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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20546
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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ATC GROUP SERVICES INC.
(NAME OF SUBJECT COMPANY)
ATC GROUP SERVICES INC.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS OF SECURITIES)
0020671
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MORRY F. RUBIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATC GROUP SERVICES INC.
104 EAST 25TH STREET, 10TH FLOOR
NEW YORK, NEW YORK 10010
(212) 353-8280
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPY TO:
LAWRENCE A. LAROSE, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is ATC Group Services Inc., a Delaware
corporation (the "Company"), and the address of its principal executive
offices is 104 East 25th Street, 10th Floor, New York, New York 10010. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $0.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Acquisition Corp., a Delaware
corporation (the "Offeror"), a wholly owned subsidiary of Acquisition
Holdings, Inc., a Delaware corporation (the "Parent"), which is currently
wholly-owned by WPG Corporate Development Associates V, L.P., a Delaware
limited partnership (the "WPG Fund"), disclosed in a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"), dated December 4, 1997, to purchase all
the outstanding Shares for $12.00 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 the Offer to Purchase, dated December 4, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer"). 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 13% of the equity capital of the
Parent.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 26, 1997 (the "Merger Agreement"), among the Parent, the
Offeror and the Company. The Merger Agreement provides, among other things,
that as soon as practicable after the satisfaction or waiver of the conditions
set forth in the Merger Agreement, the Offeror will be merged with and into
the Company (the "Merger"), and the Company will continue as the surviving
corporation (the "Surviving Corporation"). In the Merger, each outstanding
share (other than shares owned by the Company, Parent, Offeror or any other
subsidiary of the 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"). A copy of the Merger
Agreement is filed as Exhibit 3 hereto and is incorporated herein by reference
in its entirety.
As set forth in the WPG Fund's Schedule 14D-1, the principal executive
offices of the Parent and the Offeror are located c/o Weiss, Peck & Greer,
L.L.C., One New York Plaza, 30th floor, New York, New York 10004.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or actual or potential conflicts of interest
between the Company or its affiliates and (i) its executive officers,
directors or affiliates or (ii) the Parent, the Offeror, their executive
officers, directors or affiliates.
The Stockholders Agreement. On October 17, 1997, Mr. George Rubin, Chairman
of the Board of Directors of the Company, and Mr. Morry F. Rubin, President
and Chief Executive Officer and a Director of the Company (collectively, the
"Rubins"), entered into a Stockholders Agreement (the "Stockholders
Agreement") with the Parent. The following summary is qualified in its
entirety by reference to the Stockholders Agreement which is filed as Exhibit
4 hereto and is incorporated herein by reference in its entirety.
Pursuant to the Stockholders Agreement, the Rubins granted to the Parent a
proxy to vote 1,170,030 Shares (14.99%) in the aggregate of the issued and
outstanding Shares, among other things, (i) in favor of the Merger and the
other transactions contemplated by the Merger Agreement and (ii) against
(other than in connection with the Merger and the other transactions
contemplated by the Merger Agreement) (A) any extraordinary transaction,
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(B) any sale, lease or transfer of material assets of the Company or any
reorganization, recapitalization, or dissolution of the Company and (C) any
change in the majority of the Board of the Company.
The proxy is revocable only upon termination of the Stockholders Agreement.
The Rubins have also agreed not to sell, pledge or otherwise transfer shares
representing approximately 14.99% of the outstanding Shares.
The Stockholders Agreement contains a "no solicitation" provision pursuant
to which the Rubins, subject to their fiduciary duties as directors of the
Company, are prohibited until termination of the Stockholders Agreement from
entering into, soliciting, initiating or continuing any discussions or
negotiations with or providing any information to or otherwise cooperating in
any way with any person concerning any offer or proposal which constitutes or
is reasonably likely to lead to a proposal (other than the Merger and the
other transactions contemplated by the Merger Agreement) to acquire the
Company.
If any acquisition or similar transaction is consummated by the Company
(other than the Merger and the other transactions contemplated by the Merger
Agreement), each of the Rubins is required to pay to the Parent an amount
equal to the total number of shares of Common Stock owned by each of them
multiplied by the excess of the value of such other transaction over $12 per
share.
