AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1998
REGISTRATION STATEMENT NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

ATC GROUP SERVICES INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

----------------

DELAWARE 8734 46-0399408
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)

----------------

104 EAST 25TH STREET, TENTH FLOOR
NEW YORK, NEW YORK 10010
(TELEPHONE: 212-353-8280)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

----------------

NICHOLAS J. MALINO
CHIEF EXECUTIVE OFFICER AND PRESIDENT
ATC GROUP SERVICES INC.
104 EAST 25TH STREET, TENTH FLOOR
NEW YORK, NEW YORK 10010
(TELEPHONE: 212-353-8280)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

----------------

COPIES OF COMMUNICATIONS TO:

CLAUDE S. SERFILIPPI, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(TELEPHONE: 212-408-5100)

----------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
----------------

IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE
WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [_]

----------------

CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------

12% Senior Subordinated
Notes
due 2008.............. $100,000,000 100.0% $100,000,000 $29,500

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.

----------------

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

* TABLE OF ADDITIONAL REGISTRANTS

EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER
- --------------------------- ------------------------------ ---------------------

ATC Blattert Inc.......... South Dakota 46-0435981
ATC Construction Services
Inc. .................... Massachusetts 04-3353299
ATC Environmental Inc..... Delaware 43-1783470
ATC InSys Technology Inc.. Delaware 13-3889249
ATC Management Inc........ South Dakota 46-0430230
ATC New England Corp...... Delaware 04-3248424
Bing Yen & Associates,
Inc...................... California 33-0398574
Environmental Warranty,
Inc...................... Connecticut 06-1339917
Hygeia Laboratories Inc. . Delaware 04-3125670

- --------
* The address of these additional registrants is 104 East 25th Street, Tenth
Floor, New York, New York, 10010. Their telephone number is (212) 353-8280

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 30 , 1998

PROSPECTUS

ATC GROUP SERVICES INC.

OFFER TO EXCHANGE

12% SENIOR SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING 12% SENIOR
SUBORDINATED NOTES DUE 2008

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1998 UNLESS EXTENDED.

ATC GROUP SERVICES INC., a Delaware corporation ("ATC" or the "Company"), is
hereby offering (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this prospectus (the "Prospectus") and in the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
its 12% Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a registration statement of which this Prospectus is a part
(together with all amendments and exhibits thereto, the "Registration
Statement"), for an equal principal amount of its outstanding 12% Senior
Subordinated Notes due 2008 (the "Private Notes"), of which $100 million
aggregate principal amount was issued on January 29, 1998 (the "Issue Date")
and is outstanding on the date hereof. The Private Notes were sold by
Acquisition Corp., a Delaware corporation, in an offering (the "Offering") by
Acquisition Corp. exempt from the registration requirements of the Securities
Act.

On February 5, 1998, pursuant to the terms of a Merger Agreement, dated as of
November 26, 1997 (the "Merger Agreement"), by and between the Company,
Acquisition Corp. and Acquisition Holdings, Inc., a Delaware corporation and
the parent of Acquisition Corp. ("Holdings"), Acquisition Corp. merged with and
into the Company, with the Company as the surviving corporation of the merger
(the "Merger"). At the time of the Merger, the Company, the Trustee (as defined
herein) and the subsidiary guarantors named therein (the "Subsidiary
Guarantors"), entered into a Supplemental Indenture, dated as of February 5,
1998 (the "Supplemental Indenture"), pursuant to which the Subsidiary
Guarantors agreed to guarantee the Notes on a senior subordinated basis and the
Company agreed to assume all of the rights and obligations of Acquisition Corp.
set forth in the Indenture, dated as of January 23, 1998 (the "Indenture")
between Acquisition Corp. and the Trustee pursuant to which the Notes were
originally issued. The Indenture and the Supplemental Indenture are referred to
herein as the "Supplemented Indenture." See "The Transactions."

The form and terms of the Exchange Notes are identical in all material
respects to those of the Private Notes, except for certain transfer
restrictions and registration rights relating to the Private Notes and except
for certain interest provisions related to such registration rights. The
Exchange Notes will evidence the same indebtedness as the Private Notes (which
they replace) and will be entitled to the benefits of the Supplemented
Indenture. The Exchange Notes will mature on January 15, 2008. Interest on the
Exchange Notes will accrue from the Issue Date and will be payable semi-
annually in arrears on each January 15 and July 15 of each year, commencing
July 15, 1998. The Private Notes and the Exchange Notes are sometimes
collectively referred to herein as the "Notes." See "The Exchange Offer" and
"Description of the Notes."

The Exchange Notes may be redeemed, at the option of the Company, in whole or
in part, at any time on or after January 15, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to January 15, 2001, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
with the net cash proceeds of one or more Public Equity Offerings (as defined
herein) at a redemption price equal to 112% of the principal amount thereof;
provided, that immediately following any such redemption at least 65.0% of the
aggregate principal amount of the Notes remains outstanding.
[continued on next page]

-----------
SEE "RISK FACTORS" COMMENCING ON PAGE 20 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE
EXCHANGE NOTES.

-----------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

-----------

[continued from front cover]

The Exchange Notes are general unsecured obligations of the Company, and are
subordinated in right and payment to all existing and future Senior
Indebtedness (as defined herein) and to all existing and future indebtedness
of the Company's subsidiaries that are not Subsidiary Guarantors. The Exchange
Notes will rank pari passu in right of payment with any future senior
subordinated indebtedness of the Company and will rank senior in right of
payment to all other subordinated obligations of the Company. As of November
30, 1997, on a pro forma basis after giving effect to the consummation of the
Acquisitions and Transactions (each as defined herein), the Company would have
an aggregate of approximately $26.2 million of Senior Indebtedness (excluding
unused commitments of $28.4 million available under the Revolving Credit
Facility (as defined herein)) which would rank senior to the Notes. See
"Unaudited Pro Forma Combined Condensed Financial Data" and "Description of
the New Credit Facility."

The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended by the Company in its sole discretion
(the "Expiration Date"). Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. Private Notes may be tendered only in integral
multiples of $1,000 principal amount. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer."

The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Subsidiary Guarantors under the
Registration Rights Agreement, dated as of January 29, 1998 (the "Registration
Rights Agreement"), between Acquisition Corp., the Subsidiary Guarantors and
the Initial Purchaser (as defined herein). The Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Private Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker-dealer who purchased such Private
Notes directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company or the Subsidiary Guarantors within the meaning of
Rule 405 under the Securities Act), without compliance with the registration
and prospectus delivery requirements of the Securities Act; provided, that the
holder is acquiring Exchange Notes in the ordinary course of its business and
is not participating, does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the
Exchange Notes. Holders of Private Notes wishing to accept the Exchange Offer
must represent to the Company that such conditions have been met. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes which
contains a plan of distribution with respect to such resale transactions. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with any resale of the Exchange Notes received for
Private Notes where such Private Notes were acquired by a broker-dealer as a
result of market-making or other trading activities (other than Private Notes
acquired directly from the Company). The Company has agreed that, for a period
of 45 days after the Registration Statement is declared effective, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resales. See "Plan of Distribution." The Company believes that none
of the registered holders of the Private Notes is an affiliate (as such term
is defined in Rule 405 under the Securities Act) of the Company.

Since their issuance, the Private Notes have traded on the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market of
the National Association of Securities Dealers, Inc. (the "NASD"). The Company
does not intend to apply for listing of the Exchange Notes on any securities
exchange or to seek approval through any automated quotation system. There can
be no assurance regarding the future development of a market for the Exchange
Notes, or the ability of the holders of the Exchange Notes to sell their
Exchange Notes or the price at which such holders may be able to sell their
Exchange Notes. If such a market were to develop, the Exchange Notes could
trade at prices that may be higher or lower than the initial public offering
price depending on many factors, including prevailing interest rates, the
Company's operating results and the market for similar securities. See "Risk
Factors--Lack of Public Market."

Holders of Private Notes whose Private Notes are not tendered and accepted
in the Exchange Offer will continue to hold such Private Notes and will be
entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Supplemented Indenture. Following
consummation of the Exchange Offer, the holders of Private Notes will continue
to be subject to the existing restrictions upon transfer thereof and the
Company and the Subsidiary Guarantors will have no further obligation to such
holders to provide for the registration under the Securities Act of the
Private Notes held by them.

The Company and the Subsidiary Guarantors will not receive any proceeds
from, and the Company agreed to bear all registration expenses of, the
Exchange Offer. No underwriter is being used in connection with the Exchange
Offer. See "The Exchange Offer--Resale of the Exchange Notes."

This Prospectus is dated , 1998

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY SUBSIDIARY GUARANTOR. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY SUCH PROSPECTUS SUPPLEMENT NOR ANY RESALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
THIS PROSPECTUS AND ANY SUCH RELATED PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.

----------------

THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES LAWS. ALL STATEMENTS REGARDING THE COMPANY'S AND ITS
SUBSIDIARIES' EXPECTED FINANCIAL POSITION, BUSINESS AND FINANCING PLANS ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY AND ITS SUBSIDIARIES BELIEVE
THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO
HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM SUCH EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN
THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE INFORMATION UNDER "RISK
FACTORS," "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS." ALL SUCH FORWARD-LOOKING STATEMENTS ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.

----------------

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.

AVAILABLE INFORMATION

This Prospectus constitutes a part of an exchange offer Registration
Statement on Form S-4 filed by the Company and the Subsidiary Guarantors with
the Securities and Exchange Commission (the "Commission") under the Securities
Act with respect to the Exchange Notes. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to such Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the Subsidiary Guarantors and the Exchange Notes. Any statement contained
herein concerning the provisions of certain documents are not necessarily
complete, and in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement for a more complete
description of the matter involved. Each such statement is qualified in its
entirety by such reference.

As a result of the filing of the Registration Statement with the Commission,
the Company will become subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith will be required to file with or furnish to the
Commission certain reports and other information. The Registration Statement,
the exhibits and schedules thereto, reports and other information filed with
or furnished to the Commission by the Company may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained by
mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Additionally, the
Commission maintains a Web site on the Internet (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that submit electronic filings to the Commission,
including the Company.

The Indenture requires the Company to deliver to the Trustee within 15 days
after filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or Section 15(d) of
Exchange Act, the Indenture requires the Company to file with the Commission
to the extent permitted, and provide the Trustee and holders with such annual
reports and such information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act.

SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. As used in this Prospectus, unless the context indicates otherwise,
all references to (i) "Acquisition Corp." are to Acquisition Corp. prior to the
Merger and to ATC Group Services Inc. after the Merger, as the context
requires, (ii) "ATC" or the "Company" are to ATC Group Services Inc. and its
consolidated subsidiaries, (iii) "Holdings" are to Acquisition Holdings, Inc.,
a Delaware corporation and the parent of the Company and (iv) a fiscal year are
to the Company's fiscal year ended the last day of February.

THE COMPANY

ATC is a leading national provider of professional consulting, engineering
and testing services within the environmental and construction materials
industries. Management believes the Company is also a leading provider of
integrated environmental information management technology services. The
Company provides a broad range of services to a diverse client base of over
8,000 customers, with domestic businesses and non-federal government entities
representing over 95.0% of the Company's gross revenues for the twelve months
ended November 30, 1997. No single customer represented more than 1.8% of the
Company's gross revenues during the twelve months ended November 30, 1997. In
addition, the Company's ten largest customers taken together accounted for less
than 13.6% of the Company's gross revenues during the twelve months ended
November 30, 1997. The Company provides its services through a network of 73
branch offices located in 34 states covering every major market of the United
States.

Asset preservation, liability and health related considerations have
increasingly driven demand in the environmental services industry, whereas
regulation has decreased as a driver over time. As a result of these market
dynamics, environmental administration has become an integral component of day-
to-day property management activities. Management believes that ATC is well-
positioned to take advantage of certain rapidly growing sectors of the
approximately $16.0 billion environmental services industry. In addition, the
industry is highly fragmented and management believes that the industry
presents many favorable opportunities for growth through acquisitions.

In 1993, the Company initiated a strategy of controlled growth through
acquisitions to build a national infrastructure and to broaden its range of
technical services. The Company has created a national infrastructure through
the completion of 12 acquisitions since May 1993. ATC has thereby also expanded
its service mix by adding construction materials testing and engineering, lead
risk management, indoor air quality management, water and wastewater management
and information management technology services. As a result of this growth and
diversification strategy, net revenues and EBITDA (as defined) increased to
fiscal 1997 levels of $95.9 million and $13.8 million, respectively, from $15.4
million and $1.4 million, respectively, in fiscal 1993.

Management believes that ATC is well-positioned to grow revenues and EBITDA
in the future. The key elements of its continuing strategy to achieve this
growth include (i) pursuing cross-selling opportunities presented by ATC's
recently diversified service mix and recently developed national
infrastructure, (ii) capitalizing on specific sectors which management believes
have high growth potential, including indoor air quality, risk assessment,
Brownfield development and environmental information management technology
services outsourcing, (iii) expanding its national programs, the first of which
was established in 1995, which emphasize expanding existing regional or local
customer relationships into national relationships and (iv) increasing
profitability by implementing tactical acquisitions. Management intends to
pursue companies that can be "tucked into" ATC's established infrastructure and
that provide opportunities for additional contribution from branch operations
without proportional increases to overhead or fixed costs.

The following table describes services provided by the Company:

-----------------------------
ATC GROUP SERVICES INC.(1)(2)
-----------------------------
Pro Forma Gross Revenues:
$182.4 million for fiscal
1997 (3)
-----------------------------

- ----------------------- --------------------------- ------------------------
ENVIRONMENTAL CONSTRUCTION MATERIALS INFORMATION MANAGEMENT
SERVICES (4) TESTING AND ENGINEERING (5) TECHNOLOGY (6)
- ----------------------- --------------------------- ------------------------
79.9% of pro forma 14.5% of pro forma fiscal 5.6% of pro forma fiscal
fiscal 1997 gross 1997 gross revenues 1997 gross revenues
revenues
- ----------------------- --------------------------- ------------------------

. Environmental Engi- . Construction Materials . System Design
neering and Testing and Engineering . System Development
Consulting(7) . Geotechnical Engineering . Maintenance and
. Industrial Hygiene(8) and Consulting Management of Main-
. Water and Wastewater frame and Client-
Management(9) Server Environments
. Lead Risk Manage- . Environmental Info-
ment(10) rmation Management
. Health and Safety Technology
Training(11)

- -------
(1) While the Company's product and service offerings include minor
remediation projects such as groundwater recovery systems, they do not
include actual remediation of "Super Fund" sites, asbestos removal or
nuclear waste disposal, nor is the Company routinely involved in the
handling, transportation, storage or disposal of hazardous waste.
(2) Gross revenues include a negligible amount of gross revenues from non-core
businesses not described in this chart, such as environmental insurance
and building condition surveys. See "Business--Other ATC Products and
Services."
(3) The information set forth in this chart is pro forma to reflect the Merger
and the acquisitions of American Testing and Engineering Corp., 3D
Information Systems Inc., BCM Engineers, Inc., Environmental Warranty,
Inc. and Bing Yen & Associates, Inc. as if each acquisition occurred at
March 1, 1996. The difference between gross and net revenues is
reimbursable costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(4) Environmental services include (a) environmental engineering, consulting
and testing services such as environmental audits (for example, Phase I
and Phase II reports), site assessments, remedial action planning and
design, and soil and groundwater remediation management, (b) industrial
hygiene consulting services, including asbestos management, indoor air
quality, occupational hazard assessments and other industrial hygiene
consulting services, (c) water and wastewater management including the
design of wastewater treatment facilities, (d) lead risk management and
(e) health and safety training which includes revenues generated by the
"Environmental Institute," the Company's environmental training facility.
(5) Construction materials testing engineering services include (a) systematic
testing and inspection of construction materials and (b) geotechnical
engineering and consulting services involving analysis of soil for
construction of structures supported on or within the earth.
(6) Information management technology services includes system design, system
development, maintenance and management of mainframe and client-server
environments and environmental information management technology.
Information management technology services can be provided in conjunction
with the Company's environmental services or can be provided as a separate
independent service to clients.
(7) 46.6% of pro forma fiscal 1997 gross revenues.
(8) 24.8% of pro forma fiscal 1997 gross revenues.
(9) 5.1% of pro forma fiscal 1997 gross revenues.
(10) 1.9% of pro forma fiscal 1997 gross revenues.
(11) 1.5% of pro forma fiscal 1997 gross revenues.

COMPETITIVE STRENGTHS

Management believes the following competitive strengths contribute to the
Company's position as a market leader and to its growth in revenues and EBITDA:

. Strong Branch Operations and Low Overhead Costs. Management believes that
its operating structure results in higher profitability than most of its
competitors. During the nine months ended November 30, 1997, over 90.0%
of the Company's branches generated operating profit at the branch level
before allocation of interest, taxes and corporate overhead such as
corporate accounting, corporate marketing, corporate human resources,
corporate management salaries, goodwill, general legal expenses, external
accountants and public company expenses ("Branch Operating Profit").
Calculation of Branch Operating Profit includes such items as branch
employee payroll, rent, branch depreciation, regional administration and
accounting expenses, branch sales and marketing, branch employee
benefits, branch insurance and bad debt expenses. In addition, more than
32.0% of the branches generated greater than 20.0% of Branch Operating
Profit and more than 23.0% generated greater than 25.0% of Branch
Operating Profit. Strong Branch Operating Profit is attributable to
management's entrepreneurial model for branch operations. Branches are
operated as coordinated business units with financial incentives for
branch managers to meet certain financial and operating criteria set by
corporate management. In addition, ATC corporate overhead costs are low
as a result of this decentralized operating structure. For fiscal 1997
and the nine months ended November 30, 1997, overhead represented
approximately 6.0% and 9.3%, respectively, of net revenues compared to
the industry average of approximately 13.5%.

. High Utilization Rates. The Company's utilization rates, measured as a
percentage of hours billable, are believed to be among the highest in the
industry at approximately 70.6% for the nine months ended November 30,
1997. The Company's utilization rate, measured as a percentage of
billable hours to net hours recorded, is calculated by deducting employee
benefit hours from gross hours recorded on the time sheets. This net
billable utilization rate includes hours recorded for all branches,
including local administrative staff time, but excludes any corporate
staff at the Company's headquarters and two administrative offices.
Management believes its utilization rate is attributable to certain key
initiatives. ATC employs approximately 16.2% of its work force under its
flexible staff program. Flexible staff employees are employed only for
hours to be charged to client engagements, resulting in near 100.0%
utilization rates for such employees. The Company's breadth of services
has allowed management to implement cross-training initiatives to
increase employee proficiency in multiple consulting and engineering
service disciplines. As a result, ATC, unlike many of the Company's
competitors, maximizes the ability of its employees to work on multiple
types of projects and reduces non-billable time.

. Experienced Management Team and Significant Employee Involvement. The
Company has a highly experienced management team which is responsible for
the successful growth of the Company's businesses over the past five
years. Nicholas J. Malino and Christopher P. Vincze joined ATC in October
1992 and July 1991, respectively, and have led the Company's expansion
and service diversification strategy since May 1993. Following the
consummation of the Merger, Mr. Malino was appointed Chief Executive
Officer and President, and Mr. Vincze was appointed Chief Operating
Officer. In addition, ATC's key regional and branch managers have
substantial industry experience and have been and will continue to be
significant contributors to the implementation of ATC's growth strategy.
Furthermore, management has promoted company-wide employee involvement in
every phase of new business development.

. Nature of Revenues. The Company's revenues are derived from a diverse
client base of over 8,000 businesses and government agencies which range
from Fortune 500 companies to small and mid-size businesses and federal,
state and local governments. No single customer represented more than
1.8% of the Company's revenues for the twelve months ended November 30,
1997, with domestic businesses and non-federal entities representing over
95.0% of the Company's gross revenues. The Company's national
infrastructure allows ATC to service its diverse client base throughout
the United States. The

Company's broad geographic coverage, wide range of high-quality service
offerings and strong and diversified customer relationships are key
contributors to ATC's stable and recurring revenue stream.

. Broad Service Offerings and National Branch Network. The Company benefits
from economies of scale, particularly in its ability to provide a broad
range of services through its national branch network. As a result, the
Company is well-positioned to take advantage of the increasing tendency
for clients to obtain environmental and consulting services from fewer
providers. Companies are seeking larger providers such as ATC that have a
national network of branch office locations, a broad range of service
capabilities, engineers and consultants with strong technical skills and
team mobilization capabilities and insurance coverage with higher limits
than that provided by smaller firms. In addition, the Company has an
advantage over its smaller competitors in its ability to leverage its
overhead costs by spreading corporate selling, general and administrative
costs over a larger number of branch office locations. As a result of
these economies of scale, the Company is well-positioned to continue to
achieve growth in both revenues and profitability.

BUSINESS STRATEGY

In 1993, the Company began the implementation of a strategy, the key
elements of which were designed to: (i) establish a national infrastructure of
branch office locations and (ii) diversify its service offerings. Management
believes that the Company has achieved these strategic, structural objectives
and now intends to focus on the following strategies to build on this
foundation to improve its market position and to grow operating earnings:

. Cross-Sell Services. As a result of its acquisition strategy, the Company
has expanded its service offerings and client portfolio. This has
resulted in many cross-selling successes for the Company because ATC has
been able to sell additional services to existing clients and newly
acquired clients. Management expects these cross-selling opportunities to
continue at an accelerated rate as a result of its acquired service
capabilities in the construction materials testing and engineering, lead
risk management, water and wastewater management and information
management technology services. Additionally, the Company's national
infrastructure provides opportunities for cross-selling expanded services
to existing customers that currently receive more limited services on a
local or regional basis.

. Focus on High-Growth Services and Sectors. The successful implementation
of strategies designed to increase service offerings has resulted in the
Company's ability to capitalize on many high-growth market opportunities.
ATC is well-positioned to take advantage of the niche markets of indoor
air quality management, water and wastewater management, risk assessment,
Brownfield development and environmental information management
technology services, each of which management believes has high growth
potential. In addition, management intends to take advantage of trends
such as the outsourcing of specialized technical services by national and
multi-national corporations.

. Expand National Sales Programs and Develop International
Opportunities. Since 1995, ATC has implemented six national programs
which have been highly successful in generating new business from
existing clients and from specific industries with growth potential.
Existing programs focus on incremental revenues from clients in the lead
risk management, hazardous waste/Brownfield development, PCS/wireless
communications industry, national commercial account management programs,
federal programs and petroleum markets. In the Asia-Pacific markets, the
Company is in the early stages of its long-term effort to take advantage
of a developing demand for environmental services. ATC is currently
providing asbestos management services to Mitsui Fudosan in Japan and is
providing design services for a wastewater treatment facility in China
for a multi-national corporation. The Company intends to use such
relationships to pursue other opportunities in these markets.

and branch operations into ATC's existing infrastructure and expanding
acquired companies' service and product offerings to existing clients.
Management intends to strengthen its position as a leading industry
consolidator through tactical acquisitions which meet operating,
financial and geographic criteria. Management believes that its existing
national infrastructure provides a platform for "tuck-in" acquisitions of
regional and local companies. According to management estimates, there
are 3,500 companies whose businesses are complementary to those of the
Company. Management believes that a significant number of those companies
could be operated more profitably as part of ATC's operations.

. Emphasis on Business Fundamentals. Management believes that industry
participants typically have management teams with predominantly technical
orientations. In contrast, ATC has distinguished itself by focusing on
business fundamentals to complement its technical expertise. ATC intends
to continue to emphasize a disciplined approach to such basic business
fundamentals as selling and marketing, customer service, cost management,
overtime minimization and collection of receivables.

THE TRANSACTIONS

The Company, Holdings and Acquisition Corp., a wholly-owned subsidiary of
Holdings, entered into the Merger Agreement pursuant to which Acquisition
Corp. offered to purchase all of the outstanding shares of common stock, par
value $ 0.01 per share (the "Common Stock"), of the Company in accordance with
the terms of an offer to purchase, dated December 4, 1997, as amended (the
"Offer to Purchase"), at a price of $12.00 per share, net to the seller in
cash (the "Tender Offer"). Holdings is a Delaware corporation owned by
affiliates of Weiss, Peck & Greer, L.L.C. ("Weiss Peck") and other investors,
including current ATC management and employees. Acquisition Corp. acquired
ownership in excess of 90% of the outstanding shares of Common Stock pursuant
to the Tender Offer, which expired on January 29, 1998, and the subsequent
purchase in the open market of approximately 15,000 shares of Common Stock.

On February 5, 1998, pursuant to the terms of the Merger Agreement and upon
the satisfaction of the other conditions set forth in the Merger Agreement and
in accordance with the requirements of the Delaware General Corporation Law
(the "DGCL"), Acquisition Corp. merged with and into the Company (the "Merger"
and, together with the Offering, the Tender Offer and the refinancing of
approximately $41.4 million aggregate principal amount of indebtedness of ATC
upon consummation of the Merger, the "Transactions") with the Company as the
surviving corporation of the Merger. As a result of the Merger, the Company
became a wholly-owned subsidiary of Holdings. At the time of the Merger, the
Company, the Subsidiary Guarantors and the Trustee entered into the
Supplemental Indenture pursuant to which the Company and the Subsidiary
Guarantors assumed all of the rights and obligations of Acquisition Corp. set
forth in the Indenture.

Acquisition Corp. used approximately $160.0 million to consummate the Tender
Offer, Merger and refinancing of approximately $41.4 million aggregate
principal amount of indebtedness of ATC. These funds were provided by (i) the
proceeds of a $20.0 million term loan (the "Term Loan") entered into by the
Company upon consummation of the Tender Offer and funded at the time of the
Merger, (ii) the sale of the Private Notes, (iii) a $32.5 million capital
contribution (the "Holdings Contribution") to Acquisition Corp. from Holdings
($30.0 million of which was contributed on the Issue Date), (iv) borrowings of
approximately $1.6 million under a revolving credit facility entered into upon
consummation of the Tender Offer and funded at the time of the Merger (the
"Revolving Credit Facility" and together with the Term Loan, the "New Credit
Facility") and (v) cash on hand of $5.8 million.

The Holdings Contribution was provided by (a) an equity investment of
approximately $19.9 million in the common stock of Holdings by affiliates of
Weiss Peck, (b) an equity investment of $0.5 million in the common stock of
Holdings by Jackson National Life Insurance Company together with its
affiliates ("JNL"), (c) the issuance to JNL of preferred stock of Holdings,
par value $0.01, redeemable 2009, having an original aggregate

liquidation value of $10.0 million, and expected to accrue dividends through
the issuance of additional shares of preferred stock, at a compounded rate of
8.0% per annum (the "Holdings Preferred Stock") and warrants entitling JNL to
purchase 6.0% of the shares of common stock of Holdings on a fully diluted
basis (the "Warrants" and collectively with the offering of the Holdings
Preferred Stock, the "Preferred Stock Offering"), see "Description of Preferred
Stock," and (d) an equity investment of approximately $2.1 million in common
stock of Holdings by ATC management and employees (including the economic value
of Holdings employee stock options which replaced existing ATC options).

Weiss Peck is a private investment firm, founded in 1970, which manages in
excess of $14 billion in public equities and fixed-income securities for
institutional and individual clients worldwide. In addition to its money
management activities, the firm has a twenty-seven year history as an investor
of equity capital in over 200 venture capital and private equity transactions.
Investments of its Private Equity Group are made through affiliated funds with
$230 million of committed capital.

RECENT DEVELOPMENTS

Acquisitions

On November 26, 1997, the Company completed the purchase of all of the
outstanding stock of Bing Yen & Associates, Inc. ("Bing Yen"). Bing Yen
provides geotechnical and structural forensic services to a wide variety of
clients in the western United States. The acquisition was accounted for as a
purchase. The purchase price totaled $4.3 million, consisting of $2.2 million
paid at closing, $0.6 million in the form of a short-term, interest bearing
promissory note, $1.2 million in unsecured, three-year, interest bearing notes
and the assumption of liabilities and transaction costs of $0.4 million. In
addition a maximum aggregate principal amount of $1.5 million in unsecured
contingent achievement promissory notes will be issued if certain minimum net
revenue levels are achieved resulting in a maximum purchase price of $5.4
million.

On November 4, 1997, the Company purchased 100% of the outstanding preferred
stock and 90.9% of the outstanding common stock of Environmental Warranty, Inc.
("EWI"), a property and casualty insurance brokerage firm specializing in
environmental insurance with property and casualty licenses, including excess
and surplus lines in 43 states and with license applications pending in an
additional five states. EWI sells insurance products covering environmental
liabilities to large property owners and municipal government clients. The
acquisition was accounted for as a purchase. The purchase price totaled
approximately $1.7 million, consisting of $218,750 (includes $68,750 for
partial payment of the assumed payments commitments totaling $275,000) in cash
at closing, $582,424 (net of imputed interest) in contingent three-year, non-
interest bearing notes (subject to certain set-offs), $206,250 of unconditional
payment commitments due in three annual installments, 33,000 shares of
unregistered Common Stock of the Company (valued at $11 1/16 per share) and the
assumption of liabilities and transaction costs of $339,811.

On August 20, 1997, the Company purchased certain assets and assumed certain
liabilities of the Engineering Division of Smith Technology Corporation ("Smith
Technology") which operated primarily as BCM Engineers, Inc. ("BCM"). BCM is a
leading environmental engineering and consulting firm that provides services in
water and wastewater treatment, natural resources management, environmental
compliance and site investigation, remedial design and engineering, asbestos
and air quality management. The acquisition of BCM was accounted for as a
purchase. The purchase price totaled $12.5 million consisting of $5.4 million
in cash, $2.8 million in short-term notes payable that are subject to set-offs
and assumed liabilities and transaction costs of $4.3 million, including
working capital liabilities.

The acquisitions of Bing Yen, EWI and BCM are collectively referred to herein
as the "Acquisitions." Each of the seller notes issued in connection with the
Acquisitions, including contingent notes, constitutes Senior Indebtedness.

CORPORATE STRUCTURE

Affiliates of Weiss Peck, JNL and certain of its affiliates, and management
and employees of ATC own approximately 68.2%, 7.7% and 24.1%, respectively, of
the common stock of Holdings on a fully diluted basis. Management's and
employees' 24.1% fully diluted ownership is based on an equity investment of
$2.1 million and options to purchase 11.7% of the common stock of Holdings. JNL
owns 100.0% of the Holdings Preferred Stock. The following chart sets forth the
Company's corporate structure:

Acquisition Holdings, Inc. . $10.0 million of Preferred Stock and
Warrants (1)
. $22.5 million Equity Investment (1)
[DOWN ARROW] 100%

ATC Group Services Inc. (2) . Borrowings available under the
Revolving Credit Facility
. $20.0 million Term Loan (1)
. $100.0 million of Notes (1)
[DOWN ARROW] 100%

Subsidiary Guarantors (3)

- --------
(1) Acquisition Corp. used approximately $160.0 million to consummate the
Tender Offer, Merger and refinancing of approximately $41.4 million
aggregate principal amount of indebtedness of ATC (including related fees
and expenses). This sum was provided by (a) $20.0 million of borrowings
under the Term Loan, see "Description of New Credit Facility," (b) gross
proceeds of $100.0 million from the issuance of the Private Notes, see
"Description of the Notes," (c) the $32.5 million Holdings Contribution
(comprised of (i) the issuance of $10.0 million of Holdings Preferred Stock
and Warrants to JNL, see "Description of Preferred Stock," (ii) an equity
investment of $19.9 million by affiliates of Weiss Peck and $0.5 million by
JNL and (iii) an equity investment of approximately $2.1 million by ATC
management and employees (including the economic value of Holdings employee
stock options which replaced ATC options)) (d) borrowings of approximately
$1.6 million under the Revolving Credit Facility, see "Description of New
Credit Facility" and (e) cash on hand of $5.8 million.
(2) Pursuant to the terms of the Merger Agreement, Acquisition Corp. merged
with and into ATC on February 5, 1998, with ATC as the surviving
corporation.
(3) The Subsidiary Guarantors unconditionally guarantee all amounts owed under
the New Credit Facility on a senior basis and guarantee all amounts owing
under the Notes on a senior subordinated basis. ATC currently owns 100% of
the outstanding preferred stock and 90.9% of the outstanding common stock
of EWI.

THE EXCHANGE OFFER

The Exchange Offer

The Exchange Offer.......... The Company and the Subsidiary Guarantors are
hereby offering to exchange Exchange Notes for an
equal principal amount of Private Notes that are
properly tendered and accepted. The Company and
the Subsidiary Guarantors will issue Exchange
Notes on or as promptly as practicable after the
Expiration Date. As of the date hereof, there is
$100.0 million aggregate principal amount of
Private Notes outstanding. See "The Exchange
Offer."

Based on interpretations by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company and the Subsidiary
Guarantors believe that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for
Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that the holder is acquiring
Exchange Notes in the ordinary course of its
business, is not participating, does not intend
to participate and has no arrangement or
understanding with any person to participate in
the distribution of the Exchange Notes and is not
an "affiliate" of the Company or the Subsidiary
Guarantors within the meaning of Rule 405 under
the Securities Act. Each broker-dealer who holds
Private Notes acquired for its own account as a
result of market-making or other trading
activities and who receives Exchange Notes
pursuant to the Exchange Offer for its own
account in exchange therefor must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes.

This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with resales of
Exchange Notes received in exchange for Private
Notes acquired by such broker-dealer as a result
of market-making activities or other trading
activities. The Letter of Transmittal that
accompanies this Prospectus states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. Any holder of Private Notes who
tenders in the Exchange Offer with the intention
to participate in a distribution of the Exchange
Notes cannot rely on the above-referenced
position of the staff of the Commission and, in
the absence of an exemption under the Securities
Act, would have to comply with the registration
and prospectus delivery requirements therein in
connection with any resale transaction. Failure
to comply with such requirements in such instance
could result in such holder incurring liability
under the Securities Act for which the holder is
not indemnified by the Company. See "The Exchange
Offer--Resale of the Exchange Notes."

Registration Rights......... The Private Notes were sold by Acquisition Corp.
on January 29, 1998 to BT Alex. Brown (the
"Initial Purchaser") pursuant to a Purchase
Agreement, dated as of January 22, 1998 (the
"Purchase Agreement"), among Acquisition Corp.,
the Subsidiary Guarantors and the Initial
Purchaser. Pursuant to the Purchase Agreement,
Acquisition Corp. and the Subsidiary Guarantors
entered into the Registration Rights Agreement
with the Initial Purchaser, which agreement
grants the holders of Private Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy, as to all Notes,
such rights. Except under certain limited
circumstances, the holders of the Exchange Notes
will not be entitled to any exchange or
registration rights with respect to the Exchange
Notes. Holders of Private Notes who do not
participate in the Exchange Offer may thereafter
hold a less liquid security. See "The Exchange
Offer--Termination of Certain Rights." The
Company will not receive any proceeds from and
has agreed to bear the expenses of the Exchange
Offer.

Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998.

Procedures for Tendering Each holder of Private Notes wishing to accept
Private Notes.............. the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes
and any other required documentation to State
Street Bank and Trust Company, as Exchange Agent
(the "Exchange Agent"), at the address set forth
herein. By executing the Letter of Transmittal,
the holder will represent to and agree with the
Company and the Subsidiary Guarantors that, among
other things, (i) the Exchange Notes to be
acquired by such holder of Private Notes in
connection with the Exchange Offer are being
acquired by such holder in the ordinary course of
its business, (ii) such holder is not
participating, does not intend to participate and
has no arrangement or understanding with any
person to participate in a distribution of the
Exchange Notes, and (iii) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company or the Subsidiary
Guarantors. If the holder is a broker-dealer that
will receive Exchange Notes for its own account
in exchange for Private Notes that were acquired
as a result of market-making or other trading
activities, such holder will be required to
acknowledge in the Letter of Transmittal that
such holder will deliver a prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."

Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other

nominee and who wishes to tender such Private
Notes in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering such owner's
Private Notes, either make appropriate
arrangements to register ownership of the Private
Notes in such owner's name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer--Procedures for Tendering."

Guaranteed Delivery Holders of Private Notes who wish to tender their
Procedures................. Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offer--Guaranteed
Delivery Procedures."

Acceptance of the Private
Notes and Delivery of the
Exchange Notes.............
Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company and
the Subsidiary Guarantors will accept for
exchange any and all Private Notes that are
properly tendered in the Exchange Offer prior to
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
on the earliest practicable date following the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."

Withdrawal Rights........... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."

Certain Tax Considerations.. For a discussion of certain tax considerations
relating to the Exchange Notes, see "Certain U.S.
Federal Income Tax Considerations."

Exchange Agent.............. State Street Bank and Trust Company is serving as
the Exchange Agent in connection with the
Exchange Offer. State Street Bank and Trust
Company also serves as trustee (the "Trustee")
under the Supplemented Indenture.

The Notes

The Exchange Offer applies to the $100 million aggregate principal amount of
Private Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes except that the
Exchange Notes will not bear legends restricting the transfer thereof and
holders of the Exchange Notes will not be entitled to any of the registration
rights of holders of the Private Notes under the Registration Rights Agreement,
which rights will terminate, except under certain limited circumstances, upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Supplemented Indenture. For
further information and for definitions of certain capitalized terms, see
"Description of the Notes."

Acquisition Corp............ ATC Group Services Inc.

Notes....................... $100,000,000 aggregate principal amount of 12%
Senior Subordinated Notes due 2008.

Maturity Date............... January 15, 2008.

Interest Payment Dates...... Interest on the Notes will accrue from the Issue
Date and will be payable semi-annually in arrears
on each January 15 and July 15 of each year,
commencing July 15, 1998.

