<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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INFORMATION STATEMENT
PURSUANT TO SECTION 14(F)
OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
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ATC GROUP SERVICES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
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1-10583 46-0399408
(IRS EMPLOYER IDENTIFICATION NO.)
(COMMISSION FILE NUMBER)
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104 EAST 25TH STREET, 10TH FLOOR
NEW YORK, NEW YORK 10010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 353-8280
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<PAGE>
ATC GROUP SERVICES INC.
104 EAST 25TH STREET
10TH FLOOR
NEW YORK, NEW YORK 10010
(212) 353-8280
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
AND RULE 14F-1 THEREUNDER
January 16, 1998
This Information Statement is being mailed to the holders of shares of
common stock, par value $0.01 per share (the "Common Stock"), of ATC Group
Services Inc., a Delaware corporation (the "Company"), in conjunction with a
Solicitation/Recommendation Statement on Schedule 14D-9 previously furnished
by the Company (as amended by the enclosed Amendment No. 1 thereto filed on
January 15, 1998, the "Schedule 14D-9"). The Schedule 14D-9 relates to the
offer (the "Offer"), disclosed in a Tender Offer Statement on Schedule 14D-1
filed with the Securities and Exchange Commission on December 4, 1997 by
Acquisition Corp., a Delaware corporation (the "Purchaser"), a wholly-owned
subsidiary of Acquisition Holdings, Inc., a Delaware corporation ("Parent"),
by Purchaser to purchase all outstanding Common Stock at a price of $12.00 per
share, net to the seller in cash, 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 with the
Offer to Purchase, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 26, 1997 (the "Merger Agreement") among Parent, Purchaser and the
Company under which Purchaser would merge with and into the Company following
consummation of the Offer (the "Merger"), with the Company becoming a wholly
owned subsidiary of Parent. Pursuant to the Merger, each share of Common Stock
not acquired by Purchaser in the Offer will be exchanged for the same
consideration payable under the Offer. The Merger will occur following the
consummation of the Offer and the satisfaction or waiver of certain
conditions.
You are receiving this Information Statement in connection with the possible
appointment of persons designated by Purchaser to a majority of the seats on
the Board of Directors of the Company. The Company has agreed under the Merger
Agreement that, promptly upon acceptance for payment of, and payment for,
50.1% of the shares of Common Stock by Purchaser pursuant to the Offer,
Purchaser will be entitled to designate such number of directors on the
Company's Board of Directors as will give Purchaser a majority of such
directors, and the Company will, at such time, cause Purchaser's designees to
be so appointed by its existing Board of Directors. This Information Statement
is required by Section 14(f) of the Securities Exchange Act of 1934, as
amended, and Rule 14f-1 thereunder.
YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT,
HOWEVER, REQUESTED TO TAKE ANY ACTION PERTAINING TO THE APPOINTMENT OF
DIRECTORS DESCRIBED HEREIN.
In accordance with the Merger Agreement, Purchaser commenced the Offer on
December 4, 1997. The Offer is currently scheduled to expire at midnight on
Wednesday, January 21, 1998, New York City time. Purchaser has informed the
Company that promptly after the expiration of the Offer, if all conditions of
the Offer have been satisfied or waived, it intends to purchase all shares of
Common Stock validly tendered pursuant to the Offer and not withdrawn.
VOTING SECURITIES
The outstanding voting securities of the Company as of January 12, 1998
consisted of 7,942,327 shares of Common Stock. Each share of Common Stock is
entitled to one vote in the election of directors and in all other matters
requiring a stockholder vote.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the information as to beneficial ownership of
shares of the Company's Common Stock by each person known to the Company to
own 5% or more of the shares of the Company's Common Stock as of January 12,
1998 based upon shares of Common Stock outstanding on such date plus shares
deemed outstanding pursuant to Securities and Exchange Commission Rule 13d-
3(d)(1).
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ------------ ----------
<S> <C> <C>
George Rubin ............ 1,512,542(2) 17.9%
104 East 25th Street
10th Floor
New York, New York 10010
Morry F. Rubin........... 800,489(3) 10.0
104 East 25th Street
10th Floor
New York, New York 10010
Corbyn Investment Manage-
ment Inc., et al........ 1,642,035(4) 20.7
2330 West Jappa Road
Suite 108
Lutherville, Maryland
21093
WPG Corporate Development
Associates V, L.P., et
al...................... 1,170,030(5) 14.7
c/o Weiss, Peck & Greer,
L.L.C.