The Stockholders Agreement will terminate upon the earlier to occur of (1)
October 17, 1998 or (2) the effective time of the Merger. However, if the
Parent (i) breaches its obligations under the Stockholders Agreement, the
Stockholders Agreement will terminate on March 16, 1998, or (ii) fails to
negotiate the Merger Agreement in good faith and to use its commercially
reasonable efforts to consummate the transaction, then the Stockholders
Agreement will terminate immediately.
Consulting and Non-Compete Agreements. Pursuant to the Stockholders
Agreement, the Rubins, the Company and the Parent have each agreed that on the
effective date of the Merger, the Rubins and the Company will enter into
Severance, Consulting and Noncompetition Agreements (the "Consulting and Non-
Compete Agreements") in the forms filed as Exhibits 5 and 6 hereto which are
incorporated herein by reference in their entirety. Pursuant to the Consulting
and Non-Compete Agreements, George Rubin would resign from his position as a
director of the Company and Morry F. Rubin would resign from his position as
President and Chief Executive Officer of the Company, in each case effective
on the effective date of the Merger.
Under the Consulting and Non-Compete Agreements, each of 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
Consulting and Non-Compete Agreements would also restrict the Rubins for a
period of 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 or (iii) competing with ATC InSys
Inc. or 3D Information Services, Inc., anywhere in the State of New Jersey or
soliciting certain customers of ATC InSys Inc. within New York City. Under the
Consulting and Non-Compete Agreements, the Company is required to pay each of
the Rubins $1,550,000 upon their resignation and $276,715 on each of the six
calender quarters thereafter.
The Merger Agreement. The following is a summary of the Merger Agreement,
which summary is qualified in its entirety by reference to the Merger
Agreement which is filed as Exhibit 3 hereto.
The Offer. The obligation of the Offeror to, and the Parent to cause the
Offeror to, accept for payment, and pay for, Shares tendered pursuant to the
Offer is subject to the satisfaction or waiver of certain terms and conditions
set forth in the Merger Agreement and described below (the "Offer
Conditions"). Under the Merger Agreement, the Offeror expressly reserves the
right, in its sole discretion, to modify the terms of the Offer, except that
without the prior written consent of the Company, the Offeror is not permitted
to (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 described below, 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
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holders of the Shares or (vii) waive the Minimum Condition (as defined below).
Notwithstanding the foregoing, the Offeror may, without the consent of the
Company, (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 Securities and Exchange Commission (the "SEC") or the staff
thereof 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 Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and (D) extend the Offer for a period not to exceed 15 business days,
notwithstanding that all Offer Conditions 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, the Offeror 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 the Merger
Agreement, the Offeror shall, and the Parent shall cause 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 after the expiration of
the Offer; provided, however, that in no event shall the Offer expire prior to
January 21, 1998.
Offer Conditions. 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) (the "Minimum Condition") and (ii) expiration
or termination of the applicable waiting period under the HSR Act.
Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, the Offeror shall not be required to accept for payment or 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 (as defined below) 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 the 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, the 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
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
business or assets, or to compel the 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 the 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;
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(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 this Statement) withdrawn or
modified in a manner adverse to the Parent or the Offeror its approval or
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any Acquisition Proposal (as defined below), (ii)
the Company shall have entered into any agreement with respect to any
Superior Proposal (as defined below) 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;
(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 of worsening
thereof; or
(i) the Company shall fail to receive the proceeds of financing pursuant
to the "highly confident" letter for BT Alex. Brown Incorporated and a
letter of commitment from Bankers Trust Company or involving such other
financing sources, as the Parent and the Company shall reasonably agree and
are not materially more onerous, in amounts sufficient to consummate the
transactions contemplated by the Merger Agreement, including, without
limitation, (i) to pay, with respect to all Common Stock in the Merger, the
Offer Price, (ii) to refinance the outstanding indebtedness of the Company,
(iii) to pay any fees and expenses in connection with the transactions
contemplated by the Merger 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 Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), at the effective time of the Merger
(the "Effective Time"), the Offeror shall be merged with and into the Company
(the "Surviving Corporation"). As a result of the Merger, the separate
corporate existence of the Offeror will cease and the Company will continue as
the surviving corporation and shall succeed to and assume all the rights and
obligations of the Offeror in accordance with the DGCL.