Optional Redemption......... The Notes will be redeemable, in whole or in
part, at the option of the Company on or after
January 15, 2003 at the redemption prices set
forth herein, plus accrued interest to the date
of redemption. The Notes are not otherwise
redeemable by the Company prior to January 15,
2003, except that, at any time on or prior to
January 15, 2001, the Company, at its option, may
redeem, with the net cash proceeds of one or more
Public Equity Offerings, up to 35.0% of the
aggregate principal amount of the Notes
originally issued, at a redemption price equal to
112% of the principal amount thereof, plus
accrued interest thereon, if any, to the date of
redemption; provided that at least 65.0% of the
aggregate principal amount of the Notes
originally issued remains outstanding immediately
following such redemption. See "Description of
the Notes--Redemption."

Change of Control........... Upon a Change of Control, each holder of Notes
will have the right, subject to certain
restrictions, to require the Company to
repurchase such holder's Notes at a price equal
to 101.0% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
repurchase date. See "Description of the Notes--
Change of Control."

Ranking..................... The Notes are general unsecured obligations of
the Company and are subordinated in right of
payment to all existing and future Senior
Indebtedness and to all existing and future
indebtedness of the Company's subsidiaries that
are not Subsidiary Guarantors. The Notes will
rank pari passu in right of payment with any
future senior subordinated indebtedness of the
Company and will rank senior in right of payment
to all other subordinated obligations of the
Company. As of November 30, 1997, on a pro forma
basis after

giving effect to the consummation of the
Acquisitions and Transactions, the Company would
have an aggregate of approximately $26.2 million
of Senior Indebtedness (excluding unused
commitments of $28.4 million available under the
Revolving Credit Facility) which would rank
senior to the Notes. See "Unaudited Pro Forma
Combined Condensed Financial Data" and
"Description of the New Credit Facility."

Guarantees.................. The Notes are unconditionally guaranteed on a
senior subordinated basis (the "Guarantees") by
the Subsidiary Guarantors. The Guarantees are
general unsecured obligations of the Subsidiary
Guarantors and are subordinated in right of
payment to all existing and future Guarantor
Senior Indebtedness (as defined herein). The
Guarantees rank pari passu with any future senior
subordinated indebtedness of the Subsidiary
Guarantors and rank senior in right of payment to
all other subordinated obligations of the
Subsidiary Guarantors. As of November 30, 1997,
on a pro forma basis after giving effect to the
consummation of the Acquisitions and the
Transactions, the Subsidiary Guarantors
collectively would have had no amount of
Guarantor Senior Indebtedness (excluding
guarantees of Senior Indebtedness of the
Company).

Certain Covenants........... The Supplemented Indenture contains certain
covenants with respect to the Company and its
subsidiaries that restrict, among other things,
(a) the incurrence of additional indebtedness,
(b) the payment of dividends and other restricted
payments, (c) the creation of certain liens, (d)
the use of proceeds from sales of assets and
subsidiary stock, (e) sale and leaseback
transactions, (f) transactions with affiliates,
and (g) conduct of business. The Supplemented
Indenture also restricts the Company's ability to
consolidate or merge with or into, or to transfer
all or substantially all of its assets to,
another person. In addition, under certain
circumstances, the Company will be required to
offer to purchase the Notes, in whole or in part,
at a purchase price equal to 100.0% of the
principal amount thereof plus accrued interest to
the date of repurchase, with the net cash
proceeds of certain Asset Sales. These
restrictions and requirements are subject to a
number of important qualifications and
exceptions. See "Description of the Notes--
Certain Covenants."

Book-Entry, Delivery and Exchange Notes issued in exchange for the Private
Form....................... Notes currently represented by one or more fully
registered global notes will be represented by
one or more fully registered global notes
(collectively, the "Global Notes") and will be
deposited upon issuance with The Depository Trust
Company ("DTC" or the "Depositary") and
registered in the name of a nominee of DTC.
Beneficial interests in Global Note(s)
representing the Notes will be shown on, and
transfers thereof will be effected through,
records maintained by DTC and its participants.
See "Book-Entry; Delivery and Form."

For additional information regarding the Notes, see "Description of the
Notes." and "Certain U.S. Federal Income Tax Considerations."

NO CASH PROCEEDS TO THE COMPANY

This Exchange Offer is intended to satisfy certain obligations of the Company
and the Subsidiary Guarantors under the Registration Rights Agreement. None of
the Company or any Subsidiary Guarantors will receive any proceeds from the
issuance of the Exchange Notes offered hereby and the Company has agreed to pay
the expenses of the Exchange Offer. In consideration for issuing the Exchange
Notes as contemplated in this Prospectus, the Company will receive, in
exchange, the Private Notes representing an equal aggregate principal amount.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Private Notes, except as otherwise described
herein under "The Exchange Offer--Terms of the Exchange Offer." The Private
Notes surrendered in exchange for Exchange Notes will be retired and canceled
and cannot be reissued. Accordingly, issuance of the Exchange Notes will not
result in any increase in the outstanding indebtedness of the Company.

RISK FACTORS

See "Risk Factors," immediately following this Summary, for a discussion of
certain factors to be considered in evaluating the Company, its business and an
investment in the Exchange Notes.

----------------

The Company's principal executive office is located at 104 East 25th Street,
Tenth Floor, New York, New York 10010 and its telephone number is (212) 353-
8280.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth summary historical financial data of the
Company for fiscal years 1993 through 1997, for the nine month periods ended
November 30, 1996 and November 30, 1997 and as of November 30, 1997 and certain
unaudited pro forma financial data of the Company for fiscal year 1997, the
nine month period ended November 30, 1997 and as of November 30, 1997. The
summary historical financial data for the fiscal years 1993 through 1997 were
derived from audited financial statements of the Company. The summary
historical financial data as of November 30, 1997 and for the nine months ended
November 30, 1996 and November 30, 1997 were derived from the unaudited
historical financial statements of the Company for such periods, which, in the
opinion of management of the Company, reflect normal and recurring adjustments
necessary to present fairly the financial position and results of operations
for the periods presented. The information in this table should be read in
conjunction with "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Unaudited Pro
Forma Combined Condensed Financial Data" and the Company's audited financial
statements and the notes thereto included elsewhere in this Prospectus.

FISCAL YEAR NINE MONTHS ENDED NOVEMBER 30,
------------------------------------------------------ -----------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1996 1997 1997(1) 1996 1997 1997(2)
------- ------- ------- ------- ------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS)

OPERATING DATA:
Net revenues........... $15,370 $24,380 $33,270 $40,114 $95,901 $148,912 $ 70,062 $ 88,389 $ 102,962
Gross profit........... 6,650 12,294 17,916 20,450 42,151 68,976 31,099 40,448 48,288
Operating income....... 728 3,227 5,625 5,795 11,711 15,508 9,514 7,984 6,088
Income (loss) before
income taxes.......... 653 3,077 5,301 5,671 10,398 (48) 8,691 6,030 (4,847)
Net income (loss)...... $ 353 $ 1,867 $ 3,257 $ 3,866 $ 6,308 $ (30) $ 5,326 $ 3,604 $ (2,981)
OTHER DATA:
EBITDA(3).............. $ 1,354 $ 3,913 $ 6,544 $ 7,010 $13,810 $ 21,852 $ 11,044 $ 10,265 $ 11,427
Capital expenditures... 567 731 756 946 1,286 1,713 1,123 1,503 1,564
Depreciation and
Amortization.......... 627 686 920 1,214 2,099 6,277 1,530 2,281 5,190
Ratio of earnings to
fixed charges(4)...... 3.1x 7.2x 9.0x 7.3x 4.8x -- 5.6x 2.8x --

AS OF NOVEMBER 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- --------------

SELECTED BALANCE SHEET DATA:
Working capital...................................... $ 38,072 $ 32,874
Total assets......................................... 117,545 179,253
Short-term and long-term debt(5)..................... 45,946 126,163
Stockholders' equity(5).............................. 49,643 29,821

- --------
(1) Gives pro forma effect to the Transactions and the following acquisitions:
(a) On November 26, 1997, ATC acquired substantially all of the assets of
Bing Yen for a purchase price of approximately $4.3 million.
(b) On November 4, 1997, ATC acquired substantially all of the assets of EWI
for a purchase price of $1.7 million.
(c) On August 20, 1997, ATC acquired certain assets and assumed certain
liabilities of BCM for a purchase price of $12.5 million.
(d) On May 28, 1996, ATC acquired certain assets and assumed certain
liabilities of 3D Information Services, Inc. for a purchase price of
$5.8 million, consisting of cash and notes payable.
(e) On May 24, 1996, ATC acquired certain assets and assumed certain
liabilities of American Testing and Engineering Corp. for an initial
purchase price of $41.6 million comprised of cash, payment obligations
and assumed liabilities. The total final purchase price, including
earned contingent purchase consideration, was $50.7 million.
(2) Gives pro forma effect to the Transactions and the Acquisitions.
(3) EBITDA represents the sum of net income before income taxes, interest
expense net of interest income and nonoperating items and depreciation and
amortization. EBITDA is not a measure of performance or financial condition
under generally accepted accounting principles but is presented to provide
additional information related to debt service capability. EBITDA should
not be considered in isolation or as a substitute for other measures of
financial performance or liquidity service requirements and it is not
necessarily comparable to other similarly titled captions of other
companies due to potential inconsistencies in the method of calculation.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent net income before income taxes and fixed charges. Fixed
charges consist of (i) interest, whether expensed or capitalized; (ii)
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized; and (iii) that portion of
rental expense considered to represent interest cost (assumed to be one-
third). There was a deficiency of earnings to fixed charges for the pro
forma nine months ended November 30, 1997 and for pro forma fiscal year
1997 of $4.8 million and $0.05 million, respectively, due to the additional
pro forma interest expense.
(5) As of January 19, 1998, capital stock had increased for the exercise of
certain stock options and long-term debt increased by $250,000 as compared
with amounts on the November 30, 1997 unaudited consolidated balance sheet
included herein.

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the
Company and its business before deciding whether or not to tender Private
Notes in exchange for Exchange Notes pursuant to the Exchange Offer. This
Prospectus contains certain forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere herein.

SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT

The Company has significant indebtedness. At November 30, 1997, the
Company's total liabilities would have been $149.4 million and its
stockholders' equity would have been $29.8 million, in each case on a pro
forma basis after giving effect to the Transactions and Acquisitions. In
addition, subject to the restrictions in the New Credit Facility and the
Supplemented Indenture, the Company may incur additional indebtedness from
time to time to finance acquisitions or capital expenditures or for other
purposes. After giving pro forma effect to the Transactions and the
Acquisitions as if they had occurred at the beginning of the nine month period
ended November 30, 1997 the Company's earnings would have been insufficient to
cover fixed charges by approximately $4.8 million and after giving pro forma
effect to the Transactions and the Acquisitions as if they occurred at the
beginning of fiscal 1997 the Company's earnings would have been insufficient
to cover fixed charges by approximately $0.05 million.

The degree to which the Company is leveraged could have important
consequences to holders of the Notes including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to debt service and will not be available for
other purposes; (ii) the Company's future ability to obtain additional debt
financing for working capital, capital expenditures or acquisitions may be
limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and general economic
conditions. Certain of the Company's competitors currently operate on a less
leveraged basis and have greater operating and financing flexibility than the
Company.

The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance including
its ability to implement its business strategy, which will be affected by the
factors described herein and by prevailing economic conditions and financial,
business, regulatory and other factors, many of which are beyond its control.
The Company currently anticipates that its operating cash flow, together with
borrowings under the New Credit Facility, will be sufficient to meet its
operating expenses and to service its debt requirements as they become due.
However, there can be no assurance that this will be the case and if the
Company is unable to service its indebtedness, it will be forced to adopt an
alternative strategy that may include actions such as reducing or delaying its
strategy of expanding through acquisitions, selling assets, restructuring or
refinancing its indebtedness or seeking additional capital. There can be no
assurance that any of these strategies could be effected on satisfactory
terms, if at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS

The Supplemented Indenture and the New Credit Facility restrict, among other
things, the ability of the Company and its subsidiaries to: (i) incur
additional indebtedness; (ii) incur liens; (iii) pay dividends or make certain
other restricted payments; (iv) consummate certain asset sales; (v) enter into
certain transactions with affiliates; (vi) impose restrictions on the ability
of a subsidiary to pay dividends or make certain payments; (vii) merge or
consolidate with any other person; or (viii) sell, assign, transfer, lease,
convey or otherwise dispose of its assets. See "Description of the Notes--
Certain Covenants" and "Description of New Credit Facility." In addition, the
New Credit Facility contains other and more restrictive covenants and
prohibits the Company from prepaying certain of its indebtedness (including
the Notes) and from making any distribution or other payment on its capital
stock. The New Credit Facility also requires the Company to maintain specified
financial ratios and satisfy certain financial tests. The Company's ability to
maintain those financial ratios and satisfy those tests will be affected by
events

beyond its control; there can be no assurance that the Company will be able to
meet such tests. A breach of any of those covenants could result in a default
under the New Credit Facility and/or the Supplemented Indenture. Upon the
occurrence of an event of default under the New Credit Facility, the lenders
could elect to declare all amounts outstanding under the New Credit Facility,
together with accrued interest, to be immediately due and payable.
Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the New Credit Facility. If the Company were unable
to repay those amounts, the lenders could proceed against the collateral
granted to them to secure that indebtedness and any proceeds realized upon the
sale of such collateral would be used first to satisfy all amounts outstanding
under the New Credit Facility. If the indebtedness under the New Credit
Facility were to be accelerated, there can be no assurance that the assets of
the Company would be sufficient to repay in full that indebtedness and the
other indebtedness of the Company, including the Notes. See "Description of
New Credit Facility."

SUBORDINATION

The Notes are unsecured senior subordinated obligations of the Company and,
as such, are subordinated to all existing and future Senior Indebtedness of
the Company, including borrowings under the New Credit Facility. The Notes
will also be effectively subordinated to all secured indebtedness of the
Company to the extent of the assets secured by such indebtedness. As of
November 30, 1997, on a pro forma basis after giving effect to the
Transactions and the Acquisitions, the Company would have had approximately
$26.2 million of Senior Indebtedness.

The Company may not pay principal of, premium, if any, or interest on or
other amounts owing in respect of the Notes, make any deposit pursuant to any
defeasance provisions or repurchase, redeem or otherwise retire the Notes if
Senior Indebtedness is not paid when due or any other default on such Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default
has been cured or waived, any such acceleration has been rescinded or such
Senior Indebtedness has been paid in full. Moreover, under certain
circumstances, if any non-payment default exists with respect to certain
Senior Indebtedness, the Company may not make any payments on the Notes for a
specified time, unless such default is cured or waived, any acceleration of
such indebtedness has been rescinded or such indebtedness has been paid in
full. See "Description of the Notes--Subordination."

FRAUDULENT TRANSFER CONSIDERATIONS

Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or void the Notes or
the Guarantees, in favor of other existing or future creditors of the Company
or the Subsidiary Guarantors.

The original incurrence by Acquisition Corp. of indebtedness, such as the
Notes, would be subject to review under relevant federal and state fraudulent
conveyance laws in a bankruptcy case or a lawsuit by or on behalf of unpaid
creditors of the Company or a representative of such creditors, such as a
trustee or the Company as debtor-in-possession. Under such laws, if a court
were to find that, at the time the Notes were issued, either (i) Acquisition
Corp. issued the Notes with the intent of hindering, delaying or defrauding
creditors, or (ii) Acquisition Corp. received less than a reasonably
equivalent value or fair consideration for incurring the indebtedness
represented by the Notes and Acquisition Corp. (a) was insolvent or was
rendered insolvent after giving effect to the incurrence of such indebtedness,
(b) left with an unreasonably small amount of capital or (c) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, such court could void the Company's obligations under
the Notes and direct the repayment of any amount paid thereunder to the
Company or a fund for the benefit of the Company's creditors, or take other
action detrimental to the holder of the Notes.

The Company believes that Acquisition Corp. received fair consideration and
reasonably equivalent value for the Notes and that after giving effect to, the
incurrence of the indebtedness and obligations evidenced by the Notes,
Acquisition Corp. was (A) neither insolvent nor rendered insolvent thereby,
(B) had sufficient capital to operate its business effectively and (C)
incurring debts within its ability to pay as the same mature or become due. In
reaching

the foregoing conclusions, the Company has relied upon, among other things,
its analysis of internal cash flow projections and estimated value of its
consolidated assets and liabilities. There can be no assurance, however, that
any such analysis will prove to be correct or that a court passing on such
questions would reach the same conclusions.

The Guarantees may be subject to review under relevant federal and state
fraudulent conveyance and similar statutes in a potential bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the
Subsidiary Guarantors. In such a case, the analysis set forth above would
generally apply, except that the Guarantees could also be subject to the claim
that, since the Guarantees were incurred for the benefit of the Company (and
only indirectly for the benefit of the Subsidiary Guarantors), the obligations
of the Subsidiary Guarantors thereunder were incurred for less than reasonably
equivalent value or fair consideration. A court could void a Subsidiary
Guarantor's obligation under its Guarantee, subordinate the Guarantee to other
indebtedness of a Subsidiary Guarantor or take other action detrimental to the
holders of the Notes.

Additionally, under federal bankruptcy or applicable state insolvency law,
if a bankruptcy or insolvency were initiated by or against the Company within
90 days after any payment by the Company with respect to the Notes, or if the
Company anticipated becoming insolvent at the time of such payment, all or a
portion of the payment could be avoided as a preferential transfer and the
recipient of such payment could be required to return such payment.

LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL

Upon a Change of Control, each holder of Notes will have certain rights to
require the Company to repurchase all or a portion of such holder's Notes. See
"Description of the Notes." If a Change of Control were to occur, there can be
no assurance that the Company would have sufficient funds to pay the
repurchase price for all Notes tendered by the holders thereof and such
failure would result in an event of default under the Supplemented Indenture.
In addition, a Change of Control would constitute a default under the New
Credit Facility and is otherwise restricted by the New Credit Facility and may
be prohibited or limited by, or create an event of default under, the terms of
other agreements relating to borrowings which the Company may enter into from
time to time, including other agreements relating to secured indebtedness. If
the Company's obligations under the New Credit Facility were accelerated due
to a default thereunder, the lenders thereunder would have a priority claim on
the proceeds from the sale of the collateral securing the New Credit Facility.
See "Description of the Notes--Subordination."

HOLDING COMPANY STRUCTURE

The Company conducts part of its operations through its subsidiaries. As a
result, the Company relies, in part, upon payment from its subsidiaries for
the funds necessary to meet its obligations, including the payment of interest
on and principal of the Notes. The ability of the subsidiaries to make such
payments will be subject to, among other things, applicable state laws. Claims
of creditors of the Company's subsidiaries will generally have priority as to
the assets of such subsidiaries over the claims of the Company. At November
30, 1997, on a pro forma basis after giving effect to the Transactions and
Acquisitions, holders of the Notes would have been structurally subordinated
to no amount of indebtedness plus other liabilities (including trade payables)
of the Company's subsidiaries, which management believes were approximately
$5.0 million at November 30, 1997 on the same pro forma basis.

GROWTH AND ACQUISITION RISKS

One of the Company's primary strategies is to increase its revenues through
the acquisition of other companies. Although the Company has successfully
completed a number of acquisitions, there can be no assurance that the Company
will be able to successfully integrate any additional companies into ATC's
operations without substantial costs, delays or other problems. In addition,
there can be no assurance that any companies acquired will be profitable at
the time of their acquisition or will achieve sales and profitability that
justify the investment therein. Acquisitions may involve a number of special
risks, including adverse effects on the Company's reported operating results,
diversion of management's attention, dependence on retention and

hiring of key personnel, risks associated with unanticipated problems or legal
liabilities, some or all of which could have a material adverse effect on the
Company's operations and financial performance. In addition, in connection
with an acquisition the Company may become responsible for liabilities that it
was unaware of at the time of the consummation of such acquisition. The
expansion of the Company's operations, whether through acquisitions or
internal growth, may place substantial burdens on the Company's management
resources and financial controls. There is no assurance that the increasing
burdens on the Company's management resources and financial controls will not
have an adverse effect on the Company's operations or that the restrictions
contained in the New Credit Facility or Supplemented Indenture will not have
an adverse effect on the Company's ability to consummate future acquisitions.
See "Business--Business Strategy."

COMPETITION

The environmental services, construction materials engineering and testing
and information management technology consulting industries in which the
Company operates are subject to intense competition. In addition to the
thousands of small environmental consulting and construction testing firms
operating in the United States, ATC competes with several national
environmental and construction materials engineering and consulting firms
including Law Companies Group, Inc., Dames & Moore, Inc. and Professional
Service Industries, Inc. In the information management technology consulting
market, ATC competes with many small and medium-sized information technology
firms as well as large temporary staffing companies, including The Olsten
Corporation, Corestaff, Inc. and Accustaff Incorporated among others and large
systems consulting firms.

Many of ATC's present and future competitors may have greater financial,
technical and personnel resources than ATC. It is not possible to predict the
extent of competition that ATC will encounter in the near future as the
environmental services, construction materials engineering and information
management technology consulting services industries continue to mature and
consolidate. Historically, competition has been based primarily on the
quality, timeliness and costs of services. The ability of ATC to compete
successfully will depend upon its marketing efforts, its ability to accurately
estimate costs, the quality of work it performs, its ability to hire and train
qualified personnel and the availability of insurance. There can be no
assurance that ATC will be able to compete successfully.

CHANGING TRENDS IN THE INDUSTRY

The current growth of the demand for environmental services is being driven
by economic and liability management considerations rather than regulation.
Although the Company believes that the demand for services in certain segments
of the industry will continue and increase over the next several years as
companies become more sensitive to the potential adverse consequences of
environmental issues and the potential impact of environmental liabilities,
there can be no assurance that such growth will continue or increase.
Moreover, there can be no assurance that demand for services in niche areas,
which is predicted to outpace demand in the industry, will grow or that the
Company's products and services will meet the demands of clients in such niche
market segments. Failure of the Company to anticipate future growth trends in
these market segments, or the industry generally, or client needs could have a
material adverse effect on the Company's business.

POTENTIAL LIABILITY

The Company is engaged in a wide range of advisory services. Due to the
nature of the Company's services, ATC is exposed to a significant risk of
professional liability for errors and omissions, environmental damage,
property damage, personal injury and economic loss which may substantially
exceed the fees derived from such services. ATC currently maintains a "claims
made" professional liability insurance policy, including contractor's
pollution liability coverage. The professional liability insurance policy has
a two-year term ending on May 23, 1998, which is subject to biennial renewal
(subject to the issuer's approval), with a per claim aggregate limit of $10.0
million and a deductible of $250,000 per claim, although increased limits have
been obtained on a specific endorsement basis to meet the needs of particular
clients or contracts. The Company's policy covers both errors and omissions. A
"claims made" policy only insures against claims filed during the

period in which the policy is in effect. ATC also carries an occurrence form
general liability insurance in the amount of $1.0 million, with a $10.0
million umbrella. The general liability insurance policy has a one-year term,
ending on May 23, 1998, which is subject to annual renewal.

ATC also may be exposed to status liability under the federal Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA") and similar
state laws that impose joint and several liability for cleanup costs on
persons who conduct operations on or at contaminated facilities. In performing
environmental services at contaminated sites, ATC could theoretically be
considered an operator under CERCLA or similar state laws. While the Company
believes that it does not typically engage in the type of control over
facility operations that would result in status liability under such laws,
there can be no guarantee that such liability would never be asserted or
imposed. Moreover, the types of environmental services performed by ATC are
often subject to extensive federal, state and local regulations. Violations of
these requirements can result in significant penalties, including fines and
other sanctions. See "Business--Legal Proceedings."

Although the Company believes that its current level of insurance coverage
is adequate to protect it from the type and level of liability exposure that
it can reasonably expect to encounter during its ordinary course of business,
the coverage would most likely be inadequate if a significant event occurred
for which the Company was found to be liable. The possible future
unavailability or modification of this insurance or any significant increase
in insurance rates could have a material adverse effect on ATC's operations.
Further, because customers may require that ATC maintain liability insurance,
the possible future unavailability of such insurance could adversely affect
ATC's ability to compete effectively. In the event the Company expands its
services into new markets, no assurance can be given that the Company will be
able to obtain insurance coverage for such activities or, if insurance is
obtained, that the dollar amount of any liabilities incurred in connection
with the performance of such services will not exceed policy limits.
Furthermore, certain claims have been asserted against the Company under
federal, state and local statutes and regulations, contractual indemnification
agreements or otherwise, which are by their nature uninsurable. There can be
no assurance that the Company will not be subject to such claims which, if
determined adversely to the Company, would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Insurance" and "Business--Legal Proceedings."

RELIANCE ON KEY PERSONNEL

The Company's future success depends to a significant extent on the
continued services of Nicholas J. Malino and Christopher P. Vincze, each of
whom has entered into an employment agreement with the Company, which may be
terminated under certain circumstances by either the Company or Mr. Malino or
Mr. Vincze. See "Management--Employment Agreements." The loss of the services
of either Mr. Malino or Mr. Vincze could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company's future success depends to a certain extent upon the
continuing contributions of regional and branch managers and other key
personnel. Failure of the Company to attract and retain key personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations.

FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY

The Company's operating results may vary from period to period due to a
variety of factors, including the size and timing of the Company's projects
and the impact of acquisitions. In addition, ATC typically experiences a slow
down in business activities during the winter months and an increase in
activities during summer months. This is due to the seasonal fluctuations in
construction and remediation activities. As a result, operating results may
vary from period to period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality."

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and

other factors that may cause the actual results, performance or achievements
of the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following: (i)
general economic and business conditions, both domestic and foreign; (ii)
industry and market capacity; (iii) demographic changes; (iv) existing
government regulations and changes in, or the failure to comply with,
government regulations; (v) legislative proposals regarding environmental
regulation; (vi) liability and other claims asserted against the Company;
(vii) competition; (viii) the loss of any significant customers; (ix) changes
in operating strategy or development plans; (x) the ability to attract and
retain qualified personnel; (xi) the significant indebtedness of the Company;
(xii) the availability and terms of capital to fund the expansion of the
Company's business; and (xiii) other factors referenced in this Prospectus.
Certain of these factors are discussed in more detail elsewhere in this
Prospectus, including, without limitation, under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." Given these uncertainties, holders of
Private Notes are cautioned not to place undue reliance on such forward-
looking statements. The Company disclaims any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.

LACK OF PUBLIC MARKET

The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for inclusion of the Exchange Notes in any
automated quotation system. As a result, there can be no assurance as to the
development or liquidity of any market that may develop for the Exchange
Notes. If a market for the Exchange Notes were to develop, the price of such
Exchange Notes may fluctuate and liquidity may be limited. If a market for the
Exchange Notes does not develop, the purchasers may be unable to resell such
Exchange Notes for an extended period of time, if at all. Historically, the
market for non-investment grade debt has been subject to disruptions that have
caused substantial volatility in the prices of securities similar to the
Exchange Notes. There can be no assurance that, if a market for the Exchange
Notes were to develop, such a market would not be subject to similar
disruptions.

FAILURE TO EXCHANGE PRIVATE NOTES

The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, holders of Private Notes desiring to tender such
Private Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company are under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes for exchange. Private Notes that are not tendered or
are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Private Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer who holds Private Notes acquired for its own account as a
result of market making or other trading activities and who receives Exchange
Notes for its own account in exchange for such Private Notes pursuant to the
Exchange Offer, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. To the extent that Private
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Private Notes could be adversely
affected due to the limited amount, or "float," of the Private Notes that are
expected to remain outstanding following the Exchange Offer. Generally, a
lower "float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such security. For
the same reason, to the extent that a large amount of Private Notes are not
tendered or are tendered and not accepted in the Exchange Offer, the trading
market for the Exchange Notes could be adversely affected. See "Plan of
Distribution" and "The Exchange Offer."

THE COMPANY

ATC is a leading national provider of professional consulting, engineering
and testing services within the environmental and construction materials
industries. Management believes the Company is also a leading provider of
integrated environmental information management technology services. The
Company provides a broad range of services to a diverse client base of over
8,000 customers, with domestic businesses and non-federal government entities
representing over 95.0% of the Company's gross revenues for the twelve months
ended November 30, 1997. No single customer represented more than 1.8% of the
Company's gross revenues during the twelve months ended November 30, 1997. In
addition, the Company's ten largest customers taken together accounted for
less than 13.6% of the Company's gross revenues during the twelve months ended
November 30, 1997. The Company provides its services through a network of 73
branch offices located in 34 states covering every major market of the United
States.

The following paragraphs provide a brief description of the acquisitions
consummated by the Company since 1993 and includes the purchase price paid by
ATC as of November 30, 1997:

Bing Yen & Associates, Inc. On November 26, 1997, the Company acquired all
of the stock of Bing Yen & Associates, Inc. ("Bing Yen"), a provider of
geotechnical and structural forensic services for approximately $4.3 million
plus a maximum aggregate principal amount of $1.5 million in unsecured
contingent achievement promissory notes which will be issued if certain
minimum net revenue levels are achieved, resulting in a maximum purchase price
of $5.8 million. The Bing Yen acquisition gave the Company capabilities in
forensic geotechnical consulting and access to its forensic network. The
acquisition will also allow ATC to consolidate its local office with Bing
Yen's facilities, resulting in overhead cost savings. In connection with the
acquisition of Bing Yen, the Company believes there may be a potential
underfunding liability of up to $60,000 with respect to a defined benefit plan
of Bing Yen (the "Bing Yen Plan"). The former shareholders of Bing Yen have
assumed all cost, expense and liability for correcting any potential
underfunding associated with this plan.

Environmental Warranty, Inc. On November 4, 1997, the Company purchased 100%
of the outstanding preferred stock and 90.9% of the outstanding common stock
of Environmental Warranty, Inc. ("EWI"), a property and casualty insurance
brokerage firm specializing in environmental insurance with property and
casualty licenses, including excess and surplus lines in 43 states and with
license applications pending in an additional five states. The EWI acquisition
allows ATC to offer the sale and limited underwriting of environmental
insurance products. ATC will also be able to take advantage of its
distribution channels for referrals to sell EWI's insurance products. The
purchase price totaled approximately $1.7 million.

BCM Engineers, Inc. On August 20, 1997, the Company acquired certain assets
and assumed certain liabilities of the Engineering Division of Smith
Technology Corporation ("Smith Technology") which operated primarily as BCM
Engineers, Inc. ("BCM"). BCM is a leading environmental engineering and
consulting firm providing services in water and wastewater treatment, natural
resources management, environmental compliance and site investigation,
remedial design and engineering and asbestos and air quality management. BCM
operated offices in nine states throughout the United States. The purchase
price totaled approximately $12.5 million.

Earth Technology, Inc. On August 5, 1996, the Company acquired certain
assets of Earth Technology, Inc. ("Earth Technology") consisting of Earth
Technology's operating assets of its Berkeley, California branch office for a
purchase price of approximately $189,000. Earth Technology is a provider of
environmental, engineering and construction consulting services.

3D Information Services Inc. On May 28, 1996, the Company acquired certain
assets and assumed certain liabilities of 3D Information Services Inc. ("3D"),
a New Jersey based information services company, providing technical
information system consulting services in all phases of information system
design, development, maintenance and management in client server and mainframe
based environments. Consideration paid for the 3D acquisition included cash
and notes payable in the amount of approximately $5.8 million.

American Testing and Engineering Corporation. On May 24, 1996, the Company
acquired certain assets and assumed certain liabilities of American Testing
and Engineering Corporation ("ATEC"), a national environmental consulting firm
with a large network of branch and regional offices providing environmental
consulting and engineering services including site assessments, compliance
audits, environmental remediation consulting, geotechnical materials testing,
industrial hygiene and analytical services. The ATEC acquisition allowed the
Company to expand both its service offerings and geographical base,
particularly in the midwestern and southeastern United States. The initial
purchase price totaled approximately $41.6 million and was comprised of cash,
payment obligations and assumed liabilities. The final purchase price,
including earned contingent consideration, was $50.7 million, approximately
$4.6 million of which is due under a note to the seller. Such note is secured
by a security interest in certain assets of ATC including accounts, accounts
receivable and contract rights, deposit accounts, inventory, equipment,
documents, instruments, goods (including certificates of title), chattel
paper, general intangibles, fixtures and all proceeds of the foregoing
(including tort claims and insurance).

Applied Geosciences Inc. On February 29, 1996, the Company acquired certain
assets and certain liabilities of Applied Geosciences Inc. ("Applied"), a
California based consulting company providing services in environmental and
hazardous waste site assessments, remediation design, air quality management,
asbestos services, litigation support and engineering geology. The purchase
price paid for the acquisition was approximately $0.9 million, with a maximum
contingent payment up to $190,000 of which $22,324 was paid prior to February
28, 1997 in full satisfaction of this contingent obligation.

Hill International. On November 10, 1995, the Company acquired certain
assets and assumed certain liabilities of Hill International, Inc.'s ("Hill")
environmental consulting and laboratory operations (collectively, the "Hill
Assets"). The Hill Assets provided environmental consulting and engineering
services, including asbestos management, industrial hygiene and indoor air
quality consulting, environmental auditing and assessment and environmental
laboratory services. This acquisition significantly expanded ATC's operations
in the New York City area. The purchase price for the acquisition included
cash, a note, assumed liabilities and direct expenses totaling approximately
$5.3 million.

R. E. Blattert and Associates. On January 13, 1995, the Company acquired
substantially all of the assets and assumed certain liabilities of R.E.
Blattert and Associates ("R.E. Blattert"), an environmental consulting firm
having geologic, environmental management and water resource expertise with
offices in Indiana and Iowa. The purchase price paid for the acquisition was
approximately $1.2 million, including $0.2 million of contingent
consideration.

Microbial Environmental Services, Inc. On January 4, 1995, the Company
assumed the service performance obligations under certain contracts of
Microbial Environmental Services, Inc. ("Microbial") and purchased certain
assets of Microbial, which was engaged, principally in Iowa, Nebraska and
Wisconsin, in the business of remediation of contaminated soils and water
utilizing enhanced naturally occurring biological processes, including
services such as assessment of contaminated properties, design of bio-
remediation systems, management of bioremediation projects and monitoring of
compliance with clean-up standards. The consideration paid for the acquisition
was approximately $1.4 million.

Con-Test Inc. On October 1, 1994, the Company acquired substantially all of
the environmental consulting and laboratory assets and certain liabilities of
Con-Test Inc. ("Con-Test"), a Massachusetts-based environmental consulting and
field and laboratory testing company with branch offices in Massachusetts,
Connecticut, Vermont, Rhode Island, New York and Pennsylvania, whose primary
services included industrial hygiene, environmental and industrial health and
safety and lead risk management. In addition, Con-Test maintained an
analytical laboratory and had developed a line of environmental facilities
management software used by several industrial firms and federal government
agencies. The purchase price for the acquisition included cash and stock
consideration and assumed liabilities totaling approximately $7.9 million.

BSE Management, Inc. On May 30, 1993, the Company acquired certain assets of
BSE Management Inc. ("BSE"), a California based environmental consulting
holding company and certain of its subsidiaries including Diagnostic
Environmental Inc., Hygeia Laboratories, Inc. and The Environmental Institute,
Inc. The BSE acquisition doubled the then number of ATC's offices and
significantly increased its presence in the western United States. The
acquisition also added building system evaluation services to ATC's service
offerings. The purchase agreement provided for total consideration equal to
$2.7 million, including approximately $1.4 million in contingent consideration
which has been paid in full.

NO CASH PROCEEDS TO THE COMPANY

This Exchange Offer is intended to satisfy certain obligations of the
Company and the Subsidiary Guarantors under the Registration Rights Agreement.
None of the Company or any of the Subsidiary Guarantors will receive any
proceeds from the issuance of the Exchange Notes offered hereby and the
Company has agreed to pay the expenses of the Exchange Offer. In consideration
for issuing the Exchange Notes as contemplated in this Prospectus, the Company
will receive, in exchange, Private Notes representing an equal aggregate
principal amount. The form and terms of the Exchange Notes are identical in
all material respects to the form and terms of the Private Notes, except as
otherwise described herein under "The Exchange Offer--Terms of the Exchange
Offer." The Private Notes surrendered in the exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding debt of the
Company.

CAPITALIZATION

The following table sets forth the capitalization of the Company at November
30, 1997, and pro forma as adjusted, to reflect the Acquisitions and the
consummation of the Transactions. The following table should be read in
conjunction with the consolidated financial statements and notes thereto of
the Company included elsewhere in this Prospectus.