One New York Plaza
New York, New York 10004
The Parnassus Fund....... 595,000(6) 7.5
One Market, Stuart Tower
Suite 1600
San Francisco,
California 94105
</TABLE>
- --------
(1) Each person has sole voting power and investment power with respect to the
number of shares indicated as owned, except as otherwise noted.
(2) Includes warrants to purchase 490,500 shares. George Rubin has granted a
proxy to Parent to vote 720,035 shares of Common Stock in connection with
the Merger; Mr. Rubin has retained the power to dispose of or direct the
disposition of such shares, subject to the terms of the Stockholders'
Agreement dated as of October 17, 1997 among George Rubin, Morry F. Rubin
and Parent (the "Stockholders' Agreement"). The Stockholders' Agreement
will terminate upon the earlier to occur of (i) October 17, 1998 or (ii)
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.
(3) Includes options to purchase 81,750 shares. Morry F. Rubin has granted a
proxy to Parent to vote 449,995 shares of Common Stock in connection with
the Merger; Mr. Rubin has retained the power to dispose of or direct the
disposition of such shares, subject to the terms of the Stockholders'
Agreement.
(4) As reported in Schedule 13G to the Securities and Exchange Commission
dated December 31, 1997. Includes shares owned or beneficially owned by
Corbyn Investment Management, Inc. and Greenspring Fund, Inc.
(5) WPG Corporate Development Associates V, L.P., WPG Private Equity Partners
II, L.L.C., WPG Corporate Development Associates V (Overseas), L.P., WPG
Private Equity Partners II (Overseas), L.L.C., WPG CDA V (Overseas), Ltd.,
Parent, Purchaser, and Wesley W. Lang, Jr. may be deemed to beneficially
own 1,170,030 shares of Common Stock as a result of the Stockholders'
Agreement, pursuant to which George Rubin and Morry F. Rubin granted their
irrevocable proxy, among other things, to vote 1,170,030 of their shares
of Common Stock in favor of the Merger.
(6) As reported in Schedule 13G to the Securities and Exchange Commission
dated February 10, 1997.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the information as to beneficial ownership of
shares of the Company's Common Stock by (i) each person who is a director of
the Company, (ii) each named executive officer, and (iii) all such persons as
a group as of January 12, 1998 based upon shares of Common Stock outstanding
on such date plus shares deemed outstanding pursuant to Securities and
Exchange Commission Rule 13d-3(d)(1).
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND POSITION OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
-------------------- ------------ ----------
<S> <C> <C>
George Rubin........................................ 1,512,542(2) 17.9
Chairman of the Board and Secretary,
Director
Morry F. Rubin...................................... 800,489(3) 10.0
President, Chief Executive Officer, Treasurer,
Director
Richard L. Pruitt................................... 23,962(4) *
Vice President, Principal Accounting Officer,
Director
Julia S. Heckman.................................... 15,000(5) *
Director
Richard S. Greenberg, Esq........................... 15,000(6) *
Director
Christopher P. Vincze............................... 52,500(7) *
Senior Vice President
Nicholas J. Malino.................................. 76,667(8) *
Senior Vice President
John T. Goodwin..................................... 0 *
President and Director
ATC InSys Technology Inc.
All Officers and Directors as a Group (11 persons).. 2,520,040(9) 29.1
</TABLE>
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* Represents less than 1%.
(1) Each person has sole voting power and investment power with respect to the
number of shares indicated as owned, except as otherwise noted.
(2) Includes warrants to purchase 490,500 shares. George Rubin has granted a
proxy to Parent to vote 720,035 shares of Common Stock in connection with
the Merger; Mr. Rubin has retained the power to dispose of or direct the
disposition of such shares, subject to the terms of the Stockholders'
Agreement. The Stockholders' Agreement will terminate upon the earlier to
occur of (i) October 17, 1998 or (ii) 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.
(3) Includes options to purchase 81,750 shares. Morry F. Rubin has granted a
proxy to Parent to vote 449,995 shares of Common Stock in connection with
the Merger; Mr. Rubin has retained the power to dispose of or direct the
disposition of such shares, subject to the terms of the Stockholders'
Agreement.
(4) Includes options to purchase 1,500 shares.