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time (other than the Shares that are owned by the Company,
any subsidiary of the Company, the Parent, the Offeror or any other subsidiary
of the Parent or the Shares held by stockholders, if any, who are entitled to
and who properly exercise dissenters' rights under Delaware law) will be
canceled, extinguished and converted into the right to receive the Offer
Price, payable to the holder thereof, without interest, upon surrender of the
certificate formerly representing such Share in the manner described in the
Merger Agreement, less any required withholding taxes.
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 of the Merger will have certain rights pursuant
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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.
Stockholders Meeting. Pursuant to the Merger Agreement, the Company, if
required by law, will, at the Parent's request, as soon as practicable
following the acceptance for payment of, and payment for, any Shares by the
Offeror pursuant to the Offer and expiration of the Offer duly call, give
notice of, convene and hold a meeting of its stockholders for the purpose of
the stockholders' approval of the Merger. The Merger Agreement provides that,
notwithstanding the foregoing, in the event that the Offeror acquires at least
90% of the outstanding Shares, the parties shall, at the request of the
Parent, take all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after the expiration of the
Offer, without a meeting of the Company's stockholders, in accordance with
Section 253 of the DGCL.
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 Securities Exchange Act of 1934, as
amended (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 the 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.
Acquisition Proposals. The Merger Agreement provides that, from the date
thereof until such time as the 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,
the Merger Agreement or the Merger, approve or recommend the Superior Proposal
or terminate the Merger Agreement pursuant to Section 9.01(d) thereof and
shall promptly notify the Parent in writing of any such determination. For
five business days after the Parent has been informed by the Company of the
above conclusion with respect to such Superior Proposal, the 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 the Parent and the Company. Subject to all of the foregoing
requirements, the Company will immediately notify the 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 the Parent of all material terms of any
proposal which it may receive in respect of any such Acquisition Proposal,
including the identity of the Person making the Acquisition Proposal or the
request for information, if known, and thereafter shall inform the
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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 Merger or which would
reasonably be expected to dilute materially the benefits to the 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 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 to so 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.
Indemnification and Insurance. In the Merger Agreement, the 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, the Parent and the Offeror have 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 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
the 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
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and the Parent and reasonably approved by the Indemnified Party, and who has
not otherwise performed services for the Surviving Corporation, the 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 the 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 the 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 the
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 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 the Parent,
as the case may be) and satisfactory to the Company, the Surviving Corporation
or the 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 the
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 the 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 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 or 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, the Parent will, for a period of six years
from the effectiveness of the Merger, unless the 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, the Parent will be obligated to purchase only so much coverage as
may then be obtained for such amount.
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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.
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 the Parent, during the period from the date of the Merger Agreement
until such time as the 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 the Company's obligations to use its commercially reasonable
efforts to amend the stock option plans of the Company as provided below, to
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
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 the 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 the 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 the 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 or 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 or 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 of the Merger Agreement, 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 (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
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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
thereby 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.
Stock Options and Warrants. The Merger Agreement provides that (a) the
Company will amend its ATC Group Services Inc. 1988 Incentive and Non-
Statutory Stock Option Plan, ATC Group Services Inc. 1993 Incentive 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 Effective Time of the Merger. The Company is
also required to 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 will
equal the product of (i) the Offer Price minus the exercise price per Share of
each such option and (ii) the number of previously unexercised Shares covered
by each such option.
Except as may be otherwise agreed to by the Parent or the Offeror and the
Company, the Company's Stock Option Plans will terminate as of the Effective
Time 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 will be
deleted as of the Effective Time of the Merger. The Company is required to use
its commercially reasonable efforts so that following the Effective Time of
the Merger no holder of employee stock options will have any right to receive
Shares upon exercise of an employee stock option.