AT NOVEMBER 30, 1997
----------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
------- --------------
(DOLLARS IN THOUSANDS)

Cash.................................................... $ 5,840 $ 0
======= ========
Debt:
Existing Credit Facility.............................. $ 7,400 $ --
Term Loan............................................. -- 20,000
Notes................................................. -- 100,000
Revolving Credit Facility(2).......................... -- 1,649
8.18% Senior Secured Notes............................ 32,500 --
Seller Notes(3)....................................... 5,743 4,211
Other debt............................................ 303 303
------- --------
Total debt.......................................... 45,946 126,163
------- --------
Stockholders' equity:
Common Stock, Actual: par value $.01 per share;
20,000,000 shares authorized and 7,930,107 shares
issued and outstanding; Pro Forma As Adjusted: par
value $0.01 per share, 10,000 shares authorized and
1,000 shares issued and outstanding.................. 79 --
Additional paid-in capital............................ 29,595 29,821
Retained earnings..................................... 19,969 --
------- --------
Total stockholders' equity(4)....................... 49,643 29,821
------- --------
Total capitalization................................ $95,589 $155,984
======= ========

- --------
(1) Assumes purchase of all outstanding shares of Common Stock pursuant to the
Tender Offer and the consummation of the Merger and other Transactions.
(2) Amounts outstanding under the Revolving Credit Facility increased by
approximately $0.8 million as a result of early prepayment of certain
accrued liabilities in connection with the consummation of the
Transactions.
(3) As of November 30, 1997, Seller notes include $0.3 million due to Hill,
which is overdue and payable upon settlement of disputed issues with Hill,
$2.95 million due to Smith Technology of which $1.6 million of offsets
have been reflected in the consolidated balance sheet as of November 30,
1997 and additional offsets through the note due date, March 30, 1998, are
anticipated, $25,000 due to SAS (a company acquired in May 1995) which is
payable in May 1998, $1.5 million due to 3D, $586,000 (net of imputed
interest) to EWI and $1.7 million due in connection with the acquisition
of Bing Yen. On a pro forma basis, total seller notes will be $4.2 million
as the 3D seller note of $1.5 million will be refinanced in the
transaction. Seller notes were issued in connection with the acquisition
of Bing Yen including (i) $0.4 million interest bearing notes with a
three-year amortization schedule, (ii) $0.8 million interest bearing notes
with a three-year amortization schedule and (iii) a $0.6 million short-
term promissory note payable in January 1998. EWI seller notes include a
$0.6 million non-interest bearing note with a three-year amortization
schedule and a $0.2 unconditional payment commitment due in three annual
installments on each November 4 beginning in 1998. On a pro forma basis
assuming the Smith Technology notes are fully offset and excluding the
note due Hill, amortization of seller notes will be $0.8 million in fiscal
1999, $0.6 million in fiscal 2000 and $0.6 million in fiscal 2001.
(4) Book value of pro forma stockholders' equity reflects a predecessor basis
adjustment of $2.7 million. Total equity invested was $32.5 million. See
"Unaudited Pro Forma Combined Condensed Financial Data."

THE EXCHANGE OFFER

PURPOSE OF THE EXCHANGE OFFER

The Private Notes were sold by the Company on the Closing Date to the
Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently sold the Private Notes to (i) "qualified institutional buyers"
("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A"), in
reliance on Rule 144A and (ii) other investors in offshore transactions in
reliance on Regulation S under the Securities Act. As a condition to the sale
of the Private Notes, the Company, the Subsidiary Guarantors and the Initial
Purchaser entered into the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, the Company and the Subsidiary Guarantors
agreed that (i) within 60 days after the Issue Date, they would file the
Registration Statement with the Commission with respect to the Exchange Notes
and (ii) cause the Registration Statement to be declared effective under the
Securities Act within 130 days after the Issue Date (the "Effectiveness
Date"). Upon the Registration Statement being declared effective, the Company
and the Subsidiary Guarantors will offer to all holders of the Private Notes
an opportunity to exchange the Private Notes for a like principal amount of
Exchange Notes. The Company and the Subsidiary Guarantors agreed to use
commercially reasonable best efforts (i) to keep the Exchange Offer open for
acceptance for not less than 20 business days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holder and (ii) to consummate the Exchange Offer on or prior to the 45th day
following the date on which the Registration Statement is declared effective.

For each Private Note surrendered for exchange pursuant to the Exchange
Offer, the holder of such Private Note will receive an Exchange Note having a
principal amount equal to that of the surrendered Private Note. Interest on
each Exchange Note will accrue (A) from the later of (i) the last interest
payment date on which interest was paid on the Private Note surrendered in
exchange therefor or (ii) if the Private Note is surrendered for exchange on a
date in a period which includes the record date for an interest payment date
to occur on or after the date of such exchange and as to which interest will
be paid, the date of such interest payment date or (B) if no interest has been
paid on such Private Note, from the Issue Date. The Company and the Subsidiary
Guarantors agreed to issue and exchange Exchange Notes for all Private Notes
validly tendered and not withdrawn before the Expiration Date of the Exchange
Offer. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company and the Subsidiary Guarantors
will accept any and all Private Notes validly tendered and not withdrawn prior
to the Expiration Date.

The Company and the Subsidiary Guarantors will issue Exchange Notes in
exchange for an equal aggregate principal amount of outstanding Private Notes
validly tendered pursuant to the Exchange Offer and not withdrawn prior to the
Expiration Date. Private Notes may be tendered only in integral multiples of
$1,000 principal amount.

The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the Exchange Notes will be registered
under the Securities Act and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to any of the registration rights of holders of
Private Notes under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same indebtedness as the Private Notes (which they replace) and
will be issued under, and be entitled to the benefits of, the Supplemented
Indenture, which also authorized the issuance of the Private Notes, such that
both series of Notes will be treated as a single class of debt securities
under the Supplemented Indenture.

As of the date of this Prospectus, $100.0 million in aggregate principal
amount of the Private Notes is outstanding. Only a registered holder of the
Private Notes (or such holder's legal representative or attorney-in-

fact), as reflected on the records of the Trustee under the Supplemented
Indenture may participate in the Exchange Offer. Solely for reasons of
administration, the close of business on , 1998 has been fixed as the
record date for the Exchange Offer for purposes of determining the persons to
whom this Prospectus and the Letter of Transmittal will be mailed initially.
There will be no fixed record date for determining registered holders of the
Private Notes entitled to participate in the Exchange Offer.

Holders of the Private Notes do not have any appraisal or dissenters' rights
under the DGCL or the Supplemented Indenture in connection with the Exchange
Offer. The Company and the Subsidiary Guarantors intend to conduct the
Exchange Offer in accordance with the provisions of the Registration Rights
Agreement and the applicable requirements of the Securities Act and the rules
and regulations of the Commission thereunder.

The Company and the Subsidiary Guarantors shall be deemed to have accepted
validly tendered Private Notes when, and if, the Company and the Subsidiary
Guarantors have given oral or written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Private
Notes for the purposes of receiving the Exchange Notes from the Company and
the Subsidiary Guarantors.

Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."

EXPIRATION DATE

The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998.

INTEREST ON THE EXCHANGE NOTES

Interest on each Exchange Note will accrue (A) from the later of (i) the
last interest payment date on which interest was paid on the Private Note
surrendered in exchange therefor or (ii) if the Private Note is surrendered
for exchange on a date in a period which includes the record date for an
interest payment date to occur on or after the date of such exchange and as to
which interest will be paid, the date of such interest payment date or (B) if
no interest has been paid on such Private Note, from the Issue Date. The
Company and the Subsidiary Guarantors agreed to issue and exchange Exchange
Notes for all Private Notes validly tendered and not withdrawn before the
Expiration Date of the Exchange Offer. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part.

RESALE OF THE EXCHANGE NOTES

With respect to the Exchange Notes, based upon interpretations by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder who exchanges Private Notes for
Exchange Notes in the ordinary course of business, who is not participating,
does not intend to participate, and has no arrangement with any person to
participate in a distribution of the Exchange Notes, and who is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities
Act, will be allowed to resell Exchange Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the Exchange Notes a prospectus that satisfies the requirements of Section
10 of the Securities Act. However, if any holder acquires Exchange Notes in
the Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Notes, such holder cannot rely on the position of
the staff of the Commission enumerated in such no-action letters issued to
third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes acquired by such broker-dealer as a result of market-making or
other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of Exchange

Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of any Exchange Notes received in
exchange for Private Notes acquired by such broker-dealer as a result of
market-making or other trading activities. Pursuant to the Registration Rights
Agreement, the Company and the Subsidiary Guarantors have agreed to make this
Prospectus, as it may be amended or supplemented from time to time, available
to any such broker-dealer that requests copies of such Prospectus for use in
connection with any such resale for a period not to exceed 45 days after the
Registration Statement has been declared effective by the Commission. See
"Plan of Distribution."

PROCEDURES FOR TENDERING

Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth below under "Exchange
Agent" for receipt prior to the Expiration Date. In addition, either (i)
certificates for such Private Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such
procedure is available, into the Exchange Agent's account at DTC pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply
with the guaranteed delivery procedures described below.

The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement among such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.

THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY
PRIVATE NOTES TO THE COMPANY OR THE SUBSIDIARY GUARANTORS. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.

Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wish(es) to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.

Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined herein) unless the Private Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box titled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" (within the meaning of Rule

17Ad-15 under the Exchange Act) that is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").

If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder exactly as such registered holder's name appears on such
Private Notes.

If the Letter of Transmittal or any Private Notes are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.

The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender Private Notes.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Private Notes not properly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Private Notes will not be
deemed to have been made until such defects or irregularities have been cured
or waived.

While neither the Company nor any of the Subsidiary Guarantors have a
present plan to acquire any Private Notes that are not tendered in the
Exchange Offer or to file a registration statement to permit resales of any
Private Notes that are not tendered pursuant to the Exchange Offer, the
Company and the Subsidiary Guarantors reserve the right in their sole
discretion to purchase or make offers for any Private Notes that remain
outstanding subsequent to the Expiration Date and, to the extent permitted by
applicable law, purchase Private Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or
offers could differ from the terms of the Exchange Offer.

By tendering, each holder of Private Notes will represent to the Company and
the Subsidiary Guarantors that, among other things, (i) the Exchange Notes to
be acquired by such holder of Private Notes in connection with the Exchange
Offer are being acquired by such holder in the ordinary course of business of
such holder, (ii) such holder has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, (iii) such
holder acknowledges and agrees that any person who is participating in the
Exchange Offer for the purposes of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position of the staff of the
Commission set forth in certain no-action letters, (iv) such holder
understands that a secondary resale transaction described in clause (iii)
above and any resales of Exchange Notes obtained by such holder in exchange
for Private Notes acquired by such holder directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or any of the
Subsidiary Guarantors. If the holder is a broker-dealer that will receive
Exchange Notes for such holder's own account in exchange for Private Notes
that were acquired as a result of market-making activities or other trading
activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so

acknowledging and by delivering a prospectus, such holder will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.

RETURN OF PRIVATE NOTES

If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's
account at the Depositary pursuant to the book-entry transfer procedures
described below, such Private Notes will be credited to an account maintained
with the Depositary) as promptly as practicable.

BOOK-ENTRY TRANSFER

The Exchange Agent will make a request to establish an account with respect
to the Private Notes with the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in
accordance with the Depositary's procedures for transfer. However, although
delivery of Private Notes may be effected through book-entry transfer at the
Depositary, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:

(a) The tender is made through an Eligible Institution;

(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company and
the Subsidiary Guarantors (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder and the
certificate number(s) of such Private Notes, stating that the tender is
being made thereby and guaranteeing that, within three business days after
the Expiration Date, the Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing the Private Notes in proper
form for transfer or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and

(c) Such properly executed Letter of Transmittal (or facsimile thereof)
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the Expiration Date.

Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.

WITHDRAWAL OF TENDERS

Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date. To withdraw a tender of
Private Notes in the Exchange Offer, a written notice of withdrawal by
telegram, telex, facsimile transmission or letter must be received by the
Exchange Agent at its address set forth

herein prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Private Notes to be
withdrawn, (ii) identify the Private Notes to be withdrawn (including the
certificate number or numbers) and the principal amount of the Private Notes
to be withdrawn and (iii) include a statement that such holder is withdrawing
its election to have such Private Notes exchanged and must be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal by which such Private Notes were tendered (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Any Private Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer, and no Exchange Notes
will be issued with respect thereto unless the Private Notes so withdrawn are
validly retendered. Properly withdrawn Private Notes may be retendered by
following one of the procedures described above under "The Exchange Offer--
Procedures for Tendering" at any time prior to the Expiration Date.

TERMINATION OF CERTAIN RIGHTS

Other than the Company's obligations with respect to Private Exchange Notes
(as defined in the Registration Rights Agreement) and Exchange Notes that may
not be resold without restriction under federal and state securities laws
(other than solely as a result of such holders status as an affiliate of the
Company as defined in the Securities Act), all registration rights under the
Registration Rights Agreement accorded to holders of the Private Notes (and
all rights to receive additional interest on the Notes to the extent and in
the circumstances specified therein) will terminate upon consummation of the
Exchange Offer except with respect to the Company's duty to keep the
Registration Statement effective until the closing of the Exchange Offer, and,
for a period of 45 days after the Registration Statement has been declared
effective by the Commission, to provide copies of the latest version of the
Prospectus to any broker-dealer that requests copies of such Prospectus in the
Letter of Transmittal for use in connection with any resale by such broker-
dealer of Exchange Notes received for its own account pursuant to the Exchange
Offer in exchange for Private Notes acquired for its own account as a result
of market-making or other trading activities.

EXCHANGE AGENT

State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:

By Mail: By Facsimile Transmission: By Hand/Overnight Delivery:
State Street Bank and Trust Company (For Eligible Institutions Only) State Street Bank and Trust Company
Goodwin Square (860) 244-1832 Goodwin Square
225 Asylum Street, 23rd Floor 225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103 Confirm by Telephone: Hartford, Connecticut 06103
Attention: Corporate Trust Administration (860) 244-1897 Attention: Corporate Trust Administration

State Street Bank and Trust Company also serves as Trustee under the
Supplemented Indenture.

FEES AND EXPENSES

The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and their affiliates.

The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable, out-of-pocket expenses in connection
therewith.

The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Private Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.

CONSEQUENCE OF FAILURE TO EXCHANGE

Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.

Private Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes may not
be offered, sold, pledged or otherwise transferred except (i) to a person whom
the seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account
or for the account of a qualified institutional buyer in a transaction meeting
the requirements of Rule 144A, (ii) in an offshore transaction complying with
Rule 903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant
to an exemption from registration under the Securities Act provided by Rule
144 thereunder (if available), (iv) pursuant to an effective registration
statement under the Securities Act or (v) to institutional accredited
investors in a transaction exempt from the registration requirements of the
Securities Act, and, in each case, in accordance with all other applicable
securities laws and the transfer restrictions set forth in the Supplemented
Indenture.

ACCOUNTING TREATMENT

For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Exchange Notes.

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

The following unaudited pro forma combined condensed balance sheet of ATC
has been adjusted to give effect to the Merger, the Offering, the application
of proceeds therefrom and the Acquisitions as if such transactions occurred as
of November 30, 1997. The unaudited pro forma combined statements of
operations of the Company for the 1997 fiscal year and the nine month interim
period ended November 30, 1997 give effect to the Transactions as if such
Transactions occurred on March 1, 1996. For information regarding the Merger
and the Offering, see "Offering Summary--The Transactions."

The accompanying unaudited pro forma combined condensed financial data has
been prepared under guidelines established by Article 11 of Regulation S-X
under the Securities Act. Under those guidelines, there are limitations on the
adjustments that can be made in the presentation of pro forma financial
information. Accordingly, no pro forma adjustments have been applied to
reflect (i) elimination of corporate overhead charges of acquired companies,
(ii) reduction of certain administrative staff from acquired companies not
expected to be replaced and (iii) other operating efficiencies or cost savings
(other than those that are directly attributable to the Acquisitions and
contractually supportable). The pro forma adjustments made are based upon
currently available information as well as upon certain assumptions that
management believes are reasonable. Such pro forma adjustments for the
statement of operations shall include amortization of goodwill, depreciation
and other adjustments based on the allocated purchase price of net assets
acquired. Each of the Acquisitions was accounted for as a purchase with the
acquired assets and assumed liabilities recorded at their estimated fair
market values. Management believes that actual fair market value adjustments
will not differ materially from the preliminary allocation of the purchase
price contained in the pro forma adjustments reflected in the pro forma
financial information.

The unaudited pro forma combined financial statements are not necessarily
indicative of either future results of operations or results that might have
been achieved had the foregoing transactions been consummated as of the
indicated dates. The unaudited pro forma combined condensed financial
statements should be read in conjunction with the notes thereto, the
historical consolidated financial statements of the Company, together with the
related notes thereto, "The Company--Acquisitions" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," all
of which are presented elsewhere in this Prospectus.

ATC GROUP SERVICES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

NOVEMBER 30, 1997

ATC PRO FORMA
ACTUAL TRANSACTION PRO FORMA
NOVEMBER 30, 1997 ADJUSTMENTS(C) NOVEMBER 30, 1997
----------------- -------------- -----------------

ASSETS
CURRENT ASSETS:
Cash and equivalents...... $ 5,839,819 $ (5,839,819) $ --
Trade accounts receivable
net...................... 42,507,431 -- 42,507,431
Cost in excess of billings
on uncompleted contracts. 9,291,883 -- 9,291,883
Prepaid expenses and other
assets................... 2,308,060 -- 2,308,060
Deferred income taxes..... 790,400 -- 790,400
------------ ------------ ------------
Total current assets..... 60,737,593 (5,839,819) 54,897,774
PROPERTY AND EQUIPMENT,
Net....................... 5,633,719 -- 5,633,719
GOODWILL, net of
accumulated amortization.. 48,340,578 59,406,795 107,747,373
COVENANTS NOT TO COMPETE,
net of accumulated
amortization.............. 622,750 4,112,580 4,735,330
OTHER ASSETS............... 2,210,275 4,100,000 6,238,797
600,000
(671,478)
------------ ------------ ------------
$117,544,915 $ 61,708,078 $179,252,993
============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt........... $ 2,449,748 $ -- $ 2,449,748
Current maturities of
long-term debt........... 1,343,007 (848,633) 494,374
Accounts payable.......... 7,355,315 -- 7,355,315
Income taxes payable...... 887,673 (659,288) 228,385
Accrued compensation...... 5,832,039 -- 5,832,039
Accrued payment
obligations--ATEC
acquisition.............. 1,748,500 -- 1,748,500
Other accrued expenses.... 3,049,780 (1,399,228) 3,915,301
2,264,749
------------ ------------ ------------
Total current
liabilities............. 22,666,062 (642,400) 22,023,662
------------ ------------ ------------
LONG-TERM DEBT, less
current maturities........ 42,153,196 120,000,000 123,218,976
(40,583,625)
1,649,405
OTHER LIABILITIES.......... 2,364,618 1,106,860 3,471,478
DEFERRED INCOME TAXES...... 717,900 -- 717,900
------------ ------------ ------------
Total liabilities........ 67,901,776 81,530,240 149,432,016
------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Common stock at par value. 79,301 (79,301) --
Additional paid-in
capital.................. 29,595,099 225,878 29,820,977
Retained earnings
(deficit)................ 19,968,739 (19,968,739)
------------ ------------ ------------
Total stockholders'
equity.................. 49,643,139 (19,822,162) 29,820,977
------------ ------------ ------------
$117,544,915 $ 61,708,078 $179,252,993
============ ============ ============

See notes to unaudited pro forma combined condensed financial statements.

ATC GROUP SERVICES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED FEBRUARY 28, 1997

ACQUIRED BUSINESSES(A)
----------------------------------------
PRO FORMA
ATC BCM RESULTS
YEAR ENDED ATEC YEAR ENDED PRO FORMA PRO FORMA YEAR ENDED
FEBRUARY 28, MARCH 1, 1996- FEBRUARY 28, 3D, EWI & ACQUISITION TRANSACTION FEBRUARY 28,
1997 MAY 24, 1996 1997 BING YEN(B) ADJUSTMENTS ADJUSTMENTS 1997
------------ -------------- ------------ ----------- ----------- ----------- ------------

REVENUES................ $113,855,364 $20,603,767 $ 45,661,968 $7,450,658 $(5,127,368)(d) $ -- $182,444,389
Reimbursable Costs..... 17,953,895 5,572,368 12,823,947 627,696 (2,725,860)(d) -- 34,252,046
------------ ----------- ------------ ---------- ----------- ----------- ------------
NET REVENUES............ 95,901,469 15,031,399 32,838,021 6,822,962 (2,401,508) -- 148,192,343
COST OF NET REVENUES.... 53,750,707 7,248,931 15,877,382 3,885,498 (1,546,199)(e) -- 79,216,319
------------ ----------- ------------ ---------- ----------- ----------- ------------
Gross profit........... 42,150,762 7,782,468 16,960,639 2,937,464 (855,309) -- 68,976,024
OPERATING EXPENSES:
Selling................ 3,118,926 606,026 79,604 211,587 (107,359)(d) -- 3,908,784
General and
administrative........ 26,299,172 7,352,001 14,846,418 1,793,777 (4,357,316)(f) 2,104,251 48,038,303
Provision for bad
debts................. 1,021,631 86,301 328,292 91,024 (6,012) -- 1,521,236
Impairment of goodwill
and intangibles....... -- -- 18,324,000 -- (18,324,000)(l) -- --
------------ ----------- ------------ ---------- ----------- ----------- ------------
30,439,729 8,044,328 33,578,314 2,096,388 (22,794,687) 2,104,251 53,468,323
------------ ----------- ------------ ---------- ----------- ----------- ------------
OPERATING INCOME (LOSS). 11,711,033 (261,860) (16,617,675) 841,076 21,939,378 (2,104,251) 15,507,701
NONOPERATING EXPENSE
(INCOME):
Interest expense....... 1,569,043 355,426 1,778,333 -- (1,156,230)(g) 12,794,152 15,340,724
Interest income........ (230,610) -- -- (29,768) -- -- (260,378)
Other, net............. (25,134) (22,024) 800,000 1,523 (278,769)(h) -- 475,596
------------ ----------- ------------ ---------- ----------- ----------- ------------
1,313,299 333,402 2,578,333 (28,245) (1,434,999) 12,794,152 15,555,942
------------ ----------- ------------ ---------- ----------- ----------- ------------
INCOME (LOSS) BEFORE
INCOME TAXES........... 10,397,734 (595,262) (19,196,008) 869,321 23,374,377 (14,898,403) (48,241)
INCOME TAX EXPENSE
(BENEFIT).............. 4,090,000 -- -- 16,525 1,759,587(i) (5,884,869) (18,757)
------------ ----------- ------------ ---------- ----------- ----------- ------------
INCOME (LOSS) BEFORE
MINORITY INTEREST...... 6,307,734 (595,262) (19,196,008) 852,796 22,005,540 (9,013,534) (29,484)
MINORITY INTEREST....... -- 449 -- -- -- -- 449
------------ ----------- ------------ ---------- ----------- ----------- ------------
NET INCOME.............. $ 6,307,734 $ (595,711) $(19,196,008) $ 852,796 $21,614,790 $(9,013,534) $ (29,933)
============ =========== ============ ========== =========== =========== ============

See notes to unaudited pro forma combined condensed financial statements.

ATC GROUP SERVICES INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

NINE MONTHS ENDED NOVEMBER 30, 1997

ACQUIRED BUSINESSES(A)
-------------------------
NINE MONTHS PRO FORMA
ATC SIX MONTHS ENDED RESULTS
NINE MONTHS ENDED NOVEMBER 30, NINE MONTHS
ENDED AUGUST 20, 1997(A) PRO FORMA PRO FORMA ENDED
NOVEMBER 30, 1997(A) EWI & ACQUISITION TRANSACTION NOVEMBER 30,
1997 BCM BING YEN(B) ADJUSTMENTS ADJUSTMENT 1997
------------ ----------- ------------ ----------- ------------ ------------

REVENUES................ $104,263,345 $15,771,885 $3,420,366 $ -- $ -- $123,455,596
Reimbursable costs..... 15,874,338 4,352,935 265,998 -- -- 20,493,271
------------ ----------- ---------- ---------- ------------ ------------
NET REVENUES............ 88,389,007 11,418,950 3,154,368 -- -- 102,962,325
COST OF NET REVENUES.... 47,940,544 5,443,804 1,350,822 (60,517)(e) -- 54,674,653
------------ ----------- ---------- ---------- ------------ ------------
Gross profit........... 40,448,463 5,975,146 1,803,546 (60,517) -- 48,287,672
OPERATING EXPENSES:
Selling................ 3,226,393 17,713 169,623 -- -- 3,413,729
General and
administrative........ 28,077,190 6,879,052 1,019,002 (324,467)(f) 1,565,475 (j) 37,216,252
Provision for bad
debts................. 1,160,529 409,273 -- -- -- 1,569,802
------------ ----------- ---------- ---------- ------------ ------------
32,464,112 7,306,038 1,188,625 (324,467) 1,565,475 42,199,783
------------ ----------- ---------- ---------- ------------ ------------
OPERATING INCOME (LOSS). 7,984,351 (1,330,892) 614,921 384,984 (1,565,475) 6,087,889
NONOPERATING EXPENSE
(INCOME):
Interest expense....... 2,163,548 1,067,000 -- (768,210)(g) 8,694,032 (k) 11,156,371
Interest income........ (164,864) -- (8,086) -- -- (172,950)
Other, net............. (44,398) -- (4,185) -- -- (48,583)
------------ ----------- ---------- ---------- ------------ ------------
1,954,286 1,067,000 (12,271) (768,210) 8,694,032 10,934,838
------------ ----------- ---------- ---------- ------------ ------------
INCOME (LOSS) BEFORE
INCOMETAXES............ 6,030,065 (2,397,892) 627,192 1,153,194 (10,259,507) (4,846,949)
INCOME TAX EXPENSE...... 2,426,000 -- 13,240 (252,310)(i) (4,052,505)(i) (1,865,575)
------------ ----------- ---------- ---------- ------------ ------------
NET INCOME.............. $ 3,604,065 $(2,397,892) $ 613,952 $1,405,504 $ (6,207,002) $ (2,981,374)
============ =========== ========== ========== ============ ============

See notes to unaudited pro forma combined condensed financial statements.

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

(a) The following summarizes the companies acquired since March 1, 1996 and
the related acquisition dates that are reflected in the pro forma
financial statements:

American Testing and Engineering Corp. ("ATEC").......... May 24, 1996
3D Information Services, Inc. ("3D")..................... May 28, 1996
BCM Engineers, Inc. ("BCM").............................. August 20, 1997
Environmental Warranty, Inc. ("EWI")..................... November 4, 1997
Bing Yen & Associates, Inc. ("Bing Yen")................. November 26, 1997

The unaudited pro forma combined balance sheet sets forth the combination
of the financial positions of ATC and Acquisition Corp. as if the Merger,
the Tender Offer and the Offering had occurred on November 30, 1997. The
unaudited pro forma combined statement of operations for the nine months
ended November 30, 1997 reflects the merger of ATC and Acquisition Corp.
and the acquisition of BCM, EWI and Bing Yen as if each had occurred on
March 1, 1997. The unaudited pro forma combined statement of operations for
the year ended February 28, 1997 reflects the merger of ATC and Acquisition
Corp. and the acquisitions of the companies listed above as if each had
occurred at March 1, 1996.

For the unaudited pro forma combined statements of operations, the
financial statements of the acquired businesses were adjusted to conform
with ATC's fiscal year end, except for Bing Yen for which December 31 was
used for the year ended February 28, 1997.

(b) The acquisitions of EWI and Bing Yen were accounted for as purchases,
applying the provisions of Accounting Principles Board Opinion No. 16. The
acquired assets and assumed liabilities were recorded at their estimated
fair market values with the cost in excess of the net assets acquired
recorded as goodwill. The pro forma acquisition adjustments reflect such
purchase accounting adjustments.

(c) Reflects the adjustments for the Merger, Tender Offer, the Offering and
debt payment (collectively, the "Transactions").

1. The pro forma balance sheet reflects the following approximate sources
and uses of funds for the Transactions:

Source of funds:
Notes..................................................... $100,000,000
Term loan................................................. 20,000,000
Equity Investment from Holdings........................... 32,500,000
Revolving Credit Facility................................. 1,649,405
------------
Total sources......................................... 154,149,405
------------
Use of funds:
Purchase common stock..................................... 104,057,738
Repay existing debt:......................................
Principal............................................... 41,432,258
Accrued interest........................................ 1,399,228
Prepayment penalty...................................... 3,900,000
Shareholder agreement payment............................. 3,100,000
Financing costs........................................... 4,100,000
Other expenses............................................ 2,000,000
------------
Total uses............................................ 159,989,224
------------
Existing Cash to be Used.............................. $ (5,839,819)
============

2. The pro forma balance sheet reflects the following purchase accounting
adjustments for the Transactions:

Purchase price:
Purchase of common stock and stock options................. $104,057,738
Required payments under shareholder agreement.............. 6,420,580
Direct expenses............................................ 5,900,000
------------
Total.................................................. 116,378,318
------------
Allocation of purchase price:
Net assets acquired........................................ 49,643,139
Fair value of adjustments:
Other assets............................................. (671,478)
Non-compete agreement.................................... 4,112,580
Consulting agreement..................................... 600,000
Other liabilities........................................ (51,029)
Tax benefit of shareholder agreement payment............... 659,288
------------
54,292,500
------------
Excess purchase price........................................ 62,085,818
Predecessor basis adjustment................................. (2,679,023)
------------
Goodwill..................................................... $ 59,406,795
============

3. The pro forma balance sheet reflects the remaining liability under
certain shareholder agreements as other accrued expenses and other long-
term liabilities.

(d) Reflects adjustments to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC (revenues of $4,979,407, reimbursable costs
of $2,725,860 and selling expenses of $100,405) and results of operations
of 3D subsequent to May 28, 1996.

(e) Reflects adjustments to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC ($1,052,477 for the 12 months), the results
of operations of 3D subsequent to May 20, 1996, and a reduction of
depreciation expense ($383,066 and $85,695 for the 12 and nine months,
respectively) related to the acquisition of BCM.

(f) Reflects adjustments to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC ($1,070,827 for the 12 months), the
operations of 3D subsequent to May 28, 1996 ($11,835) and the following
purchase accounting adjustments for the 12 and nine months, respectively:
(i) goodwill amortized over 30 years ($363,618 and $112,171); (ii) non-
compete agreements amortized over two to ten years ($119,190 and $42,222);
(iii) net property depreciation decrease ($870,055 and $70,019); (iv)
elimination of expenses for facility, employee and legal obligations not
assumed by ATC ($2,770,837 and $832,327); (v) expense increase for revised
employment agreements ($389,400 and $479,550) which does not include
possible future bonuses ranging from zero to $500,000 per year (such
amount to be determined by the achievement of future EBITDA targets, which
targets are not determinable on a pro forma basis); (vi) elimination of
historical corporate goodwill amortization ($586,161 and $56,064); and
(vii) other ($80,191 and $0).

(g) Reflects an adjustment to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC ($90,030 for the 12 months) and for interest
expense on debt required to finance the Acquisitions ($967,711 and
$298,790 for the 12 and nine months, respectively) less interest expense
on debt not assumed ($2,033,911 and $1,077,000 for the 12 and nine months,
respectively).

(h) Reflects adjustment to remove charges by BCM's former parent for
litigation costs and legal issues not assumed by ATC.

(i) Represents the income tax impact on purchase accounting adjustments and
other pro forma adjustments.

(j) Reflects the following purchase accounting adjustments for the 12 and nine
month period, respectively: (i) goodwill amortized over 30 years
($1,980,227 and $1,485,170); (ii) non-compete and consulting agreements
amortized over three to four years ($1,410,503 and $1,057,877); and (iii)
expense reduction for revised employment agreements ($1,286,479 and
$977,572).

(k) Increased interest expense related to the issuance of the Notes at an
interest rate of 12.0%, the Term Loan at an assumed interest rate of
7.88%, the Revolving Credit Agreement at an assumed interest rate of 7.88%
and the amortization of other financing costs.

(l) Reflects an adjustment to eliminate the write-off of goodwill by BCM
during the 1997 fiscal year.

SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth historical financial data of the Company as
of and for each of the five fiscal years in the period ended February 28, 1997
and as of and for the nine month periods ended November 30, 1996 and November
30, 1997. The selected historical financial data as of the end of and for the
fiscal years 1993 through 1997 were derived from audited financial statements
of the Company. The selected historical financial data as of the end of and
for the nine months ended November 30, 1996 and November 30, 1997 were derived
from the unaudited historical financial statements of the Company for such
periods, which, in the opinion of management of the Company, reflect normal
and recurring adjustments necessary to present fairly the financial position
and results of operations for the periods presented. The information in this
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Unaudited Pro Forma
Combined Condensed Financial Data" and the Company's audited financial
statements and the notes thereto included elsewhere in this Prospectus.

NINE MONTHSENDED
FISCAL YEAR ENDED FEBRUARY 28(29), NOVEMBER 30,
-------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)

OPERATING DATA:
Revenues................ $16,539 $26,664 $36,272 $44,965 $113,855 $83,417 $104,263
Reimbursable costs.... 1,169 2,284 3,002 4,851 17,954 13,355 15,874
------- ------- ------- ------- -------- ------- --------
Net revenues............ 15,370 24,380 33,270 40,114 95,901 70,062 88,389
Cost of net revenues.... 8,720 12,085 15,354 19,664 53,751 38,963 47,941
------- ------- ------- ------- -------- ------- --------
Gross profit............ 6,650 12,294 17,916 20,450 42,151 31,100 40,448
Operating expenses:
Selling............... 686 785 1,106 1,513 3,119 2,181 3,226
General and
administrative....... 5,151 8,140 10,997 12,851 26,299 18,780 28,077
Provision for bad
debts................ 85 143 189 290 1,022 625 1,161
------- ------- ------- ------- -------- ------- --------
5,922 9,068 12,291 14,654 30,440 21,585 32,464
------- ------- ------- ------- -------- ------- --------
Operating income........ 728 3,227 5,625 5,795 11,711 9,514 7,984
Nonoperating expense
(income):
Interest expense...... 115 185 286 377 1,569 1,080 2,164
Interest income....... (50) (45) (34) (272) (231) (221) (165)
Other................. 9 9 73 20 (25) (36) (44)
------- ------- ------- ------- -------- ------- --------
Income before income
taxes.................. 653 3,077 5,301 5,671 10,398 8,691 6,030
Income tax expense...... 300 1,210 2,044 1,805 4,090 3,365 2,426
------- ------- ------- ------- -------- ------- --------
Net income.............. $ 353 $ 1,867 $ 3,257 $ 3,866 $ 6,308 $ 5,326 $ 3,604
======= ======= ======= ======= ======== ======= ========
OTHER FINANCIAL AND OPERATIONAL
DATA:
EBITDA................ $ 1,354 $ 3,913 $ 6,544 $ 7,010 $ 13,810 $11,044 $ 10,265
Depreciation and
Amortization......... 627 686 920 1,214 2,099 1,530 2,280
Capital expenditures.. 567 731 756 946 1,286 1,123 1,503
Ratio of earnings to
fixed charges........ 3.1x 7.2x 9.0x 7.3x 4.8x 5.6x 2.8x
SELECTED BALANCE SHEET
DATA:
Working capital....... $ 3,343 $ 6,049 $ 8,114 $24,977 $ 27,702 $19,614 $ 38,072
Total assets.......... 9,335 14,157 25,009 46,685 86,294 88,528 117,545
Short-term and long-
term debt............ 1,637 2,841 4,822 1,839 24,410 23,877 45,946
Stockholders' equity.. 5,813 7,659 13,813 39,192 45,439 44,480 49,643

- -------
Note: Numbers may not add due to rounding.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
"Selected Historical Financial Data" and the audited Consolidated Financial
Statements of the Company and the notes thereto appearing elsewhere in this
Prospectus.

OVERVIEW

General. ATC is a leading national provider of professional consulting,
engineering and testing services within the environmental and construction
materials industries. Management believes the Company is also a leading
provider of integrated environmental information management technology
services. The Company provides a broad range of services to a diverse client
base of over 8,000 customers, with domestic businesses and non-federal
government entities representing over 95.0% of the Company's gross revenues
for the twelve months ended November 30, 1997. No single customer represented
more than 1.8% of the Company's gross revenues during the twelve months ended
November 30, 1997. In addition, the Company's ten largest customers taken
together accounted for less than 13.6% of the Company's gross revenues during
the twelve months ended November 30, 1997. The Company provides its services
through a network of 73 branch offices located in 34 states covering every
major market of the United States.

In 1993, the Company initiated a strategy of controlled growth through
acquisitions to build a national infrastructure and to broaden its range of
technical services. The Company has created a national infrastructure through
the completion of 12 acquisitions since May 1993. ATC has thereby also
expanded its service mix by adding construction materials testing and
engineering, lead risk management, indoor air quality management, water and
wastewater management and information management technology services. As a
result of this growth and diversification strategy, net revenues and EBITDA
increased to fiscal 1997 levels of $95.9 million and $13.8 million,
respectively, from $15.4 million and $1.4 million, respectively, in fiscal
1993.

The Company's rapid growth is primarily attributable to the acquisition of
assets of ATEC in May 1996 and the acquisition of assets of BCM in August
1997. Management believes that at the time of the respective acquisitions,
each of the acquired companies was an underdeveloped operating asset with
strong client relationships in their respective markets. ATEC, with its large
network of regional and branch offices, positioned the Company as a national
provider of professional environmental consulting, testing and engineering
services. As a result of the BCM acquisition, ATC has become a high-quality
provider of consulting, engineering and design services in water supply and
treatment, wastewater systems, air quality management, traditional
environmental site investigations, site assessments and storage tank
management services. Subsequent to each acquisition that it has made, the
Company has implemented cost reduction measures, including integration of
offices, introduction of flexible staffing programs and reduction of
duplicative corporate overhead costs.

The Company has experienced substantial increases in net revenues and net
income over the past three fiscal years. ATC's net revenues were $33.3
million, $40.1 million, and $95.9 million, respectively, in fiscal 1995, 1996
and 1997, representing a compound annual growth rate ("CAGR") of 69.8% over
this period, principally attributable to acquisitions which were accounted for
on a purchase basis. ATC's net income was $3.3 million, $3.9 million, and $6.3
million, respectively, in such fiscal years, representing a CAGR of 39.2% over
such periods. Furthermore, ATC's EBITDA was $6.5 million, $7.0 million and
$13.8 million, respectively, in such fiscal years, representing a CAGR of
45.3% over such periods.