(5) Includes options to purchase 15,000 shares.
(6) Includes options to purchase 15,000 shares.
(7) Includes options and/or warrants to purchase 52,500 shares.
(8) Includes shares held by Mr. Malino's wife and options to purchase 70,638
shares.
(9) Includes options and/or warrants to purchase 730,588 shares.
3
<PAGE>
CHANGE IN CONTROL
The Offer, if consummated, will result in a change in control of the
Company. See the Offer to Purchase for additional information concerning the
Offer, Parent and the Purchaser.
THE BOARD OF DIRECTORS
CURRENT DIRECTORS
The persons named below are the current members of the Board of Directors
and serve for a term of one year expiring at the 1998 Annual Meeting of
Stockholders and upon the election and qualification of their successors or
until earlier resignation or removal.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
George Rubin............ 69 Chairman of the Board, Secretary and Director
Morry F. Rubin.......... 38 President, Chief Executive Officer, Treasurer and Director
Richard L. Pruitt....... 57 Vice President and Principal Accounting Officer
Richard S. Greenberg,
Esq.................... 48 Director
Julia S. Heckman........ 48 Director
</TABLE>
George Rubin has been Chairman of the Board of the Company since 1988. From
1961 to 1987, Mr. Rubin served as President, Treasurer and director of Staff
Builders, Inc., a publicly held corporation engaged in the business of
providing temporary personnel primarily in the health care field. Since
December 1986, Mr. Rubin has been a principal stockholder, executive officer
and a director of National Diversified Services, Inc., a publicly held
corporation which completed a public offering in December 1986 and currently
has no business operations. George Rubin is the father of Morry F. Rubin.
Morry F. Rubin has been President, Chief Executive Officer, Treasurer and a
director of the Company since 1988. Mr. Rubin was also President, Chief
Executive Officer and Treasurer of Aurora Environmental Inc. ("Aurora") from
May 1985 to June 1995, and was a director of Aurora from September 1983 to
June 1995. Since 1986, Mr. Rubin has been a principal stockholder and, from
1986 to July 1995, was President and a director, of National Diversified
Services, Inc., a publicly held corporation which completed a public offering
in December 1986 and currently has no business operations. From 1981 to 1987,
Mr. Rubin was employed in sales and as director of acquisitions for Staff
Builders, Inc. Morry F. Rubin is the son of George Rubin.
Richard L. Pruitt has served as a Vice President of the Company since
September 1990, as Principal Accounting Officer since April 1988 and as a
director since January 1988. Mr. Pruitt served as Principal Financial Officer
of the Company from September 1989 to April 1992 and from May 1993 to July
1995. Mr. Pruitt served as the Principal Financial Officer of Aurora from
February 1982.
Richard S. Greenberg, Esq. has been a director of the Company since July
1995. Mr. Greenberg has been a director of the Environmental Management
Consulting Services Group at Coopers & Lybrand LLP since October 1989.
Julia S. Heckman has been a director of the Company since August 1995. Ms.
Heckman has been a Managing Director with Rodman & Renshaw, Inc.'s Investment
Banking Group since April 1995 and had been a Managing Director with Mabon
Securities Corp.'s Investment Banking Group since 1991. Prior to joining Mabon
Securities Corp., Ms. Heckman was a Managing Director with Paine Webber Group
Inc.'s Corporate Finance Group. Ms. Heckman serves as a member of the
Company's Board of Directors pursuant to an Underwriting Agreement dated
October 10, 1995 between Rodman & Renshaw, Inc. and the Company. Ms. Heckman
is also a member of the Board of Directors of Manhattan Bagel Company, Inc.
4
<PAGE>
Each member of the Board of Directors has been named a defendant in a
summons and complaint which were filed on or about November 5, 1997 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 also names the Company as defendant. 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 members of the Board of Directors, the Company,
Weiss, Peck & Greer, LLC and WPG Corporate Development Associates V, L.P. 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. On December 18, 1997,
counsel for the defendants were served with an amended Peters Complaint that
essentially makes the same allegations and seeks the same relief as the
original complaint. Also on December 18, 1997, counsel for the defendants were
served with a Notice of Dismissal without prejudice of the Richter action. The
discovery process has begun in the Peters action. The Company believes the
allegations contained in both Complaints are meritless and, to the extent the
actions proceed, intends to defend both actions vigorously.