The Merger Agreement provides that 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 issued warrants to certain persons. The holders of such warrants will
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 of the Merger 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, if it is determined that the
above described treatment of options and warrants would cause any individual
subject to Section 16 of the Exchange Act to become subject to the profit
recovery provisions thereof, any stock options or warrants held by such
individual will be canceled or purchased, as the case may be, at the Effective
Time of the Merger 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 an amount equal to the excess, if any, of
the Offer Price over the per Share exercise price of such stock option or
warrant multiplied by the number of Shares subject thereto.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
Fees and Expenses. The Merger Agreement provides that, in the event that (i)
the Merger Agreement is terminated pursuant to clause (c) or (d) under
"Termination of the Merger Agreement" below, or (ii) any person (other than
the 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 the Parent, in
the case of an event under clause (i) above, promptly upon any such
termination, and, in the
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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 this 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 the Parent or the Offeror, the Company shall promptly
reimburse the 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 the 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.
Conditions to the Obligations of the Parties to Effect the Merger. The
Merger Agreement provides that the obligations of the parties to effect the
Merger are 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 the 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 of the Merger, whether before or after
approval of the terms of the Merger Agreement by the stockholders of the
Company:
(a) by mutual written consent of the Parent and the Company, by action of
their respective Boards of Directors;
(b) by the Parent or the Company if the Merger shall not have been
consummated on or before June 30, 1998; provided; however, that neither the
Parent nor the Company may terminate the Merger Agreement under this clause
if such party shall have materially breached the Merger Agreement;
(c) by the 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 the Merger Agreement shall have used its
best reasonable efforts to remove or lift such order, decree, ruling or
other action;
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(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
(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 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 the 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) approved or recommended a Superior Proposal, (iv) resolved to
effect any of the foregoing or (v) otherwise taken steps to impede the
Stockholder Acceptance;
(f) by the 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
(g) by the Company, if prior to the consummation of the Offer, there has
been a material violation or breach by the Parent or the Offeror of any
representation, warranty, covenant or agreement contained in the Merger
Agreement (which violation or breach is not cured by the Parent or the
Offeror within 10 days after written notice reasonably describing such
breach); provided, however, that there shall have no cure period if the
Offeror fails to accept for payment, and pay for, all Shares validly
tendered and not withdrawn pursuant to the Offer as provided in Section
1.01(a) of the Merger Agreement.
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 of the Merger, the affirmative vote
of the directors of the Company not designated by the Parent or the 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 and the Parent's respective
obligations under the Merger Agreement.
Certain Understandings. The Company has been advised that 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 the Parent
or in the Surviving Corporation. The Company has been also advised that 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 the 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 the Parent or in the Surviving Corporation would be reduced
on a pro rata basis.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors of the Company.
After receiving the recommendation of the Special Committee (as defined
below), the Board of Directors of the Company 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 stockholders of the Company, and recommends that holders of the Shares
accept the Offer and tender their Shares in the Offer.
(b) (i) Background of the Offer.
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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 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 the Rubins, who, in the aggregate, own approximately 24% of the Shares on
a fully diluted basis, in their capacity as stockholders of the Company, to
discuss the terms of a potential transaction and to discuss a possible
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 Rubins would
grant the Parent an irrevocable proxy to vote that number of the Rubins' 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 Rubins would give the Parent the right to receive all consideration
above $12.00 per Share received by the Rubins with respect to all the Rubins'
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 Rubins would enter into severance
agreements on and as of the date of the Merger (which severance agreements are
more fully described in Item 3(b)), and (iv) the Parent would negotiate a
merger agreement in good faith and use its commercially reasonable efforts to
consummate the Merger on mutually acceptable terms. See description of the
Stockholders Agreement in Item 3(b) above.
A number of other meetings and discussions took place among the Management
Team, the Rubins and the management of the WPG Fund from September 22, 1997
through October 16, 1997.
On October 17, 1997, the Rubins entered into the Stockholders Agreement with
the 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 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,
negotiate the terms of the WPG Proposal with the WPG Fund and 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 indemnity agreements
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 Consulting and Non-Compete 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, 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 the WPG Fund and to assist the Special
Committee in 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.
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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 proposed 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 such 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 affiliates of 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 Rubins of
their interests in the Offer and the Merger, including the Stockholders
Agreement and the Consulting and Non-Compete 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, the 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.
