aggregate with any such other changes or effects, is materially adverse to the business, financial condition or results of operations of the Company and its subsidiaries taken as a whole. Notwithstanding the foregoing, a material adverse change or material adverse effect shall not include any material adverse change or material adverse effect caused by any change resulting from the announcement of the Offer or the Merger. 29 Section 10.04. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 10.05. Entire Agreement; Third Party Beneficiaries. This Agreement (including the documents and the instruments referred to herein) (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 7.07, is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 10.06. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable conflicts of law, except to the extent the DGCL shall be held to govern the terms of the Merger. Section 10.07. Publicity. Except as otherwise required by law or the rules of the Nasdaq National Market, for so long as this Agreement is in effect, neither the Company nor Parent shall, or shall permit any of its subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. Section 10.08. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 10.09. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York or Delaware or in a New York or Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit to the personal jurisdiction of any Federal court located in the States of New York or Delaware or any New York or Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a Federal court sitting in the State of New York or Delaware or a New York or Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. 30 In Witness Whereof, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. Acquisition Holdings, Inc. /s/ Steven N. Hutchinson By: _________________________________ Name: Steven N. Hutchinson Title: President /s/ Tania R. Cochran By: _________________________________ Name: Tania R. Cochran Title: Treasurer Acquisition Corp. /s/ Steven N. Hutchinson By: _________________________________ Name: Steven N. Hutchinson Title: President /s/ Tania R. Cochran By: _________________________________ Name: Tania R. Cochran Title: Treasurer ATC Group Services Inc. /s/ Morry F. Rubin By: _________________________________ Name: Morry F. Rubin Title: President and Chief Executive Officer Approved: /s/ Julia S. Heckman By: _________________________________ Name: Julia S. Heckman Title: Member of the Special Committee /s/ Richard S. Greenberg By: _________________________________ Name: Richard S. Greenberg Title: Member of the Special Committee 31 EXHIBIT A Conditions of the Offer Notwithstanding any other term of the Offer or this Agreement, and in addition to (and not in limitation of) Sub's right to extend and amend the Offer at any time in its sole discretion (subject to the provisions of this Agreement), Sub shall not be required to accept for payment or, subject to applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any Shares tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares that would constitute a majority of the outstanding Shares (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares) (the "Minimum Condition") and (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, notwithstanding any other term of the Offer or this Agreement, Sub shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of this Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be any action or proceeding commenced by any Governmental Entity which has a reasonable likelihood of success and which, if decided adversely to the Company, would have a material adverse effect on the Company, (i) challenging the acquisition by Parent or Sub of any Shares under the Offer or seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement, or seeking to obtain from the Company, Parent or Sub any damages that are material in relation to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit or impose any material limitations on Parent's or Sub's ownership or operation (or that of any of their respective Subsidiaries or affiliates) of all or a material portion of the Company's businesses or assets, or to compel Parent or Sub or their respective Subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company and its Subsidiaries taken as a whole, (ii) seeking to impose material limitations on the ability of Sub, or render Sub unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (iii) seeking to impose material limitations on the ability of Sub or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's stockholders, or (iv) which otherwise is reasonably likely to have a material adverse effect on the Company; (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred any events after the date of this Agreement that, either individually or in the aggregate, have caused or are reasonably likely to cause a material adverse change with respect to the Company other than a change resulting from the announcement of the Offer or the Merger; (d)(i) the Board of Directors of the Company or any committee thereof shall have publicly (including by amendment of its Schedule 14D-9) withdrawn or modified in a manner adverse to Parent or Sub its approval or recommendation of the Offer, the Merger or this Agreement, or approved or recommended any Acquisition Proposal, (ii) the Company shall have entered into any agreement with respect to any Superior Proposal in accordance with Section 6.02(a) of this Agreement or (iii) the Board of Directors of the Company or any committee thereof shall have resolved to take any of the foregoing actions; 32 (e) any of the representations and warranties of the Company set forth in this Agreement shall not be true and correct in any material respect, in each case at the date of this Agreement and at the scheduled or extended expiration of the Offer, except for such breaches that would, individually or in the aggregate, not have a material adverse effect on the Company; (f) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under this Agreement, except for such breaches that would, individually or in the aggregate, not have a material adverse effect on the Company; (g) this Agreement shall have been terminated in accordance with its terms; (h) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange or on NASDAQ, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war, armed hostilities or other international or national calamity directly involving the armed forces of the United States that materially and adversely affects the financial markets in the United States, (iv) any material limitation (whether or not mandatory) by any governmental authority on the extension of credit by banks or other lending institutions, (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (i) the Company shall fail to receive the proceeds of financing pursuant to the Financing Letters set forth on Schedule 5.06 or involving such other financing sources, as Parent and the Company shall reasonably agree and are not materially more onerous, in amounts sufficient to consummate the transactions contemplated by this Agreement, including, without limitation (i) to pay, with respect to all Common Stock in the Merger, the Offer Price pursuant to Section 1.01, (ii) to refinance the outstanding indebtedness of the Company, (iii) to pay any fees and expenses in connection with the transactions contemplated by this Agreement or the financing thereof and (iv) to provide for the working capital needs of the Company following the Merger, including, without limitation, if applicable, letters of credit. The foregoing conditions are for the sole benefit of Parent and Sub, may be asserted by Parent or Sub regardless of the circumstances giving rise to such condition (including any action or inaction by Parent or Sub not in violation of this Agreement) and may be waived by Parent or Sub in whole or in part at any time and from time to time in the sole discretion of Parent or Sub, subject in each case to the terms of this Agreement. The failure by Parent or Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 33 EX-99.