During fiscal 1997, the Board of Directors held four meetings.
PURCHASER DIRECTOR DESIGNEES
The Merger Agreement provides that, promptly upon the acceptance for payment
of, and payment for, 50.1% of the shares of the Company's Common Stock by
Purchaser pursuant to the Offer, Purchaser will be entitled to designate such
number of directors ("Purchaser Designees") on the Company's Board of
Directors as will give Purchaser a majority of such directors. Parent and the
Purchaser have informed the Company that they will choose the Purchaser
Designees listed on Schedule I to this Information Statement. Schedule I also
sets forth the present principal occupation or employment and five-year
employment history and citizenship for each person who will be designated as a
director. Parent, Purchaser, and the Purchaser Designees have advised the
Company that none of the Purchaser Designees beneficially owns any securities
(or rights to acquire securities) of the Company or has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates that are required to be disclosed pursuant to the rules of the
Securities and Exchange Commission, except as may be disclosed in the Offer to
Purchase. Parent and Purchaser have informed the Company that each of the
persons listed on Schedule I to this Information Statement has consented to
act as a director, if so designated.
The information regarding the Purchaser Designees was provided by Purchaser
and the Company does not assume any responsibility for the accuracy or
completeness thereof.
Upon consummation of the Offer, each of George Rubin, Morry F. Rubin and
Richard L. Pruitt will resign as directors of the Company, and the Purchaser
Designees listed on Schedule I to this Information Statement will be appointed
by the remaining directors, Richard S. Greenberg and Julia S. Heckman, to fill
the vacancies created by such resignations. In the event the Purchaser
Designees are elected to the Board of Directors, until the time the Merger
becomes effective the Board of Directors will have at least two directors who
are directors on the date of the Merger Agreement and who are not officers of
the Company (the "Independent Directors"). In such event, if the number of
Independent Directors is reduced below two for any reason whatsoever, the
remaining Independent Director must designate a person to fill such vacancy
who will be deemed to be an Independent Director for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors
must designate two persons to fill such vacancies who are not 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 will be
deemed to be Independent Directors for purposes of the Merger Agreement.
5
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS AND DIRECTOR COMPENSATION
The Company has a standing Executive Compensation Committee and an Audit
Committee of the Board of Directors, with Morry F. Rubin, Julia S. Heckman and
Richard S. Greenberg, Esq. as members of each committee.
The Audit Committee has the power to (i) select the independent certified
public accountant for the Company, (ii) satisfy itself on behalf of the Board
of Directors that the external and internal auditing procedures assure
reliable and informative accounting and financing reporting, (iii) have
meetings with management, or with the auditors, or with both management and
auditors, to review the scope of the auditor's examination, audit reports and
the Company's internal auditing procedures and reviews, (iv) monitor policies
established to prohibit unethical, questionable or illegal activities by those
associated with the Company; and (v) review the compensation paid to the
auditors through annual audit and non-audit fees and the effect on the
independence of the auditors in relation thereto, and it may exercise the
powers and authority of the Board of Directors to implement changes in
connection with the foregoing or, at its option, may make recommendations to
the entire Board of Directors for its approval. Further, the Audit Committee
is responsible for approving any transactions between the Company and its
officers, directors or affiliates.
The Compensation Committee has the power to review compensation of the
Company's executive officers, including salaries, the granting of stock
options and other forms of compensation for executive officers whose salaries
are within the purview of the Board of Directors. In some cases, the
Compensation Committee may make recommendations to the entire Board of
Directors for its approval or itself exercise the powers and authority of the
Board of Directors to designate compensation.
During the fiscal year ended February 28, 1997, the Audit Committee and
Compensation Committee held zero and eight meetings, respectively.
DIRECTORS' COMPENSATION
During both the fiscal years ended February 1996 and 1997, the Company
granted options to purchase 7,500 shares to each of Julia S. Heckman and
Richard S. Greenberg, Esq., the Company's two outside directors. In the fiscal
year ended February 1997, the Company's Board of Directors approved the grant
of replacement options to both outside directors to extend the term of the
options and lower the exercise price. No other compensation was paid to the
Company's directors during the fiscal year ended February 1997 for serving in
the capacity of director.
Ms. Heckman and Mr. Greenberg were paid $35,000 each for services rendered
to the Company as members of the Special Committee of Independent Directors
appointed by the Board of Directors to review and evaluate the terms of the
Offer and the Merger.