Operating margins were negatively impacted from the quarter ended August,
1996 through the quarter ended May, 1997 principally as a result of (i)
incorporation of ATEC offices into ATC, (ii) investment in national client
programs, (iii) cross-training of personnel and (iv) investment in management
information systems, including hardware, software and regional accounting
systems. Management believes that cost savings from typical acquisitions,
other than ATEC which was disproportionate to the size of the Company at the
acquisition date, are substantially realized at closing and fully realized
within 60 days of closing. Recent investments in the new

information technology systems will be completed in the near term and are
expected to result in operating efficiencies. In addition, the salaries and
other expenses of George and Morry Rubin were eliminated in connection with
the Transactions. However, the Company entered into employment agreements with
each of Nicholas J. Malino and Christopher P. Vincze following the
consummation of the Transactions. See "Management--Employment Agreements."

The Company believes that, for the next few years, growth in demand from
private sector clients and in certain service areas will exceed the average
growth rate of the overall industry. These service areas include, according to
independent market assessments, indoor air quality consulting services, water
and wastewater management, risk assessment, Brownfield development and
environmental information management technology services. In addition, new
market sectors are constantly developing, which could provide new business
opportunities. The Company has established national technical and sales
programs to target customers with need of services in certain market sectors
such as real estate, lead risk management, hazardous waste
management/Brownfield development, PCS/wireless communications, petroleum and
international markets.

Recent Developments. The Company has acquired twelve businesses since 1993,
the three most recent of which have been acquired since August 1997: (i) the
Company purchased all of the stock of Bing Yen on November 26, 1997, a
provider of geotechnical and structural forensic services to a wide variety of
clients in the western United States; (ii) the Company purchased substantially
all of the stock of EWI on November 4, 1997, a property and casualty insurance
brokerage firm specializing in environmental insurance with property and
casualty licenses, including excess surplus lines in 43 states and with
license applications pending in an additional five states, which sells
insurance products covering environmental liabilities to large property owners
and municipal government clients; and (iii) the Company purchased certain
assets and assumed certain liabilities on August 20, 1997 of the Engineering
Division of Smith Technology Corporation which operated primarily as BCM and
provided engineering and consulting services in water and wastewater
treatment, natural resource management, environmental compliance and site
investigation, remedial design and engineering and asbestos and air quality
management.

Revenues. The Company derives its revenues primarily from specialized
environmental engineering and consulting services, including industrial
hygiene services and construction materials testing and engineering, and to a
lesser extent from environmental information management technology services.
The Company sets the pricing of the different components of its services and
products in accordance with its national and regional marketing strategies,
taking competitive factors into account.

Reimbursable Costs. Reimbursable costs associated with the Company's
environmental engineering and consulting services consist primarily of costs
associated with outside drilling, laboratory services, materials handling and
transportation, excavation and certain specialized technical services.
Generally, the costs associated with a particular project can be billed
directly to environmental engineering and consulting services clients.
Services that have a large component of subcontracted services have a larger
portion of reimbursable costs as a percentage of revenues.

Cost of Net Revenues. Cost of Net Revenues consists of professional field
staff costs, depreciation of field and laboratory equipment, contract
maintenance costs, and other project related costs. The Company's field labor
is generally fixed in the short-term, except for certain variable costs
relating to the Company's flexible staffing program. Typically, the Company
does not own large capital intensive equipment.

Operating Expenses. Operating expenses include selling expenses, general and
administrative expenses and provision for bad debts as described below:

Selling Expenses. Selling expenses consist of costs associated primarily
with (i) compensation and benefits for its sales and marketing professionals
throughout the Company's network of branch offices and (ii) advertising and
promotional efforts.

General and Administrative Expenses. General and administrative expenses
consist primarily of: (i) employee compensation and benefit expenses, (ii)
travel and other administrative costs and (iii) general corporate overhead,
including rent for the Company's facilities, insurance, legal and accounting
and amortization of intangible assets.

Provision For Bad Debts. The Company maintains an allowance for bad debts
based on its past bad debt experience. It has been the Company's experience
that such allowance has been sufficient to cover the costs actually incurred
for bad debts.

Nonoperating Expense. Nonoperating expense consists of interest expense,
interest income and other similar expenses or income.

RESULTS OF OPERATIONS

The following table sets forth, net for the periods indicated, certain
statements of operations data of the Company expressed as a percentage of net
revenues.

NINE MONTHS
FISCAL YEAR ENDED ENDED
FEBRUARY 28 (29), NOVEMBER 30,
------------------- --------------
1995 1996 1997 1996 1997
----- ----- ----- ------ ------

Revenues................................ 109.0% 112.1% 118.7% 119.1% 118.0%
Reimbursable costs.................... 9.0 12.1 18.7 19.1 18.0
----- ----- ----- ------ ------
Net revenues............................ 100.0 100.0 100.0 100.0 100.0
Cost of net revenues.................... 46.1 49.0 56.0 55.6 54.2
----- ----- ----- ------ ------
Gross profit.......................... 53.9 51.0 44.0 44.4 45.8
Operating expense:
Selling............................... 3.3 3.8 3.3 3.1 3.7
General and administration............ 33.1 32.0 27.4 26.8 31.8
Provision for bad debts............... 0.6 0.7 1.1 0.9 1.3
----- ----- ----- ------ ------
Operating income........................ 16.9 14.4 12.2 13.6 9.0
Nonoperating expense (income):
Interest expense...................... 0.9 0.9 1.6 1.5 2.4
Interest income....................... (0.1) (0.7) (0.2) (0.3) (0.2)
Other................................. 0.2 -- -- (0.1) (0.1)
----- ----- ----- ------ ------
Income loss before income taxes..... 15.9 14.1 10.8 12.4 6.8
Income tax expense...................... 6.1 4.5 4.3 4.8 2.7
----- ----- ----- ------ ------
Net income.............................. 9.8% 9.6% 6.6% 7.6% 4.1%
===== ===== ===== ====== ======

- --------
Note: Numbers may not add due to rounding.

NINE MONTHS ENDED NOVEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED NOVEMBER 30,
1996

Revenues. Revenues in the nine months ended November 30, 1997 increased by
approximately $20.9 million, or 25.0%, to $104.3 million, compared with $83.4
million in the nine months ended November 30, 1996. This increase was
primarily attributable to revenues associated with the BCM acquisition, which
was effective August 20, 1997, and to a lesser degree, revenues from the ATEC
and 3D acquisitions, which were completed in May 1996. Revenues attributable
to the acquisition of certain assets of BCM totaled $6.1 million, or 5.8% of
revenues, for the nine months ended November 30, 1997. Revenues associated
with the ATEC and 3D acquisitions totaled $54.2 million and $6.2 million,
respectively, for the nine months ended November 30, 1997, compared to $40.7
million and $5.1 million, respectively, in the prior period.

Revenues in the nine months ended November 30, 1997 from ATC's branch
offices having comparable operations in the nine months ended November 30,
1996 decreased 2.9% to $77.8 million, compared with $80.2 million in the nine
months ended November 30, 1996. Comparable revenues included revenues of ATEC
and 3D for the six months ended November 30, 1997 and 1996, respectively, but
excluded first quarter revenues as these acquisitions were made in the quarter
ended May 31, 1996. Comparable revenues decreased in part, due to a large
project representing $2.0 million in revenue for the prior fiscal period
during which time the project was completed.

Reimbursable Costs. For the nine months ended November 30, 1997,
reimbursable costs increased by approximately $2.5 million, or 18.9%, to $15.9
million compared with $13.4 million, in the nine months ended November 30,
1996. Reimbursable costs as a percentage of revenues decreased to 15.2% in the
nine months ended November 30, 1997 compared with 16.0% in the nine months
ended November 30, 1996. Reimbursable costs decreased in part due to lower
amounts of such costs related to the acquired BCM operations.

Cost of Net Revenues. Cost of net revenues in the nine months ended November
30, 1997 increased by approximately $9.0 million, or 23.0%, to $47.9 million
compared with $39.0 million in the nine months ended November 30, 1996.

Cost of net revenues as a percentage of net revenue decreased to 54.2% in
the nine months ended November 30, 1997 compared with 55.6% in the nine months
ended November 30, 1996. In the prior year, the Company benefited from higher
than normal productivity in the first quarter of fiscal 1997. Higher
productivity in the first quarter of fiscal 1997 is attributable to increased
workloads in that quarter, resulting from work which was delayed in the last
quarter of fiscal 1996 and carried over into the first quarter of fiscal 1997
due to adverse weather conditions primarily in the northeast, which at that
time constituted over 60.0% of ATC's revenue stream. During the third quarter
of fiscal 1997, the second complete quarter that the Company owned ATEC and
3D, cost of net revenues as a percentage of net revenues increased to 58.5%,
reflecting the impact of ATEC's service mix and initial labor utilization and
final project costs incurred to complete a fixed price contract which could
not be billed to the client. In addition, the Company has reduced cost of net
revenues as a percentage of net revenues due to improved labor utilization.

Gross Profit. For the reasons set forth above, gross profit in the nine
months ended November 30, 1997 increased by approximately $9.3 million, or
30.1%, to $40.4 million compared with $31.1 million in the nine months ended
November 30, 1996.

Operating Expenses. Operating expenses in the nine months ended November 30,
1997 increased by approximately $10.9 million, or 50.4%, to $32.5 million,
compared with $21.6 million in the nine months ended November 30, 1996.
Operating expenses increased as a percentage of net revenues to 36.7% in the
nine months ended November 30, 1997, compared with 30.8% in the nine months
ended November 30, 1996. The increase in operating expenses as a percentage of
net revenue for the nine month period ended November 30, 1997 fully reflects
the ATEC service mix and integration of its operations, including additional
labor and administrative costs. The increase was due primarily to structural
adjustments in ATC's operating infrastructure to accommodate the integration
of ATEC's operations. The structural adjustments consisted primarily of the
creation of a regional management infrastructure to manage the larger, more
geographically and technically diverse business resulting from the ATEC
acquisition. Such structural investments required the Company to add higher
level operations management employees, including regional management and
financial personnel and sales personnel for its corporate sales programs.

In addition, executive and employee compensation levels increased during the
latter part of fiscal 1997 and certain additional bonuses to branch personnel
were paid during the quarterly period ended November 30, 1997 in excess of
amounts previously accrued. Employee costs increased 64.9% to $14.6 million,
or 16.5% of net revenues, in the nine months ended November 30, 1997 compared
with $8.8 million, or 12.6% of net revenues,

in the nine months ended November 30, 1996. These increases in total cost are
due to employees hired in connection with the expansion of ATC's operations.
Other increases in operating expenses resulted from legal expenses and
administrative expenses resulting from the growth in operations and increased
employee levels. Additionally, in the nine months ended November 30, 1997,
amortization of goodwill and intangibles increased to $1.4 million, compared
with $0.9 million in the nine months ended November 30, 1996 reflecting the
additional goodwill amortization resulting from acquisitions.

Operating Income. For the reasons set forth above, operating income in the
nine months ended November 30, 1997 decreased by approximately $1.5 million,
or 16.1%, to $8.0 million, compared with $9.5 million in the nine months ended
November 30, 1996. Operating income decreased as a percentage of net revenues
to 9.0% in the nine months ended November 30, 1997, compared with 13.6% in the
nine months ended November 30, 1996.

Nonoperating Expense. Nonoperating expense in the nine months ended November
30, 1997 increased by approximately $1.1 million to $2.0 million, compared
with $0.8 million in the nine months ended November 30, 1996. The increase in
nonoperating expense is primarily attributable to increased interest expense
due to increased bank debt outstanding since May 1996 when the ATEC and 3D
acquisitions were completed and as a result of the issuance of 8.18% Senior
Secured Notes due May 31, 2004 (the "8.18% Senior Secured Notes") in May 1997
(such notes were prepaid in connection with the consummation of the
Transactions).

Income Tax Expense. Income tax expense in the nine months ended November 30,
1997 was $2.4 million, compared with $3.4 million in the nine months ended
November 30, 1996. During the nine months ended November 30, 1997 and 1996,
the Company's effective tax rates were 40.2% and 38.7%, respectively.

Net Income. As a result of the foregoing, net income in the nine months
ended November 30, 1997 decreased by approximately $1.7 million, or 32.3%, to
$3.6 million, compared with $5.3 million in the nine months ended November 30,
1996. Net income decreased as a percentage of net revenues to 4.1% in the nine
months ended November 30, 1997, compared with 7.6% in the nine months ended
November 30, 1996.

FISCAL 1997 COMPARED WITH FISCAL 1996

Revenues. Revenues in fiscal 1997 increased by approximately $69.0 million,
or 153.2%, to $113.9 million compared with $45.0 million in fiscal 1996. This
increase was primarily attributable to $57.7 million and $7.2 million, of
revenues, associated with the acquisitions of ATEC and 3D, respectively in May
1996 and reflects a full year's revenue contribution from the acquisition of
the Hill Assets ($3.4 million) and Applied ($2.6 million) which were completed
in November 1995 and February 1996, respectively. Revenues attributable to the
acquisitions of certain assets of the ATEC, 3D, Hill Assets and Applied
totaled $70.9 million, or 62.3% of revenues, for fiscal 1997.

Revenues in fiscal 1997, from ATC's branch offices having comparable
operations in fiscal 1996, increased 3.6% to $42.9 million, compared with
$41.4 million in fiscal 1996.

Reimbursable Costs. For fiscal 1997, reimbursable costs increased by
approximately $13.1 million, or 270.1%, to $18.0 million, compared with $4.9
million in fiscal 1996. Reimbursable costs as a percentage of revenues
increased to 15.8% in fiscal 1997 compared with 10.8% in fiscal 1996. ATEC's
environmental and traditional consulting services, consisting of drilling,
laboratory services, materials testing and subcontracting services, utilize
higher amounts of outside services and direct project expenses compared to
those consulting services being provided prior to the ATEC acquisition. Higher
amounts of outside services and direct project expenses result in a higher
percentage of reimbursable costs. For the year ended December 31, 1995, ATEC's
reimbursable costs were approximately 21.0% of revenues.

Cost of Net Revenues. Cost of net revenues in fiscal 1997 increased by
approximately $34.1 million, or 173.3%, to $53.8 million, compared with $19.7
million in fiscal 1996. Cost of net revenues as a percentage of net revenues
increased to 56.0% in fiscal 1997 compared with 49.0% in fiscal 1996. The
increase is due to lower

margins earned on certain of ATEC's geotechnical engineering services. In
addition, cost of net revenues increased because approximately $0.3 million of
final project costs incurred to complete a large fixed-price contract could
not be billed to a client. Cost of net revenues were also negatively impacted
because in certain price competitive regions where the Company experienced
lower net revenues, costs could not be reduced proportionately.

Gross Profit. For the reasons set forth above gross profit in fiscal 1997
increased by approximately $21.7 million, or 106.1%, to $42.2 million,
compared with $20.4 million in fiscal 1996. Gross profit as a percentage of
net revenues decreased to 44.0% in fiscal 1997, compared with 51.0% in fiscal
1996.

Operating Expenses. Operating expenses in fiscal 1997 increased by
approximately $15.8 million, or 107.7%, to $30.4 million, compared with $14.7
million in fiscal 1996. Operating expenses decreased as a percentage of net
revenues to 31.7% in fiscal 1997, compared with 36.5% in fiscal 1996. The
decrease in operating expenses as a percentage of net revenues is the result
of the additional net revenues from the ATEC and other acquisitions without
corresponding increases in general and administrative costs. Employee costs
increased 66.8% to $12.4 million, or 12.9% of net revenues in fiscal 1997,
compared with $7.4 million, or 18.5% of net revenues, in fiscal 1996. These
increases in total cost were due to employees hired in connection with the
expansion of ATC's operations. Other increases in operating expenses resulted
from higher facility costs and administrative expenses resulting from the
growth in operations and increased employee levels. Additionally, in fiscal
1997, amortization of goodwill and intangibles increased to $1.2 million,
compared with $0.4 million in fiscal 1996, reflecting the additional goodwill
amortization resulting from acquisitions.

Operating Income. For the reasons set forth above, operating income in
fiscal 1997 increased by approximately $5.9 million, or 102.1%, to $11.7
million, compared with $5.8 million in fiscal 1996. Operating income decreased
as a percentage of net revenues to 12.2% in fiscal 1997, compared with 14.4%
in the fiscal 1996.

Nonoperating Expense. Nonoperating expense in fiscal 1997, increased to $1.3
million compared with $0.1 million in fiscal 1996. The increase in
nonoperating expense is primarily attributable to increased interest expense
on bank debt outstanding since May 1996, when the ATEC and 3D acquisitions
were completed, and to a lesser extent from lower interest income.

Income Tax Expense. Income tax expense in fiscal 1997 was $4.1 million,
compared with $1.8 million in fiscal 1996. The income tax expense for fiscal
1996 reflects a one-time benefit of $0.4 million resulting from the merger of
Aurora Environmental Inc. ("Aurora") into ATC (the "Aurora Merger") which
allowed ATC to utilize Aurora's net operating loss carryforward as offsets to
future taxable income. During fiscal 1997 and 1996, after adjusting for the
one-time tax benefit, the Company's effective tax rates were 39.3% and 38.0%,
respectively.

Net Income. As a result of the foregoing, net income for fiscal 1997,
increased by approximately $2.4 million, or 63.2%, to $6.3 million compared
with $3.9 million in fiscal 1996. Excluding the impact of the one-time tax
benefit of $0.4 million, net income would have been $3.5 million.

FISCAL 1996 COMPARED WITH FISCAL 1995

Revenues. Revenues in fiscal 1996 increased by approximately $8.7 million,
or 24.0%, to $45.0 million compared with $36.3 million in fiscal 1995. This
increase was primarily attributable to the positive effect of the acquisitions
of Con Test ($6.0 million), Microbial ($1.4 million) and R.E. Blattert ($2.2
million) completed during the second half of fiscal 1995 and from the
acquisition of the Hill Businesses ($2.4 million) in November 1995. Revenues
attributable to operations resulting from these acquisitions totaled $12.0
million, or 26.8% of revenues, for fiscal 1996. During fiscal 1996, increased
revenues from certain existing operations were offset by lower revenues from a
significant customer due to delays in funding for certain projects and the
completion of certain work for another significant customer. In addition,
revenues of ATC's largest offices located in the Mid-

Atlantic and New England regions were negatively impacted for the three months
ended February 29, 1996, due to severe winter weather conditions. Revenues in
these regions, excluding revenues of the acquired Hill Businesses, declined
$1.8 million or 27.5% in the fourth quarter ended February 29, 1996 compared
to the third quarter period ended November 30, 1995. In fiscal 1995, where
normal seasonal changes were experienced, the decrease for the comparable
period was less than 3.0%. The Hill Businesses were acquired just prior to the
fourth quarter and were also adversely affected by these weather conditions.

Revenues in fiscal 1996 from ATC's branch offices having comparable
operations in fiscal 1995, increased 2.6% to $32.9 million, compared with
$32.1 million in fiscal 1995. If revenues from certain large projects for two
significant customers (discussed below) are eliminated in each period, ATC's
revenues from existing branch offices having comparable operations would have
increased 16.2% to $29.1 million in fiscal 1996, compared with $25.0 million
in fiscal 1995.

Revenues in fiscal 1996 earned directly from the New York City School
Construction Authority ("NYCSCA") decreased 30.2% to $2.7 million, compared
with $3.9 million in fiscal 1995. As a percentage of revenues, revenues from
the NYCSCA decreased to 6.0% in fiscal 1996, compared with 10.6% in fiscal
1995. During the first quarter 1996, delays in the approval of the NYCSCA's
program budget and funding requests for the New York City school construction
and maintenance program resulted in diminished service levels in asbestos
management consulting and testing services and, consequently, lower revenues
to ATC under this program. ATC's revenues under this program are not
predictable and depend upon many factors such as the scope of work necessary
at particular sites, budgeting constraints and the timing of projects.

Revenues in fiscal 1996 from the Army Corps of Engineers (the "Corps")
decreased 63.6% to $1.2 million, compared with $3.2 million in fiscal 1995. As
a percentage of revenues, revenues from the Corps decreased to 2.6% in fiscal
1996, compared with 8.9% in fiscal 1995. The Company's revenues from the Corps
during this period related to certain asbestos management services and
decreased due to the completion of the larger phases of the project during
fiscal 1995.

Reimbursable Costs. For fiscal 1996, reimbursable costs increased by
approximately $1.8 million, or 61.6%, to $4.9 million, compared with $3.0
million, in fiscal 1995. Reimbursable costs as a percentage of revenues
increased to 10.8% in fiscal 1996, compared with 8.3% in fiscal 1995. The
increase in reimbursable costs and reimbursable costs as a percentage of net
revenues is due to higher subcontract and drilling costs related to the
Company's geological and remediation services. These services increased as a
result of the acquisitions of R.E. Blattert and Microbial.

Cost of Net Revenues. Cost of net revenues in fiscal 1996 increased by
approximately $4.3 million, or 28.1%, to $19.7 million, compared with $15.4
million in fiscal 1995. Cost of net revenues as a percentage of net revenues
increased to 49.0% in fiscal 1996, compared with 46.1% in fiscal 1995. This
increase was due to lower revenues related to severe weather conditions
experienced during the three months ended February 29, 1996. Cost of net
revenues for the nine months ended November 30, 1995 was 46.7%. For the fourth
quarter ended February 29, 1996, cost of net revenues was $5.5 million on net
revenues of $9.8 million or 56.2%.

Gross Profit. For the reasons set forth above, gross profit in fiscal 1996
increased by approximately $2.5 million, or 14.1%, to $20.4 million, compared
with $17.9 million in fiscal 1995. Gross profits as a percentage of net
revenues decreased to 51.0% in fiscal 1996, compared with 53.9% in fiscal
1995.

Operating Expenses. Operating expenses in fiscal 1996 increased by
approximately $2.4 million, or 19.2%, to $14.7 million, compared with $12.3
million in fiscal 1995. Operating expenses decreased as a percentage of net
revenues to 36.5% in fiscal 1996, compared with 36.9% in fiscal 1995. The
decrease in operating expenses as a percentage of net revenues is the result
of ATC's ability to service greater revenue levels without corresponding
increases in general and administrative costs. Employee costs increased 18.0%
to $7.4 million, or 18.5% of net revenues, in fiscal 1996, compared with $6.3
million, or 18.9% of net revenues, in fiscal 1995. These increases in employee
costs were due to employees hired in connection with the expansion of ATC's

operations. Other increases in operating expenses resulted from higher
facility costs, travel and administrative expenses resulting from the growth
in operations and increased employee levels. Additionally, in fiscal 1996,
amortization of goodwill and intangibles increased to $0.4 million, compared
with $0.2 million in fiscal 1995, reflecting the additional goodwill
amortization resulting from acquisitions.

Operating Income. For the reasons set forth above, operating income in
fiscal 1996 increased by approximately $0.2 million, or 3.0%, to $5.8 million,
compared with $5.6 million in fiscal 1995. Operating income as a percentage of
net revenues was 14.4% in fiscal 1996 and 16.9% in fiscal 1995.

Nonoperating Expense. Nonoperating expenses in fiscal 1996 decreased by
approximately $0.2 million, or 61.6%, to $0.1 million compared with $0.3
million in fiscal 1995. The decrease in nonoperating expenses is primarily
attributable to higher interest income earned on the net proceeds of an
October 1995 secondary offering of shares of the Company's Common Stock which
were invested in short-term investments.

Income Tax Expense. Income tax expense in fiscal 1996 was $1.8 million,
compared with $2.0 million in fiscal 1995. The income tax expense reflects a
one-time benefit of $0.4 million resulting from the merger of Aurora into ATC
which allowed ATC to utilize Aurora's net operating loss carryforwards as
offsets to its future taxable income. During fiscal 1996, excluding for the
one-time tax benefit, and fiscal 1995, the Company's effective tax rates were
38.0% and 38.6%, respectively.

Net Income. As a result of the foregoing, net income in fiscal 1996
increased by approximately $0.6 million, or 18.7%, to $3.9 million, compared
with $3.3 million in fiscal 1995. Excluding the impact of the one-time tax
benefit of $0.4 million, net income would have been $3.5 million for fiscal
1996. Net income as a percentage of net revenues was 8.8% in fiscal 1996,
after excluding the one-time tax benefit, compared with 9.8% in fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity are cash flow from operations
and available borrowings under the Revolving Credit Facility. The Revolving
Credit Facility provides the Company with an aggregate of up to $30.0 million
of senior secured financing to be used for working capital and general
corporate purposes (including permitted acquisitions). As of March 24, 1998,
the Company had approximately $25.2 million of availability under the
Revolving Credit Facility. It is expected that the Company's principal uses of
liquidity will be to provide working capital, finance capital expenditures,
fund costs associated with acquisitions and meet debt service requirements. As
a result of the consummation of the Transactions, the Company is highly
leveraged. Except to the extent set forth below, there will be no mandatory
payments of principal on the Notes scheduled prior to their maturity. Based
upon current operations, anticipated cost savings and future growth, the
Company believes that its cash flow from operations, together with available
borrowings under the Revolving Credit Facility will be adequate to meet its
anticipated requirements for working capital, capital expenditures and
scheduled principal and interest payments, although the Company believes that
its ability to repay the Notes and amounts outstanding under the New Credit
Facility at maturity will require additional financing. There can be no
assurance, however, that any such additional financing will be available at
such time to the Company, or that any such available financing will be on
terms favorable to the Company. Furthermore there can be no assurance that the
Company's business will continue to generate cash flow at or above current
levels or that estimated cost savings or growth can be achieved.

The Supplemented Indenture imposes certain limitations on the ability of the
Company and its subsidiaries to, among other things, incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, issue preferred stock, merge or consolidate with any other person
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company and its subsidiaries. In
addition, the New Credit Facility contains

other and more restrictive covenants effectively prohibiting the Company from
prepaying the Notes. The New Credit Facility also requires the Company to
maintain specified financial ratios and satisfy certain financial tests. The
Company's ability to meet such financial ratios and tests will be affected by
events beyond its control; there can be no assurance that the Company will be
able to meet such tests. See "Description of New Credit Facility."

The Company has historically financed its operations through internally
generated funds, public and private equity and debt financings and borrowings
under its credit facilities. As of November 30, 1997, working capital was
$38.1 million, compared with working capital of $27.7 million at February 28,
1997, an increase of $10.4 million. The increase in working capital was
primarily due to the net proceeds from the offering of the 8.18% Senior
Secured Notes in May 1997 after repayment of bank debt and fees, and the
purchase of certain assets of BCM including accounts receivable and unbilled
receivables. As a result of the Company's acquisition of BCM and additional
costs incurred in connection with the ATEC acquisition, the Company's tangible
net worth decreased to $0.7 million at November 30, 1997 from $9.2 million at
February 29, 1997, primarily as a result of goodwill amounts recognized in
connection with these transactions.

Nine-month Cash Flows. During the nine months ended November 30, 1997, net
cash flows used in operating activities were $1.5 million, primarily due to
the increase in billed and unbilled receivables and decreases in accounts
payable and other liabilities, representing payments of property facility
rentals, non-compete consideration and assumed liabilities of ATEC and other
acquisitions. Net cash flows used in investing activities were $11.3 million,
resulting from the acquisitions of BCM and ATEC and purchases of property and
equipment. Net cash flows provided by financing activities were $16.7 million,
primarily representing the proceeds of the 8.18% Senior Secured Notes less
repayment of outstanding bank debt and a bank borrowing of $5,500,000 made in
connection with the BCM acquisition.

Twelve-month Cash Flows. During fiscal 1997 and fiscal 1996, net cash flows
used in operating activities were $6.7 million and $0.8 million, respectively,
primarily due to income generated from operations and increases in billed and
unbilled receivables, which were offset in fiscal 1997 by reductions of
accounts payable and other liabilities, including assumed liabilities
associated with acquisitions. Net cash flows used in investing activities were
$13.1 million and $4.6 million, respectively, in each of the periods,
resulting from the acquisitions of ATEC and 3D and purchases of property and
equipment in fiscal 1997 and the acquisitions of the Hill Assets, Applied,
Con-Test and R.E. Blattert, additional contingent purchase obligations in
connection with the BSE and R.E. Blattert acquisitions and purchases of
property and equipment in fiscal 1996. Net cash flows provided by financing
activities were $8.4 million and $17.5 million, respectively, representing the
proceeds of the bridge credit facility, less payments made on long-term debt
and notes payable assumed from ATEC in fiscal 1997 and representing the net
offering proceeds of the Company's secondary offering of Common Stock plus
proceeds from a $2.6 million increase in debt primarily under the Company's
prior credit facilities, less payments made on long-term debt and notes
payable of $6.7 million in fiscal 1996.

SEASONALITY

ATC typically experiences a slow down in business activities during the
winter months and an increase in business activities during the summer months.
This is due to seasonal fluctuations in construction and remediation
activities. As a result, operating results may vary from period to period. For
fiscal 1997 and 1996, comparable quarterly revenues as a percentage of
relevant annual revenues were 26.8%, 25.7%, 23.7% and 23.8% and 25.1%, 27.0%,
25.2% and 22.7%, respectively.

BUSINESS

ATC is a leading national provider of professional consulting, engineering
and testing services within the environmental and construction materials
industries. Management believes the Company is also a leading provider of
integrated environmental information management technology services. The
Company provides a broad range of services to a diverse client base of over
8,000 customers, with domestic businesses and non-federal government entities
representing over 95.5% of the Company's gross revenues for the twelve months
ended November 30, 1997. No single customer represented more than 1.8% of the
Company's gross revenues during the twelve months ended November 30, 1997. In
addition, the Company's ten largest customers taken together accounted for
less than 13.6% of the Company's gross revenues during the twelve months ended
November 30, 1997. The Company provides its services through a network of 73
branch offices located in 34 states covering every major market of the United
States.

Asset preservation, liability and health related considerations have
increasingly driven demand in the environmental services industry, whereas
regulation has decreased as a driver over time. As a result of these market
dynamics, environmental administration has become an integral component of
day-to-day property management activities. Management believes that ATC is
well-positioned to take advantage of certain rapidly growing sectors of the
approximately $16.0 billion environmental services industry. In addition, the
industry is highly fragmented and management believes that the industry
presents many favorable opportunities for growth through acquisitions.

In 1993, the Company initiated a strategy of controlled growth through
acquisitions to build a national infrastructure and to broaden its range of
technical services. The Company has created a national infrastructure through
the completion of 12 acquisitions since May 1993. ATC has thereby also
expanded its service mix by adding construction materials testing and
engineering, lead risk management, indoor air quality management, water and
wastewater management and information management technology services. As a
result of this growth and diversification strategy, net revenues and EBITDA
increased to pro forma fiscal 1997 levels of $95.9 million and $13.8 million,
respectively, from $15.4 million and $1.4 million, respectively, in fiscal
1993.

Management believes that ATC is well-positioned to grow revenues and EBITDA
in the future. The key elements of its continuing strategy to achieve this
growth include (i) pursuing cross-selling opportunities presented by ATC's
recently diversified service mix and recently developed national
infrastructure, (ii) capitalizing on specific sectors which management
believes have high growth potential, including indoor air quality, risk
assessment, Brownfield development and environmental information management
technology services outsourcing, (iii) expanding its national programs, the
first of which was established in 1995, which emphasize expanding existing
regional or local customer relationships into national relationships and (iv)
increasing profitability by implementing tactical acquisitions. Management
intends to pursue companies that can be "tucked into" ATC's established
infrastructure and that provide opportunities for additional contributions
from branch operations without proportional increases to overhead or fixed
costs.

BUSINESS STRATEGY

In 1993, the Company began the implementation of a strategy, the key
elements of which were designed to (i) establish a national infrastructure of
branch office locations and (ii) diversify its service offerings. Management
believes that the Company has achieved these strategic, structural objectives
and now intends to focus on the following strategies to build on this
foundation to improve its market position and to grow operating earnings:

water and wastewater management and information management technology
services. Additionally, the Company's national infrastructure provides
opportunities for cross-selling expanded services to existing customers
that currently receive more limited services on a local or regional
basis.

. Focus on High-Growth Services and Sectors. The successful implementation
of strategies designed to increase service offerings has resulted in the
Company's ability to capitalize on many high-growth market opportunities.
ATC is well-positioned to take advantage of the niche markets of indoor
air quality, water and wastewater management, risk assessment, Brownfield
development and environmental information management technology services,
each of which management believes has high growth potential. In addition,
management intends to take advantage of trends such as the outsourcing of
specialized technical services by national and multi-national
corporations.

. Pursue Tactical Acquisitions. ATC has developed significant expertise in
identifying, completing and integrating acquisitions. ATC plans to apply
its expertise in assimilating acquired companies' personnel and branch
operations into ATC's existing infrastructure and expanding acquired
companies' service and product offerings to existing clients. Management
intends to strengthen its position as a leading industry consolidator
through tactical acquisitions which meet operating, financial and
geographic criteria. Management believes that its existing national
infrastructure provides a platform for "tuck-in" acquisitions of regional
and local companies. According to management estimates, there are 3,500
companies whose businesses are complementary to those of the Company.
Management believes that a significant number of those companies could be
operated more profitably as part of ATC's operations.

. Emphasis on Business Fundamentals. Management believes industry
participants typically have management teams with predominantly technical
orientations. In contrast, ATC has distinguished itself by focusing on
business fundamentals to complement its technical expertise. ATC intends
to continue to emphasize a disciplined approach to such basic business
fundamentals as selling and marketing, customer service, cost management,
overtime minimization and collection of receivables.

INDUSTRY OVERVIEW

Environmental Services Industry

Unlike the 1970's and 1980's, when new environmental regulations were
frequently promulgated by federal and state agencies and regulatory compliance
was the primary market driver, the demand for environmental services has
shifted and is now driven by economic and liability management considerations.
In the early 1990's, public awareness also heightened concerns for
environmental issues. Today many companies insist that environmental
improvement expenditures not only satisfy regulatory compliance, but also be
justifiable on other grounds--such as protecting assets, increasing workplace
safety, reducing health risks, improving public relations, minimizing waste
and preventing pollution and reducing financial liabilities.

Customer needs and demands have also changed. Many customers have become
more sophisticated in their expectations of environmental services providers.
Cost and image considerations have become key drivers in the environmental
services industry. In addition, management believes that customers are looking
for service providers that can provide a broad range of integrated services,
can deliver these services on a national basis and

can provide an adequate level of insurance coverage. Through its service
diversification and geographic expansion, ATC has positioned itself to respond
to these new market demands. ATC's national sales and technical programs (the
"National Programs") focus on providing services to targeted market segments
where these new demands create increased revenues and market share and higher
pricing opportunities. The Company believes that these trends will continue to
create new and more profitable opportunities for serving major commercial and
industrial clients.

The municipal water and wastewater services market is currently driven by
the deterioration of existing utilities and treatment facilities and the
expansion of new water and sewer facilities to developing areas. Regulatory
agencies play a secondary market driver role through placing construction
moratoriums on developments and utilities that do not meet existing water
quality criteria. Management believes that this market also presents revenue
growth opportunities for other integrated ATC services such as construction
materials testing and engineering and geotechnical engineering. In a recent
report to Congress, the U.S. Environmental Protection Agency (the "EPA")
estimated that approximately $140 billion in expenditures will be needed over
the next twenty years to meet expected municipal wastewater requirements.

Two independent market evaluations, one by the Environmental Business
Journal ("EBJ") and the other by the independent marketing firm of Richard K.
Miller & Associates, Inc. ("RKM&A"), estimate the size of the environmental
consulting and engineering services market for 1995 at between $15.0 and $16.0
billion. Annual growth is projected at 3.0% to 5.0% through the next three to
four years. Generally, the environmental consulting and engineering services
industry is viewed as having stabilized, with declining market demand in some
sectors being offset by growth in others. Over the last three years, the
market for federal agency contracts has declined, and those service firms
dependent on revenues from this sector have been negatively affected. ATC has
experienced more stable market conditions over the last three years due to its
focus on the commercial and industrial market segments. Certain companies in
the environmental services industry have been required to reduce size and
revenues in an effort to improve operating performance. During this period,
ATC has maintained its position as an industry leader in financial
performance, while increasing its market share through internal growth and
acquisitions.

Management believes that, for the next few years, growth in demand from
municipal clients, private sector clients (commercial and industrial) and in
certain service areas will exceed the expected average growth rate of the
overall environmental service industry. These service areas include lead risk
management, indoor air quality consulting services, occupational health and
industrial hygiene services, environmental risk management consulting,
hazardous waste consulting, water and wastewater design services,
environmental insurance and environmental information management technology.
The Company also believes that there will be significant opportunities in: (i)
outsourcing of environmental management and due diligence services to clients
with large portfolios of real estate holdings; (ii) providing environmental,
geotechnical and construction materials testing services to the PCS/Wireless
industry; and (iii) providing environmental insurance, assessment services,
remediation design and site development engineering of certain environmentally
impaired but otherwise valuable properties, which can be returned to the
market place with a "clean" status. Such sites are known as "Brownfield"
sites.

Industry observers believe that the asbestos market will show little growth
and the hazardous waste services market will experience some decline in the
coming years. The Company believes, based on the significant size of these
markets, that there are opportunities for continued revenues from existing
client relationships, increased market share through acquisitions and the
Company's ability to penetrate the market with competitive pricing and
reliable services. Furthermore, while governmental expenditures are expected
to grow more slowly in coming years as a result of changes in political
priorities, private sector spending on environmental services is expected to
increase, particularly in certain sectors.

Within the past three years, regulations have been promulgated which have
created new business opportunities within certain sectors of the environmental
consulting and engineering services industry. In February 1994, the United
States Department of Labor promulgated new asbestos regulations for the
construction

industry, which are more stringent than the previous regulations. Lead-based
paint is another area of increasing regulatory activity, partially in response
to the provisions of Title X of the Housing and Community Development Act of
1992, as amended in 1997, and partially as a result of increasing concern
arising from evidence of the severe health effects of childhood lead
poisoning. A U.S. study has documented serious lead dust hazards caused by
conventional remodeling and painting practices in residential properties and
another federal study documented the problem of "take home" lead, wherein
unprotected construction workers expose their families to lead dust
transported home from the work place. Organizations, including the EPA and
Occupational Safety and Health Administration ("OSHA"), have placed a high
priority on enforcing these standards.