(C)(2) 13 STOCKHOLDERS AGREEMENT DATED 10/17/97 Exhibit(c)(2) THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of October 17, 1997, is among Acquisition Holdings, Inc., a Delaware corporation ("Holdco"), and the stockholders (the "Stockholders") of ATC Group Services Inc. (the "Company") signatory hereto. RECITALS WHEREAS, Holdco has simultaneously herewith delivered to the Company an offer letter, dated October 17, 1997, from Weiss, Peck & Greer, L.L.C., attached hereto as Exhibit A, pursuant to which Holdco through a subsidiary would enter into a business combination with the Company (the "Transaction") pursuant to an agreement and plan of merger in the form attached hereto as Exhibit B (as the same may be negotiated and entered into by Holdco and/or its affiliates and the Company, the "Merger Agreement") in accordance with which Holdco would acquire the entire equity interest in the Company for $12 per share of Common Stock; and WHEREAS, the Stockholders have agreed to vote 14.99% in the aggregate of the Common Stock of the Company in favor of the Transaction and Holdco and the Stockholders desire to memorialize certain other agreements, all as set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: AGREEMENT 1. Certain Definitions. For purposes of this Agreement: ------------------- "Acquisition Proposal" shall mean any inquiry, proposal or offer from any Person relating to any direct or indirect acquisition or purchase of 15% or more of the assets of the Company and its subsidiaries or 15% or more of any class of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 15% or more of any class of equity securities of the Company or any of its subsidiaries, any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the Transaction, or any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Transaction or which would reasonably be expected to dilute materially the benefits to Holdco of the Transaction. "Beneficially Own" or "Beneficial Ownership" with respect to any securities shall mean having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned by all other Persons with whom such Person would constitute a "group" within the meaning of Section 13(d) of the Exchange Act. "Closing Date" shall mean the date set forth in the Merger Agreement, if executed and delivered, as the closing date for the Transaction. "Common Stock" shall mean at any time the Common Stock, par value $.01 per share, of the Company. "Existing Shares" shall mean the shares of Common Stock owned by the Stockholders on the date hereof. "Permitted Transfer" means a sale, transfer, assignment or other disposition to a Permitted Transferee. "Permitted Transferee" means any person who is (A) the spouse or former spouse of, or any lineal descendent of, or any spouse of such lineal descendant of, or the grandparent, parent, brother or sister of, or spouse of such brother or sister of, either of the Stockholders or of a Permitted Transferee; (B) upon the death of any of the Stockholders or any Permitted Transferee of such person, the executors of the estate of such Stockholder or such Permitted Transferee, and any of such Stockholder's or such Permitted Transferee's heirs, testamentary trustees, devisees, or legatees; (C) any trust for the benefit of one or more of the Stockholders or Permitted Transferees; (D) upon the disability of either of the Stockholders or any Permitted Transferee, any guardian or conservator of such Stockholder or such Permitted Transferee; (E) any corporation, partnership or other entity if at least 95% of the beneficial ownership is held by either Stockholder individually or by the Stockholders in the aggregate or Permitted Transferees, or (F) a lending institution in whose favor either of the Stockholders pledges or otherwise grants a security interest in any or all of the Proxy Shares (as defined herein) for the purpose of obtaining one or more bona fide loans or advances for the exercise of options, warrants or other rights held by either Stockholder to acquire shares of Common Stock; provided, that in each case such transferee (in -------- the case of a transferee under clause (F) above, on behalf of itself and any transferee of the collateral) assumes and agrees to perform and becomes a party to this Agreement, agrees not to make an Acquisition Proposal, and agrees not to dissent in the Transaction, all on terms reasonably acceptable to Holdco. For purposes of this Agreement, when a Permitted Transferee has 2 acquired Shares in accordance herewith, such person shall be deemed a "Stockholder" hereunder. "Person" shall mean an individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or other entity. "Shares" shall mean the Existing Shares and any right to acquire shares of Common Stock owned on the date hereof and any shares of Common Stock or rights to acquire shares of Common Stock acquired by any Stockholder in any capacity after the date hereof and prior to the termination of this Agreement. "Shares" shall include (i) shares of Common Stock acquired upon the exercise of options, warrants or other rights to acquire shares; (ii) shares of Common Stock acquired upon the conversion or exchange of convertible or exchangeable securities; (iii) shares of Common Stock acquired by means of purchase, dividend, distribution, gift, bequest, inheritance or as a successor in interest in any capacity or otherwise; and (iv) rights to acquire shares of Common Stock, vested or not, presently exercisable or not, including, but not limited to, options and warrants. In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend, split-up, recapitalization, reclassification, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed, reclassified or exchanged and appropriate adjustments shall be made to the terms and provisions of this Agreement. "Shares" shall also include voting trust certificates issued in respect of any Shares. 2. Voting of Shares; No Inconsistent Agreements. -------------------------------------------- (a) With respect to the Shares identified as Proxy Shares on Exhibit C attached hereto (the "Proxy Shares"), each Stockholder, subject to the terms of this Agreement, hereby irrevocably grants to, and appoints, Holdco and any other Person who shall hereafter be designated by Holdco, such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote such Stockholder's Proxy Shares, or grant a consent or approval in respect of such Proxy Shares, at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, (i) in favor of (A) the Transaction, (B) the Merger Agreement and (C) the transactions contemplated by the Merger Agreement, including, but not limited to, the amendments to the Certificate of Incorporation of the Company contemplated thereby and (ii) against (other than in connection with the Transaction) (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries (other than the Transaction); (B) any sale, lease or transfer by the Company of a material amount of 3 assets (including stock) of the Company or any of its subsidiaries, or a reorganization, restructuring, recapitalization, special dividend, dissolution or liquidation of the Company or any of its subsidiaries; and (C)(1) any change in a majority of the persons who constitute the board of directors of the Company or any of its subsidiaries; (2) any change in the present capitalization of the Company or any of its subsidiaries including any proposal to sell a substantial equity interest in the Company or any of its subsidiaries; (3) any amendment of the Company or any of its subsidiaries' charters or by-laws; (4) any other change in the Company or any of its subsidiaries' corporate structure or business; and (5) any other action which, in the case of each of the matters referred to in clauses (C)(1), (2), (3) or (4), is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the Transaction and the transactions contemplated by this Agreement and the Merger Agreement. (b) Such Stockholder represents that any proxies previously given in respect of such Stockholder's Proxy Shares are not irrevocable, and that any such proxies are hereby revoked. (c) Such Stockholder hereby affirms that the irrevocable proxy set forth in this Section 2 is given to secure the performance of the duties of the Stockholder under this Agreement. Such Stockholder hereby further affirms that such irrevocable proxy is coupled with an interest and may under no circumstances be revoked, except in connection with the termination of this Agreement pursuant to Section 7 hereof. Such Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. (d) Each Stockholder severally and not jointly agrees that it shall not enter into any agreement or understanding with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained herein, including in this Section 2. Further, from the date hereof until such time as Holdco's designees shall constitute a majority of the members of the Board of Directors of the Company, each Stockholder severally and not jointly agrees that it will, if the Board of Directors of the Company fails or refuses to submit the Transaction to the Company stockholders, vote all Proxy Shares held of record or Beneficially Owned by such Stockholder to (i) call or cause to be called a special meeting of stockholders of the Company (or effect a written consent) to remove the directors of the Company who have so failed or refused, or to increase the size of the Board of Directors and elect a majority of new directors who will submit the Transaction to the stockholders of the Company for a vote, and (ii) use its reasonable efforts to vote such Proxy Shares to effect 4 such removal and replacement, or increase and election, and the submission of the Transaction to the stockholders of the Company; and (iii), at any time after initial approval by the stockholders of the Company of the Transaction, if so requested by Holdco, vote such Proxy Shares to approve all or any actions incident to the Transaction or the other matters referred to in this Section 2 by stockholder written consent. 