6
<PAGE>
MANAGEMENT
The following table sets forth certain information as of January 15, 1998,
as to the executive officers of the Company.
<TABLE>
<CAPTION>
POSITION WITH
NAME AGE COMPANY
---- --- -------------
<S> <C> <C>
George Rubin.......... 69 Chairman of the Board and Secretary
Morry F. Rubin........ 38 President, Chief Executive Officer, Treasurer
Richard L. Pruitt..... 57 Vice President and Principal Accounting Officer
Nicholas J. Malino.... 47 Senior Vice President, Financial
and General Operations
Christopher P. 35 Senior Vice President, Financial
Vincze............... and General Operations
Donald W. Beck........ 39 Senior Vice President
Wayne A. Crosby....... 44 Controller
John J. Smith, Esq.... 47 General Counsel
</TABLE>
For biographical information regarding George Rubin, Morry F. Rubin and
Richard L. Pruitt, see their respective biographies under "Current Directors"
above.
Nicholas J. Malino, age 47, has been Senior Vice President, Financial and
General Operations of the Company since May 1993. Mr. Malino has been an
employee of the Company since October 1992. From February 1991 to September
1993, Mr. Malino was the New York Regional Manager of Kemron Inc., a hazardous
waste consulting company headquartered in McLean, Virginia. From August 1989
to January 1991, he was the Operations Manager for the New York City branch of
Professional Services Industries, Inc.
Christopher P. Vincze, age 35, has been Senior Vice President, Financial and
General Operations of the Company since July 1993. Mr. Vincze has served as a
regional manager of the Company since July 1991 and Vice President of a
subsidiary of the Company since 1992. Mr. Vincze joined Dennison
Environmental, Inc. in 1984 as an industrial hygienist and served as Vice
President of Marketing and Operations from 1987 to July 1991.
Donald W. Beck, age 39, has been Senior Vice President of the Company since
April 1990 and Vice President since January 1988. Mr. Beck is responsible for
managing the operations of certain of the Company's offices. Mr. Beck also
served as a director of ATC Laboratories, Inc., a predecessor of the Company,
from November 1985 until January 1988, President of ATC Laboratories, Inc.
from May 1986 until January 1988, and as Vice President of ATC Laboratories,
Inc. from November 1985 until May 1986. Mr. Beck has been a full-time employee
of the Company (and formerly ATC Laboratories, Inc.) since May 1982.
Wayne A. Crosby, age 44, has served as Controller of the Company since
October 1997, served as Chief Financial Officer of the Company between July
1995 and October 1997, and served as a regional controller of the Company from
December 1993 to July 1995. Prior to joining the Company, Mr. Crosby was the
Chief Financial Officer of BSE Management, Inc. from 1991 to 1993, and Chief
Financial Officer of Compex Systems, Inc. from 1986 through 1990. Mr. Crosby
is a certified public accountant and was employed by Deloitte Haskins & Sells
for eight years.
John J. Smith, Esq., age 47, has been General Counsel of the Company since
August 1989 and served as a Vice President of the Company from September 1990
through December 1993. Prior to joining the Company, from 1986 to 1989, Mr.
Smith was the Secretary of the South Dakota Department of Water and Natural
Resources, a cabinet level position responsible for managing all of the
State's environmental and natural resource development programs.
7
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who beneficially own more
than ten percent of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission"). These officers, directors and
beneficial owners are required by the Commission's regulations to furnish the
Company with copies of all Section 16(a) forms they file. Richard S.
Greenberg, Julia Heckman, Christopher P. Vincze, Richard L. Pruitt, Wayne A.
Crosby, John J. Smith and Donald W. Beck each filed a Form 5 for the year
ended February 28, 1997 to reflect a transaction that should have been
reported on Form 4 for the month of February 1997. Further, Christopher P.
Vincze filed a Form 5 and reported a transaction that occurred in January 1997
that should have been reported on a Form 4 for the month of January 1997.
CERTAIN TRANSACTIONS
Pursuant to the Stockholders' Agreement, George Rubin, Morry F. Rubin, the
Company and Parent have each agreed that on the effective date of the Merger,
George Rubin, Morry F. Rubin and the Company will enter into Severance,
Consulting and Noncompetition Agreements (the "Consulting and Non-Compete
Agreement") in the forms filed as Exhibits 5 and 6 to the Schedule 14D-9 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 and (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 Technology 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 calendar quarters thereafter.