In the late 1970's and early 1980's, several significant environmental
regulations were promulgated: (i) the Clean Water Act, (ii) the Clean Air Act,
(iii) the Resource Conservation and Recovery Act ("RCRA"), (iv) the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") and (v) the Asbestos Hazard Emergency Response Act. While
regulatory matters may continue to diminish generally as a market driver, the
Company believes that clarification and enhancement of laws in some areas,
such as lead regulation, can create new business opportunities. For example,
the U.S. Department of Housing and Urban Development ("HUD") operates the
Lead-Based Paint Hazard Control Grant Program established by Title X of the
Housing and Community Development Act of 1992, as amended in 1997, known as
the Residential Lead-Based Paint Hazard Reduction Act. The primary purpose of
the HUD program is to reduce the exposure of young children to lead-based
paint hazards in their homes. Lead in paint, drinking water and soil is a
major threat to human health and the environment. Lead is known to be toxic to
the human body, even at relatively low doses. In children, excessive exposures
to lead can result in brain damage leading to learning disabilities and, in
some cases, retardation. Adult exposures to excessive amounts of lead can
cause reproductive, hematological and nervous system disorders.

The HUD program provides grants between $1.0 million and $4.0 million to
state and local governments for control of lead-based paint hazards in
privately-owned, low income owner-occupied and rental housing. As part of this
effort, HUD also provides grants between $0.5 million and $2.0 million for
conducting lead-based paint hazard control in low income, privately-owned
housing units on or near Superfund or Brownfield sites. All grants are
designed to stimulate the development of a trained and certified hazard
evaluation and control industry. Evaluation and hazard control work under the
program must be conducted by contractors who are certified and workers who are
trained through a state-accredited program. In awarding grants, HUD promotes
the use of cost-effective approaches to hazard control that can be replicated
across the nation. Since 1993, $335.0 million has been awarded to 70 grantees
in 26 states and is currently being spent by such agencies.

Additional opportunities are presented by federal regulations under Title X
of the Housing and Community Development Act of 1992 which, among other things
(i) established a national requirement for training and certification of all
lead contractor workers and supervisors, inspectors, risk assessors, project
designers and other individuals involved in lead paint activities and (ii)
established new disclosure requirements applicable to all property
transactions affecting residential properties built prior to 1978.

While historical growth in the demand for environmental services has been
stimulated by regulatory compliance concerns, management believes that future
growth will, in large part, be driven by private litigation, asset
preservation and productivity considerations. As companies have become
increasingly sensitive to the potential adverse consequences of environmental
problems and the potential impact of environmental liabilities, they have
taken an active approach to managing environmental health and safety risks and
liabilities, whether or not they are subject to regulations. This trend is
observed in such areas as steel structure repainting projects, real estate
transaction assessments and indoor air quality initiatives.

For example, bridge and tunnel authorities undertaking the removal of lead-
based paint from large steel structures are seeking to establish monitoring
systems to prevent the dispersion of lead dust into the environment, which
could lead to future liabilities. The Company believes that such actions are
motivated in large part by concerns regarding the potential liabilities
associated with lead contamination. Similarly, concerns over

environmental liability risks have made environmental assessments an integral
component of the due diligence process for commercial real estate
transactions. Financial institutions frequently require environmental
assessments prior to loan origination, refinancing, and foreclosure
activities, while insurance companies increasingly require environmental
assessments before issuing environmental insurance liability policies. All of
these factors create opportunities and markets for ATC to provide its
integrated environmental services.

Construction Materials Testing and Engineering Industry

Numerous specialty services are provided to the construction and the related
engineering and architectural design industries. ATC provides services in the
areas of construction materials testing and engineering, geotechnical and
civil engineering services, site surveying, roofing system inspections, on-
site client construction services and development of material specifications.

Construction of a significant structure or improvement represents a major
permanent investment for any owner, whether commercial or governmental. The
primary driver for materials testing, inspection services and geotechnical
services (soil and earth analysis) is an owner's concern that this investment
be protected by quality construction materials that meet design
specifications. Architects and engineering firms require that the quality of
construction materials and on-site soil conditions be monitored in order to
ensure that the project design conditions are being met.

Contractors, architects and engineers hire materials testing and
geotechnical consultants to test materials such as concrete, structural and
reinforcing steel, soil and geosynthetic liners both prior to commencing
design and during the construction phase of a project. The quality of
materials and their ability to conform to design specifications are critical
to the future life and constructability of the facility. Three common types of
construction materials and geotechnical tests are (i) soil tests for moisture
content and compaction density, (ii) concrete tests for compressive strength
and (iii) structural and reinforcing steel tests for tensile strength and
connection strength.

The construction materials testing and engineering industry is driven by
national and local economic conditions. Most of the construction materials
testing and engineering services provided by ATC are for projects within 200
miles of the office where the service is provided. Geotechnical consulting and
engineering services are less sensitive to geographical constraints. For these
reasons, the ATC offices providing construction materials testing and
engineering services are located in metropolitan areas identified with current
and ongoing construction activities. Construction activities can develop from
commercial, industrial, institutional and governmental entities. ATC currently
offers construction materials testing and engineering services from offices
in: Miami, Florida; Nashville, Tennessee; Atlanta, Georgia; Dallas, Texas;
Washington D.C./Baltimore, Maryland; Boston, Massachusetts; Cincinnati, Ohio;
Indianapolis, Indiana; Chicago, Illinois; Detroit, Michigan; Louisville,
Kentucky; St. Louis, Missouri; Orange County, California; and San Antonio,
Texas. Based on anticipated demand for construction materials testing and
engineering services, offices in the markets serving Charlotte, North
Carolina, New York, New York and Mobile, Alabama are currently being
considered as expansion opportunities. Construction materials testing and
engineering services are considered mature markets and a project award is
generally based on service reputation, price, client relationship, and local
competition. Delivery of services on a national basis through a network of
offices is a factor considered by national clients. Expansion of ATC's
construction materials testing and engineering services to new markets can be
achieved through tactical acquisitions of local service firms.

Except for state licensure requirements for the engineering component, there
is little regulation of the construction materials testing and engineering or
geotechnical consulting service industries. Industry standards are set by
agencies such as the American Society of Testing Material, the American
Association of State Highway & Transportation Officials, the American Concrete
Institute, the American Welding Society and several others. Construction
projects themselves, however, are governed by state and local building codes,
the stringency of which varies by location. In general, independent third
party materials testing and inspection for construction projects are required
by owners on all new commercial and public construction projects over $1.0
million. Frequently, testing and inspection requirements also apply to
renovation and repair projects as well.

Information Management Technology Industry

Information management technology services are driven by the desire for
businesses and government agencies to more efficiently manage complex
operational information utilizing the latest technologies. Economic benefits
of information management technology services are realized when the ability to
manage information maintains or creates a competitive market position for a
business. Government agencies look to information management technology
services as a means of cutting costs for many agency operations. Knowledge and
skills in the latest technological advances, along with quality service,
enable ATC to be a leading service provider in this market.

Over the last five years, the increased development and use of technology by
businesses and governmental agencies has led to a dramatic rise in the demand
for information management technology services including, project support,
software development and other computer-related services. To meet their needs,
many businesses and governmental agencies are seeking the services of
consulting firms for technical staff to supplement internal resources for the
management of complex projects and for expertise in leading edge technologies.

The information management technology services market grew by almost 25.0%
to a total of $24.7 billion during 1996 according to a special study by Input
Information Technology Intelligence Services ("INPUT") conducted for the
Updata Group, Inc. This market was expected to grow from 1996 at an annual
compounded rate of 17.3% to a total of $55.0 billion by the year 2001. In
similar studies conducted since 1993, actual industry growth has exceeded
INPUT estimates in every year. INPUT estimated in 1996 that the consulting
services segment of the industry, which is the industry's leading growth
segment, would grow at an annual rate of 21.1% to reach aggregate revenue of
$18.3 billion by 2001.

The Company believes that the demand for Internet/intranet system
development services will grow at a much faster rate as companies use the
Internet to provide their business partners with access to corporate data.

ATC provides information management technology services in general
consulting services, Internet/intranet applications development and on-site
staffing support or outsourcing.

SERVICE AND PRODUCT OFFERINGS

The Company's core service groups are (i) Environmental Services, (ii)
Construction Materials Testing and Engineering Services and (iii) Information
Management Technology Services. Other non-core services offered by ATC are
environmental analytical laboratory services, environmental insurance,
building condition surveys, construction management services, environmental
training and outsourcing of professional staff. A description of each service
group follows:

Environmental Services

The majority of ATC's project activities within this segment focus on
identifying potential environmental hazards and risk exposures and developing
regulatory and technical solutions for such problems. The major service areas
within this group are (i) Environmental Engineering and Consulting, (ii)
Industrial Hygiene, (iii) Water and Wastewater Management, (iv) Lead Risk
Management and (v) Health and Safety Training.

Environmental Engineering and Consulting. Management believes that ATC is
one of the largest providers in the environmental services industry of Phase I
and Phase II assessments of commercial and industrial properties. In addition,
ATC occasionally provides Phase III and Phase IV monitoring and testing on
these properties. The Company has a significant presence in the Phase I and II
markets, particularly Phase I work associated with property transfer
transactions. In addition, ATC effectively utilizes its national
infrastructure of offices to conduct Phase I assessments on large, multi-site
property portfolios under the direction of ATC's National Commercial Accounts
Program.

Phase I assessments generally involve a visual inspection of the site, an
examination of aerial photographs, an investigation of past land uses and a
review of other sources of site data that may be appropriate. As a result

of its research and visual inspections, further investigation under a Phase II
may be recommended. Phase I assessments are now required in the majority of
commercial real estate transactions. Under standards promulgated by the
American Society of Testing and Materials, a minimum amount of environmental
due diligence must be performed by a commercial real estate buyer to qualify
for the "innocent landowner defense" as outlined under CERCLA. If necessary,
Phase II testing involves sampling of soil, water and other materials from a
site utilizing ATC's analytical laboratories to identify and quantify the
presence of specific compounds.

ATC provides hazardous waste consulting services to corporate and
governmental clients. Many of these clients are large regional and national
corporations with multi-site consulting needs. The market for these services
are primarily driven by client relationships and quality of service delivery.
Regulatory drivers are RCRA and CERCLA plus state-specific hazardous waste
regulations. Prerequisites for inspection by a client are strong regulatory
experience at both the federal and state level as well as expertise in site
investigation strategies and site remediation. Under the RCRA Corrective
Action Guidelines, tasks required on hazardous waste projects may include
regulatory strategy development, site investigations, corrective measures
studies, remedial design and remedial construction management. Similar tasks
are required under the CERCLA regulatory process. In addition to hourly
consulting fees, project revenues come from site drilling services and
analytical services which are also provided by ATC. In order to coordinate and
develop the technical resources of ATC in this complex service area and to
provide a mechanism for nurturing long-term client relationships with targeted
clients, ATC's Hazardous Waste/Brownfield Development Program was created. New
market opportunities exist in the areas of site characterization, regulatory
strategy development, environmental insurance, remedial design and remediation
management of Brownfield sites. ATC has formed business relationships with
three firms specializing in this market.

ATC provides environmental compliance services to industrial, commercial and
governmental clients. These services include environmental compliance audits,
wetland delineation and mitigation, environmental impact studies, air quality
permits, ambient air quality modeling and sampling, continuous emission
monitoring system design and solid waste landfill design and permitting.
Market drivers for these services are state and federal regulatory
requirements for compliance. Demand for these services varies by state
depending on the progress made by a particular state in promulgating and
enforcing regulations. Air quality permitting and consulting services are
currently in demand by many corporations.

ATC also offers hydrocarbon environmental services to companies engaged in
exploration, refining, distributing and retailing of petroleum products.
Typical facilities requiring these services are drilling operations,
pipelines, terminals, refineries, bulk storage facilities, convenience stores
and gas stations, and truck stops. Typical projects may include site
assessments, risk assessments, regulatory strategy development, above-ground
and underground tank testing, remediation design and construction, on-site
recovery and maintenance and state funding recovery. Market drivers are state
and federal regulatory mandates; however, clients are sensitive to value-added
pricing and the quality of services. For the reasons noted above, the
petroleum industry tends to award large volume contracts to a select number of
service providers that can meet these requirements. ATC's National Petroleum
Industry Program is focused on maintaining client relationships, ensuring
quality service delivery and coordinating internal pricing strategies. ATC's
success and commitment to the petroleum industry has made it a leading service
provider in this market. Management believes that targeted clients in this
industry can generate annual revenues for ATC in excess of $10.0 to $15.0
million over the next five years. Other integrated services offered by ATC to
petroleum clients include Phase I and Phase II assessments for property
transactions, environmental insurance, geotechnical engineering, construction
materials testing and engineering, analytical laboratory services and
construction management.

Industrial Hygiene Services. The Company offers a variety of industrial
hygiene services, including asbestos management, industrial hygiene
investigations and analyses, indoor air quality services and industrial
hygiene laboratory services, each as described below.

ATC provides asbestos management services including comprehensive asbestos
testing and consulting. These services may begin with a survey of facilities
to determine the condition, type, quantity and location of

asbestos. After gathering field samples, the Company may utilize polarized
light microscopy, phase contrast microscopy and transmission electron
microscopy to analyze asbestos fibers. Other services include risk assessment,
remediation design for asbestos abatement, industrial hygiene services before,
during and after the asbestos removal process, development of operations and
maintenance training programs for facilities personnel and asbestos awareness
seminars for client personnel.

ATC's services are designed to enable building owners and operators to
comply with federal, state and local regulations for asbestos control by
providing a comprehensive approach for controlling or removing asbestos.
Management believes that ATC is one of the largest providers of asbestos
management services in the United States and that ATC will continue to gain
market share in the industry because small regional competitors will be unable
to meet the demands of national, multiple-site projects. ATC's technical
personnel include registered architects, professional engineers, certified
industrial hygienists, certified safety professionals and asbestos
specialists, all with extensive experience in managing asbestos materials.
Such personnel are licensed and certified by federal, state and local
agencies.

As part of the services related to industrial hygiene investigations and
analyses, ATC evaluates potential health hazards in occupational settings,
including hazards arising from exposure to chemical or biological substances.
Potential hazards include corrosive chemicals, solvents, gases, toxic dusts,
radiation, lasers, noise, lighting, heat, bacteria and other pathogenic
organisms. Results of these evaluations determine the extent of exposure to
potentially hazardous substances, and methods can then be developed to control
and minimize associated risks. Field measurements are used to determine
compliance with governmental regulations and other standards. After corrective
measures are designed and implemented, ATC provides follow-up monitoring which
is designed to ensure that workplace exposures are minimized.

Healthy indoor air quality is recognized as an essential factor in promoting
comfort and welfare. ATC's indoor air quality specialists conduct
investigations designed to identify (i) sources of indoor air pollution and
(ii) possible effects on occupants. A thorough building system investigation
evaluates mechanical and ventilation systems. An inventory of chemicals, air
contaminants, office equipment, plants, harmful sub-chemicals, air
contaminants and maintenance practices are part of the evaluation. ATC
typically recommends solutions that are customized to each specific facility
and problem. Market drivers are related to workplace environment and
productivity issues.

ATC's laboratory services utilize in-house analytical testing facilities
capable of detecting and quantifying a wide variety of materials, including
asbestos-containing materials and hazardous substances. These laboratories are
certified in states where ATC's industrial hygiene services are offered. ATC
provides industrial hygiene services to commercial, institutional and
industrial clients and governmental entities. Compliance with federal, state
and local regulations is a market driver; however, general concern for human
health and the environment, along with potential liabilities, are also
significant incentives for clients requesting these services.

Water and Wastewater Management. Due to the acquisition of BCM, ATC has the
ability to provide water and wastewater services for municipal and industrial
clients. For municipal water clients, these services include the design,
operation, maintenance and construction management of water supply systems and
reservoirs, water treatment plants, water pumping systems, pipelines and
elevated storage tanks. Municipal sewerage system services include the design,
operation and maintenance, financial rate analysis and construction management
of sewers, lift stations and wastewater treatment systems. Market drivers for
these services are the demand for new or upgraded water and sewerage systems
in developing residential and commercial areas. Furthermore, old water and
sewerage systems constructed prior to the 1980's are deteriorating and often
require upgrading. Regulatory requirements for meeting water quality criteria
and local moratoriums on area developments are often drivers for these
services. Municipal client relationships generally require a significant
effort to develop; however, once established, such relationships can provide
long-term demand for repeat services by a provider.

Industrial water and wastewater services are more client-specific with
regard to the types of services required. Prerequisite qualifications for
selection by an industrial client are knowledge and experience with

various manufacturing processes along with expertise in a variety of
biological and physical/chemical processes. Client relationship development
and quality service delivery are key factors in maintaining repeat business
with industrial clients. Typical project tasks may include wastewater
characterization studies, permitting and regulatory strategy development,
process water and material balances, waste treatability studies, water and
wastewater treatment system design, system operation and maintenance and
construction management. Market drivers include the need to expand an
industrial facility's production rates and compliance with treated effluent
discharge criteria established by state and federal regulatory agencies. Other
integrated ATC services may include hazardous waste management services,
analytical laboratory services, construction materials testing and engineering
and environmental insurance.

Lead Risk Management Services. ATC was one of the first companies to provide
national lead risk management services because it had the first state-
accredited lead risk management training institute in the United States. ATC
is a co-founder of the National Lead Abatement Council, the first trade
organization representing contractors, inspectors, vendors, attorneys and
public officials engaged in managing lead risks. ATC maintains a high degree
of visibility and credibility in the lead services arena through participation
in professional and standard-setting organizations and through publishing
articles in trade publications.

Until recently, lead risk management services were sought primarily to
establish compliance with lead poisoning prevention regulations. However, the
market is now expanding as clients increasingly seek voluntary risk reduction
programs and defend against a proliferation of lead poisoning lawsuits.

Federal law requires lead paint testing of all federally assisted public
housing authority projects nationwide, and comprehensive abatement of lead
paint identified in these projects. ATC has provided lead paint testing and
abatement project management services to numerous public housing authorities
throughout the United States. ATC is currently pursuing opportunities created
by federally funded programs.

Management believes that the market for lead risk management services has a
potential for high growth rates over the next five to ten years. In order to
focus and develop its technical resources in this area of specialization and
provide a program dedicated to marketing these services to targeted groups,
ATC formed the Lead Risk Management Program in 1996.

ATC's lead risk management services are comprised of corporate lead risk
management services, steel structure and industrial compliance services and
residential lead paint testing and project management services.

ATC develops corporate lead risk management programs, policies and
procedures catering primarily to insurance companies, lending institutions,
law firms and large real estate managers. Policy development typically entails
an examination of a client's real estate with respect to potential lead
liabilities. Working closely with corporate legal and technical divisions, ATC
recommends policies and procedures to ensure lead-safe management of
properties and compliance with applicable lead poisoning prevention
regulations. The Company's corporate lead risk management services also
include designing and implementing compliance training seminars and workshops.

ATC also offers lead paint litigation support services exclusively in
support of property owners, managers, lending institutions and insurers. These
services include case consultation, regulatory analysis, document and
deposition review, expert testimony, as well as site investigation and testing
services.

ATC provides comprehensive environmental monitoring of surface preparation
activities that include the removal of lead and associated coatings from steel
structures. Nationwide, hundreds of thousands of petroleum storage tanks,
water tanks, transportation bridges and other major structures are made of
steel and painted with coats of lead-based paints and lead primers. These
structures require periodic maintenance, including full removal of the lead
paint and primers followed by re-painting to prevent corrosion. ATC employs
trained engineers and prepares abatement specifications to guide major
customers through lead removal activities in accordance with all federal,
state and local regulations.

ATC provides residential property owners and managers with testing and
project management services for the analysis and abatement of lead
contamination in paint, soil, air and drinking water. Consultation services
include conducting surveys to identify lead problems, and designing optimal
procedures for the removal of lead paint. Project management services include
providing construction monitoring of lead projects to prevent exposure to lead
dust.

Health and Safety Training. The Company has established several health and
safety training and advisory programs. ATC operates training schools under the
name The Environmental Institute, as well as under ATC Associates. Management
believes that the Environmental Institute is a leading environmental services
learning center. The Company develops and presents public and private training
courses each year for those involved in environmental, asbestos, lead,
hazardous materials and safety and health issues. "Right-to-Know" programs in
accordance with mandates by OSHA, the EPA and some state regulations are
designed to communicate information regarding the hazards of chemicals to
workers and communities. ATC routinely customizes courses to meet specific
client needs. The Environmental Institute also provides basic technical
training for ATC's professionals.

Construction Materials Testing and Engineering Services

ATC provides testing and client representative services related to soil,
concrete and steel materials used in the construction industry. These services
are divided between two broad categories (i) construction materials testing
and engineering and (ii) geotechnical testing and engineering. From the
preconstruction stage of evaluating materials to the completion of the
project, ATC's range of services supporting construction projects include
quality assurance and quality control, construction specifications, test
evaluations, materials performance documentation and problem solving. These
services are conducted in ATC's laboratories prior to and during construction,
in the fabrication plant and at the construction site.

ATC's expertise in these areas provide valuable assistance to clients in the
construction of foundations, highways, railroads, dams, bridges, transmission
towers, buildings, airports, industrial plants, water supply facilities,
wastewater treatment facilities, dock and waterway facilities, solid waste
landfills, power plants and many other structures. Potential clients include
architects, engineers, contractors, commercial developers, local and federal
government agencies and corporations.

ATC provides state-of-the-art testing of concrete and structural and
reinforcing steel. Through proven systematic methods and procedures of quality
control management, ATC customizes project work to meet the specific needs of
the client. As a result of its national presence, ATC is able to deliver
materials testing services on-site for the duration of a construction project,
giving it a competitive advantage over regional and local providers.

Concrete is tested during and after placement to measure the mixture and
strength of concrete. Specifications are developed by the architect or
engineer and are customized for the design of the structure or foundation.

Steel structures are tested for deficiencies in two main areas, the beam
welds and the fastening bolts. While many steel tests are performed at the
project site, tests are also done at the steel fabrication plant, where the
process can be monitored and imperfections can be corrected more efficiently.

Concrete and steel samples collected in the field are transported back to a
local ATC laboratory for analysis. Field representatives are deployed to the
job site from the nearest area office providing these services. Typically, a
200-mile proximity to the job site is the most economically feasible distance
for providing these services. Therefore, ATC only provides these services in
areas with construction activities to support the necessary operational
resources. Periodically, field offices are established to accommodate large
projects.

Geotechnical Engineering and Consulting Services. ATC's geotechnical
engineering and consulting services involve the analysis of soil data and
design of structures supported on or within the earth. Geotechnical

services begin with the project planning and design phase of a project, extend
through construction, and often continue through the service life of a
structure. Geotechnical engineers, geologists and earth scientists conduct
geotechnical, subsurface explorations to ascertain the behavior of soil, rock
and groundwater as affected by existing geologic features and new construction
activities. ATC's professionals have expertise in soil and rock mechanics,
geophysics and earthquake engineering. The design of a subsurface program
requires familiarity with local geology and a thorough knowledge of economical
construction methods. ATC provides expertise to customers through its
extensive geographic distribution of offices staffed by professionals with
expertise in a wide variety of soil conditions and physiographic provinces.

Soil tests are performed to determine soil compaction characteristics both
before foundation design and after excavation or soil placement has taken
place. The purpose of these tests is to determine the stability and load-
bearing characteristics of a soil before, during and after construction. ATC
uses the expertise of its geotechnical engineers, geologists and experienced
field drilling personnel to design a field exploratory program. The field data
and samples are brought to certified ATC soils laboratories for further
testing and evaluation. The information obtained during the field exploration
and laboratory testing is used to provide the client with cost-effective
designs for high-rise building foundations, site improvements, tunnels, dams,
manufacturing facilities, landfills, bridges and many other structures. ATC
also provides specific recommendations to avoid delays and cost overruns
during construction, particularly in the weather-dependent site preparation
phase of a project. An engineering report is prepared under the direction and
review of a licensed professional engineer familiar with the particular
geologic conditions and engineering practices of the project area.

Information Management Technology Services

ATC's information management technology services encompass all phases of
information system design, development, maintenance and management in client
server and mainframe-based environments. The Company also provides support to
clients in maintaining computer systems and in areas such as help desk
management and other system and network support services. The Company's
information management technology services fall into the following four
categories: (i) general information technology consulting services; (ii)
internet/intranet applications development; (iii) outsourcing services; and
(iv) environmental information management technology services.

The Company's general information management technology consulting services
are designed to provide highly-trained technical personnel to meet clients'
supplemental staffing needs. Such personnel typically provide services in the
areas of design, programming, testing, implementation, maintenance, support,
data conversions and the evaluation of networks, databases and operating
systems. These services are generally provided on an hourly billing rate
basis.

Through its Internet/intranet applications development services, the Company
provides leading-edge technology design and implementation services in the
development of dynamic database applications that operate over clients'
customized intranets or through the Internet. These services can include web
site hosting services, where appropriate, which are used to segregate the
applications database from a client's internal data base systems.

As part of its outsourcing services, ATC offers outsourcing staff support
services to provide staffing and management of all aspects of an information
management technology project or service within guidelines established by the
Company and the client. The Company's outsourcing service offerings include
help desk support, remote network administration and Internet site
development, hosting, maintenance and support.

ATC provides information management technology services related to
environmental data, data storage and access and regulatory compliance
documentation. This capability, along with ATC's core environmental services,
national infrastructure, depth of professional expertise and environmental
insurance products, has been a competitive advantage in winning certain
national contracts.

Market demand for these services is high, and pricing strategies typically
allow high labor rate multipliers. This is especially the case for critically
needed expertise by a client when information management technology systems
are inoperable due to software or hardware problems. Prospective clients for
ATC's information management technology services include corporations,
institutions and governmental agencies.

Other ATC Products and Services

In addition to the core services described above, ATC maintains specialized
services that can be integrated with the overall needs of its clients. This is
part of ATC's overall business strategy to build and maintain client
relationships while adjusting to the market demand for professional services.
Most of these services have either developed within the last five years or
been obtained through recent acquisitions. The following is a description of
some of the non-core services offered by ATC to complement its core business.

Environmental Laboratory Analytical Services. ATC provides environmental
laboratory analytical services to outside clients as well as to internal
operations. Full-service analytical laboratories are located in Atlanta,
Georgia; Indianapolis, Indiana; Woburn, Massachusetts; and Dallas, Texas and
cover organic and inorganic analyses of soil, water, waste and gas media.
These laboratories as well as various other ATC offices also provide analysis
of asbestos materials. State and federal certifications are maintained by
ATC's laboratories for conducting tests under strict audits established by
state and federal agencies' quality assurance protocols. Annual
recertification procedures are typically required to ensure that laboratories
continue to operate under the latest standards of practice. Laboratory service
clients are comprised of commercial, industrial, municipal and federal
government clients. On many occasions, these services are provided as support
to other internal projects and services offered by ATC. However, due to market
demand, ATC's laboratories obtain over half of their revenues from outside
clients, many of which are direct competitors of ATC.

Environmental Insurance. As a result of the recent acquisition of EWI, ATC
can now offer environmental insurance products to existing and new clients. In
the last two years, numerous new insurance products have been developed to
meet the increasing demand by owners or operators for liability protection and
risk limitation against environmental problems. Examples of new insurance
products include: (i) environmental risk transfer insurance for sellers and
buyers of real estate; (ii) lender protection insurance; and (iii) remedial
cost cap insurance. Management believes that the ability to offer innovative
environmental insurance products to its clients is a distinct advantage in the
environmental services industry that will allow ATC to further meet the
special needs of its clients. Prospective clients for these products are
lending organizations, commercial developers, real estate holding companies,
municipalities and large corporations. Insurance premiums can vary from
several thousand dollars to several hundred thousand dollars, depending upon
the extent and amount of coverage required. These costs, although significant,
are seen as reasonable risk management tools by a client when spread across a
portfolio or when necessary to close a transaction or avoid carrying or
incurring a major liability on a corporate balance sheet.

Building Condition Surveys. As part of its integrated service strategy for
commercial and industrial clients, ATC also offers building condition surveys.
As a general rule, building condition surveys involve an evaluation of the
facility's heating, ventilation and lighting systems, water services, roofing
system and structural/ architectural construction. This service is frequently
associated with the purchase of real estate where the purchaser requires an
evaluation of operation and maintenance exposures of property prior to
closing. These services are also integrated with other ATC commercial and
industrial project services such as Phase I and Phase II assessments, asbestos
assessments, indoor air quality consulting and lead risk management. ATC is in
the process of promoting and developing building condition surveys on a
national level.

Construction Management Services. Through its effort to serve its clients'
needs and generate additional profitable revenue sources, ATC extends its
services to include construction management services. These services range
from serving as the client's field representative during construction to
complete management and responsibility for project construction. The role of
the client representative is to ensure that the construction is done according
to the plans and specifications developed by either ATC or the
architect/engineer. These services are typically billed on either daily rates
or hourly rates plus expense reimbursement.

An example of such services includes the oversight of construction of a
water or wastewater treatment facility for a client. Such projects are
generally long duration assignments. Other client opportunities may occur when
a client desires to have a project completed on a "turnkey" basis, which
covers not only the facility design but also its construction and startup
operation.

MARKETING AND SALES

Marketing, Environmental and Construction Materials and Engineering Testing
Services. The Company provides its professional consulting, engineering and
testing services in the environmental and construction industries to Fortune
500 companies, small companies, real estate property owners and managers and
federal, state and local governments. The Company's contracts are obtained by
its professional sales staff through relationship building followed by
proposals and bidding. Referrals from existing and former clients, architects
and engineers are a significant source of contract leads. The Company has been
able to sell both environmental services and construction materials testing
and engineering services to the same clients.

Consistent with trends towards focusing on litigation, liability and cost
management, there is an increasing tendency for companies to obtain a greater
share of their environmental services from a smaller number of large national
service providers. Industry observers attribute this trend to (i) the need for
broader services, (ii) the desire to reduce the number of consultants used and
(iii) secondary issues such as minimizing liability exposure through the use
of large firms carrying greater insurance and indemnity coverage. The Company
believes that this trend presents a significant opportunity for firms, such as
ATC, that have the service diversity, the technical skills, branch office
coverage, team mobilization capabilities and financial resources to perform
the services and provide the insurance and indemnity protection demanded by
large corporate and governmental clients.

To take advantage of this trend, ATC's overall marketing strategy is a
combined national and regional approach. National efforts are directed by
senior professionals of the Company, while regional efforts are typically
directed either by a regional or branch manager or by a sales and marketing
professional. The Company's regional sales and marketing departments generate
leads, act as proposal administrators, perform technical writing and generally
support the Company's sales efforts. In addition, senior technical and sales
staff have been assigned to market specialized services to specific sectors
such as the PCS/Wireless communications industry and Brownfield initiatives.

ATC presently markets its environmental services and construction materials
testing and engineering services through its network of branch offices located
in 34 states. Direct marketing is accomplished by technical sales
representatives, technical personnel and management personnel who routinely
call on prospective clients. ATC also utilizes government and industry
publications to identify potential services and requests for project proposals
for submission of competitive bids. In addition, ATC markets its services
through its environmental seminars and training courses for existing and
potential clients.

Marketing, Information Management Technology Services. The Company provides
information management technology consulting services to Fortune 500 and other
clients, including major companies in the telecommunications, financial
services and pharmaceutical industries. A significant majority of the
Company's information management technology service revenue is derived from
its existing client base. The Company obtains new clients through personal
sales presentations, telemarketing, referrals from other clients and referrals
from current and former staff. In addition, ATC has found that a significant
need for information management technology services exists among its present
environmental services and construction materials testing and engineering
clients and as a result, cross-selling between these areas has been
advantageous.

National Technical and Sales Programs. Recent trends in the engineering and
consulting market require that a service provider commit considerable
resources toward maintaining and developing client relationships. This shift
from project-specific to long-term client relationship partnering requires a
service provider to dedicate both technical and marketing resources toward
tailoring services for a client. It also requires the provider to maintain a
broad range of responsive, quality services. The rewards of such client
relationship partnering and quality, service-focused programs are continued
revenues from repeat customers and, in many instances, sole source
solicitation and award of work to the firm.

ATC's two initial national programs were the National Commercial Accounts
Program, started in November 1995, and the Lead Risk Management Program,
started in March 1996. Revenues from the National Commercial Accounts Program
are derived primarily from real estate assessment services provided to banks,
insurance companies, real estate management companies and retailers. The Lead
Risk Management Program's revenues are derived primarily from local and state
housing authorities, municipalities and financial institutions.

In May 1996, ATC established the Hazardous Waste Management/Brownfield
Development Program. This program was created to develop, coordinate and
market ATC's hazardous waste consulting services primarily targeted at large
industrial clients. In response to the emerging Brownfield redevelopment
market, ATC also established business relationships with firms specializing in
the identification, purchase and resale of environmentally-impaired
properties. Since April, 1997 when these relationships were formed, ATC has
been awarded two Brownfield projects.

In August 1996, ATC established the Federal Program which is focused on
procurement initiatives from the U.S. Postal Services, the Army Corps of
Engineers, the Veterans Administration and several other small federal
government agencies. Much of this work is derived from subcontracting or team
relationships with larger federal government contractors. The purpose of this
program is to coordinate and maximize ATC's efforts to obtain business from
the federal government.

In March 1997, ATC initiated the PCS/Wireless Communication Program. In
1995, it was anticipated that up to 100,000 towers would be needed by the year
2000 to deploy networks for mobile radio and PCS services. As of June 30,
1997, there were over 38,000 operating sites. ATC services required for each
tower installation include environmental, geotechnical, structural and
construction materials testing and engineering. Since its inception, the
program has received project awards from six nationally known communication
companies.

In July 1997, ATC formally established the Petroleum Services Program to
focus on coordinating and expanding ATC's services to existing and targeted
retail and fully integrated petroleum companies. Eligible facilities for ATC
services include underground and above-ground storage tank installations,
terminals, pipelines and refineries. Currently, eleven nationally-known
petroleum companies are managed by the program.

In order to capitalize on emerging high growth markets and services, ATC
plans to continue adding new National Programs. One program under
consideration is an international business development program. The Company
intends to expand its operations into international markets, beginning with
the Asia-Pacific region. ATC is currently providing asbestos management
services to Mitsui Fudosan in Japan and is designing a wastewater treatment
facility for a U.S. multi-national corporation in China. The Company intends
to use these and other relationships to pursue new opportunities in the Asia-
Pacific region and, if appropriate, establish an international business
development program. As part of its acquisition strategy, ATC will also
consider candidate firms with existing operations or business relationships in
attractive international markets.

KEY CLIENT SECTORS

ATC's services and products are applicable to a full range of business,
manufacturing, institutional and governmental sectors. However, based on
demand for its services, existing relationships and revenue generation
potential, ATC has targeted eight key client sectors for development under its
national and regional sales activities. Those key client sectors, in order of
priority, are:

1. Petroleum Industry
2. Chemical Industry
3. Financial Institutions
4. Real Estate Management and Development Firms
5. Municipalities
6. Public School Systems
7. Public Housing Authorities
8. U.S. Army Corps of Engineers

COMPETITION

The environmental services, construction materials testing and engineering
and information management technology consulting industries in which the
Company operates are subject to intense competition. In addition to the
thousands of small environmental consulting and testing firms operating in the
United States, ATC competes with several national environmental engineering
and consulting firms including Law Companies Group, Inc., Dames & Moore, Inc.
and Professional Service Industries, Inc. In the information management
technology consulting market, ATC competes with many small and medium-sized
firms as well as large temporary staffing companies, including The Olsten
Corporation, Corestaff, Inc. and Accustaff Incorporated, among others, and
large systems consulting firms.

Certain of ATC's present and future competitors may have greater financial,
technical and personnel resources than ATC. It is not possible to predict the
extent of competition that ATC will encounter in the near future as the
environmental services, construction materials testing and engineering and
information management technology consulting services industries continue to
mature and consolidate. Historically, competition has been based primarily on
the quality, timeliness and costs of services. The ability of ATC to compete
successfully will depend upon its marketing efforts, its ability to accurately
estimate costs, the quality of the work it performs, its ability to hire and
train qualified personnel and the availability of insurance.

GOVERNMENTAL REGULATION

Public concern in the 1970's and 1980's over health, safety and preservation
of the environment resulted in the enactment of a broad range of environmental
laws and regulations. This growth has slowed somewhat in the 1990's. However,
the currently existing laws and their implementing regulations affect nearly
every industry in the United States and are expected to continue to stimulate
demand for ATC's services.

Most environmental laws and regulations are promulgated by Congress and
departments and agencies of the federal government. Many of the federal
regulations contemplate enforcement by state agencies and adoption by the
states of similar regulations which must meet the minimum federal
requirements. In areas of environmental law where federal regulation is
silent, the states may adopt their own environmental laws. Local governments
such as counties and municipalities may also enact and enforce environmental
laws that address local concerns.

Those federal agencies whose regulations, guidelines or standards have the
greatest potential impact on ATC are:

1. The EPA, which through a pervasive body of laws and regulations,
including statutes, such as the Clean Air Act, CERCLA, the Clean Water Act,
the National Environmental Policy Act and the Asbestos Hazard Emergency
Response Act and regulations such as the National Emissions Standards for
Hazardous Air Pollutants, regulates a very broad spectrum of industrial,
commercial and governmental activities, including the handling and disposal
of hazardous waste and the cleanup of asbestos contamination;

2. The United States Department of Labor, which, through OSHA requires
particular work practices, sets limits for worker exposure to hazardous
substances on the job, requires employers to provide employees in certain
industries with protective devices and requires employers to maintain
records for periods of up to 30 years;

3. HUD, which sets the standards for and funds the testing and
remediation of lead-based paint in publicly funded housing; and

4. The United States Department of Transportation, which regulates
packaging and transportation of hazardous waste by all who transport or
cause the transport of hazardous waste.