3. Other Stockholder Covenants. --------------------------- (a) Restriction on Transfer; Proxies and Non-interference. From the ----------------------------------------------------- date hereof through the Closing Date or the earlier termination of this Agreement in accordance with its terms, and except for Permitted Transfers as expressly permitted herein and subject to Section 3(f), each Stockholder severally and not jointly agrees that it shall not directly or indirectly: (i) offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to, or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of (collectively, "transfer"), any or all of the Proxy Shares or any interest therein; (ii) grant any proxies or powers of attorney with respect to the Proxy Shares, deposit the Proxy Shares into a voting trust or enter into a voting agreement with respect to the Proxy Shares; or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or would result in a breach by such Stockholder of its obligations under this Agreement. (b) No Solicitation. --------------- Subject to Section 3(f), from the date hereof until the Closing Date, or the earlier termination of this Agreement in accordance with Section 7 hereof, each Stockholder severally and not jointly agrees that such Stockholder shall not, and shall not permit any of such Stockholder's representatives, agents or affiliates (including, without limitation, any investment banker, attorney or accountant retained by any Stockholder) to, directly or indirectly, enter into, solicit, initiate or continue any discussions or negotiations with, or provide any information to, or otherwise cooperate in any other way with, any Person or group, other than Holdco and its affiliates, concerning any offer or proposal which constitutes or is reasonably likely to lead to an Acquisition Proposal. Each Stockholder severally and not jointly agrees that it will immediately notify Holdco orally and in writing if any discussions or negotiations are sought to be initiated, any 5 inquiry or proposal is made, or any information is requested with respect to any Acquisition Proposal or which could lead to an Acquisition Proposal, and immediately notify Holdco of all material terms of any proposal which it may receive in respect of any such Acquisition Proposal, including the identity of the prospective purchaser or soliciting party if known, and thereafter shall inform Holdco on a timely, ongoing basis of the status and content of any discussions or negotiations with such a third party, including immediately reporting any material changes to the terms and conditions thereof. (c) Reliance. Each Stockholder understands and acknowledges that -------- Holdco is proposing to enter into the Transaction in reliance upon each Stockholder's execution and delivery of this Agreement. (d) Further Assurances. From time to time, at Holdco's request and ------------------ without further consideration, each Stockholder severally and not jointly agrees that it shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the purposes of this Agreement. (e) Stockholder Termination Fee. In the event that any Acquisition --------------------------- Proposal is consummated, then each Stockholder shall pay to Holdco as soon as practicable, but in no event longer than two business days after receipt of the consideration paid to such Stockholder in connection with such Acquisition Proposal an amount (the "Stockholder Termination Fee") equal to the product of (x) the number of Shares Beneficially Owned by such Stockholder, multiplied by (y) the excess of the per share value of consideration paid or payable in consequence of consummation of the Acquisition Proposal (with the value of any non-cash consideration being determined by agreement of Holdco and such Stockholder or, failing such agreement within 10 business days of consummation of such Acquisition Proposal, as provided below) over $12. In the case of options on Shares, to the extent the same are cancelled for a payment in cash (the "Option Payment"), the amount due hereunder shall be the amount by which the Option Payment exceeds the product of (a) the number of Shares underlying such options and (b) $12. In the event that the consideration paid or payable in consequence of consummation of the Acquisition Proposal: (i) consists solely of cash, then the Stockholder Termination Fee shall be payable solely in cash, or (ii) consists of cash and other non-cash property, or solely non-cash property, then the Stockholder Termination Fee shall be payable in cash and such non-cash property in the same proportion as the cash bears to the value of the non-cash property issued or issuable in consequence of consummation of the Acquisition Proposal (as such value is determined herein). If Holdco and such Stockholder fail to agree promptly on the value of such non-cash consideration, then the parties shall 6 appoint an independent investment banking firm reasonably acceptable to Holdco and such Stockholder to act as arbitrator (the "Arbitrator"). Upon the selection of the Arbitrator, Holdco on the one hand and such Stockholder on the other shall deliver to the Arbitrator and to each other their last and final offer concurrently in writing (the "Certified Offers"). The Certified Offers shall list one amount which the submitting party asserts is the appropriate valuation of such non-cash consideration as of the date of submittal. The Arbitrator's sole role shall be to select which one of the two Certified Offers most closely approximates the valuation the Arbitrator would have determined for such non- cash consideration, taking into account current market valuations of any publicly traded securities which constitute such non-cash consideration. The Arbitrator shall notify the parties of such determination. The determination of the Arbitrator shall be binding on the parties. All costs and expenses of the Arbitrator shall be borne by the parties whose Certified Offer is not selected. Each Stockholder acknowledges that the agreements contained in this Section 3(e) are an integral part of the transactions contemplated by this Agreement and the Transaction. Accordingly, if the Stockholder shall fail to pay when due any amounts which shall become due under Section 3(e) hereof, the Stockholder shall in addition hereto pay to Holdco all costs and expenses (including fees and disbursements of counsel) incurred in collecting such overdue amounts, together with interest on such overdue amounts from the date such payment was required to be made until the date such payment is received at a rate per annum equal to the Prime Rate as announced from time to time by Citibank, N.A. as its "prime rate," "reference rate," "base rate" or other similar rate. Any payment required to be made pursuant to this Section 3(e) shall be made when due by wire transfer of immediately available funds to an account designated by Holdco. The parties agree and acknowledge that in the event that any Acquisition Proposal is consummated, it would be impracticable and extremely difficult to ascertain with certainty the amount of damages to Holdco. Therefore, the parties agree that payment of the Stockholder Termination Fee pursuant to this Section 3(e) shall represent full liquidated damages. The parties agree that no party shall be liable for special, indirect, incidental or consequential damages of any nature arising from this Agreement. (f) Fiduciary Duty of Directors. Holdco agrees and acknowledges that --------------------------- each Stockholder is a director of the Company, and, in such capacity, has fiduciary duties to the stockholders of Company. Nothing in this Agreement (including, without limitation, Section 3(b)) shall be deemed to limit or affect the obligation of each Stockholder, as a director of the Company, to take any and all action as may be necessary in the exercise of his fiduciary duty to the stockholders of the Company. 