The Company has in the past, and may in the future, enter into transactions
with officers, directors and other affiliates which may be deemed to be non-
arms-length transactions (i.e. transactions between related parties). Any new
transactions would be approved by a majority of disinterested members of the
Board of Directors and would be expected to be made on terms no less favorable
to the Company than could be arranged with independent third parties.
8
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to the compensation of
the Company's Chief Executive Officer and its executive officers, other than
the Chief Executive Officer, who were serving as executive officers at the end
of the fiscal year 1997 whose total annual salary and bonus, if any, exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------- -------
OTHER SECURITIES ALL
YEAR ANNUAL RESTRICTED UNDER- OTHER
NAME AND ENDED COMPEN- STOCK LYING LTIP COMPEN-
PRINCIPAL FEBRUARY SALARY BONUS SATION AWARD(S) OPTIONS PAYOUTS SATION
POSITION 28 (29) ($) ($) ($) ($) (#) ($) ($)
--------- -------- ------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morry F. Rubin, 1997 268,750 259,943 0 0 0 0 0
President and Chief 1996 225,000 141,774 0 0 0(2) 0 0
Executive Officer 1995 225,000 132,500 0 0 0 0 0
George Rubin, 1997 268,750 259,943 0 0 0 0 0
Chairman of the 1996 225,000 141,774 0 0 0(3) 0 0
Board and Secretary 1995 225,000 132,500 0 0 0 0 0
Christopher P. Vincze, 1997 170,000 100,000 6,000(1) 0 37,500 0 0
Senior Vice President 1996 142,308 0 6,000(1) 0 30,000 0 0
1995 105,385 86,500 5,550(1) 0 17,500 0 0
Nicholas J. Malino, 1997 170,000 100,000 0 0 57,500 0 0
Senior Vice President 1996 142,308 0 0 0 30,000 0 0
1995 105,385 86,500 0 0 37,500 0 0
John T. Goodwin 1997 140,000 51,335 0 0 0 0 0
President and Director 1996 140,000 0 0 0 0 0 0
ATC InSys Technology 1995 70,000(4) N/A 0 0 0 0 0
Inc.
</TABLE>
- --------
(1) Represents compensation relating to a car allowance.
(2) Does not include options to purchase 81,750 shares of Common Stock issued
in replacement of previously held options of Aurora, the Company's former
parent company which was merged into ATC in June 1995, with the Company as
the surviving corporation.
(3) Does not include 490,500 warrants to purchase Common Stock issued in
replacement of previously held warrants of Aurora.
(4) John J. Goodwin commenced employment September 1, 1994.
9
<PAGE>
The following compensation table provides information with respect to
individual grants of stock options by the Company during the fiscal year ended
February 28, 1997 to each of the executive officers named in the preceding
summary compensation table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS TERM(1)
------------------------------------------ ---------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR (2) ($/SH) DATE ($) ($)
- ---- ---------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Morry F. Rubin.......... 0 0 N/A N/A 0 0
George Rubin............ 0 0 N/A N/A 0 0
Christopher P. Vincze... 7,500(3) 2.1% 7.50 02-06-2007(4) 35,375 89,648
20,000(3) 5.7% 7.50 02-06-2007(4) 94,334 239,061
10,000(3) 2.8% 7.50 02-06-2007(4) 47,167 119,531
------ --- ---- ---------- ------- -------
Nicholas J. Malino...... 27,500(3) 7.8% 7.50 02-06-2007(4) 129,710 328,709
20,000(3) 5.7% 7.50 02-06-2007(4) 94,334 239,061
10,000(3) 2.8% 7.50 02-06-2007(4) 47,167 119,531
------ --- ---- ---------- ------- -------
John J. Goodwin ........ 0 0 N/A N/A 0 0
------ --- ---- ---------- ------- -------
</TABLE>
- --------
N/A--not applicable
(1) The potential realizable value of each grant of options assumes that the
market price of the Common Stock appreciates in value from the date of
grant to the end of the option term at annualized rates of 5% and 10%,
respectively, after subtracting out the applicable exercise price.
(2) The "% of Total Options Granted to Employees in Fiscal Year" column is
based upon options granted to Company employees only and excludes options
granted to non-employees.