The EPA, OSHA and HUD have each published regulations and guidelines to
safeguard employees and the general public from environmental hazards. Federal
regulations specify work practices for removal of asbestos and lead containing
materials from buildings. Federal law also presently requires employers to
inform workers,

and in some places the general public, of the dangers connected with hazardous
chemicals in the workplace. These "Right-to-Know" laws usually require
employers to list all hazardous chemicals in the workplace, to instruct
workers about safe work practices and to train workers on how to respond in
the case of exposure to or release of hazardous chemicals.

Most states and local governments have adopted licensing and certification
requirements for workers engaged in the environmental industry, which require
workers to attend training classes. ATC is currently accredited by the
National Voluntary Laboratory Program and expects to continue to participate
in all future National Institute of Standards and Technology programs.
Furthermore, ATC maintains various licenses and certifications pertaining to
its laboratories, training facilities and certain field testing equipment in
addition to licenses and certification of its employees. ATC has not
experienced, and does not contemplate, any material difficulties in complying
with regulatory and licensing provisions applicable to its business. ATC has
received citations from governmental authorities, none of which have had a
material adverse effect on the Company's business operations.

The information management technology industry is not subject to significant
government regulation or certification requirements. It is affected by tax
regulations concerning the definition of independent contractors and by
regulations governing the immigration of non-U.S. technical staff who make up
a growing percentage of the staff available for consulting assignments.

ORGANIZATIONAL STRUCTURE

ATC's organizational structure consists of five operating regions and
corporate support operations in Sioux Falls, South Dakota; New York, New York;
and Woburn, Massachusetts. Branch offices within each region are encouraged to
share projects and technical resources to accomplish common deadlines and
goals. Profits and losses are measured at the branch level to ensure
profitability of all operations. Operational management and performance
incentives, however, are maintained at the regional level to foster
coordination of effort and technical resources in broad geographic areas.

OFFICE AND SUPPORT SERVICES

ATC operates through 73 branches located in 34 states. The branch is the
basic economic and functional unit of the Company through which all services
are provided. Personnel located in each office are experienced in developing
and implementing solutions which meet the requirements of local regulations.
The Company monitors all branches with an experienced staff of regional vice
presidents. ATC specialists are responsible for introducing new services to
customers, managing projects within budget and meeting pre-established quality
control standards. Each region also has a dedicated sales and marketing staff
and a financial controller. ATC has created systems and controls at the branch
level through the use of standardized operating procedures.

Financial controls involve ongoing review of specific benchmarks, key
components of which include, bi-weekly sales and profit projections, payroll
expenses and employee utilization rates. Branch managers are responsible for
hiring, training, and motivating branch personnel. Incentives at ATC are based
on a bonus program directed at regional performance. The bonus program has two
key performance criteria: (i) operating margins and (ii) days sales
outstanding. Bonuses for a region are earned on an increasing scale with
minimum thresholds for Branch Operating Profit to encourage maximum operating
performance and the timely collection of accounts receivable. The Company
believes that the incentive program has allowed it to achieve a high retention
rate for managers.

The Company intends to relocate all administrative functions located in
Sioux Falls, South Dakota, consisting primarily of accounting, human resources
and MIS support, to Woburn, Massachusetts. Severance costs associated with the
relocation are expected to be nominal. It is anticipated that the relocation
will be complete by the end of the first quarter of fiscal 1999.

PERSONNEL

As of November 30, 1997, ATC employed approximately 2,018 employees, 1,691
of which were full-time employees and 327 of which were part-time staff
members. ATC's employees consist of 1,585 technical and professional
personnel, 54 sales and marketing persons and 379 administrative employees
inclusive of executive officers. The backgrounds of ATC's technical and
professional staff include, among other disciplines, environmental
engineering, information management technology, industrial hygiene,
hydrogeology, chemistry, biology and geology. ATC from time to time hires
additional personnel on a temporary basis.

ATC believes that it has been able to establish and maintain a stable work
force of experienced personnel by paying competitive wages and by providing
standard benefits. ATC believes that its own training school has helped to
ensure the availability of a trained work force. To help maintain and grow its
information management technology staff, ATC has increased the proportion of
work performed in its facilities so that these projects may be used to provide
enhanced training and retention opportunities for staff when they are not
engaged at a client site.

FACILITIES

ATC leases office space, laboratory facilities, temporary housing facilities
and storage space under operating lease agreements, which have varying dates
of expiration. ATC utilizes all of its leased facilities near maximum
capacity. However, ATC does not foresee any difficulty in leasing adequate
supplementary facilities, if necessary, and therefore does not believe any of
its leases are material. The Company leases the facility housing its principal
executive, administrative, operations and laboratory facilities, aggregating
approximately 40,000 square feet located at 104 East 25th Street, New York,
New York at a base rate of $362,700 per annum with a term ending on September
30, 2001. ATC has three separate lease and sublease agreements which, on an
aggregate basis, cover the premises housing its consulting and laboratory
operations at 600 West Cummings Park, Woburn, Massachusetts, comprised of
approximately 24,567 square feet at an aggregate base rent of approximately
$310,844, with lease terms expiring at the end of the summer in 2002. ATC
entered into three leases with the Mann Realty Company in connection with its
acquisition of the assets of ATEC. These leases cover the premises located in
Indianapolis, Indiana; Dallas, Texas and Atlanta, Georgia. These leases cover
15,827 square feet, 12,150 square feet and 18,700 square feet, respectively,
at annual rents of $193,512, $117,540 and $209,936, respectively. Each of the
three leases has a ten-year term, all of which commenced on May 24, 1996, with
an option to terminate after four years upon the occurrence of certain
specified events. Although the Company believes it can lease similar space, no
assurances can be given that the Company will obtain leases at the same
locations and at the same lease rates. As a result of the Transactions, the
Company and certain of its subsidiaries are in technical violation of certain
of their leases which require prior written consent upon assignment or a
change of control. To the extent such consent is not obtained, the Company may
incur incremental rental expenses for its facilities or incur relocation costs
and there can be no assurance that any such expenses or costs would not have a
material adverse effect on the Company's financial position or results of
operations.

In addition, ATC utilizes various laboratory, field and computer equipment
which are owned or leased. ATC also rents equipment on a project-by-project
basis.

PROFESSIONAL TRAINING AND QUALITY CONTROL

ATC's commitment to quality control and high quality work and work practices
was first established when the Company was primarily an environmental
laboratory. This commitment is demonstrated by ATC's corporate quality
awareness strategy, the principles of which are founded on client
satisfaction, participation of employees at all levels, problem prevention and
continual quality improvement. ATC insures quality awareness through both
internal and external training at branch, regional and national levels. Branch
training covers all phases of regulatory requirements by discipline as well as
specific technical training developed through ATC's National Programs.
Additionally, field workshops and mentoring programs are commonly used. Formal
training is

provided by the Environmental Institute and ATC's other training divisions and
supplemented by outside training providers as necessary.

INSURANCE

ATC has secured a "claims made" professional liability insurance policy,
including contractor's pollution liability coverage. The professional
liability insurance policy has a two-year term, ending on May 23, 1998, which
is subject to biennial renewal, with a per-claim and aggregate limit of $10.0
million and a deductible of $250,000 per claim, although increased limits have
been obtained on a specific endorsement basis to meet the needs of particular
clients or contracts. A "claims made" policy only insures against claims filed
during the period in which the policy is in effect. This policy covers both
errors and omissions. Under the policy, the deductible payable in respect of a
claim decreases to $50,000 per claim for the balance of the policy term, if
the Company has paid an aggregate of $750,000 during the policy term. Although
various claims have been made in the past against the Company's professional
liability/contractor's pollution policy, to date no such claim has ever
resulted in an insured loss. The Company has paid $0, $25,000 and $16,000,
respectively, for fiscal 1996, fiscal 1997 and the nine months ended November
30, 1997, for uninsured professional liability and pollution claims (i.e.,
claims that have not exceeded the $250,000 deductible) under this policy. In
the three months ended November 30, 1997, the Company recognized a $250,000
charge related to a probable loss for the uninsured portion of a claim made
under the Company's professional liability insurance policy. ATC also carries
an occurrence form general liability insurance policy in the amount of $1.0
million, with a $10.0 million umbrella; this coverage includes
products/completed operations. The general liability insurance policy has a
one-year term, ending on May 23, 1998, which is subject to annual renewal.
ATC's policies have been renewed in each of the last several years that they
have been in effect. The Company maintains a claims made directors and
officers' liability insurance policy, which was procured following the
consummation of the Transactions and procured a six-year extended reporting
period for the directors and officers' liability insurance policy that was in
effect prior to the Transactions.

LEGAL PROCEEDINGS

Recent Proceedings

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 Irvin Richter, as plaintiff (the "Richter
Complaint"). The Richter Complaint named the Company and the members of the
Company's board of directors as defendants. On or about December 18, 1997,
counsel for Mr. Richter filed with the Delaware Court a Notice of Dismissal
Without Prejudice of the Richter Complaint. 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 Action"). On or about December 18,
1997, an amended complaint was filed in the Peters Action (the "Amended
Complaint"). The Amended Complaint names the Company, the members of the
Company's board of directors, Weiss Peck and the WPG Corporate Development
Associates V, L.P. as defendants. The Amended Complaint challenges the Tender
Offer and Merger. The Amended Complaint seeks class action status on behalf of
the stockholders of the Company. The plaintiff in the Peters Action claims
that the offer price for the Company's Common Stock is inadequate and that the
defendants have breached their fiduciary duties to the plaintiff and other
stockholders of the Company. The plaintiff seeks, among other things, to
enjoin the Transactions or compensatory damages. On January 7, 1998, a motion
to dismiss was filed by Weiss Peck and WPG Corporate Development Associates V,
L.P. On January 13, 1998, answers to the complaint were filed by the Company
and the remaining defendants. The parties to the Peters Action are currently
conducting discovery. The Company believes the allegations contained in the
Amended Complaint are without merit and intends to defend the Peters Action
vigorously; however, there can be no assurance of the outcome.

General Litigation

First Fidelity Bank, N.A., et al v. Hill International, Inc. et al.,
Superior Court of New Jersey, Law Division, Burlington County, Docket No. Bur-
L-03400-95, filed December 19, 1995. Irvin E. Richter, et al v. ATC Group

Services Inc., et al. United States District Court, District of New Jersey,
Civ. No. 96 CV 5818 (JBS) filed December 6, 1996. On December 19, 1995, a
second amended complaint was filed in the above-entitled action which joined
the Company as a defendant and included a count against the Company seeking
recovery of certain assets purchased from Hill on the grounds that plaintiff
banks held security interests in the assets and that Hill was in default under
the security agreement creating such alleged security interests. The original
plaintiffs in this action were First Fidelity Bank, N.A. and United Jersey
Bank, N.A. The primary defendants were Hill and certain of its subsidiaries,
and Irvin Richter, David Richter, Janice Richter and William Doyle. Irvin
Richter and David Richter are officers and stockholders of Hill. In April
1996, the Company filed a cross-claim against Hill, Irvin Richter and David
Richter alleging breach of contract and fraud, among other allegations and
seeking unspecified damages, including punitive damages and equitable relief.
In August, 1996, Hill and the Richters filed an answer denying ATC's cross-
claims, a cross-claim against ATC and a third party claim against certain
members of ATC's management and an employee. The cross-claim and third party
claim seek unspecified damages, including punitive damages, for defamation,
breach of the Richters' non-competition agreements and securities fraud. The
defamation claims are based (i) on plaintiff banks' allegation of fraud
against Hill and the Richters in their amended complaint, which Hill and the
Richters allege was based on defamatory statements made by ATC in settlement
discussions with the plaintiff banks and (ii) on a letter which was sent to an
account debtor of the Company by an employee alleged to contain defamatory
statements. In its answer, the Company both denies that it made defamatory
statements and asserts that the defamation allegations fail to state legally
valid claims. The breach of contract and securities claims are based on
allegations that ATC made representations concerning a registration rights
agreement to be provided in connection with options issued to the Richters as
consideration for their non-competition agreements. In its answer, the Company
denies that an agreement concerning registration rights was ever reached and
asserts that any such rights were forfeited or suspended by the Richters in
any case as a result of their conduct in connection with the asset purchase.
These related cases are in their discovery phases. In January, 1997, the
plaintiff banks dismissed their claim against ATC. On December 6, 1996, Hill
and the Richters commenced an action against ATC and the same officers and
employees of ATC alleging essentially the same claims in federal court as in
the state action. This action is entitled Irwin E. Richter et al. v. ATC Group
Services, et al., Civ. No. 96-5818 (JBS), U.S. District Court for the District
of New Jersey, December 6, 1996. ATC has answered, raising the same defenses
and additional defenses related to the timeliness of the federal claim. The
case is currently in the discovery phase. It does not create a risk of double
recovery. In the Company's opinion, the outcome of this matter will not have a
significant effect on the Company's financial position or future results of
operations, although no assurances can be given in this regard.

Commonwealth of Massachusetts v. TLT Construction Corp. et al., Civ. Action
No. 96-02281 F, Superior Court of Middlesex County, Massachusetts. This is an
action brought by the Commonwealth of Massachusetts in April 1996, against the
architects and general contractor on a renovation and construction project on
the Suffolk County Courthouse in Massachusetts. The basis of the lawsuit is
that one or more damp-proofing products specified by the architect defendants
and installed by the contractor defendant made employees in the courthouse ill
because of the off-gassing of harmful vapors. Dennison Environmental Services
Inc., ("Dennison") an ATC subsidiary, was joined on August 13, 1996, as a
third party defendant by TLT Construction Corporation, the general contractor,
because Dennison performed some air quality testing of the air in the
courthouse for the Commonwealth of Massachusetts during the construction
process. The contractor alleges that it acted in reliance on these tests in
continuing to install the material after the test report was given to it by
the state. ATC's position is that it did not commit any error or omission in
this case, that ATC made no representation to the contractors or material
supplier and had no privity with them and that Dennison's opinion concerning
short term, during-construction health effects of the off-gassing could not be
justifiably relied upon with respect to the long-term performance and health
effects of the product or its installation. This case is in the discovery
phase. At this point, ATC considers the case to be without merit, and ATC
intends to vigorously defend the action. The Company currently has in force a
professional liability insurance policy covering this claim in the amount of
$10,000,000 with a deductible of $250,000. Notice of claim has been made
regarding this action and the insurer has agreed to assume the defense. In the
Company's opinion, the outcome of this matter will not have a significant
effect on the Company's financial position or future results of operations,
although no assurances can be given in this regard.

Barrett-Moeller et al. v. ATC Associates Inc., Civ. Action No. 97-01037D,
Superior Court of Middlesex County, Massachusetts. This is an action arising
out of the same set of occurrences as gave rise to Commonwealth of
Massachusetts v. TLT Construction, Inc. described above. The action was
brought by a group of employees who worked in the Suffolk County Courthouse
during the period in which the off-gassing of harmful vapors was alleged to
have occurred. The suit seeks damages for personal injury in an unspecified
amount. Notice of this claim has been made to ATC's professional liability
insurer. The claim should be covered by insurance, subject to a $250,000
deductible.

Joan Spencer v. TLT Construction et al., Civ. Action No. 97-4161C, Superior
Court of Middlesex County, Massachusetts. This is an action arising out of the
same set of occurrences as gave rise to Commonwealth of Massachusetts v. TLT
Construction, Inc. described above. The action was brought by an employee who
worked in the Suffolk County Courthouse during the period in which the off-
gassing of harmful vapors was alleged to have occurred. The suit seeks damages
for personal injury in an unspecified amount. Notice of this claim has been
made to ATC's professional liability insurer. The claim should be covered by
insurance, subject to a $250,000 deductible.

Cambridge Housing Authority v. CON-TEST, Inc. and ATC Group Services Inc.,
Superior Court of Middlesex County, Massachusetts. This action was brought on
October 1, 1997 for damages in excess of $1,000,000 alleging that Con-Test,
Inc. breached its contract with Cambridge Housing Authority and was negligent
in performing asbestos survey work preparatory to a housing project re-
modernization project. ATC was joined as a party on the theory of continuous
business enterprise successor liability. ATC has filed an answer denying that
it was a successor to Con-Test under Massachusetts law and asserting that it
should therefore have no liability for Con-Test's acts or omissions. The
Company believes that the case is without merit because ATC does not meet the
definition of successor liability in the State of Massachusetts.

State of New York Department of Taxation and Finance. The Company has
received a notice of audit from the New York State Department of Taxation and
Finance for the three fiscal years 1993, 1994 and 1995. The agent has issued a
preliminary audit report, which is expected to be the basis of a formal
assessment estimated to be approximately $200,000. The Company is disputing
the agent's positions and intends to appeal any assessment if rendered. No
assurances can be given regarding the ultimate liability, if any, which may
result.

Administrative Violations

Indiana Department of Environmental Management v. ATC Associates Inc. ATC
received a Notice of Violation and Proposed Agreed Order, EPA I.D. No. IND
004939765, dated June 9, 1997, on June 12, 1997. The Notice of Violation seeks
a penalty in the amount of $120,500 for alleged violations of the federal
hazardous waste regulations and Indiana hazardous waste regulations arising
out of the handling of hazardous wastes in ATC's Indianapolis laboratory. On
January 7, 1998, ATC attended a second informal settlement conference with the
Indiana Department of Environmental Management ("IDEM"). On March 24, 1998,
the Company submitted its settlement proposal to IDEM. As a result of this
settlement process, the Company believes that this penalty can be
significantly reduced although there can be no assurances in this regard. ATEC
will be responsible for a significant part of any ultimate penalty.
Accordingly, ATC does not believe this case will result in a material loss.

Probable Claims

One Parkway Project. ATC has received notice of related potential claims by
R.M. Shoemaker Co., a Pennsylvania construction firm, and four of its workers
arising out of ATC's performance of asbestos abatement survey, design and
project monitoring services. The services were performed by ATC's Burlington,
New Jersey office on a project known as the One Parkway Project. The claims
allege that ATC: (i) failed to locate certain asbestos-containing materials in
a high rise building during its inspection of the facility; (ii) failed to
include these undiscovered materials in the design specifications for an
asbestos abatement project in connection with a renovation project on the
building; and (iii) failed to properly clearance inspect and test the areas on
which

abatement had been performed prior to demobilization of the asbestos abatement
project. The claimants allege that ATC's acts or omissions resulted in
additional corrective actions including remobilization of certain areas,
delays of the renovation project and exposure of construction workers to
asbestos contamination. R.M. Shoemaker has alleged that it sustained damages
in the amount of $1,500,000 for additional abatement costs plus additional
damages for delay. The workers' exposure claims have not been quantified. No
suit has been filed.

At this point, the Company believes that it was not responsible for the
alleged problems on this project. ATC's responsibilities on the project were
limited, and ATC believes that the alleged omissions which allegedly resulted
in the alleged losses were outside the scope of the Company's contractual
responsibilities. The Company has served notice of these claims upon its
professional liability insurer. This coverage is subject to a $250,000
deductible.

Intellectual Property. The Company possesses over one thousand computers, a
majority of which were acquired through acquisitions. No audits have been
performed to confirm that valid licenses exist for software run on all of such
acquired computers. The Company is unable to estimate the potential costs it
would incur if it were found to be in violation of any of the software
licenses.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the name, age and position of each of the
persons who are directors and executive officers of the Company and of key
employees of the Company.

NAME AGE POSITION
---- --- --------

Nicholas J. Malino....... 47 Chief Executive Officer, President and Director
Christopher P. Vincze.... 36 Chief Operating Officer and Director
Wayne A. Crosby.......... 44 Controller
Wesley W. Lang, Jr. ..... 40 Director
Nora E. Kerppola......... 33 Director
Benjamin J. James........ 41 Director
Donald W. Beck........... 39 Senior Vice President
Key Employee:
John J. Smith, Esq....... 47 General Counsel and Secretary

Nicholas J. Malino. Mr. Malino became Chief Executive Officer, President and
director of the Company following consummation of the Merger. From May 1993 to
the consummation of the Merger, Mr. Malino served as Senior Vice President,
Financial and General Operations of ATC and has been an employee of ATC since
October 1992. Mr. Malino has over fourteen years of experience in managing
professional service organizations. 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 Service Industries, Inc.

Christopher P. Vincze. Mr. Vincze became Chief Operating Officer and
director of the Company following consummation of the Merger. From July 1993
to the consummation of the Merger, Mr. Vincze served as Senior Vice President,
Financial and General Operations of ATC. Mr. Vincze has served as a regional
manager of ATC since July 1991 and Vice President of a subsidiary of ATC 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.

Wayne A. Crosby. Mr. Crosby has served as Controller of ATC since October,
1997, served as Chief Financial Officer of ATC between July 1995 and October
1997 and served as region controller of ATC from December 1993 to July 1995.
Prior to joining ATC, 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.

Wesley W. Lang, Jr. Mr. Lang became a director of ATC following consummation
of the Tender Offer. Mr. Lang 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. Mr. Lang serves
as a director of Chyron Corporation.

Nora E. Kerppola. Ms. Kerppola became a director of ATC following the
consummation of the Tender Offer. Ms. Kerppola is a principal of WPG Private
Equity Partners II, L.P., an affiliate of WPG Partners II. Prior to joining
WPG Private Equity Partners II, L.P. in 1994, 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 1990, Ms. Kerppola was an
associate in the Investment Banking Department of Credit Suisse First Boston
Corporation.

Benjamin J. James. Mr. James became a director of ATC following consummation
of the Merger. For the last five years, Mr. James has been employed at PPM
America, Inc. ("PPM"), agent and investment manager for JNL, as Managing
Director since 1997 and as Vice President since May 1991. Mr. James serves on
the

advisory boards of certain private equity funds. Mr. James presently serves as
an observer for JNL at various companies during their board meetings.

Donald W. Beck. Mr. Beck has been Senior Vice President of ATC since April
1990 and Vice President since January 1988. Mr. Beck is responsible for
managing the operations of certain ATC offices. Mr. Beck also served as a
director of ATC Laboratories, Inc., a predecessor company of ATC, 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 ATC
(and formerly ATC Laboratories, Inc.) since May 1982.

John J. Smith, Esq. Mr. Smith has been General Counsel since August 1989 and
served as a Vice President of ATC from September 1990 through December 1993.
Following consummation of the Merger, Mr. Smith assumed the position of
Secretary of the Company. Prior to joining ATC, 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.

DIRECTORS COMPENSATION

During both fiscal 1996 and fiscal 1997, ATC granted options to purchase
7,500 shares to each of Julia S. Heckman and Richard S. Greenberg, Esq., ATC's
two outside directors. In fiscal 1997, ATC's Board approved the grant of
replacement options to both outside directors to extend the term of the
options and lower the exercise price. The replacement options were
subsequently exercised by each of Ms. Heckman and Mr. Greenberg. Other than
$35,000 earned by each of Ms. Heckman and Mr. Greenberg for their services as
members of the Special Committee of the Board of Directors appointed to review
and consider the Merger in fiscal 1998, no other compensation was paid to
ATC's directors for serving in the capacity of director. There are no current
arrangements for future compensation of directors.

EXECUTIVE COMPENSATION

The following summarizes, for the fiscal year indicated, the principal
components of compensation for the Company's Chief Executive and the four most
highly compensated executive officers of the Company for the periods
indicated.

SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- --------------------- -------
RESTRICTED SECURITIES
NAME AND YEAR ENDED OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION FEBRUARY 28 SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
------------------ ----------- ------- ------- ------------ ---------- ---------- ------- ------------

Morry F. Rubin(1)....... 1997 268,750 259,943 -0- -0- -0- -0- -0-
President and Chief 1996 225,000 141,774 -0- -0- -0-(3) -0- -0-
Executive Officer 1995 225,000 132,500 -0- -0- -0- -0- -0-
George Rubin(2)......... 1997 268,750 259,943 -0- -0- -0- -0- -0-
Chairman of the Board 1996 225,000 141,774 -0- -0- -0- -0- -0-
and Secretary 1995 225,000 132,500 -0- -0- -0- -0- -0-
Nicholas J. Malino......
Chief Executive 1997 170,000 100,000 -0- -0- 57,500 -0- -0-
Officer, 1996 142,308 -0- -0- -0- 30,000 -0- -0-
President and Director 1995 105,385 86,500 -0- -0- 37,500 -0- -0-
Christopher P. Vincze... 1997 170,000 100,000 6,000(4) -0- 37,500 -0- -0-
Chief Operating Officer 1996 142,308 -0- 6,000(4) -0- 30,000 -0- -0-
and Director 1995 105,385 86,500 5,550(4) -0- 17,500 -0- -0-
John J. Goodwin(5)......
President and Director 1997 140,000 51,335 -0- -0- -0- -0- -0-
ATC InSys Technology, 1996 140,000 -0- -0- -0- -0- -0- -0-
Inc. 1995 70,000 N/A -0- -0- -0- -0- -0-

- --------
(1) Morry F. Rubin is no longer employed by the Company and resigned as
President, Chief Executive Officer and director in connection with the
consummation of the Transactions. Mr. Morry F. Rubin has agreed to provide
consulting services to the Company on the terms and conditions set forth
in a Severance Agreement (as defined herein). See "Certain Relationships
and Related Transactions--Severance Agreements."
(2) George Rubin is no longer employed by the Company and resigned as Chairman
of the Board and Secretary in connection with the consummation of the
Transactions. Mr. George Rubin had agreed to provide consulting services
to the Company on the terms and conditions set forth in the Severance
Agreement. See "Certain Relationships and Related Transactions."
(3) Does not include options to purchase 81,750 shares of Common Stock issued
in replacement of previously held options of Aurora, ATC's former parent
company, which was merged into ATC in June 1995, with ATC as the surviving
corporation.
(4) Represents compensation relating to a car allowance.
(5) John J. Goodwin commenced employment September 1, 1994.

EMPLOYMENT AGREEMENTS

In connection with the Transactions, the Company entered into employment
agreements with each of Nicholas J. Malino and Christopher P. Vincze (each
employment agreement is referred to as an "Employment Agreement," and both the
employment agreements are collectively referred to as the "Employment
Agreements." Messrs. Malino and Vincze are referred to individually as an
"Executive" and collectively as the "Executives"). The Employment Agreements
are for a term commencing on February 16, 1998 and expiring on February 28,
2001. Pursuant to the Employment Agreements, each of the Executives will
receive (i) a base salary

of $200,000 per year until March 1, 1998, and thereafter an annual salary of
not less than $250,000, to be increased at a rate equal to the percentage
increase of the Consumer Price Index and (ii) an incentive bonus of up to
$250,000, which will be performance based. In addition, the Employment
Agreements provide for the grant to each of the Executives options for 3.41%
of the fully diluted common equity of Holdings following the consummation of
the Transactions. 50% of the options granted to each of the Executive are
time-vested, 50% of the options vest upon the Company's attaining certain
operating targets established in the Employment Agreements. In addition,
pursuant to the Employment Agreements, each Executive will receive 33,896
restricted shares of common stock of Holdings which will be subject to a time-
vesting schedule, and a special cash bonus of $168,000 payable no later than
June 1, 1998. The Employment Agreements also grant certain registration rights
to each Executive in connection with his securities and contain termination
provisions.

ATC pays John J. Goodwin a bonus based upon a percentage of pretax operating
profits of ATC InSys Technology, Inc.

During fiscal 1990, ATC approved a 401(k) employee savings plan (the "401(k)
Plan") which allows voluntary contributions by eligible employees into
designated investment funds. ATC 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 401(k) Plan continued in effect following the consummation of the Merger

ATC has no other annuity, pension or retirement benefits for its employees.
ATC provides life, dental and health insurance, which is available to all
full-time employees. ATC 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.

STOCK OPTION PLANS

Prior to the Transactions, the Company maintained (i) a Stock Option Plan
which was adopted by the Company's board of directors and ratified by
stockholders on January 12, 1988, (ii) the 1993 Incentive and Non-Qualified
Stock Option Plan and (iii) the 1995 Stock Option Plan (collectively, the "Old
Plans"). Options had been awarded to a number of individuals under each of the
Old Plans (the "Old Options"). In connection with the consummation of the
Transactions, all Old Options outstanding which were not fully vested were
accelerated and became immediately exercisable.

Holdings offered individuals who had been awarded Old Options with an
exercise price below twelve dollars ($12.00) per share at the time of the
consummation of the Merger the opportunity either (i) to receive a cash
payment in full settlement of their Old Options, (ii) to exchange Old Options
for options to purchase shares of common stock of Holdings (the "Holdings
Options"), with the number of shares covered thereby and at an exercise price
per share to be determined pursuant to a formula designed to cause the
economic value (i.e., the difference between the aggregate fair market value
of the shares of common stock of Holdings subject to such options and the
aggregate per share exercise price thereof) of the Holdings Options
immediately after the Merger to be the same as the economic value of the Old
Options immediately prior to Merger in a substitution transaction described in
Section 424(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
or (iii) to receive a combination of cash settlements and substituted options.
Holdings took action to effect such substitute grants by adopting, through its
Board of Directors, the Acquisition Holdings, Inc. 1998 Incentive and Non-
Qualified Stock Option Plan, effective as of January 28, 1998 (the "1998 Stock
Option Plan"). To the extent so elected by the optionees, non-qualified
options under the Old Plans were substituted by non-qualified options under
the 1998 Stock Option Plan and incentive stock options ("ISOs") under the Old
Plans were substituted by ISOS under the 1998 Stock Option Plan. Holdings also
intends to grant non-qualified stock options and ISOs to employees of Holdings
and its subsidiaries and non-qualified stock options to directors of Holdings
in the future under the 1998 Stock Option Plan.

The 1998 Stock Option Plan authorizes the Board of Directors of Holdings to
grant options to purchase Common Stock of Holdings at an exercise price (the
"option price") determined by the Board of Directors of Holdings, except in
the case of ISOs, which are awarded at an option price equal to the fair
market value of the Common Stock (110% of the fair market value in the case of
ISOs granted to ten (10%) percent shareholders of Common Stock).

The 1998 Stock Option Plan is administered by Holdings' Board of Directors.
Shares available under the 1998 Stock Option Plan can be allocated between
non-qualified options and ISOs among the participants as the Board of
Directors of Holdings deems appropriate. Awards may be granted for such terms
as the Board of Directors of Holdings may determine, except that the term of
an ISO may not exceed ten years from its date of grant.

The terms under which all options may be exercised are determined by
Holdings' Board of Directors. No option granted under the 1998 Stock Option
Plan is exercisable until approval and ratification of the Plan has been
obtained from the stockholders. No option may be exercised after the
expiration of its term, which in the case of an ISO may not exceed 10 years
from the date of grant. In addition, however, ISOs may not be exercised at any
time unless the holder is an employee of Holdings or any of its subsidiaries
and has been continuously employed by Holdings or any subsidiary since the
date of grant. This restriction with respect to ISOs applies regardless of
whether termination occurs as a result of death, disability or any other
reason.

The 1998 Stock Option Plan provides that, in the event of any change in the
outstanding Common Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like, the Board of Directors of Holdings may appropriately
adjust the number of shares of Common Stock which may be issued under the 1998
Stock Option Plan, the number of shares of Common Stock subject to options
previously granted, the exercise price of options previously granted, and any
and all other matters it deems appropriate.

LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION

As permitted by the Delaware General Corporation Law, ATC's certificate of
incorporation provides that a director of ATC will not be personally liable to
ATC or its stockholders for monetary damages for breach of the fiduciary duty
of care as a director, except under certain circumstances, including breach of
the director's duty of loyalty to ATC or its stockholders or any transaction
from which the director derived an improper personal benefit.

ATC's by-laws provide for the indemnification of ATC's officers and
directors to the fullest extent permitted by Delaware law. In this respect,
ATC has entered into indemnification agreements with its officers and
directors to hold them harmless and to indemnify each person from and against
all fines, amounts paid in settlements and expenses, including attorneys' fees
incurred as a result of or in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or
administrative or investigative, by reason of the fact that the person was a
director and/or officer of ATC or served any other corporation in any capacity
at the request of ATC, in the manner and to the extent permitted by law.

ATC has been advised that it is the position of the Securities and Exchange
Commission that insofar as the foregoing provisions may be invoked to disclaim
liability for damages arising under the federal securities laws, such
provisions are against public policy as expressed in the federal securities
laws and are therefore unenforceable.

PRINCIPAL STOCKHOLDERS

The Company is a wholly-owned subsidiary of Holdings. The following sets
forth certain information concerning ownership of shares of common stock, par
value $0.01 per share of Holdings (the "Holdings Common Stock") and the
Holdings Preferred Stock owned beneficially as of March 27, 1998, by (i) each
director, (ii) each of the named executive officers of the Company, (iii) all
executive officers and directors as a group, and (iv) each person who is the
beneficial owner of more than five percent of the shares of each class of
Holdings capital stock.

HOLDINGS COMMON STOCK HOLDINGS PREFERRED STOCK
--------------------- ----------------------------
APPROXIMATE APPROXIMATE
PERCENT OF PERCENT OF
NUMBER BENEFICIAL NUMBER BENEFICIAL
OF OWNERSHIP OF OWNERSHIP
NAMES OF INDIVIDUALS(1) SHARES OF CLASS(2) SHARES OF CLASS
- ----------------------- --------- ----------- ------------- --------------

Nicholas J. Malino(3)...... * * -- --
Wesley W. Lang, Jr.(4)..... 1,661,253 97.55% -- --
Nora E. Kerppola(4)........ 1,661,253 97.55% -- --
Benjamin J. James(5)....... 187,771 10.16% -- --
WPG Corporate Development
Associates V, L.P. 1,661,253 97.55% -- --
and certain related
parties...................
One New York Plaza
New York, NY 10004
Jackson National Life 187,771 10.16% 100,000 100.0%
Insurance.................
c/o PPM America, Inc.(6)
225 West Wacker Drive,
Suite 1200
Chicago, Illinois 60606
All directors and officers
as a group(3)(7).......... * * -- --

- --------
* Represents less than one percent.
(1) Each person has sole voting power and investment power with respect to the
number of shares indicated as owned. Except as otherwise indicated, the
business address for each of the parties listed in the chart above is: c/o
ATC Group Services Inc., 104 East 25th St., 10th Floor, New York, NY
10010.
(2) Based upon 1,702,920 shares of common stock of Holdings outstanding as of
March 27, 1998.
(3) In addition, directors, officers and certain employees of ATC will own an
equity ownership stake in Holdings, the parent of ATC, equal to
approximately 24.1%, which reflects management's investment of $2.1
million and options representing 11.7% of the fully diluted ownership of
common stock of Holdings.
(4) Includes 1,661,253 shares of Holdings Common Stock owned by certain
affiliates of Weiss Peck of which Mr. Lang and Ms. Kerppola are
principals. Mr. Lang and Ms. Kerppola disclaim beneficial ownership of
such shares of Common Stock.
(5) Includes 41,667 shares of Holdings Common Stock and warrants to purchase
146,104 shares of Holdings Common Stock owned by certain affiliates of
JNL, including PPM America, Inc., the agent and investment manager of JNL,
of which Mr. James is a managing director. Mr. James disclaims beneficial
ownership of such shares of Common Stock and warrants.
(6) The ultimate parent of JNL is Prudential Corporation PLC, headquartered in
the United Kingdom. The beneficial ownership of shares of Holdings Common
Stock indicated above includes warrants to purchase 146,104 shares of
Holdings Common Stock granted to JNL in connection with its investment in
the Holdings Preferred Stock; the warrants are currently exercisable.
(7) Excludes 1,661,253 shares of Holdings Common Stock beneficially owned by
certain affiliates of Weiss Peck, which may be deemed to be beneficially
owned by Wesley W. Lang, Jr. and Nora E. Kerppola and 187,771 shares of
Holdings Common Stock beneficially owned by affiliates of JNL, which may
be deemed to be beneficially owned by Benjamin J. James.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SEVERANCE AGREEMENTS

Upon consummation of the Merger, the Company entered into two separate
Severance, Consulting and Noncompetition Agreements (the "Severance
Agreements") with George Rubin and Morry F. Rubin, pursuant to which George
Rubin resigned his position as Chairman of the Board and Secretary of the
Company and Morry Rubin resigned his position as President and Chief Executive
Officer of the Company. Pursuant to the Severance Agreements, Messrs. George
and Morry Rubin have agreed to provide certain consulting services as
requested by the Company for a period of three years following the
consummation of the Transactions. The Severance Agreements restrict Messrs.
George and Morry Rubin for a period ranging from three to four years from (i)
competing in any aspect of the Company's business as conducted on the
effective date of the Merger (the "Effective Date") anywhere in the United
States, (ii) requesting or causing any employee of the Company to terminate
employment with the Company, (iii) competing with ATC InSys Technology Inc.
("InSys") or 3D Information Services, Inc., anywhere in the State of New
Jersey and (iv) soliciting certain customers of InSys within New York City. In
consideration for the Severance Agreements, the Company paid to the Rubins
$3.1 million in the aggregate upon the Effective Date and is required to pay
$553,430 on each of the six calendar quarters thereafter, in addition to the
continuance of certain other benefits currently provided by the Company.

DESCRIPTION OF NEW CREDIT FACILITY

The Company and Holdings are party to the New Credit Facility with various
lending institutions and Bankers Trust Company, as agent, which provides for
senior secured credit facilities consisting of a $20.0 million Term Loan and
the Revolving Credit Facility in the amount of $30.0 million which includes a
sublimit for letters of credit.