7 4. Representations and Warranties of Stockholders. Each ---------------------------------------------- Stockholder hereby severally and not jointly (and solely with respect to itself and the Shares held of record or Beneficially Owned by such Stockholder) represents and warrants to Holdco as follows: (a) Ownership of Shares. Such Stockholder is the record and/or ------------------- Beneficial Owner of the Existing Shares set forth on Exhibit C hereto. On the date hereof, the Existing Shares constitute all of the Shares owned of record or Beneficially Owned by such Stockholder. With respect to the number of shares set forth opposite such Stockholder's name on Exhibit C hereto, and with the exceptions noted thereon, if any, such Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Sections 2 and 3 hereof, sole power of disposition, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Existing Shares with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Due Authorization. Such Stockholder has all requisite capacity, ----------------- power and authority to execute and deliver this Agreement and perform its obligations hereunder. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement enforceable against such Stockholder in accordance with its terms except to the extent (i) such enforcement may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (c) No Conflicts. Except for filings, authorizations, consents and ------------ approvals contemplated by the Transaction and necessary for the consummation of the transactions contemplated hereby and thereby, (i) no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof shall (A) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which 8 such Stockholder is a party or by which such Stockholder or any of its properties or assets may be bound, or (B) violate any order, writ, injunction, decree, judgment, statute, rule or regulation applicable to such Stockholder or any of its properties or assets. (d) No Encumbrances. Except as set forth on Exhibit C or as otherwise --------------- permitted herein, the Shares and the certificates representing such Shares are now, and at all times during the term hereof, will be, held by such Stockholder, or by a nominee, custodian or trust for the benefit of such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such arising hereunder. (e) No Finder's Fees. No broker, investment banker, financial advisor ---------------- or other Person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such Stockholder. 5. Representations and Warranties of Holdco. Holdco represents and ---------------------------------------- warrants to the Stockholders as follows: (a) Organization. Holdco is a corporation duly organized, validly ------------ existing and in good standing under the laws of its state of incorporation, and has all requisite corporate power or other power and authority to execute and deliver this Agreement and perform its obligations hereunder. The execution and delivery by Holdco of this Agreement and the performance by Holdco of its obligations hereunder have been duly and validly authorized by its Board of Directors and, except as contemplated in the Transaction, no other corporate proceedings on the part of Holdco are necessary to authorize the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. (b) Agreement. This Agreement has been duly and validly executed and --------- delivered by Holdco and constitutes a valid and binding agreement of Holdco enforceable against Holdco in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, or other similar laws, now or hereafter in effect, affecting creditors' rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. (c) No Conflicts. Except for filings, authorizations, consents, and ------------ approvals contemplated by the Transaction and necessary for the consummation of the transactions contemplated hereby and thereby, (i) no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement 9 by Holdco and the consummation by Holdco of the transactions contemplated hereby, and (ii) none of the execution and delivery of this Agreement by Holdco, the consummation by Holdco of the transaction contemplated hereby or compliance by Holdco with any of the provisions hereof shall (A) conflict with or result in any breach of the charter or bylaws of Holdco, (B) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third-party right of termination, cancellation, material modifications or acceleration) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Holdco is a party or by which Holdco of its properties or assets may be bound, or (C) violate any order, writ, injunction, decree, judgment, statute, rule or regulation applicable to Holdco or its respective properties or assets. 6. Legend. ------ (a) Each Stockholder severally and not jointly agrees with, and covenants to, Holdco that such Stockholder shall not request that the Company register the transfer (by book-entry or otherwise) of any certificate or uncertificated interest representing any of the Proxy Shares, unless such transfer is in compliance with this Agreement. (b) Each Stockholder severally and not jointly agrees that it shall promptly after the date hereof surrender to Holdco all certificates representing the Proxy Shares held by such Stockholder, and Holdco shall place the following legend on such certificates, which legend, except as otherwise expressly provided in this Agreement, shall remain on such certificates until the termination of this Agreement: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT, DATED AS OF OCTOBER 17, 1997 AMONG CERTAIN STOCKHOLDERS AND ACQUISITION HOLDINGS, INC. THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER OR ENCUMBRANCE AND VOTING. A COPY OF THE AGREEMENT IS AVAILABLE AT THE PRINCIPAL OFFICE OF THE COMPANY." 7. Termination. This Agreement shall terminate upon the earlier to ----------- occur of (i) the Closing Date and (ii) that date which is one year after the date hereof; provided, however, if Holdco shall have breached its obligations -------- ------- under this Agreement or the Merger Agreement, then this Agreement shall terminate in all respects (including, without limitation, Section 3(e)) 150 days after the date hereof unless Holdco breaches its obligations under Section 10(a), in which case this Agreement shall terminate immediately upon such breach. Notwithstanding the immediately 10 preceding sentence, the parties hereto agree that the provisions of Section 3(e) (but only to the extent an Acquisition Proposal is made, proposed, communicated, disclosed or consummated prior to termination hereunder) and Section 8 shall survive any termination of this Agreement, and that no such termination shall relieve any party of liability for a breach hereof prior to termination. 8. Confidentiality and Public Announcements. The parties recognize ---------------------------------------- that successful consummation of the transactions contemplated by this Agreement may be dependent upon confidentiality with respect to the matters referred to herein. In this connection, pending public disclosure thereof, each of the parties hereto severally and not jointly agrees not to disclose or discuss such matters with anyone not a party to this Agreement (other than its counsel, advisors, corporate parents and affiliates) without the prior written consent of the other parties hereto, except for filings required pursuant to the Exchange Act and the rules and regulations thereunder or disclosures its counsel advises are necessary in order to fulfill its obligations imposed by law or the requirements of any securities exchange. At all times during the term of this Agreement, the parties hereto will consult with each other before issuing or making any reports, statements or releases to the public with respect to this Agreement or the transactions contemplated hereby and will use good faith efforts to agree on the text of public reports, statements or releases. 9. Severance and Consulting Agreements. Holdco and the Stockholders ----------------------------------- agree to enter into severance, consulting and non-competition agreements in the forms attached hereto as Exhibits D-1 and D-2 on and as of the effective date of the merger under the Merger Agreement. 10. General Provisions. ------------------ (a) Commercially Reasonable Efforts to Consummate the Transaction. ------------------------------------------------------------- Holdco agrees that if the Merger Agreement, in the form attached hereto (the "Form Merger Agreement"), is acceptable to the Special Committee of Independent Directors of the Company's Board of Directors (the "Special Committee"), Holdco will execute the Form Merger Agreement; provided, however, that Holdco will not -------- ------- be required to execute the Form Merger Agreement if the Company discloses on the Company Disclosure Schedule (as such term is defined in the Form Merger Agreement) an event or circumstance of which Holdco has no knowledge as of the date hereof that would cause the representations and warranties in the Form Merger Agreement to fail to be true and correct without regard to the Company Disclosure Schedule. If such an event or circumstance is disclosed on the Company Disclosure Schedule or if the Special Committee requests changes to the Form Merger Agreement, Holdco agrees to negotiate the Merger Agreement in good faith and to use its commercially reasonable efforts to consummate the Transaction on terms mutually acceptable to the Special Committee and Holdco. 