(3) The options granted in fiscal 1997 represent replacement options of
previous grants.
(4) The options granted to Messrs. Vincze and Malino are in replacement of
prior grants which terminated. At the date of grant, the number of options
which were exercisable under the original grant became exercisable under
the replacement grant with the remaining options vesting at varying dates
over two to three years and expire within ten years.
10
<PAGE>
The following table provides information with respect to each exercise of
stock options during the fiscal year ended February 28, 1997 by each of the
executive officers in the preceding summary compensation table and the fiscal
year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY-END(#) OPTIONS AT FY-END ($)
---------------------------- ----------------------------
SHARES
ACQUIRED
ON VALUE
EXERCISE REALIZED(1)
NAME (#) ($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
---- -------- ----------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Morry F. Rubin.......... 0 0 161,750 0 701,128 0
George Rubin............ 0 0 490,500 0 3,184,625 0
Christopher P. Vincze... 0 28,750 40,000 25,000 123,563 21,750
Nicholas J. Malino...... 0 0 36,100 33,400 32,775 28,350
John J. Goodwin......... 0 0 0 0 0 0
</TABLE>
- --------
(1) The aggregate dollar values in the "Value Realized" and "Value of
Unexercised In-the-Money Options at FY-End" columns are calculated by
determining the difference between the fair market value of the Common
Stock underlying the options (or warrants) and the exercise price of the
options (or warrants) at exercise or fiscal year end, respectively. The
Company's last sale price at the close of business on February 28, 1997
was $8.25. Stock options and warrants of Aurora converted into Company
options and warrants pursuant to the terms of the applicable merger
agreement are included above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors is composed of five members, namely, George Rubin,
Chairman of the Board, Morry F. Rubin, Chief Executive Officer, Richard L.
Pruitt, Vice President, Principal Accounting Officer, Julia S. Heckman,
Managing Director with Rodman and Renshaw, Inc.'s Investment Banking Group and
Richard S. Greenberg, Esq., a director of the Environmental Management Group
at Coopers & Lybrand. The Board of Directors has an Audit Committee and a
Compensation Committee consisting of three directors including Morry F. Rubin
and outside directors Richard S. Greenberg and Julia S. Heckman. The Audit
Committee is responsible, among other things, for approving any transactions
between the Company and any of its directors, officers or affiliates. Since
August 1995, the Compensation Committee is responsible for setting
compensation of the executive officers of the Company and for granting any
further options to purchase Common Stock. Prior to August 1995, the Board of
Directors had sole responsibility for reviewing and determining the annual
salary, bonuses, stock option grants and other compensation of the executive
officers of the Company.
George Rubin and Morry F. Rubin are officers and/or directors of certain
subsidiaries of the Company. Morry F. Rubin and George Rubin each receive all
of their respective cash compensation through the Company.
George Rubin is one of two directors of National Diversified Services, Inc.
("National"). During National's fiscal year ended December 31, 1996, no cash
compensation was paid to any officer of the Company. During the past fiscal
year the Company and its subsidiaries had no business relationship with
National.
EMPLOYMENT CONTRACTS AND OTHER COMPENSATION ARRANGEMENTS
As of June 1997, George Rubin, Morry F. Rubin, Nicholas J. Malino and
Christopher P. Vincze receive annual salaries of approximately $300,000,
$300,000, $170,000 and $170,000, respectively. Salaries of all executive
officers of the Company (9 persons) currently aggregate approximately
$1,400,000. The Company has no employment contracts with its executive
officers. All salaries and bonuses are at the discretion of the Board of
Directors. However, the Company pays annual bonuses of 2 1/2% of pretax
profits to each of George Rubin and Morry F. Rubin based upon the prior years
operating results and to Christopher P. Vincze and Nicholas J. Malino based
upon operating income exclusive of the Company's subsidiary, ATC InSys
Technology, Inc. The Company pays John J. Goodwin a bonus based upon a
percentage of pretax operating profits of ATC InSys Technology, Inc. The
bonuses to be paid to such officers are not pursuant to any written
agreements.
11
<PAGE>
During fiscal year 1990, the Company approved an employee savings plan which
allows voluntary contributions by eligible employees into designated
investment funds. The Company may, at the discretion of its Board of
Directors, make additional contributions on behalf of the plan's participants.