Loans under the Term Loan Facility ("Term Loans") and up to $9.0 million of
loans under the Revolving Credit Facility ("Revolving Loans") may be borrowed
to refinance certain existing indebtedness of the Company. Additional
Revolving Loans are available for the Company's and its subsidiaries working
capital and general corporate purposes, including to make certain permitted
acquisitions. The Term Loans will amortize quarterly and have a final maturity
date of January 29, 2003. Amounts repaid or prepaid in respect of the Term
Loans may not be reborrowed. Revolving Loans also will mature on January 29,
2003 and may be repaid and reborrowed prior to the final maturity date. The
Company will be required to pay the lenders under the New Credit Facility a
revolving loan commitment fee of 1/2 of 1% per annum, payable on a quarterly
basis, on the unutilized total commitment under the Revolving Credit Facility
and a term loan commitment fee of 1/2 of 1% per annum (or less based on a
leverage formula), payable on a quarterly basis, on the total commitment under
the Term Loan Facility. The obligation to pay such term loan commitment fee
terminated on the date on which the Term Loans were funded. The Company is
also required to pay the lenders participating in the Revolving Credit
Facility letter of credit fees equal to 2.25% per annum (or less based on a
leverage formula) on the outstanding stated amounts of letters of credit and,
to each lender issuing a letter of credit, a facing fee of 1/4 of 1% on the
outstanding stated amounts.

The obligations of the Company under the New Credit Facility are
unconditionally guaranteed by Holdings and any direct or indirect subsidiaries
of the Company (the "Bank Loan Guarantors"). In addition, the obligations of
the Company and the Bank Loan Guarantors under the New Credit Facility are
secured by substantially all of the assets of the Company and the Bank Loan
Guarantors.

At the Company's option, the interest rates per annum applicable to amounts
outstanding under the New Credit Facility will be either (a) an adjusted rate
based on the Eurodollar Rate (as defined in the New Credit Facility) plus
2.25% initially (subject to quarterly adjustments based on a leverage formula)
or (b) the Base Rate (as defined in the New Credit Facility) plus 1.25%
initially (subject to quarterly adjustments based on a leverage formula).

The New Credit Facility requires the Company to meet certain financial
tests, including minimum interest coverage and maximum leverage ratios. The
New Credit Facility also contains covenants which, among other things, limit
the ability of the Company to incur additional indebtedness, pay dividends,
enter into transactions with affiliates, form subsidiaries, enter into sale-
leaseback transactions, make capital expenditures, loans, investments or lease
payments, merge, consolidate or acquire or dispose of assets, voluntarily
prepay or amend other indebtedness, incur liens and encumbrances and other
matters customarily restricted in loan agreements of this type.

The New Credit Facility contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross defaults, certain events of bankruptcy and insolvency, ERISA, judgment
defaults, failure of any guarantee or security agreement supporting the
Company's obligations under the New Credit Facility to be in full force and
effect and a change of control of Holdings or the Company.

DESCRIPTION OF THE NOTES

The Private Notes were, and the Exchange Notes will be, issued under an
indenture (the "Indenture"), dated as of January 29, 1998 among Acquisition
Corp. and State Street Bank and Trust Company, as Trustee (the "Trustee"). The
Company, the Subsidiary Guarantors and the Trustee entered into a Supplemental
Indenture dated as of February 5, 1998 (the "Supplemental Indenture"),
pursuant to which the Company agreed to assume all of the rights and
obligations of Acquisition Corp. set forth in the Indenture. The Indenture and
the Supplemental Indenture are referred to herein as the "Supplemented
Indenture." The following summary of certain provisions of the Supplemented
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Trust Indenture Act of 1939, as amended
(the "TIA"), and to all of the provisions of the Supplemented Indenture,
including the definitions of certain terms therein and those terms made a part
of the Supplemented Indenture by reference to the TIA as in effect on the date
of the Supplemented Indenture. A copy of the Supplemented Indenture may be
obtained from the Company or the Trustee. The definitions of certain
capitalized terms used in the following summary are set forth below under "--
Certain Definitions."

The Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Indebtedness of the Company.

The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes (the "Holders"). The Company will pay principal (and premium, if
any) on the Notes at the Trustee's corporate office in New York, New York. At
the Company's option, interest may be paid at the Trustee's corporate trust
office or by check mailed to the registered address of Holders. Any Notes that
remain outstanding after the completion of the Exchange Offer, together with
the Exchange Notes issued in connection with the Exchange Offer, will be
treated as a single class of securities under the Supplemented Indenture.

PRINCIPAL, MATURITY AND INTEREST

The Notes are limited in aggregate principal amount to $150,000,000, of
which $100,000,000 was issued in the Offering, and will mature on January 15,
2008. Additional amounts may be issued in one or more series from time to
time, subject to the limitations set forth under "Certain Covenants--
Limitation on Incurrence of Additional Indebtedness." Interest on the Notes
will accrue at the rate of 12% per annum and will be payable semiannually in
arrears on each January 15 and July 15, commencing on July 15, 1998, to the
persons who are registered Holders at the close of business on the fifteenth
day immediately preceding the applicable interest payment date. Interest on
the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from and including the date of
issuance.

The Notes will not be entitled to the benefit of any mandatory sinking fund.

REDEMPTION

Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after January 15,
2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the twelve-month period commencing on January 15 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:

YEAR PERCENTAGE
---- ----------

2003............................................................ 106.000
2004............................................................ 104.500
2005............................................................ 103.000
2006............................................................ 101.500
2007 and thereafter............................................. 100.000

Optional Redemption upon Public Equity Offerings. Notwithstanding the
foregoing, at any time, or from time to time, on or prior to January 15, 2001,
the Company may, at its option, redeem, with the net cash proceeds of one or
more Public Equity Offerings (as defined), up to 35.0% of the aggregate
principal amount of the Notes originally issued, at a redemption price equal
to 112.0% of the principal amount thereof, plus accrued interest thereon, if
any, to the date of redemption; provided that, at least 65.0% of the aggregate
principal amount of the Notes originally issued remain outstanding immediately
following such redemption. In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 60 days after the consummation of any such Public
Equity Offering.

As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company or
Holdings pursuant to a registration statement filed with the Commission in
accordance with the Securities Act; provided that, in the case of an
underwritten public offering by Holdings, the proceeds of such offering to the
extent required to fund the redemption shall have been contributed to the
Company by Holdings as common equity.

SELECTION AND NOTICE OF REDEMPTION

In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided further, however, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes or
portions thereof for redemption shall be made by the Trustee only on a pro
rata basis or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Supplemented
Indenture.

SUBORDINATION

The payment of all Obligations on the Notes will be subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Indebtedness whether outstanding on the Issue Date, or
thereafter incurred including, without limitation, the Company's obligations
under the Credit Agreement. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any total or partial liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshaling of
assets of the Company or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Company or its
property, whether voluntary or involuntary, all Obligations due or to become
due upon all Senior Indebtedness shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Indebtedness, before any payment or distribution of any kind
or character is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of or
regularly accruing fees with respect to, any Senior Indebtedness, no payment
of any kind or character shall be made by or on behalf of the Company or any
other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise.

In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness
then outstanding to accelerate the maturity thereof and if the Representative
for the respective issue of Designated Senior Indebtedness gives written
notice of the event of default to the Trustee (a "Default Notice"), then,
unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Indebtedness terminating the Blockage
Period (as defined below), during the 180 days after the delivery of such
Default Notice (the "Blockage Period"), neither the Company nor any other
Person on its behalf shall (x) make any payment of any kind or character with
respect to any Obligations on the Notes or (y) acquire any of the Notes for
cash or property or otherwise. No event of default which existed or was
continuing on the date of the commencement of any Blockage Period with respect
to the Designated Senior Indebtedness shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Indebtedness whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provisions
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose). Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days.

By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Indebtedness.

As of November 30, 1997, on a pro forma basis, giving effect to the sale of
Notes and the application of the estimated net proceeds therefrom to
consummate the ATC Acquisition, the aggregate amount of Senior Indebtedness
outstanding would have been approximately $26.2 million (excluding unused
commitments of $30.0 million (excluding outstanding letters of credit)
available under the Credit Agreement).

GUARANTEES

Each Subsidiary Guarantor has unconditionally guaranteed, on a senior
subordinated unsecured basis, jointly and severally, to each Holder and the
Trustee, the full and prompt performance of the Company's obligations under
the Supplemented Indenture and the Notes, including the payment of principal
and interest on the Notes. The Guarantees will be subordinated to Guarantor
Senior Indebtedness on the same basis as the Notes are subordinated to Senior
Indebtedness.

The obligations of each Subsidiary Guarantor will be limited to the maximum
amount which, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Guarantee or pursuant to its contribution obligations under the
Supplemented Indenture, will result in the obligations of such Subsidiary
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Subsidiary Guarantor that
makes a payment or distribution under its Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in an amount pro rata, based
on the net assets of each Subsidiary Guarantor, determined in accordance with
GAAP.

The Subsidiary Guarantors include (i) each of the Company's Subsidiaries as
of the effective date of the Merger other than its Foreign Subsidiaries, (ii)
each of the Company's Subsidiaries that executed a supplemental indenture in
which such Subsidiary agrees to be bound by the terms of the Supplemented
Indenture as a Subsidiary Guarantor and (iii) any Subsidiary, whether formed
or acquired after the Issue Date, that guarantees any Indebtedness outstanding
under the Credit Agreement; provided, however, that any Subsidiary acquired
after

the Issue Date which is prohibited from entering into a Guarantee pursuant to
restrictions contained in any debt instrument in existence at the time such
Subsidiary was so acquired and not entered into in anticipation or
contemplation of such acquisition shall not be required to become a Subsidiary
Guarantor so long as any such restriction is in existence and to the extent of
any such restriction; provided, further, that if any Subsidiary Guarantor is
released from its guarantee of the outstanding Indebtedness of the Company
under the Credit Agreement, such Guarantor shall be automatically released
from its obligations as Subsidiary Guarantor and, from and after such date,
such Subsidiary Guarantor shall cease to constitute a Subsidiary Guarantor.

Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor that is a Wholly Owned
Subsidiary without limitation, or with or to other Persons upon the terms and
conditions set forth in the Supplemented Indenture. See "--Certain Covenants--
Merger, Consolidation and Sale of Assets." In addition, in the event all of
the Capital Stock of a Subsidiary Guarantor (or all or substantially all of
the assets of a Subsidiary Guarantor) is sold by the Company and/or one or
more of its Subsidiaries and the sale complies with the provisions set forth
in "--Certain Covenants--Limitation on Asset Sales," such Subsidiary
Guarantor's Guarantee will be released.

Separate financial statements of the Subsidiary Guarantors are not included
herein because such Subsidiary Guarantors are jointly and severally liable
with respect to the Company's Obligations pursuant to the Notes, but pro forma
condensed combined consolidated financial statements concerning ATC and its
Subsidiaries are included in the notes to the Financial Statement included
herein.

CHANGE OF CONTROL

The Supplemented Indenture provides that upon the occurrence of a Change of
Control, each Holder has the right to require that the Company purchase all or
a portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101.0% of the
principal amount thereof plus accrued and unpaid interest to the date of
purchase.

The Supplemented Indenture provides that, prior to the mailing of the notice
referred to below, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness, and
terminate all commitments, under the Credit Agreement and all other Senior
Indebtedness the terms of which require repayment upon a Change of Control or
offer to repay in full all indebtedness, and terminate all commitments, under
the Credit Agreement and all other such Senior Indebtedness and to repay the
Indebtedness owed to each lender which has accepted such offer or (ii) obtain
the requisite consents under the Credit Agreement and all other such Senior
Indebtedness to permit the repurchase of the Notes as provided below. The
Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Notes pursuant to the
provisions described below. The Company's failure to comply with the
immediately preceding sentence shall be governed by clause (iv), and not
clause (ii), of "Events of Default" below.

Within 30 days following the date upon which a Change of Control occurs, the
Company must send, by first class mail, a notice to each Holder at such
Holder's last registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. Such notice shall
state, among other things, the purchase date, which must be no earlier than 30
days nor later than 45 days from the date such notice is mailed, other than as
may be required by law (the "Change of Control Payment Date"). Holders
electing to have a Note purchased pursuant to a Change of Control Offer will
be required to surrender the Note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
third business day prior to the Change of Control Payment Date.

If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding

Notes pursuant to a Change of Control Offer, the Company expects that it would
need to seek third party financing to the extent it does not have available
funds to meet its purchase obligations. However, there can be no assurance
that the Company would be able to obtain any such financing.

Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to repurchase upon a Change of Control.
Restrictions in the Supplemented Indenture described herein on the ability of
the Company and its Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Supplemented Indenture may not afford the Holders of Notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.

The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Supplemented Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the "Change of Control" provisions of the
Supplemented Indenture by virtue thereof.

CERTAIN COVENANTS

The Supplemented Indenture contains, among others, the following covenants:

Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not cause or permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur"), any Indebtedness (including, without
limitation, Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company and its Subsidiaries may
incur Indebtedness (including, without limitation, Acquired Indebtedness) if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.25 to 1.0 from the Issue Date through February 29,
2000 and 2.5 to 1.0 thereafter. No Indebtedness incurred pursuant to the next
preceding sentence shall be included in calculating any limitation set forth
in the definition of Permitted Indebtedness. Upon the repayment of
Indebtedness which may have been incurred pursuant to more than one provision
of the Supplemented Indenture, the Company may, in its sole discretion,
designate which provision such Indebtedness shall have been incurred under.

Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Subsidiaries to, directly or indirectly, (a) declare or
pay any dividend or make any distribution (other than dividends or
distributions made to the Company or any Subsidiary of the Company and other
than any dividend or distribution payable solely in Qualified Capital Stock of
the Company) on or in respect of shares of the Company's Capital Stock to
holders of such Capital Stock; (b) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock
(other than the exchange of such Capital Stock or any warrants, rights or
options to acquire shares of any class of Capital Stock of the Company for
Qualified Capital Stock of the Company);

(c) make any principal payment on, purchase, defease, redeem, prepay, decrease
or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company or a Subsidiary Guarantor that is subordinate or
junior in right of payment to the Notes or such Subsidiary Guarantor's
Guarantee, as the case may be; or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant above, or (iii)
the aggregate amount of all Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended for
such purposes, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of Directors
of the Company) shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned during the period
beginning on the first day of the fiscal quarter including the Issue Date and
ending on the last day of the fiscal quarter ending at least 30 days prior to
the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company,
including treasury stock; plus (y) without duplication of any amounts included
in clause (iii) (x) above, 100% of the aggregate net cash proceeds of any
equity contribution received by the Company from a holder of the Company's
Capital Stock (excluding, in the case of clauses (iii) (x) and (y), any net
cash proceeds from a Public Equity Offering to the extent used to redeem the
Notes); minus (z) the amount of all Investments made under clause (x) of the
definition of "Permitted Investments," which shall not exceed $4.0 million.

Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or the giving of such irrevocable redemption
notice if the dividend or redemption would have been permitted on the date of
declaration or giving of irrevocable redemption notice; (2) if no Default or
Event of Default shall have occurred and be continuing, the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) the repurchase of
shares of, or options to purchase shares of, common stock of Holdings, the
Company or any of their respective Subsidiaries from employees, former
employees, directors or former directors of Holdings, the Company or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments thereto)
approved by the board of directors of Holdings or the Company under which such
individuals purchase or sell, or are granted the option to purchase or sell
shares of common stock (or options to purchase common stock) (or any
Restricted Payment made to Holdings solely to fund at the time made such
payments); provided, however, that the aggregate amount of such repurchases or
Restricted Payments shall not exceed $500,000 in any calendar year which, to
the extent not used in any fiscal year, may be carried forward to the next
succeeding fiscal year, provided that the aggregate amount which may be
carried forward shall not exceed $1.0 million; (5) following the Initial
Public Equity Offering, if no Default or Event of Default shall have occurred
and be continuing, dividends or Common Stock buybacks by Holdings, the Company
or another Company in an aggregate amount in any year not to exceed 6% of the
aggregate Net Cash Proceeds received by Holdings (to the extent contributed to
the Company) or the Company in connection with such Initial Public Equity
Offering and any subsequent Public Equity Offering (or any Restricted Payment
made to Holdings

or such other Company solely to fund at the time made such payments);
provided, however, that such dividends or Common Stock buybacks shall be
included in the calculation of the amount of Restricted Payments; (6) any
payment by the Company to Holdings pursuant to the Tax Sharing Agreement;
provided, however, that the amount of any such payment shall be the lesser of
(i) the amount of taxes that the Company would have been liable for without
regard to Holdings' ownership interest in the Company or (ii) the amount
actually paid or substantially concurrently therewith to be paid by Holdings
directly to the Internal Revenue Service or applicable taxing authority in
respect of the taxes in respect of which such payment is being made by the
Company to Holdings pursuant to such Tax Sharing Agreement; provided, further,
however, that such dividends shall be excluded in the calculation of the
amount of Restricted Payments; and (7) dividends to Holdings to the extent
required to pay for general corporate and overhead expenses incurred by
Holdings; provided, however, that such dividends shall not exceed $250,000 in
any calendar year; provided, further, however, that such dividends shall be
excluded from the calculation of the amount of Restricted Payments. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2) (ii), (3) (ii) (A),
(4) and (5) shall be included in such calculation.

Limitation on Asset Sales. The Company will not, and will not cause or
permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 360 days of receipt thereof either
(A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness and, in
the case of any Senior Indebtedness or Guarantor Senior Indebtedness under any
revolving credit facility, effect a permanent reduction in the commitment
available under such revolving credit facility, (B) to make an investment in
properties and assets that replace the properties and assets that were the
subject of such Asset Sale or in properties and assets that will be used in
the business of the Company and its Subsidiaries as existing on the Issue Date
or in businesses reasonably related or complementary thereto (as determined in
good faith by the Company's Board of Directors) ("Replacement Assets"), or (C)
a combination of prepayment and investment permitted by the foregoing clauses
(iii) (A) and (iii) (B). Pending final application, the Company or the
applicable Subsidiary may temporarily reduce Indebtedness under any revolving
credit facility or invest in cash or Cash Equivalents. On the 361st day after
an Asset Sale or such earlier date, if any, as the Board of Directors of the
Company or of such Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii) (A), (iii) (B) and
(iii) (C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii) (A), (iii) (B) and (iii) (C) of the next preceding sentence (each, a
"Net Proceeds Offer Amount") shall be applied by the Company or such
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on
a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
the Company or any Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company or any such Subsidiary
of the Company, as the case may be, may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire unutilized Net Proceeds Offer Amount, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).

Notwithstanding the immediately preceding paragraph, the Company and its
Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraph to the extent (i) at least 75% of the consideration for
such Asset Sale constitutes Replacement Assets and/or Cash Equivalents and
(ii) such Asset Sale is for fair market value; provided, however, that any
consideration constituting Cash Equivalents, if any, received by the Company
or any of its Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the preceding paragraph.

Notice of each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in the Supplemented Indenture. Upon receiving notice of
the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 in exchange for cash. To the extent
Holders properly tender Notes in an amount exceeding the Net Proceeds Offer
Amount, Notes of tendering Holders will be purchased on a pro rata basis
(based on amounts tendered). A Net Proceeds Offer shall remain open for a
period of 20 business days or such longer period as may be required by law. To
the extent the amount of Notes tendered is less than the offer amount, the
Company may use the remaining Net Proceeds Offer Amount for general corporate
purposes and such Net Proceeds Offer Amount shall be reset to zero.

The Company will comply with the requirements of Rule l4e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Supplemented Indenture, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.

Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary of the Company to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Subsidiary of the Company; or (c) transfer any of its property or
assets to the Company or any other Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) the Supplemented Indenture; (3) the Credit Agreement; (4) non-
assignment provisions of any contract or any lease governing a leasehold
interest of any Subsidiary of the Company; (5) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person
or the properties or assets of the Person so acquired; (6) agreements existing
on the Issue Date to the extent and in the manner such agreements are in
effect on the Issue Date; (7) restrictions on the transfer of assets subject
to any Lien permitted under the Supplemented Indenture imposed by the holder
of such Lien; (8) restrictions imposed by any agreement to sell assets
permitted under the Supplemented Indenture to any Person pending the closing
of such sale; (9) any agreement or instrument governing Capital Stock of any
Person that is acquired; or (10) an agreement governing Indebtedness incurred
to Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (3), (5) or (6) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in
any such Indebtedness are no less favorable to the Company in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (3), (5) or (6), respectively.

Limitation on Preferred Stock of Subsidiaries. The Company will not permit
any of its Subsidiaries to issue any Preferred Stock (other than to the
Company or to a Wholly Owned Subsidiary of the Company) or permit any Person
(other than the Company or a Wholly Owned Subsidiary of the Company) to own
any Preferred Stock of any Restricted Subsidiary of the Company.

Limitation on Liens. The Company will not, and will not cause or permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of its Subsidiaries (whether owned on the
Issue Date or acquired after the Issue Date), or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any Guarantee, the
Notes and such Guarantee, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes and the Guarantees are equally and ratably
secured, except for (A) Liens existing as of the Issue Date to the extent and
in the manner such Liens are in effect on the Issue Date; (B) Liens securing
Senior Indebtedness and/or Guarantor Senior Indebtedness; (C) Liens securing
the Notes and the Guarantees; (D) Liens of the Company or a Wholly Owned
Subsidiary of the Company on assets of any Subsidiary of the Company; (E)
Liens securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture
and which has been incurred in accordance with the provisions of the
Supplemented Indenture; provided, however, that such Liens (1) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (2) do not extend to or cover any property or assets of the
Company or any of its Subsidiaries not securing the Indebtedness so Refinanced
(other than property or assets subject to Liens under clause (B) above); and
(F) Permitted Liens.

Prohibition on Incurrence of Senior Subordinated Debt. The Company will not,
and will not permit any Subsidiary Guarantor to, incur or suffer to exist
Indebtedness that by its terms (or by the terms of any agreement governing
such Indebtedness) is senior in right of payment to the Notes or its
Guarantee, as the case may be, and expressly subordinate in right of payment
to any other Indebtedness of the Company or such Subsidiary Guarantor, as the
case may be.

Guarantees of Certain Indebtedness. The Company will not permit any of its
Subsidiaries which are not already Subsidiary Guarantors, directly or
indirectly, to incur, guarantee or secure through the granting of Liens the
payment of any Indebtedness of the Company under the Credit Agreement or any
refunding or refinancing thereof, in each case unless such Subsidiary, the
Company and the Trustee execute and deliver a supplemental indenture
evidencing such Subsidiary's Guarantee, such Guarantee to be a senior
subordinated unsecured obligation of such Subsidiary. Neither the Company nor
any such Guarantor shall be required to make a notation on the Notes or the
Guarantees to reflect any such subsequent Guarantee. Nothing in this covenant
shall be construed to permit any Subsidiary of the Company to incur
Indebtedness otherwise prohibited by the "Limitation on Incurrence of
Additional Indebtedness" covenant.

Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
the Company's assets (determined on a consolidated basis for the Company and
its Subsidiaries) unless: (i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and its Subsidiaries substantially as
an entirety (the "Surviving Entity") (x) shall be a corporation organized and
validly existing under the laws of the United States or any State thereof or
the District of Columbia and (y) shall expressly assume, by supplemental
indenture (in form and substance satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual payment of the principal of,
premium, if any, and interest on all of the Notes and the performance of every
covenant of the Notes, the Supplemented Indenture and the Registration Rights
Agreement on the part of the Company to be performed or observed, as the case
may be; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i) (2) (y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or

greater than the Consolidated Net Worth of the Company immediately prior to
such transaction and (2) (x) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"--Limitation on Incurrence of Additional Indebtedness" covenant or (y) in the
case of a merger or consolidation with Holdings, shall have a Consolidated
Fixed Charge Coverage Ratio equal to or greater than the Consolidated Fixed
Charge Coverage Ratio of the Company immediately prior to such transaction;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i) (2) (y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company or the
Surviving Entity, as the case may be, shall have delivered to the Trustee an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with the applicable
provisions of the Supplemented Indenture and that all conditions precedent in
the Supplemented Indenture relating to such transaction have been satisfied.

For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.

The Supplemented Indenture provides that upon any consolidation, combination
or merger or any transfer of all or substantially all of the assets of the
Company in accordance with the foregoing, in which the Company is not the
continuing corporation, the successor Person formed by such consolidation or
into which the Company is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Supplemented Indenture and the
Notes with the same effect as if such surviving entity had been named as such.

Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
the Indenture in connection with any transaction complying with the provisions
of the Indenture described under "--Limitation on Asset Sales") will not, and
the Company will not cause or permit any Subsidiary Guarantor to, consolidate
with or merge with or into any Person other than the Company or another
Subsidiary Guarantor that is a Wholly Owned Subsidiary unless: (a) the entity
formed by or surviving any such consolidation or merger (if other than the
Subsidiary Guarantor) is a corporation organized and existing under the laws
of the United States or any state thereof or the District of Columbia; (b)
such entity assumes by execution of a supplemental indenture all of the
obligations of the Subsidiary Guarantor under its Guarantee: (c) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (d) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma
basis, the Company could satisfy the provisions of clause (ii) of the first
paragraph of this covenant. Any merger or consolidation of a Subsidiary
Guarantor with and into the Company (with the Company being the surviving
entity) or another Subsidiary Guarantor that is a Wholly Owned Subsidiary need
only comply with clause (iv) (and not clauses (i), (ii) or (iii)) of the first
paragraph of this covenant.

Limitations on Transactions with Affiliates. (a) The Company will not, and
will not cause or permit any of its Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related
transactions (including. without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than those that might reasonably have
been obtained or are obtainable in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or
such Subsidiary, as the case may be. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value
in excess of $2.0 million shall be approved by the Board of

Directors of the Company or such Subsidiary, as the case may be, such approval
to be evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) involving aggregate payments or other property with a fair market value
in excess of $5.0 million, the Company or such Subsidiary, as the case may be,
from a financial point of view, from an Independent Financial Advisor and file
the same with the Trustee.

(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees, consultants or agents of the Company or any
Subsidiary of the Company as determined in good faith by the Company's Board
of Directors or senior management; (ii) transactions between or among the
Company and any of its Wholly Owned Subsidiaries or between or among such
Wholly Owned Subsidiaries; provided such transactions are not otherwise
prohibited by the Supplemented Indenture; (iii) any agreement as in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) or in any replacement
agreement thereto so long as any such amendment or replacement agreement is
not more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date; and (iv) Restricted
Payments permitted by the Supplemented Indenture.

Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries
transfers or causes to be transferred, in one transaction or a series of
related transactions, any property aggregating more than $50,000 to any
Subsidiary that is not a Subsidiary Guarantor or a Foreign Subsidiary, or if
the Company or any of its Subsidiaries shall organize, acquire or otherwise
invest in another Subsidiary that is not a Foreign Subsidiary, then such
transferee or acquired or other Subsidiary shall (a) execute and deliver to
the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee pursuant to which such Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes and the Supplemented Indenture on
the terms set forth in the Supplemented Indenture and (b) deliver to the
Trustee an opinion of counsel stating that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Subsidiary; except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at law)
provided, however that any Subsidiary acquired on or after the Issue Date
which is prohibited from entering into a Guarantee pursuant to restrictions
contained in any debt instrument or other agreement in existence at the time
such Subsidiary was so acquired and was not entered into in anticipation or
contemplation of such acquisition shall not be required to become a Subsidiary
Guarantor so long as any such restriction is in existence and to the extent of
such restriction. After the execution and delivery of such supplemental
indenture, such Subsidiary shall be a Subsidiary Guarantor for all purposes of
the Supplemented Indenture.

Conduct of Business. The Company will not, and will not cause or permit any
of its Subsidiaries to, engage in any businesses other than the businesses in
which the Company is engaged on the Issue Date and any businesses reasonably
related or complementary thereto (as determined in good faith by the Company's
Board of Directors) provided, however, that the Company will not, and will not
cause or permit any of its Subsidiaries to, engage in any business related to
insurance other than as an insurance broker in which case without the
incurrence of any underwriting risk.

Reports to Holders. The Company will deliver to the Trustee within 15 days
after the filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and the Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of
314(a) of the TIA.

EVENTS OF DEFAULT

The following events are defined in the Indenture as "Events of Default:"

(i) the failure to pay interest (including Additional Interest, if any)
on any Notes when the same becomes due and payable and the default
continues for a period of 30 days (whether or not such payment shall be
prohibited by the subordination provisions of the Supplemented Indenture);

(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon acceleration, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Supplemented Indenture);

(iii) a default in the observance or performance of any other covenant or
agreement contained in the Supplemented Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to the
"Merger, Consolidation and Sale of Assets" covenant, which will constitute
an Event of Default with such notice requirement but without such passage
of time requirement);

(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Subsidiary of the Company and
such failure continues for a period of 20 days or more, or the acceleration
of the final stated maturity of any such Indebtedness (which acceleration
is not rescinded, annulled or otherwise cured within 20 days of receipt by
the Company or such Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, in each case
with respect to which the 20-day period described above has passed,
aggregates $10.0 million or more at any time;

(v) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and nonappealable;

(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; and

(vii) any of the Guarantees of a Subsidiary Guarantor that is a
Significant Subsidiary cease to be in full force and effect or any such
Guarantees are declared to be null and void or invalid and unenforceable or
any of the Subsidiary Guarantors denies or disaffirms its liability under
its Guarantees (other than by reason of release of a Subsidiary Guarantor
in accordance with the terms of the Supplemented Indenture).

If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 business days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If
an Event of Default specified in clause (vi) above occurs and is continuing
with respect to the Company, then all unpaid principal of, and premium, if
any, and accrued and unpaid interest on all of the outstanding Notes shall
ipso facto become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder.

The Supplemented Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding
paragraph, the Holders of a majority in aggregate principal amount of the
Notes may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree, (ii) if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of such acceleration,
(iii) to the extent the payment of

such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (v) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.

The Holders of a majority in aggregate principal amount of the Notes may
waive any existing Default or Event of Default under the Supplemented
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any Notes.

Holders of the Notes may not enforce the Supplemented Indenture or the Notes
except as provided in the Supplemented Indenture and under the TIA. Subject to
the provisions of the Supplemented Indenture relating to the duties of the
Trustee, the Trustee is under no obligation to exercise any of its rights or
powers under the Supplemented Indenture at the request, order or direction of
any of the Holders, unless such Holders have offered to the Trustee reasonable
indemnity. Subject to all provisions of the Supplemented Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
then outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.

Under the Supplemented Indenture, the Company is required to provide an
officers' certificate to the Trustee promptly upon any such officer obtaining
knowledge of any Default or Event of Default (provided that such officers
shall provide such certification at least annually whether or not they know of
any Default or Event of Default) that has occurred and, if applicable,
describe such Default or Event of Default and the status thereof.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

The Company may, at its option and at any time, elect to have its
obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes,
except for (i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payments, (iii)
the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Supplemented Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and the
Subsidiary Guarantors, if any, released with respect to certain covenants that
are described in the Supplemented Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in United States dollars, non-callable United States
government obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonable acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Supplemented Indenture,
there has been a change in the applicable federal income tax law, in either
case to the

effect that, and based thereon such opinion of counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; provided,
however, such opinion of counsel will not be required if all the Notes will
become due and payable on the maturity date within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit (other than a Default or Event of Default resulting from the
incurrence of Indebtedness all or a portion of the proceeds of which will be
used to defease the Notes); (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under,
the Supplemented Indenture or any other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound; (vi) the Company shall have
delivered to the Trustee an officers' certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; (vii) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance, as the case may
be, have been complied with; (viii) the Company shall have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied.

SATISFACTION AND DISCHARGE

The Supplemented Indenture will be discharged and will cease to be of
further effect (except as to surviving rights or registration of transfer or
exchange of the Notes, as expressly provided for in the Indenture) as to all
outstanding Notes when (i) either (a) all the Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Supplemented
Indenture by the Company; and (iii) the Company has delivered to the Trustee
an officers' certificate and an opinion of counsel stating that all conditions
precedent under the Supplemented Indenture relating to the satisfaction and
discharge of the Supplemented Indenture have been complied with.

MODIFICATION OF THE SUPPLEMENTED INDENTURE

From time to time, the Company, the Subsidiary Guarantors and the Trustee,
without the consent of the Holders, may amend the Supplemented Indenture for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the
Trustee, adversely affect the rights of any of the Holders in any material
respect. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an opinion of counsel. Other modifications, waivers and
amendments of the Supplemented Indenture may be made with the

consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Supplemented Indenture, except that,
without the consent of each Holder affected thereby, no amendment or waiver
may: (i) reduce the amount of Notes whose Holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing
the time for payment of interest, including defaulted interest, on any Notes;
(iii) reduce the principal of or change or have the effect of changing the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor; (iv) make any Notes payable in money other than that stated in
the Notes; (v) make any change in provisions of the Supplemented Indenture
protecting the right of each Holder to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal amount
of Notes to waive Defaults or Events of Default; (vi) amend, change or modify
in any material respect the obligation of the Company to make and consummate a
Change of Control Offer in the event of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect
thereto; (vii) modify or change any provision of the Supplemented Indenture or
the related definitions affecting the subordination or ranking of the Notes or
any Guarantee in a manner which adversely affects the Holders in any material
respect; or (viii) release any Subsidiary Guarantor from any of its
obligations under its Guarantee or the Supplemented Indenture other than in
accordance with the terms of the Supplemented Indenture.

GOVERNING LAW

The Supplemented Indenture provides that it, the Notes and the Guarantees
will be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts of
law to the extent that the application of the law of another jurisdiction
would be required thereby.

THE TRUSTEE

The Supplemented Indenture provides that, except during the continuance of
an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Supplemented Indenture. During the existence of
an Event of Default, the Trustee will exercise such rights and powers vested
in it by the Supplemented Indenture, and use the same degree of care and skill
in its exercise as a prudent man or woman would exercise or use under the
circumstances in the conduct of his own affairs.

The Supplemented Indenture and the provisions of the TIA contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company or a Subsidiary Guarantor, to obtain payments of claims in certain
cases or to realize on certain property received in respect of any such claim
as security or otherwise. Subject to the TIA, the Trustee will be permitted to
engage in other transactions; provided, however, that if the Trustee acquires
any conflicting interest as described in the TIA, it must eliminate such
conflict or resign.

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
Supplemented Indenture. Reference is made to the Supplemented Indenture for
the full definition of all such terms, as well as any other terms used herein
for which no definition is provided.

"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of such
Person or at the time it merges or consolidates with such Person or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person, and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of such
Person or such acquisition, merger or consolidation.

"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of

the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.

"Asset Acquisition" means (a) an Investment by the Company or any Subsidiary
of the Company in any other Person pursuant to which such Person shall become
a Subsidiary of the Company or any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary of the Company, or (b) the
acquisition by the Company or any Subsidiary of the Company of the assets of
any Person (other than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.

"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Wholly Owned Subsidiary of the Company of
(a) any Capital Stock of any Subsidiary of the Company, or (b) any other
property or assets of the Company or any Subsidiary of the Company other than
in the ordinary course of business; provided, however, that Asset Sales shall
not include (i) any transaction or series of related transactions for which
the Company or its Subsidiaries receive aggregate consideration of less than
$3.0 million in any consecutive 12-month period, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under "Merger, Consolidation and Sale of
Assets" or any disposition that constitutes a Change of Control, (iii)
disposals or replacements of obsolete or outdated equipment in the ordinary
course of business, (iv) the sale or discount, in each case without recourse
(other than recourse for a breach of a representation or warranty), of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof in the ordinary course of
business and not as part of a financing transaction, and (v) the sale, lease,
conveyance, disposition or other transfer by the Company or any Subsidiary of
assets or property to one or more Wholly Owned Subsidiaries in connection with
Investments permitted under the "Limitations on Restricted Payments" covenant.

"ATC" means ATC Group Services Inc., a Delaware corporation.

"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.

"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.

"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.

"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether voting or nonvoting) of corporate stock, including each
class of Common Stock and Preferred Stock of such Person and (ii) with respect
to any Person that is not a corporation, any and all partnership or other
equity interests of such Person.

"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof,
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation

("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (i) through
(v) above.

"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of the Indenture),
other than to a Permitted Holder or a Group controlled by a Permitted Holder;
(ii) the approval by the holders of Capital Stock of the Company of any plan
or proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Supplemented Indenture);
(iii) (x) prior to the Initial Public Equity Offering, any Person or Group
other than a Permitted Holder or a Group controlled by a Permitted Holder
shall become the owner, directly or indirectly, beneficially or of record, of
shares representing a percentage of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the Company
("Voting Power") greater than the percentage of Voting Power owned by a
Permitted Holder (y) prior to the Initial Public Equity Offering, the
percentage of Voting Power owned by Permitted Holders is less than 40% or (z)
after the Initial Public Equity Offering, any Person or Group other than a
Person or Group controlled by a Permitted Holder owns, directly or indirectly,
beneficially or of record, shares representing more than 35% Voting Power; or
(iv) the replacement of a majority of the Board of Directors of the Company
from the directors who constituted the Board of Directors of the Company on
the Issue Date, and such replacement shall not have been approved by a vote of
at least a majority of the Board of Directors of the Company then still in
office who either were members of such Board of Directors on the Issue Date or
whose election as a member of such Board of Directors was previously so
approved.

"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common stock,
whether outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.

"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Subsidiaries in accordance with
GAAP.

"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working

capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including
any Person who becomes a Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any Pro Forma Adjustments)
(provided that such Consolidated EBITDA shall be included only to the extent
includible pursuant to the definition of "Consolidated Net Income")
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period
and on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter Period.
If such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to
the incurrence of such guaranteed Indebtedness as if such Person or any
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator)
of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause (1)
above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.

"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state
and local tax rate of such Person, expressed as a decimal.