11 (b) Expenses. Whether or not the transactions contemplated hereby are -------- consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, except as otherwise specifically noted herein or in the Merger Agreement. (c) Notices. All notices, requests, demands and other communications ------- which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: (i) if to Holdco, to: Acquisition Holdings, Inc. c/o Weiss, Peck & Greer One New York Plaza New York, New York 10004 Attention: Steven N. Hutchinson Telephone: (212) 908-9500 Telecopy: (212) 908-0112 with copies to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Dennis J. Friedman, Esq. Telephone: (212) 408-5100 Telecopy: (212) 541-5369 (ii) if to the Stockholders, to the respective addresses set forth on Exhibit C. (d) Interpretation. When a reference is made in this Agreement to -------------- Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the word "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". This Agreement shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof or by reason of the status of the respective parties. All terms defined in this Agreement in the 12 singular shall have comparable meanings when used in the plural, and vice versa, unless otherwise specified. (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement ---------------------------------------------- constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. (f) Assignment. Except in connection with Permitted Transfers, ---------- neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned (whether by operation of law or otherwise) by any Stockholder without the consent of Holdco. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. (g) Governing Law. This Agreement shall be construed, interpreted ------------- and the rights of the parties determined in accordance with the laws of the State of New York (without reference to the choice of law provisions), except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. (h) Severability. Each party agrees that, should any court or other ------------ competent authority hold any provision of this Agreement or part hereof to be null, void or unenforceable, or order any party to take any action inconsistent herewith or not to take an action consistent herewith or required hereby, the validity, legality and enforceability of the remaining provisions and obligations contained or set forth herein shall not in any way be affected or impaired thereby. Upon any such holding that any provision of this Agreement is null, void or unenforceable, the parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Agreement are consummated to the extent possible. Except as otherwise contemplated by this Agreement, to the extent that a party hereto took an action inconsistent herewith or failed to take action consistent herewith or required hereby pursuant to an order or judgment of a court or other competent authority, such party shall incur no liability or obligation unless such party did not in good faith seek to resist or object to the imposition or entering of such order or judgment. (i) Injunctive Relief. Subject to the last paragraph of Section 3(e), ----------------- the parties acknowledge 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 13 Person or entity will be irreparably damaged and will not have an adequate remedy at law. Subject to the last paragraph of Section 3(e), any such Person or entity 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 shall raise the defense that there is an adequate remedy at law. (j) Attorneys' Fees. If any party to this Agreement brings an action --------------- to enforce its rights under this Agreement, the prevailing party shall be entitled to recover its costs and expenses, including without limitation reasonable attorneys' fees, incurred in connection with such action, including any appeal of such action. (k) Cumulative Remedies. Subject to the last paragraph of Section 3 ------------------- (e), all rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. (l) Counterparts. This Agreement may be executed in two or more ------------ counterparts, all of which shall be considered one and the same instrument and shall become effective when executed and delivered by each of the parties. (m) Amendments, Waivers, Etc. This Agreement may not be amended, ------------------------- changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. (n) Binding Agreement. Each Stockholder agrees that this Agreement ----------------- and the obligations hereunder shall attach to the Shares and shall be binding upon any Person or entity to which legal or Beneficial Ownership of such shares shall pass, whether by operation of law or otherwise, including, without limitation, such Stockholder's heirs, distributees, guardians, administrators, executors, legal representatives, or successors or other transferees (for value or otherwise) and any other successors in interest. Notwithstanding any transfer of Shares the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. (o) Capacity. For purposes of this Agreement and the representations, -------- covenants and promises contained herein, each of the Stockholders is acting solely in his capacity as a stockholder of, and not as a director, officer, employee, representative or agent of, the Company. (p) Obligations of the Stockholders. The liabilities and obligations ------------------------------- of each Stockholder under any provision of this 14 Agreement are several and not joint and apply solely to such Stockholder and to the Shares held of record or Beneficially Owned by such Stockholder. No Stockholder shall have any liability or obligation under this Agreement for any act, omission or breach by any other Stockholder. (q) Consent and Jurisdiction. Each party irrevocably and ------------------------ unconditionally agrees and consents that any suit, action or other legal proceeding arising out of or related to this Agreement shall be brought and heard in New York County, State of New York and each party irrevocably consents to personal jurisdiction in any and all tribunals in said County. 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Acquisition Holdings, Inc. By: /s/ Steven N. Hutchinson ----------------------------------- Name: Steven N. Hutchinson President /s/ Morry F. Rubin -------------------------------------- Morry F. Rubin /s/ George Rubin -------------------------------------- George Rubin 16 EXHIBIT C STOCKHOLDER EXISTING SHARES (#) PROXY SHARES (#) - ----------- ------------------- ---------------- George Rubin 1,022,042 720,035 c/o ATC Group Services Inc. 104 East 25th Street New York, New York 10010 Tel: (212) 353-8280 Fax: (212) 598-4283 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Tel: (212) 504-6000 Fax: (212) 504-6666 Attn: Lawrence A. Larose, Esq. Morry F. Rubin 638,739 449,995 c/o ATC Group Services Inc. 104 East 25the Street New York, New York 10010 Tel: (212) 353-8280 Fax: (212) 598-4283 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Tel: (212) 504-6000 Fax: (212) 504-6666 Attn: Lawrence A. Larose, Esq. Total 1,660,781 1,170,030 Total Outstanding* 7,805,407 - -------------------------- * As of August 18, 1997. EX-99.(C)(3) 14 FORM OF SEVERANCE AGREE. BETW. THE CO. & G. RUBIN EXHIBIT (c)(3) SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT THIS SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement"), dated as of ______________, 199_ is by and between ATC Group Services Inc. with its principal office at 104 East 25th Street, 10th Floor, New York, New York 10010 (the "Company") and George Rubin [address] ("Employee"). RECITALS WHEREAS, Employee serves as a Director and Chairman of the Board and is employed by the Company as Secretary; WHEREAS, Employee is currently compensated at the rate of $300,000 per year with a bonus equal to 2.5% of the Company's pre-tax profits (in the aggregate, the "Compensation"); WHEREAS, the Employee desires to resign his employment with the Company and his position as Director as of the effective date of the proposed merger between Acquisition Holdings, Inc. or an affiliate thereof and the Company (the "Effective Date"); WHEREAS, the parties desire to set forth their respective rights and obligations in respect of Employee's resignation from the above positions; and WHEREAS, the Company and Employee desire to enter into a consulting agreement as set forth herein. NOW, THEREFORE, in consideration of the covenants and conditions set forth herein, the parties, intending to be legally bound, agree as follows: AGREEMENT 1. Resignation. ----------- (a) Employee hereby resigns from his employment with the Company with effect on and as of the Effective Date. It is agreed by the parties that, on and as of the Effective Date, all rights and obligations of Employee and the Company with respect to such employment shall terminate. (b) Employee hereby resigns as Director and Chairman of the Board of the Company with effect on and as of the Effective Date. 2. Consulting Services. For a period of three (3) years after the ------------------- Effective Date, Employee agrees to make himself available at reasonable times and locations (taking necessary account of Employee's business commitments) to perform consulting services as reasonably requested by the Company provided, (i) the Employee shall be given at least 48 hours prior written notice of the requested services, (ii) all such consulting services shall be rendered in The City of New York and (iii) Employee shall not be required to devote more than 10 hours per month to the business of the Company. All consulting services rendered to the Company by Employee shall be performed as an independent contractor, and Employee shall not for any purpose be deemed to be an employee of the Company. 