No contributions were made by the Company in fiscal years 1995, 1996 and 1997.
The Company has no other annuity, pension or retirement benefits for its
employees. The Company provides life, dental and health insurance, which is
available to all full-time employees. The Company has not afforded any of its
executive officers any personal benefits, the value of which exceeds 10% of
his salary, which are not directly related to job performance or provided
generally to all salaried employees.
ATC STOCK OPTION PLANS
On January 12, 1988, the Board of Directors adopted a Stock Option Plan (the
"1988 Plan") which was ratified by stockholders on January 12, 1988. The 1988
Plan covers 200,000 shares of Common Stock and was utilized to strengthen the
Company's ability to attract and retain in its employ experienced persons and
to attract other persons to become associated with, and/or to maintain their
association with, the Company and its subsidiaries in various capacities (e.g.
consultants, salespersons) other than that of an employee, by affording such
employees and other persons an opportunity to hold a proprietary interest in
the Company. The 1988 Plan authorizes the issuance of the options covered
thereby as either "Incentive Stock Options" within the meaning of the Internal
Revenue Code of 1986, as amended, or as "Non-Statutory Options". While any
person is eligible to receive Non-Statutory Options, only employees are
eligible to receive an Incentive Stock Option under the provisions of
applicable law. The 1988 Plan also provided that no options may be granted
after January 11, 1998.
The 1988 Plan is administered by the Board of Directors, which has the
authority to determine the persons to whom options shall be an Incentive Stock
Option or a Non-Statutory Option, the number of shares to be covered by each
option, the time or times at which options will be granted or may be exercised
and the other terms and provisions of the options except that the 1988 Plan
prohibits the exercise of an Incentive Stock Option unless the optionee has
been continuously employed by the Company from the date of grant to the date
of exercise. Accordingly, Incentive Stock Options terminate upon termination
of the optionee's employment with the Company for any reason whatsoever. The
1988 Plan also provides that: (i) the exercise price of options granted
thereunder shall not be less than 100% (or in the case of an Incentive Stock
Option, 110% if the optionee owns 10% or more of the outstanding voting
securities of the Company) of the fair market value of such shares on the date
of grant, as determined by the Board of Directors, and (ii) no option by its
terms may be exercised more than ten years (five years in the case of an
Incentive Stock Option, where the optionee owns 10% or more of the outstanding
voting securities of the Company) after the date of grant. Any options which
are canceled or not exercised within the option period become available for
future grants.
On July 16, 1993, the Company adopted the 1993 Incentive and Non-Qualified
Stock Option Plan covering 200,000 shares (the "1993 Plan"). In 1995 the 1993
Plan was amended to increase the number of shares covered to 500,000 shares.
In 1996 the 1993 Plan was amended to increase the number of shares covered to
1,000,000 shares. The 1993 Plan provides no options may be granted after July
15, 2003. The 1993 Plan is similar in all respects to the 1988 Stock Option
Plan described above.
On June 29, 1995 the Company adopted a new stock option plan (the "1995
Plan") to replace Aurora's 1987 Stock Option Plan, except that the shares
covered by the new plan are limited to 81,750. These options were granted to
Morry F. Rubin, in replacement of Aurora options previously held, at an
exercise price of $5.32 per share and expire January 2004.
As of February 28, 1997, the Company had options outstanding to purchase
720,340 shares (under the 1988, 1993 and 1995 Plans and for grants outside of
the Plans) at exercise prices ranging from $1.88 per share to $17.00 per
share. As of February 28, 1997, options to purchase 457,550 shares of Common
Stock were currently exercisable.
12
<PAGE>
SCHEDULE I
TO INFORMATION STATEMENT
INFORMATION CONCERNING THE PURCHASER DESIGNEES
Tania R. Cochran, age 25, has been an associate at Weiss, Peck & Greer,
L.L.C. ("Weiss Peck"), an investment management company that sponsors WPG
Corporate Development Associates V, L.P., a Delaware limited partnership, and
WPG Corporate Development Associates V (Overseas), L.P., a Cayman Islands
exempted limited partnership, 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.
Nora E. Kerppola, age 33, has been a principal of WPG Private Equity
Partners II, L.P., 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 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.
Wesley W. Lang, age 40, has been a principal of Weiss Peck since 1985. Prior
to joining Weiss Peck, 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. Mr. Lang is a citizen of the United States of America.
13