(b) (ii) Reasons for the Transaction; Factors Considered by the Board.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that stockholders of the Company tender their Shares pursuant
to the Offer, the Board of Directors considered a number of factors,
including:
1. The recommendation of the Special Committee to the full Board of
Directors that the Company accept the WPG Fund's offer and enter into the
Merger Agreement.
2. The financial condition, results of operations, competitive position,
business and prospects of the Company, as reflected in the Company's
historical and projected financial information, current and prospective
economic and market conditions and the nature of the industry in which it
operates.
3. The presentation of Lehman Brothers at the November 26, 1997 Board of
Directors' meeting and Lehman Brothers' opinion to the effect that, as of
the date of such opinion, the consideration to be received by the holders
of Shares in the Offer and the Merger is fair to stockholders of the
Company from a financial point of view. The full text of the written
opinion of Lehman Brothers is attached hereto as Exhibit 7 and is
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incorporated herein by reference. Holders may read such opinion for a
discussion of the assumptions made, matters considered and limitations on
the review undertaken by Lehman Brothers in rendering such opinion.
4. The fact that no other bidder for the Shares had emerged since the
public announcement of the WPG Fund's $12.00 per Share offer on October 17,
1997.
5. The financial and other terms and conditions of the Offer, the Merger
and the Merger Agreement, including, without limitation, the fact that the
terms of the Merger Agreement should not unduly discourage other third
parties from making bona fide proposals subsequent to signing the Merger
Agreement and, if any such proposal were made, the Company, in the exercise
of the fiduciary duties of the Board of Directors in accordance with the
Merger Agreement, could determine to provide information to, engage in
negotiations and, subject to payment of the termination fee, enter into a
transaction with another party.
6. The ability of the stockholders to exercise dissenters' rights under
the Delaware law in connection with the Merger.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendation as being based on the
totality of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The members of the Special Committee will be paid $35,000 each for services
rendered to the Company in connection with their review and evaluation of the
Offer.
The Special Committee retained Squadron, Ellenoff, Present & Sheinfeld, LLP
as its special legal advisor in connection with the Offer.
Pursuant to an agreement dated November 12, 1997 (the "Engagement Letter"),
the Company engaged Lehman Brothers to render its 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 in the Offer and the Merger
and to participate in negotiations with respect to the Offer, the Merger and
the Merger Agreement. Pursuant to the terms of the Engagement Letter, the
Company paid Lehman Brothers a fee of $100,000 upon signing the Engagement
Letter and an additional fee of $250,000 upon delivery of Lehman Brothers'
opinion. The Company has agreed to reimburse Lehman Brothers for its reasonable
expenses (including, without limitation, professional and legal fees (not to
exceed $50,000) and disbursement) incurred in connection with its engagement,
and to indemnify Lehman Brothers against certain losses, claims, damages or
liabilities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director or affiliate of the Company except that on October 10, 1997
Richard Pruitt, Vice President and Director of the Company, exercised 5,000
options at $5.00 per share, 800 options at $1.875 per share, 2,500 at $2.31 per
share and 1,000 at $7.50 per share and on October 28, 1997 Morry F. Rubin
exercised 80,000 options at $2.48 per share.
(b) To the best of the Company's knowledge, except for Shares the sale of
which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, each executive officer, director and affiliate of the Company
currently intends to tender all Shares to the Offeror over which he or she has
sole dispositive power as of the expiration date of the Offer.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of
a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
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
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.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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<C> <S>
Exhibit 1. Offer to Purchase, dated December 4, 1997 (incorporated by
reference to Exhibit (a)(1) of the Schedule 14D-1 of Acquisition
Corp. and Acquisition Holdings, Inc. filed with the Securities and
Exchange Commission on December 4, 1997 (the "Schedule 14D-1")).
Exhibit 2. Letter of Transmittal with respect to the Shares (incorporated by
reference to Exhibit (a)(2) of the Schedule 14D-1).
Exhibit 3. Agreement and Plan of Merger among the Parent, the Offeror and the
Company, dated as of November 26, 1997 (incorporated by reference
to Exhibit 2 of the Form 8-K Current Report of ATC Group Services
Inc. filed with the Securities and Exchange Commission on December
1, 1997).