3. Benefits. -------- (a) Payment. In consideration of the agreements of Employee herein ------- and without diminution because of the ability or inability of Employee to perform any consulting services that may be requested by the Company, the Company agrees to pay Employee (or his assigns or, in the event of his death, his executor) the aggregate sum of three million two hundred ten thousand two hundred ninety dollars ($3,210,290), less applicable withholdings for federal, state and local taxes, to be paid as follows: (i) $1,550,000 shall be paid on the Effective Date and (ii) $276,715 shall be paid on each January 1, April 1, July 1, and October 1, commencing on the first such day that occurs at least one month following the Effective Date and ending with the sixth such payment. Any tax liability incurred by Employee in respect of consideration received hereunder hereof shall be borne by him. The parties hereto agree that (x) $986,000 of the aggregate amount payable hereunder shall be allocated to severance payments; (y) $300,000 shall be allocated as a pro rata bonus for the fiscal year ending February 28, 1998; and (z) $1,924,290 of the aggregate amount payable hereunder shall be allocated to Employee's covenant not to compete in Section 6 herein. (b) Health Insurance. For the three (3) year period commencing on the ---------------- Effective Date, Employee and the members of his immediate family shall be entitled to participate in and receive benefits under: (i) ATC Management Inc.'s health coverage plan with Unicare or any health insurance plan subsequently adopted by the Company in its place; and (ii) the Executive Supplement Plan to ATC Management Inc.'s health coverage plan with Unicare as long as the Company is able to obtain coverage for Employee under the supplemental plan; provided, that, the Company shall use commercially reasonable -------- ---- efforts to maintain substantially similar coverage during the term of this Agreement. During such period, Employee shall pay all premiums, deductibles and other charges arising out of or associated with the coverage of Employee and his immediate family under the insurance plans described in clauses (i) and (ii) hereof; provided, that, such premiums, deductibles and other charges do not -------- ---- increase 2 disproportionately for Employee as compared with other senior executives of the Company. (c) Car Lease. On the Effective Date, Employee shall return to the --------- Company the Range Rover vehicle leased by the Company and used by the Employee. 4. Expenses. All reasonable expenses incurred by Employee in -------- connection with the provision of consulting services requested hereunder, including for airfare, hotel accommodations, meals and the like, shall be reimbursed by the Company within seven (7) days after presentation by Employee of receipts and other supporting documentation, provided that such expense had been approved in advance by the Company. 5. No Solicitation of Employees. Employee hereby represents and ---------------------------- warrants that he has not solicited for employment or induced any person employed by the Company to terminate employment during the sixty-day period preceding the date hereof. 6. Covenant Not to Compete. ----------------------- (a) Employee hereby covenants and agrees that Employee shall not, alone or in conjunction with any other person or entity, whether as a principal, agent, stockholder, director, officer, manager, trustee, representative, employee, executive or consultant or in any other capacity, for whatever reason, directly or indirectly: (i) for a period of four (4) years after the Effective Date, compete or assist any person or entity in competing with the Company in all aspects of the business as conducted by the Company on the Effective Date in any manner in the United States, except as permitted in clauses (iii) and (iv) below; provided, that, upon written notice by the Company of Employee's breach -------- ---- of this Section 6(a)(i), Employee shall have 10 (ten) business days from the date of notice to cure any such breach; (ii) for a period of four (4) years after the Effective Date, request or cause any person employed by the Company on or after the date hereof to terminate employment, subject to clauses (iii) and (iv) below; (iii) for a period three (3) years after the Effective Date, compete or assist any person or entity in competing with ATC InSys Technology Inc. ("InSys") or 3D Information Services Inc. ("3D") or assist any person or entity in competing with InSys or 3D anywhere within the legal boundaries of the State of New Jersey; or (iv) for a period three (3) years after the Effective Date, solicit on behalf of himself or any other person or entity, within The City of New York, any of the following customers of InSys: (A) J.P. Morgan & Co. Incorporated, (B) Merrill, Lynch & Co. (C) The Long Island Rail Road Co. and (D) The Chase Manhattan Bank; provided, however, that the immediately preceding -------- ------- clause (iv) shall apply only to products or services that are competitive with those of InSys. This Section 6 shall not be deemed to 3 prohibit the Employee from owning up to 5% of the outstanding voting securities of any issuer whose securities are listed or traded on a U.S. national stock exchange, the Nasdaq National Market System or a comparable foreign exchange or system. (b) If the scope of any restriction contained in this Agreement is too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Employee hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. Employee acknowledges and agrees that the covenants contained herein are necessary for the protection of the Company's legitimate business interests and are reasonable in scope and content. Employee further acknowledges and understands that the remedy at law for any breach by him of this Section 6 will be inadequate, and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon Employee's violation of any provision of this Section 6, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 6 shall be deemed to limit the Company's remedies at law or in equity for any breach by Employee of any of the provisions of Section 6 which may be pursued or availed of by the Company. 7. Release. The Company hereby releases the Employee and the ------- Employee hereby releases the Company and its affiliates and its and their present and former stockholders, directors, officers, employees, agents, attorneys, successors and assigns (together, the "Company Released Parties"), from any and all claims that each of the Employee or the Company Released Parties has or may have arising in any way out of Employee's employment with the Company and service as Director and Chairman of the Board and the cessation thereof, including, but not limited to, any and all claims each of the Employee or the Company had, has or may have with respect to the Compensation. Notwithstanding the above, this provision is not intended to release any claims that may arise after the date Employee executes this Agreement, including claims to enforce this Agreement. 8. Retained Property. Employee represents that he has returned all ----------------- property of the Company in his possession, including but not limited to credit cards, security key cards, telephone cards, car service cards, computer software or hardware, company identification cards, Company records and copies of records, correspondence and copies of correspondence and other books or manuals issued by the Company. Employee also warrants that he has no debts to or loans from the Company. Notwithstanding the foregoing, Employee shall have the right to retain (i) duplicate photocopies of books and 4 records of the Company that do not fall within the category of "Confidential Information" (as defined below) and (ii) all personal property of the Employee located on the premises of the Company. 