Exhibit 4. Stockholders Agreement, dated as of October 17, 1997, among the
Parent and George Rubin and Morry F. Rubin (incorporated by
reference to Exhibit 99.1 of the Schedule 13D filed by George Rubin
and Morry F. Rubin with the Securities and Exchange Commission on
October 21, 1997).
Exhibit 5. Form of Severance, Consulting and Non-Competition Agreement between
the Company and George Rubin (incorporated by reference to Exhibit
(c)(3) of the Schedule 14D-1).
Exhibit 6. Form of Severance, Consulting and Non-Competition Agreement between
the Company and Morry F. Rubin (incorporated by reference to
Exhibit (c)(4) of the Schedule 14D-1).
Exhibit 7. Opinion of Lehman Brothers Inc., dated November 26, 1997.
Exhibit 8. Press Releases issued by the Company on October 17, 1997
(incorporated by reference to Exhibit 99 of the Form 8-K Current
Report of ATC Group Services Inc. filed with the Securities and
Exchange Commission on October 20, 1997).
Exhibit 9. Press Release issued by the Company and Weiss, Peck & Greer,
L.L.C., dated November 28, 1997 (incorporated by reference to
Exhibit (a)(8) of the Schedule 14D-1).
</TABLE>
15
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SIGNATURE
After reasonable 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.
ATC Group Services Inc.
/s/ Morry F. Rubin
By: _________________________________
Morry F. Rubin
President & Chief Executive
Officer
Dated: December 4, 1997
16
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EXHIBIT 7
LEHMAN BROTHERS
November 26, 1997
Special Committee of the Board of Directors
ATC Group Services Inc.
104 East 25th Street, 10th Floor
New York, New York 10010
Members of the Special Committee:
We understand that ATC Group Services Inc. ("ATC" or the "Company") proposes
to enter into an Agreement and Plan of Merger (the "Agreement") with Weiss,
Peck & Greer ("WPG") pursuant to which an affiliate of WPG will commence a
tender offer to acquire all of the outstanding shares of common stock of ATC
for $12 per share in cash (the "Proposed Transaction"). The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement.
We have been requested by the Special Committee of the Board of Directors of
the Company to render our 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 shareholders in the Proposed Transaction. We have not been
requested to opine as to, and our opinion does not in any manner address, the
Company's underlying business decision to proceed with or effect the Proposed
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) the tender offer
documentation to be used in connection with the Proposed Transaction and such
other publicly available information concerning the Company that we believe to
be relevant to our analysis, (3) financial and operating information with
respect to the business, operations and prospects of the Company furnished to
us by the Company, (4) a trading history of the Company's common stock from
November 1994 to the present and a comparison of that trading history with
those of other companies that we deemed relevant, (5) a comparison of the
historical financial results and present financial condition of the Company
with those of other companies that we deemed relevant, and (6) a comparison of
the financial terms of the Proposed Transaction with the financial terms of
certain other recent transactions that we deemed relevant. In addition, we
have had discussions with the management of the Company concerning its market,
business, operations, assets, financial condition and prospects and have
undertaken such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information
and have further relied upon the assurances of management of the Company that
they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial forecasts
of the Company, upon advice of the Company we have assumed that such forecasts
have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of the Company as to the
future financial performance of the Company and that the Company will perform
substantially in accordance with such forecasts. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities
of the Company and have not made or obtained any evaluations or appraisals of
the assets or liabilities of the Company. In addition, you have not authorized
us to solicit, and we have not solicited, any indications of interest from any
third party with respect to the purchase of all or a part of the Company's
business. Our opinion necessarily is based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter.
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Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and the Company has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. In the
ordinary course of our business, we may trade in the securities of the Company
for our own account and for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company and is rendered to the Special Committee in
connection with its consideration of the Proposed Transaction. This opinion is
not intended to be and does not constitute a recommendation to any stockholder
of the Company as to whether to accept the consideration to be offered to such
stockholder in connection with the Proposed Transaction.
Very truly yours,
Lehman Brothers
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