9. Confidentiality. Employee acknowledges that he has had and may in --------------- the performance of consulting services hereunder continue to have access to Confidential Information (as hereinafter defined) of the Company. Employee agrees not to disclose, communicate or divulge to, or use for the direct or indirect benefit of, any person (including Employee), firm, association or other entity (other than the Company or its affiliates) any Confidential Information. "Confidential Information" includes, but is not limited to, business methods, business policies, procedures, techniques, research or development projects or results, trade secrets (which Employee agrees include the Company's customer and prospective customer lists), pricing policies, business plans, computer software, intellectual property, and other such information not otherwise available to the general public, unless the information is disclosed to Employee without confidential or proprietary restriction by the Company or a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. If any person (including any government employee) requests the disclosure or release of Confidential Information, Employee shall (i) promptly notify the Company of such request so that the Company may pursue any available remedies to prevent the disclosure or release of such Confidential Information and (ii) furnish the Company a copy of all written materials pertaining to such request for Confidential Information as the Company shall deem appropriate. 10. No Claims. Employee represents and warrants that he has not --------- filed any charges, claims or complaints against the Company Released Parties, and he represents and warrants that he will not initiate or voluntarily participate or assist in any charge, claim, or complaint against the Company Released Parties, it being understood that this provision does not affect Employee's right to enforce this Agreement, or legal obligation, if any, to appear as a witness if subpoenaed for examination before trial or subpoenaed for trial or hearing or, if required, to provide information to the Equal Employment Opportunity Commission or to an equivalent state or local administrative agency in response to a demand for information. 11. Benefits Terminated. Employee acknowledges that he is not ------------------- entitled to receive benefits from the Company other than as set forth in Section 3 of this Agreement, except for any vested benefits to which Employee is entitled in the Company's 401(k) Plan and except for any other benefits afforded Employee by applicable law. 5 12. No Inducements. Employee warrants that he is entering into this -------------- Agreement voluntarily, and that, except as set forth herein, no promises or inducements for this Agreement have been made, and he is entering into this Agreement without reliance upon any statement or representation by any of the Company Released Parties or any other person, concerning any fact material hereto. 13. Integration. This Agreement constitutes the entire agreement ----------- between the parties with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the parties arising out of or relating to the Employee's employment and the cessation thereof. This Agreement may only be changed by written agreement executed by the parties. 14. Governing Law. This Agreement shall be governed by the laws of ------------- the State of New York, without giving effect to the conflicts of law principles thereof. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATC GROUP SERVICES INC. ------------------------------ By: Name: EMPLOYEE ------------------------------ George Rubin 7 EX-99.(C)(4) 15 FORM OF SEVERANCE AGREE. BETW. THE CO & M. RUBIN EXHIBIT (c)(4) SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT THIS SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement"), dated as of ______________, 199_ is by and between ATC Group Services Inc. with its principal office at 104 East 25th Street, 10th Floor, New York, New York 10010 (the "Company") and Morry F. Rubin [address] ("Employee"). RECITALS WHEREAS, Employee serves as a Director and is employed by the Company as President and Chief Executive Officer; WHEREAS, Employee is currently compensated at the rate of $300,000 per year with a bonus equal to 2.5% of the Company's pre-tax profits (in the aggregate, the "Compensation"); WHEREAS, the Employee desires to resign his employment with the Company and his position as Director as of the effective date of the proposed merger between Acquisition Holdings, Inc. or an affiliate thereof and the Company (the "Effective Date"); WHEREAS, the parties desire to set forth their respective rights and obligations in respect of Employee's resignation from the above positions; and WHEREAS, the Company and Employee desire to enter into a consulting agreement as set forth herein. NOW, THEREFORE, in consideration of the covenants and conditions set forth herein, the parties, intending to be legally bound, agree as follows: AGREEMENT 1. Resignation. ----------- (a) Employee hereby resigns from his employment with the Company with effect on and as of the Effective Date. It is agreed by the parties that, on and as of the Effective Date, all rights and obligations of Employee and the Company with respect to such employment shall terminate. (b) Employee hereby resigns as Director of the Company with effect on and as of the Effective Date. 2. Consulting Services. For a period of three (3) years after the ------------------- Effective Date, Employee agrees to make himself available at reasonable times and locations (taking necessary account of Employee's business commitments) to perform consulting services as reasonably requested by the Company provided, (i) the Employee shall be given at least 48 hours prior written notice of the requested services, (ii) all such consulting services shall be rendered in The City of New York and (iii) Employee shall not be required to devote more than 10 hours per month to the business of the Company. All consulting services rendered to the Company by Employee shall be performed as an independent contractor, and Employee shall not for any purpose be deemed to be an employee of the Company. 3. Benefits. -------- (a) Payment. In consideration of the agreements of Employee herein ------- and without diminution because of the ability or inability of Employee to perform any consulting services that may be requested by the Company, the Company agrees to pay Employee (or his assigns or, in the event of his death, his executor) the aggregate sum of three million two hundred ten thousand two hundred ninety dollars ($3,210,290), less applicable withholdings for federal, state and local taxes, to be paid as follows: (i) $1,550,000 shall be paid on the Effective Date and (ii) $276,715 shall be paid on each January 1, April 1, July 1, and October 1, commencing on the first such day that occurs at least one month following the Effective Date and ending with the sixth such payment. Any tax liability incurred by Employee in respect of consideration received hereunder hereof shall be borne by him. The parties hereto agree that (x) $722,000 of the aggregate amount payable hereunder shall be allocated to severance payments; (y) $300,000 shall be allocated as a pro rata bonus for the fiscal year ending February 28, 1998; and (z) $2,188,290 of the aggregate amount payable hereunder shall be allocated to Employee's covenant not to compete in Section 6 herein. (b) Health Insurance. For the three (3) year period commencing on the ---------------- Effective Date, Employee and the members of his immediate family shall be entitled to participate in and receive benefits under: (i) ATC Management Inc.'s health coverage plan with Unicare or any health insurance plan subsequently adopted by the Company in its place; and (ii) the Executive Supplement Plan to ATC Management Inc.'s health coverage plan with Unicare as long as the Company is able to obtain coverage for Employee under the supplemental plan; provided, that, the Company shall use commercially reasonable -------- ---- efforts to maintain substantially similar coverage during the term of this Agreement. During such period, Employee shall pay all premiums, deductibles and other charges arising out of or associated with the coverage of Employee and his immediate family under the insurance plans described in clauses (i) and (ii) hereof; provided, that, such premiums, deductibles and other charges do not -------- ---- increase 2 disproportionately for Employee as compared with other senior executives of the Company. (c) Car Lease. On the Effective Date, Employee shall return to the --------- Company the BMW automobile leased by the Company and used by the Employee. 4. Expenses. All reasonable expenses incurred by Employee in -------- connection with the provision of consulting services requested hereunder, including for airfare, hotel accommodations, meals and the like, shall be reimbursed by the Company within seven (7) days after presentation by Employee of receipts and other supporting documentation, provided that such expense had been approved in advance by the Company. 5. No Solicitation of Employees. Employee hereby represents and ---------------------------- warrants that he has not solicited for employment or induced any person employed by the Company to terminate employment during the sixty-day period preceding the date hereof. 6. Covenant Not to Compete. ----------------------- (a) Employee hereby covenants and agrees that Employee shall not, for a period of three (3) years after the Effective Date, alone or in conjunction with any other person or entity, whether as a principal, agent, stockholder, director, officer, manager, trustee, representative, employee, executive or consultant or in any other capacity, for whatever reason, directly or indirectly: (i) compete or assist any person or entity in competing with the Company in all aspects of the business as conducted by the Company on the Effective Date in any manner in the United States, except as permitted in clauses (iii) and (iv) below; provided, that, upon written notice by the Company -------- ---- of Employee's breach of this Section 6(a)(i), Employee shall have 10 (ten) business days from the date of notice to cure any such breach; (ii) request or cause any person employed by the Company on or after the date hereof to terminate employment; (iii) compete or assist any person or entity in competing with ATC InSys Technology Inc. ("InSys") or 3D Information Services Inc. ("3D") or assist any person or entity in competing with InSys or 3D anywhere within the legal boundaries of the State of New Jersey; or (iv) solicit on behalf of himself or any other person or entity, within The City of New York, any of the following customers of InSys: (A) J.P. Morgan & Co. Incorporated, (B) Merrill, Lynch & Co. (C) The Long Island Rail Road Co. and (D) The Chase Manhattan Bank; provided, however, that the immediately preceding clause (iv) shall apply only - -------- ------- to products or services that are competitive with those of InSys. This Section 6 shall not be deemed to prohibit the Employee from owning up to 5% of the outstanding voting securities of any issuer whose securities are listed or traded on a U.S. national stock exchange, the 3 Nasdaq National Market System or a comparable foreign exchange or system. (b) If the scope of any restriction contained in this Agreement is too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Employee hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. Employee acknowledges and agrees that the covenants contained herein are necessary for the protection of the Company's legitimate business interests and are reasonable in scope and content. Employee further acknowledges and understands that the remedy at law for any breach by him of this Section 6 will be inadequate, and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon Employee's violation of any provision of this Section 6, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 6 shall be deemed to limit the Company's remedies at law or in equity for any breach by Employee of any of the provisions of Section 6 which may be pursued or availed of by the Company. 7. Release. The Company hereby releases the Employee and the ------- Employee hereby releases the Company and its affiliates and its and their present and former stockholders, directors, officers, employees, agents, attorneys, successors and assigns (together, the "Company Released Parties"), from any and all claims that each of the Employee or the Company Released Parties has or may have arising in any way out of Employee's employment with the Company and service as Director and the cessation thereof, including, but not limited to, any and all claims each of the Employee or the Company had, has or may have with respect to the Compensation. Notwithstanding the above, this provision is not intended to release any claims that may arise after the date Employee executes this Agreement, including claims to enforce this Agreement. 8. Retained Property. Employee represents that he has returned all ----------------- property of the Company in his possession, including but not limited to credit cards, security key cards, telephone cards, car service cards, computer software or hardware, company identification cards, Company records and copies of records, correspondence and copies of correspondence and other books or manuals issued by the Company. Employee also warrants that he has no debts to or loans from the Company. Notwithstanding the foregoing, Employee shall have the right to retain (i) duplicate photocopies of books and records of the Company that do not fall within the category of "Confidential Information" (as defined below) and (ii) all 4 personal property of the Employee located on the premises of the Company. 9. Confidentiality. Employee acknowledges that he has had and may in --------------- the performance of consulting services hereunder continue to have access to Confidential Information (as hereinafter defined) of the Company. Employee agrees not to disclose, communicate or divulge to, or use for the direct or indirect benefit of, any person (including Employee), firm, association or other entity (other than the Company or its affiliates) any Confidential Information. "Confidential Information" includes, but is not limited to, business methods, business policies, procedures, techniques, research or development projects or results, trade secrets (which Employee agrees include the Company's customer and prospective customer lists), pricing policies, business plans, computer software, intellectual property, and other such information not otherwise available to the general public, unless the information is disclosed to Employee without confidential or proprietary restriction by the Company or a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. If any person (including any government employee) requests the disclosure or release of Confidential Information, Employee shall (i) promptly notify the Company of such request so that the Company may pursue any available remedies to prevent the disclosure or release of such Confidential Information and (ii) furnish the Company a copy of all written materials pertaining to such request for Confidential Information as the Company shall deem appropriate. 10. No Claims. Employee represents and warrants that he has not --------- filed any charges, claims or complaints against the Company Released Parties, and he represents and warrants that he will not initiate or voluntarily participate or assist in any charge, claim, or complaint against the Company Released Parties, it being understood that this provision does not affect Employee's right to enforce this Agreement, or legal obligation, if any, to appear as a witness if subpoenaed for examination before trial or subpoenaed for trial or hearing or, if required, to provide information to the Equal Employment Opportunity Commission or to an equivalent state or local administrative agency in response to a demand for information. 11. Benefits Terminated. Employee acknowledges that he is not ------------------- entitled to receive benefits from the Company other than as set forth in Section 3 of this Agreement, except for any vested benefits to which Employee is entitled in the Company's 401(k) Plan and except for any other benefits afforded Employee by applicable law. 5 12. No Inducements. Employee warrants that he is entering into this -------------- Agreement voluntarily, and that, except as set forth herein, no promises or inducements for this Agreement have been made, and he is entering into this Agreement without reliance upon any statement or representation by any of the Company Released Parties or any other person, concerning any fact material hereto. 13. Integration. This Agreement constitutes the entire agreement ----------- between the parties with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the parties arising out of or relating to the Employee's employment and the cessation thereof. This Agreement may only be changed by written agreement executed by the parties. 14. Governing Law. This Agreement shall be governed by the laws of ------------- the State of New York, without giving effect to the conflicts of law principles thereof. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATC GROUP SERVICES INC. ----------------------------------- By: Name: EMPLOYEE ----------------------------------- Morry F. Rubin 7 -----END PRIVACY-ENHANCED MESSAGE-----