"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without limitation, (a)
any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP, minus amortization or write off of deferred
financing costs.

"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for
such period on a consolidated basis, determined in accordance with GAAP;
provided, however, that there shall be excluded therefrom (a) gains (and
losses) on an after-tax effected basis from Asset Sales (without regard to the
$3 million limitation set forth in the definition thereof) or abandonments or
reserves relating thereto, (b) items classified as extraordinary or
nonrecurring gains or losses (including, without limitation, restructuring
costs related to facilities and/or operating line closings) on an after tax-
effected basis, (c) the net income or loss of any Person acquired in a
"pooling of interests" transaction accrued prior to the date it becomes a
Subsidiary of the referent Person or is merged or consolidated with the
referent Person or any Subsidiary of the referent Person, (d) the net income
(but not loss) of any Subsidiary of

100

the referent Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income or loss of any other Person,
other than a Subsidiary of the referent Person, except to the extent (in the
case of net income) of cash dividends or distributions paid to the referent
Person, or to a Wholly Owned Subsidiary of the referent Person, by such other
Person, (f) any restoration to income of any contingency reserve of an
extraordinary, nonrecurring or unusual nature, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets and (i) any amortization or write-off of deferred
financing costs.

"Consolidated Net Worth" means, with respect to any Person, the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.

"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate (A) depreciation, (B) amortization, (C) LIFO charges,
(D) the amount of any restructuring reserve or charge, and (E) other non-cash
charges of such Person and its Subsidiaries reducing Consolidated Net Income
of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding for purposes of clause
(C) any such charges which require an accrual of or a reserve for cash charges
for any future period).

"Credit Agreement" means the Credit Agreement dated as of January 29, 1998
among the Company, Holdings, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreement may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor
or replacement agreement and whether by the same or any other agent, lender or
group of lenders.

"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.

"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.

"Designated Senior Indebtedness" means (i) Indebtedness under or in respect
of the Credit Agreement and (ii) any other Indebtedness constituting Senior
Indebtedness or Guarantor Senior Indebtedness which, at the time of
determination, has an aggregate principal amount of at least $2.0 million and
is specifically designated in the instrument evidencing such Senior
Indebtedness or Guarantor Senior Indebtedness as "Designated Senior
Indebtedness" or "Guarantor Senior Indebtedness" by the Company or the
applicable Subsidiary Guarantor, as the case may be.

"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the sole option of the holder thereof (other than as a
result of a Change of Control) on or prior to the final maturity date of the
Notes.

101

"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.

"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid.

"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of the Company.

"Foreign Subsidiary" means any Subsidiary of the Company organized under the
laws of a country or jurisdiction other than the United States, any state or
territory thereof or the District of Columbia.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the Issue Date.

"Guarantee" means the guarantee of the Notes by the Subsidiary Guarantors.

"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
such Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Guarantor Senior Indebtedness" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations (including guarantees
thereof) of every nature of a Subsidiary Guarantor under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations (including guarantees thereof)
and (z) all obligations (including guarantees thereof) under Currency
Agreements, in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall
not include (i) any Indebtedness of a Subsidiary Guarantor to a Subsidiary of
such Subsidiary Guarantor or any Affiliate of such Subsidiary Guarantor or any
of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by such Subsidiary
Guarantor, (vi) that portion of any Indebtedness incurred in violation of the
Supplemented Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness," (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (vi) if the holder(s) of
such obligation or their representative and the Trustee shall have received an
Officers' Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of the
Indenture), (vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code is without
recourse to such Subsidiary Guarantor and (viii) any Indebtedness which is, by
its express terms, subordinated in right of payment to any other Indebtedness
of a Subsidiary Guarantor.

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"Holder" means any holder of Notes.

"Holdings" means Acquisition Holdings, Inc., a Delaware corporation.

"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of
the type referred to in clauses (i) through (vi) above which are secured by
any lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured, (viii) all
Obligations under Currency Agreements and Interest Swap Agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the Company of such
Disqualified Capital Stock.

"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.

"Initial Public Equity Offering" means the first Public Equity Offering to
occur after the Issue Date.

"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.

"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Subsidiary, as
the case may be. For the purposes of the "Limitation on Restricted Payments"
covenant, the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any
of its Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment to the extent such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Subsidiary of the Company

103

sells or otherwise disposes of any Common Stock of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such former Subsidiary
not sold or disposed of.

"Issue Date" means January 29, 1998.

"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).

"Merger" means the merger of Acquisition Corp. into ATC, with ATC as the
surviving corporation pursuant to and in accordance with the Merger Agreement.

"Merger Agreement" means the Merger Agreement dated as of November 26, 1997
among Acquisition Corp., Holdings and ATC pursuant to which Acquisition Corp.
was merged into and with ATC, as amended and in effect on the Issue Date.

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account
any reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale and (d)
appropriate amounts to be provided by the Company or any Subsidiary, as the
case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.

"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

"Permitted Holder" means any of Weiss, Peck & Greer, L.L.C. and its
Affiliates.

"Permitted Indebtedness" means, without duplication, each of the following:

(i) Indebtedness under the Notes issued on the Issue Date and the
Guarantees outstanding on the Issue Date or entered into thereafter in
accordance with the Indenture;

(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate outstanding principal amount at any time not to exceed the sum of
the aggregate commitments pursuant to the Credit Agreement as in effect on
the Issue date (A) less the amount of all mandatory principal payments
actually made in respect of the term loan thereunder and (B) reduced by any
required repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder, in each case, actually effected in
satisfaction of the Net Cash Proceeds requirement described under "Certain
Covenants--Limitation on Asset Sales" (it being recognized that a reduction
in any borrowing base thereunder in and of itself shall not be deemed a
required permanent repayment);

(iii) Interest Swap Obligations covering Indebtedness of the Company or
any of its Subsidiaries; provided, however, that such Interest Swap
Obligations are entered into to protect the Company and its Subsidiaries
from fluctuations in interest rates on Indebtedness incurred in accordance
with the Supplemented Indenture to the extent the notional principal amount
of such Interest Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation relates;

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(iv) Indebtedness under Currency Agreements; provided, however, that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;

(v) Indebtedness of a Subsidiary to the Company or to a Wholly Owned
Subsidiary of the Company for so long as such Indebtedness is held by the
Company or a Wholly Owned Subsidiary of the Company, in each case subject
to no Liens held by any Person other than the Company, a Wholly Owned
Subsidiary of the Company or the lenders under the Credit Agreement;
provided, however, that if as of any date any Person other than the
Company, a Wholly Owned Subsidiary of the Company or the lenders under the
Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company of such
Indebtedness unless such Indebtedness is otherwise permitted under the
Supplemented Indenture;

(vi) Indebtedness of the Company to a Wholly Owned Subsidiary of the
Company for so long as such Indebtedness is held by a Wholly Owned
Subsidiary of the Company or the lenders under the Credit Agreement, in
each case subject to no Lien other than under the Credit Agreement;
provided, however, that (a) any Indebtedness of the Company to any Wholly
Owned Subsidiary of the Company that is not a Subsidiary Guarantor is
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Supplemented Indenture and the Notes and
(b) if as of any date any Person other than a Wholly Owned Subsidiary of
the Company or the lenders under the Credit Agreement owns or holds any
such Indebtedness or a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company unless such Indebtedness is otherwise permitted
under the Supplemented Indenture;

(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within five business days of incurrence;

(viii) Indebtedness of the Company or any of its Subsidiaries represented
by letters of credit for the account of the Company or such Subsidiary, as
the case may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;

(ix) Existing Indebtedness (including Indebtedness of the Company and its
Subsidiaries under the Notes issued on the Issue Date) outstanding on the
Issue Date;

(x) additional Capitalized Lease Obligations and Purchase Money
Indebtedness of the Company or any of its Subsidiaries not to exceed $5.0
million at any one time outstanding;

(xi) Refinancing Indebtedness;

(xii) Indebtedness permitted by clause (x) of the definition of
"Permitted Investments";

(xiii) guarantees of Indebtedness otherwise permitted under the
Supplemented Indenture, provided that in the case of a guarantee by a
Subsidiary, such Subsidiary complies with the "Guarantees of Certain
Indebtedness" covenant to the extent applicable; and

(xiv) additional Indebtedness in the form of Seller Notes in an aggregate
principal amount not to exceed $10.0 million at any one time outstanding.

"Permitted Investments" means (i) Investments by the Company or any
Subsidiary of the Company in any Person that is or will become immediately
after such Investment a Subsidiary of the Company or that will merge or
consolidate into the Company or a Subsidiary of the Company; (ii) Investments
in the Company by any Subsidiary of the Company; provided, however, that any
Indebtedness evidencing such Investment by a Subsidiary that is not a
Subsidiary Guarantor is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes and the Supplemented
Indenture; (iii) Investments in cash and Cash

105

Equivalents; (iv) loans and advances to employees and officers of the Company
and its Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $500,000 at any one time outstanding; (v) Currency
Agreements and Interest Swap Obligations entered into in the ordinary course
of the Company's or its Subsidiaries' businesses and otherwise in compliance
with the Supplemented Indenture; (vi) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors
or customers; (vii) Investments made by the Company or its Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant; (viii) Investments
existing on the Issue Date and (ix) guarantees of Indebtedness otherwise
permitted under the Supplemented Indenture, provided that in the case of a
guarantee by a Subsidiary, such Subsidiary complies with the "Guarantees of
Certain Indebtedness" covenant to the extent applicable; and (x) additional
Investments in unconsolidated joint ventures in businesses reasonably related
or complementary to those of the Company and its Subsidiaries (as determined
in good faith by the Company's Board of Directors) in an aggregate amount for
all such Investments made pursuant to this clause (x) not to exceed $4.0
million.

"Permitted Liens" means the following types of Liens:

(i) Liens in favor of the Trustee in its capacity as trustee for the
Holders;

(ii) Liens securing Indebtedness outstanding under the Credit Agreement;

(iii) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;

(iv) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(v) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(vi) judgment Liens not giving rise to an Event of Default;

(vii) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;

(viii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any
property or assets which is not leased property subject to such Capitalized
Lease Obligation;

(ix) Liens to secure Purchase Money Indebtedness of the Company or any
Subsidiary of the Company; provided, however, that (A) the related Purchase
Money Indebtedness shall not exceed the cost of such property or assets and
shall not be secured by any property or assets of the Company or any
Subsidiary of the Company other than the property and assets so acquired,
constructed or improved and (B) the Lien securing such Indebtedness shall
be created within 90 days of such acquisition, construction or improvement;

(x) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;

(xi) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;

106

(xii) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;

(xiii) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Supplemented Indenture;

(xiv) Liens securing Indebtedness under Currency Agreements;

(xv) any lease or sublease not interfering in any material respect with
the business of the Company and its Subsidiaries;

(xvi) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided, however, that (A) such Liens secured such Acquired Indebtedness
at the time of and prior to the incurrence of such Acquired Indebtedness by
the Company or a Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company and (B) such
Liens do not extend to or cover any property or assets of the Company or of
any of its Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Subsidiary of the Company and are no more
favorable to the lienholders than those securing the Acquired Indebtedness
prior to the incurrence of such Acquired Indebtedness by the Company or a
Subsidiary of the Company.

"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.

"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.

"Pro Forma Adjustments" shall mean pro forma adjustments calculated on a
basis consistent with Regulation S-X under the Securities Act as in effect on
the Issue Date, plus the following detailed adjustments that may be made in
regard to businesses acquired or to be acquired (in either case, the
"target"), whether before or after the Issue Date:

(i) adjustments to revenues to reflect customers not likely to be
retained;

(ii) adjustments to labor and other direct costs to reflect application
of the Company's utilization rate (the billable hours of the Company's
employees divided by such employees' available hours) to the target and to
reflect the additional costs or savings, as the case may be, from the
continued use or elimination of outside laboratory and technical personnel
utilized by the target company;

(iii) adjustments to reflect home office functions of the target such as
accounting, payroll and legal that will be provided by the Company,
including any adjustments to eliminate outside professional services if
such functions are to be assumed by then existing Company personnel;

(iv) adjustments with respect to savings that will be realized by
including the target under the Company's insurance coverage and adjustments
to reflect the costs, if any, of transferring or terminating duplicate
insurance policies of the target;

(v) adjustments to reflect savings associated with the elimination of
duplicate facilities and adjustments to reflect costs associated with such
elimination (such as lease termination costs, moving and storage, etc.);

(vi) adjustments to employee benefit costs to reflect the Company's
actual employee benefit cost structure, to the extent the target's employee
benefits will be replaced with the Company's employee benefits;

(vii) adjustments to reflect the actual impact of the departure or
retention of highly compensated executives of the target (including
elimination of compensation, benefits and revenues attributable to such
executives, if departing, and any increases to compensation or benefits for
such executives continuing);

107

(viii) interest expense adjustments to reflect refinancing of existing
debt or increases in borrowings used to effect acquisition of the target;
and

(ix) adjustments to replace the target's then-current goodwill
depreciation and amortization with such amounts as are derived from the
application to the target of purchase accounting, if applicable, under
GAAP.

"Public Equity Offering" means an underwritten primary public offering of
common stock or common equity of the Company or any other Person that directly
or indirectly owns 100% of the common stock of the Company pursuant to an
effective registration statement under the Securities Act.

"Purchase Money Indebtedness" means Indebtedness the net proceeds of which
are used to finance the cost (including the cost of acquisition, construction
or improvements) of property or assets acquired in the normal course of
business by the Person incurring such Indebtedness.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.

"Refinancing Indebtedness" means any Refinancing by the Company or any
Subsidiary of the Company of Indebtedness (including any Indebtedness with
respect to letters of credit) incurred in accordance with the "Limitation on
Incurrence of Additional Indebtedness" covenant (other than pursuant to
clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (x), (xi), (xii) or
(xiii) of the definition of Permitted Indebtedness), in each case that does
not (1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing, plus
the amount of any interest and premium required to be paid under the terms of
the instrument governing such Indebtedness and plus the amount of reasonable
fees and expenses (including additional premiums that may be required to
effect such Refinancing, limited to 5.0% of the aggregate principal amount of
Indebtedness being Refinanced) incurred by the Company or such Subsidiary, as
the case may be, in connection with such Refinancing, except to the extent
that any such increase in Indebtedness is otherwise permitted by the
Supplemented Indenture or (2) create Indebtedness with (A) a Weighted Average
Life to Maturity that is less than the Weighted Average Life to Maturity of
the Indebtedness being Refinanced or (B) a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; provided, however, that
(x) if such Indebtedness being Refinanced is Indebtedness of the Company, then
such Refinancing Indebtedness shall be Indebtedness solely of the Company and
(y) if such Indebtedness being Refinanced is subordinate or junior to the
Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.

"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Subsidiary Guarantors and
the Initial Purchaser.

"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided,
however, that if, and for so long as, any Designated Senior Indebtedness lacks
such a representative, then the Representative for such Designated Senior
Indebtedness shall at all times constitute the holders of a majority in
outstanding principal amount of such Designated Senior Indebtedness in respect
of any Designated Senior Indebtedness.

"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of the Company of any property, whether
owned by the Company or any Subsidiary of the Company at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company
or such Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such property.

"Seller Notes" means notes issued by the Company or any Subsidiary thereof
to a seller in connection with an Asset Acquisition; such notes may be Senior
Indebtedness.

108

"Senior Indebtedness" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations (including guarantees thereof) of every
nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations (including guarantees thereof) and (z) all
obligations (including guarantees) under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Senior Indebtedness" shall not include (i) any Indebtedness of
the Company to a Subsidiary of the Company or any Affiliate of the Company or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation) but excluding Indebtedness in the original aggregate principal
amount of up to Two Million Six Hundred Fifty Thousand Dollars ($2,650,000)
issued to the former shareholders of Bing Yen & Associates, a California
corporation, in connection with the acquisition by ATC of all of the issued
and outstanding shares of said corporation, (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or
owing by the Company, (vi) that portion of any Indebtedness incurred in
violation of the Supplemented Indenture provisions set forth under "Limitation
on Incurrence of Additional Indebtedness," (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (vi) if
the holder(s) of such obligation or their representative and the Trustee shall
have received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at
the date on which the initial borrowing thereunder is made would not) violate
such provisions of the Supplemented Indenture), (vii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title
11, United States Code is without recourse to the Company, (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of the Company, and (ix) any Indebtedness of ATC and
its Subsidiaries until consummation of the Merger and assumption by ATC of all
Obligations under the Indenture (including execution of the Guarantees by the
Subsidiary Guarantors);

"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.

"Subsidiary" means, with respect to any Person, (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.

"Subsidiary Guarantor" means individually and collectively, (i) each of the
Company's Subsidiaries as of the Issue Date other than the Foreign
Subsidiaries and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of the Supplemented Indenture as a Subsidiary
Guarantor; (iii) any Subsidiary, whether formed or acquired after the Issue
Date, that guarantees any Indebtedness outstanding under the Credit Agreement;
provided, however, that any Subsidiary acquired after the Issue Date which is
prohibited from entering into a Guarantee pursuant to restrictions contained
in any debt instrument in existence at the time such Subsidiary was so
acquired and not

109

entered into in anticipation or contemplation of such acquisition shall not be
required to become a Subsidiary Guarantor so long as any such restriction is
in existence and to the extent of any such restriction; provided, further,
that if any Subsidiary Guarantor is released from its guarantee of the
outstanding Indebtedness of the Company under the Credit Agreement and the
pledge by it, directly or indirectly, of any of its assets as security for
such Indebtedness at a time when no Default or Event of Default has occurred
and is continuing such Subsidiary Guarantor shall be automatically released
from its obligations as a Subsidiary Guarantor and, from and after such date,
such Subsidiary Guarantor shall cease to constitute a Subsidiary Guarantor
provided, however, that any Person constituting a Subsidiary Guarantor as
described above shall cease to constitute a Subsidiary Guarantor when its
Guarantee is released in accordance with the terms of the Supplemented
Indenture.

"Tax Sharing Agreement" means any tax sharing agreement between the Company
and Holdings or any other Person with which the Company is required to, or is
permitted to, file a consolidated tax return or with which the Company is or
could be part of a consolidated group for tax purposes.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

"Wholly Owned Subsidiary" means, with respect to any Person, any Subsidiary
of such Person of which all the outstanding voting securities normally
entitled to vote in the election of directors are owned by such Person or any
Wholly Owned Subsidiary of such Person (other than directors qualifying shares
or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law).

110

BOOK-ENTRY; DELIVERY AND FORM

Exchange Notes issued in exchange for Private Notes currently represented by
one or more fully registered global notes will be represented by one or more
permanent global certificates in definitive, fully registered form (the
"Global Notes"). The Global Notes will be deposited upon issuance with, or on
behalf of, DTC and registered in the name of a nominee of DTC. Except as set
forth below, The Global Notes may be transferred in whole and not in part only
to another nominee of DTC or to a successor of DTC or its nominee.

Exchange Notes issued in exchange for Private Notes will be issued in
registered, certificated form without interest coupons.

The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Notes
of the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of such ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of participants)
and the records of participants (with respect to interests of persons other
than participants).

So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Supplemented Indenture. No beneficial owner of an interest in the
Global Notes will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the Supplemented
Indenture with respect to the Notes.

Payments of the principal of, premium (if any) and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, any Subsidiary Guarantor the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.

The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds.

DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
participants to whose account the DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant or participants has or have
given such direction. However, if there is an Event of Default under the
Supplemented Indenture, DTC will exchange the Global Notes for certificated
securities, which it will distribute to its participants.

DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and

111

facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").

Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is
not appointed within 90 days, certificated securities will be issued in
exchange for the Global Notes.

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

EXCHANGE OFFER

The exchange of the Private Notes for the Exchange Notes pursuant to the
Exchange Offer should not be treated as a taxable transaction for U.S. federal
income tax purposes because the Exchange Notes will not be considered to
differ materially in kind or extent from the Private Notes. Rather, the
Exchange Notes received by any holder should be treated as a continuation of
such holders investment in the Private Notes. As a result, there should be no
material U.S. federal income tax consequences to holders exchanging the
Private Notes for the Exchange Notes pursuant to the Exchange Offer and such
holders should have the same adjusted issue price, adjusted basis and holding
period in the Exchange Notes as it had in the Private Notes immediately prior
to the exchange.

HOLDERS CONSIDERING THE EXCHANGE OF THE PRIVATE NOTES FOR EXCHANGE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING
UNDER FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS OF SUCH AN EXCHANGE.

PLAN OF DISTRIBUTION

This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each broker-dealer that
receives Exchange Notes for its own account in exchange for such Private Notes
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company
has agreed that for a period of up to 45 days after the closing of the
Exchange Offer, it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer that requests copies of this Prospectus in
the Letter of Transmittal for use in connection with any such resale.

None of the Company or any Subsidiary Guarantors will receive any proceeds
from any sale of Exchange Notes by broker-dealers or any other persons.
Exchange Notes received by broker-dealers for their own account pursuant to
the Exchange Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions or through the
writing of options on the Exchange Notes, or a combination of such methods of
resale, at market prices prevailing at the time of resale or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer in exchange
for Private Notes acquired by such broker-dealer as a result of market-making

112

or other trading activities and any broker-dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.

The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities,
including liabilities under the Securities Act.

LEGAL MATTERS

Chadbourne & Parke L.L.P, counsel to the Company will pass upon the validity
of the Exchange Notes and certain U.S. federal income tax consequences
relating to the Exchange Notes.

EXPERTS

The Consolidated Balance Sheets as of February 29, 1996 and February 28,
1997 and the related Consolidated Statements of Income, Shareholders' Equity
and Cash Flows for the fiscal years ended February 28, 1995, February 29, 1996
and February 28, 1997 of the Company, and the financial statements for Bing
Yen for the year ended December 31, 1996 and the financial statements for ATEC
as of December 31, 1995 and 1994 and for the years ended December 31, 1995 and
1994, the three months ended December 31, 1993 and the year ended September
30, 1993 included in this Prospectus, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are included
herein and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. The
Environmental Warranty, Inc. financial statements and financial statement
schedule, as of and for the years ended June 30, 1997 and 1996, included in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report. The financial statements for the Engineering Division of
Smith Technology Corporation as of and for the year ended September 30, 1996
included in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as stated in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the division's ability to continue as a going concern as described in Note 1
to the financial statements) appearing elsewhere herein.

113

INDEX TO FINANCIAL STATEMENTS

PAGE
----

ATC GROUP SERVICES INC. AND SUBSIDIARIES............................................ F-2
Independent Auditors' Consent Report and Report on Schedules........................ F-3
Consolidated Balance Sheets, February 28 (29), 1996 and 1997 and November 30, 1997
(unaudited)........................................................................ F-4
Consolidated Statements of Operations for the three years ended February 28, 1997
and the nine months
ended November 30, 1997 and 1996 (unaudited)....................................... F-5
Consolidated Statements of Stockholders' Equity for the three years ended February
28, 1997 and the
nine months ended November 30, 1997 (unaudited).................................... F-6
Consolidated Statements of Cash Flows for the three years ended February 28, 1997
and the nine months ended November 30, 1997 and 1996 (unaudited)................... F-7
Notes to the Consolidated Financial Statements for the three years ended February
28, 1997 and nine months ended November 30, 1997 and 1996 (unaudited).............. F-8
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION............................ F-30
(dba BCM ENGINEERS, INC.)
Report of Independent Auditors...................................................... F-31
Balance Sheet, September 30, 1996................................................... F-32
Statement of Operations and Smith Equity Investment for the year ended September 30,
1996............................................................................... F-33
Statement of Cash Flows for the year ended September 30, 1996....................... F-34
Notes to Financial Statements, September 30, 1996................................... F-35
AMERICAN TESTING AND ENGINEERING CORPORATION........................................ F-41
Independent Auditors' Report........................................................ F-42
Consolidated Balance Sheets for December 31, 1995 and 1994.......................... F-43
Consolidated Statements of Operations for the years ended December 31, 1995 and
1994, the
three months ended December 31, 1993 and the year ended September 30, 1993......... F-44
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1995 and 1994,
the three months ended December 31, 1993 and the year ended September 30, 1993..... F-45
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and
1994, the
three months ended December 31, 1993 and the year ended September 30, 1993......... F-46
Notes to the Consolidated Financial Statements for the years ended December 31, 1995
and 1994,
the three months ended December 31, 1993 and the year ended September 30, 1993..... F-47
BING YEN & ASSOCIATES, INC. ........................................................ F-55
Independent Auditors' Report........................................................ F-56
Balance Sheet, December 31, 1996.................................................... F-57
Statement of Operations and Retained Earnings for the year ended December 31, 1996.. F-58
Statement of Cash Flows for the year ended December 31, 1996........................ F-59
Notes to the Financial Statements for the year ended December 31, 1996.............. F-60
ENVIRONMENTAL WARRANTY, INC......................................................... F-62
Report of Independent Public Accountants............................................ F-63
Balance Sheets as of June 30, 1997 and 1996......................................... F-64
Statements of Operations for the years ended June 30, 1997 and 1996................. F-65
Statements of Changes in Shareholders' Equity for the years ended June 30, 1997 and
1996............................................................................... F-66
Statements of Cash Flows for the years ended June 30, 1997 and 1996................. F-67
Notes to Financial Statements for the years ended June 30, 1997 and 1996............ F-68
Schedule of General and Administrative Expenses for the years ended June 30, 1997
and 1996........................................................................... F-73

F-1

ATC GROUP SERVICES INC. AND SUBSIDIARIES

FINANCIAL STATEMENTS FOR THE THREE YEARS
ENDED FEBRUARY 28, 1997 AND THE NINE MONTHS
ENDED NOVEMBER 30, 1997 AND 1996
AND INDEPENDENT AUDITORS' REPORT

F-2

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
ATC Group Services Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of ATC Group
Services Inc. and subsidiaries as of February 29, 1996 and February 28, 1997,
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended February 28,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of ATC Group Services Inc. and
subsidiaries as of February 29, 1996 and February 28, 1997 and the results of
their operations and their cash flows for each of the three years in the
period ended February 29, 1996 and February 28, 1997 and the results of their
operations and their cash flows for each of the three years in the period
ended February 28, 1997, in conformity with generally accepted accounting
principles.

/s/ Deloitte & Touche LLP

Omaha, Nebraska
May 22, 1997
(May 29, 1997 as to Notes B and D)

F-3

ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

FEBRUARY 28 (29), 1996 AND 1997 AND NOVEMBER 30, 1997 (UNAUDITED)

NOVEMBER 30,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 13,469,443 $ 2,003,890 $ 5,839,819
Trade accounts receivable, less
allowance for doubtful accounts
($383,220 in 1996, $1,455,716 in 1997
and $2,464,031 at November 30, 1997)
(Note K)............................. 14,161,774 34,406,026 42,507,431
Costs in excess of billings on
uncompleted contracts................ 2,333,835 5,191,569 9,291,883
Prepaid expenses and other current
assets............................... 906,289 2,934,193 2,308,060
Deferred income taxes (Note H)........ 440,600 790,400 790,400
Refundable income taxes (Note H)...... -- 118,340 --
------------ ------------ ------------
Total current assets................. 31,311,941 45,444,418 60,737,593
PROPERTY AND EQUIPMENT, Net (Note C)... 3,606,755 3,784,633 5,633,719
GOODWILL, net of accumulated
amortization ($453,646 in 1996,
$1,478,876 in 1997 and $2,709,740 at
November 30, 1997) (Note B)........... 11,375,399 35,587,076 48,340,578
COVENANTS NOT TO COMPETE, net of
accumulated amortization ($258,099 in
1996, $614,750 in 1997 and $557,207 at
November 30, 1997) (Note B)........... 274,401 632,184 622,750
OTHER ASSETS........................... 116,104 845,346 2,210,275
------------ ------------ ------------
$ 46,684,600 $ 86,293,657 $117,544,915
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt (Note D).............. $ 1,122,552 $ 300,000 $ 2,449,748
Current maturities of long-term debt
(Note D)............................. 354,858 1,986,730 1,343,007
Accounts payable...................... 2,231,175 7,440,024 7,355,315
Income taxes payable (Note H)......... 42,500 -- 887,673
Accrued compensation.................. 1,421,330 3,789,233 5,832,039
Accrued payment obligations--ATEC
acquisition (Note B)................. -- 1,721,594 1,748,500
Other accrued expenses................ 1,162,210 2,505,143 3,049,780
------------ ------------ ------------
Total current liabilities............ 6,334,625 17,742,724 22,666,062
LONG-TERM DEBT, less current maturities
(Note D).............................. 361,944 22,123,344 42,153,196
OTHER LIABILITIES (Note E)............. 598,817 270,386 2,364,618
DEFERRED INCOME TAXES (Note H)......... 196,800 717,900 717,900
------------ ------------ ------------
Total liabilities.................... 7,492,186 40,854,354 67,901,776
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes B
and E)
STOCKHOLDERS' EQUITY (Notes B, D, F,
and G):
Common stock, par value $.01 per
share; authorized 20,000,000 shares;
issued and outstanding 7,796,577
shares in 1996, 7,800,187 shares in
1997 and 7,930,107 shares at November
30, 1997............................. 77,966 78,002 79,301
Additional paid-in capital............ 29,030,189 28,996,627 29,595,099
Notes receivable--common stock ....... (45,000) --
Retained earnings..................... 10,129,259 16,364,674 19,968,739
------------ ------------ ------------
Total stockholders' equity........... 39,192,414 45,439,303 49,643,139
------------ ------------ ------------
$ 46,684,600 $ 86,293,657 $117,544,915
============ ============ ============

See notes to consolidated financial statements.

F-4

ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

NINE MONTHS ENDED
YEAR ENDED FEBRUARY 28 (29), NOVEMBER 30,
-------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ------------ ----------- ------------
(UNAUDITED)

REVENUES................ $36,271,557 $44,964,897 $113,855,364 $83,416,851 $104,263,345
Reimbursable Costs..... 3,001,811 4,851,206 17,953,895 13,354,833 15,874,338
----------- ----------- ------------ ----------- ------------
NET REVENUES............ 33,269,746 40,113,691 95,901,469 70,062,018 88,389,007
COST OF NET REVENUES.... 15,353,682 19,663,968 53,750,707 38,962,629 47,940,544
----------- ----------- ------------ ----------- ------------
Gross Profit........ 17,916,064 20,449,723 42,150,762 31,099,389 40,448,463
----------- ----------- ------------ ----------- ------------
OPERATING EXPENSES:
Selling................ 1,105,937 1,513,222 3,118,926 2,180,498 3,226,393
General and
administrative........ 10,996,709 12,850,874 26,299,172 18,779,916 28,077,190
Provision for bad
debts................. 188,819 290,165 1,021,631 624,981 1,160,529
----------- ----------- ------------ ----------- ------------
12,291,465 14,654,261 30,439,729 21,585,395 32,464,112
----------- ----------- ------------ ----------- ------------
Operating Income.... 5,624,599 5,795,462 11,711,033 9,513,994 7,984,351
NON-OPERATING EXPENSE
(INCOME):
Interest expense....... 285,570 376,621 1,569,043 1,080,217 2,163,548
Interest income........ (34,073) (272,463) (230,610) (221,115) (164,864)
Other.................. 72,582 20,306 (25,134) (36,182) (44,398)
----------- ----------- ------------ ----------- ------------
324,079 124,464 1,313,299 822,920 1,954,286
----------- ----------- ------------ ----------- ------------
Income before income
taxes.............. 5,300,520 5,670,998 10,397,734 8,691,074 6,030,065
INCOME TAX EXPENSE (Note
H)..................... 2,044,000 1,805,000 4,090,000 3,365,000 2,426,000
----------- ----------- ------------ ----------- ------------
NET INCOME.............. $ 3,256,520 $ 3,865,998 $ 6,307,734 $ 5,326,074 $ 3,604,065
=========== =========== ============ =========== ============
EARNINGS PER COMMON
SHARE AND DILUTIVE
COMMON EQUIVALENT
SHARE:
Primary (Note H)....... $ .57 $ .54 $ .74 $ .62 $ .42
=========== =========== ============ =========== ============
Fully diluted (Note H). $ .56 $ .54 $ .74 $ .62 $ .42
=========== =========== ============ =========== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Primary................ 5,753,856 7,181,416 8,483,387 8,537,271 8,503,018
=========== =========== ============ =========== ============
Fully diluted.......... 5,850,233 7,181,416 8,508,061 8,570,170 8,548,252
=========== =========== ============ =========== ============

See notes to consolidated financial statements.

F-5

ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)

COMMON STOCK
------------
NOTES
ADDITIONAL RECEIVABLE-
PAID-IN COMMON RETAINED
SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL
--------- ------- ----------- ----------- ----------- -----------

BALANCE, February 28,
1994................... 5,303,352 $53,034 $ 4,610,860 $(34,250) $ 3,029,841 $ 7,659,485
Sale of common stock at
$1.87 to $5.00 per
share, upon exercise of
stock options and
warrants............... 16,980 170 51,354 -- -- 51,524
Sale of common stock at
$8.00 per share, upon
exercise
of Class B common stock
purchase warrants...... 284,803 2,848 2,275,576 -- -- 2,278,424
Issuance of common stock
in connection with the
purchase of Con-Test,
Inc.................... 116,556 1,165 491,740 -- -- 492,905
Issuance of common stock
in connection with the
purchase of R.E.
Blattert & Associates.. 16,327 163 112,340 -- -- 112,503
Other capital
transactions........... -- -- (57,417) 19,250 -- (38,167)
Net income.............. -- -- -- -- 3,256,520 3,256,520
--------- ------- ----------- -------- ----------- -----------
BALANCE, February 28,
1995................... 5,738,018 57,380 7,484,453 (15,000) 6,286,361 13,813,194
Issuance of common stock
in public offering at
$12.00
per share less
expenses............... 1,970,000 19,700 21,534,761 -- -- 21,554,461
Sale of common stock at
$1.83 to $10.50 per
share,
upon exercise of stock
options and warrants... 39,613 396 100,223 -- -- 100,619
Net issuance of common
stock and adjustments
in connection with the
merger of Aurora
Environmental Inc. into
ATC (Note B)........... 83,356 834 60,283 (30,000) -- 31,117
Common stock recovered
in connection with the
Con-Test, Inc.
acquisition (Note B)... (33,130) (331) (139,682) -- -- (140,013)
Other capital
transactions........... (1,280) (13) (9,849) -- (23,100) (32,962)
Net income.............. -- -- -- -- 3,865,998 3,865,998
--------- ------- ----------- -------- ----------- -----------
BALANCE, February 29,
1996................... 7,796,577 77,966 29,030,189 (45,000) 10,129,259 39,192,414
Sale of common stock at
$1.85 to $10.00 per
share,
upon exercise of stock
options and warrants... 15,930 159 74,998 -- -- 75,157
Common stock received as
consideration for sale
of assets.............. (12,320) (123) (51,990) -- (72,319) (124,432)
Other capital
transactions........... -- -- (56,570) 45,000 -- (11,570)
Net income.............. -- -- -- -- 6,307,734 6,307,734
--------- ------- ----------- -------- ----------- -----------
BALANCE, February 28,
1997................... 7,800,187 78,002 28,996,627 -- 16,364,674 45,439,303
Sale of common stock at
$1.88 to $10.00 per
share,
upon exercise of stock
options and warrants... 96,920 969 288,973 -- -- 289,942
Issuance of common stock
in connection with the
acquisition of Bing Yen
& Associates, Inc...... 33,000 330 364,733 -- -- 365,063
Continuing registration
costs applied against
additional paid-in cap-
ital................... -- -- (55,234) -- -- (55,234)
Net income.............. -- -- -- -- 3,604,065 3,604,065
--------- ------- ----------- -------- ----------- -----------
BALANCE, November 30,
1997................... 7,930,107 $79,301 $29,595,099 $ -- $19,968,739 $49,643,139
========= ======= =========== ======== =========== ===========

See notes to consolidated financial statements.

F-6

ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

NINE MONTHS ENDED
NOVEMBER 30
--------------------------
1995 1996 1997 1996 1997
---------- ----------- ----------- ------------ ------------
(UNAUDITED)

CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $3,256,520 $ 3,865,998 $ 6,307,734 $ 5,326,074 $ 3,604,065
Adjustments to
reconcile net income
to net cash from
operating activities:
Depreciation and
leasehold
amortization......... 707,318 776,917 882,803 642,779 888,629
Amortization of
goodwill and
covenants............ 212,320 437,254 1,216,008 887,305 1,392,196
Provision for bad
debts................ 188,819 290,165 1,021,631 624,981 1,160,529
Deferred income taxes. 23,500 (191,700) 171,300 -- --
Other................. (57,258) (132,700) (143,981) (130,586) (2,230,058)
Changes in operating
assets and
liabilities, net of
amounts acquired in
acquisitions:
Receivables.......... (348,459) (4,168,658) (3,861,601) (5,400,578) (2,725,157)
Prepaid expenses and
other assets........ (22,269) (434,890) (143,679) (448,876) 1,990,786
Accounts payable and
other liabilities... 72,615 (1,199,278) (12,210,762) (7,316,178) (6,513,985)
Income taxes
refundable/payable.. (1,002,403) (85,750) 75,858 225,455 887,673
---------- ----------- ----------- ------------ ------------
Net cash flows from
operating
activities......... 3,030,703 (842,642) (6,684,689) (5,589,624) (1,545,322)
---------- ----------- ----------- ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of BCM
Engineers, Inc....... -- -- -- -- (5,425,539)
Purchase of Bing Yen &
Associates, Inc., net
of cash acquired..... -- -- -- -- (2,093,122)
Purchase of
Environmental
Warranty, Inc., net
of cash acquired..... -- -- -- -- 19,350
Purchase of American
Testing and
Engineering Corp.,
net of cash acquired. -- -- (8,965,952) (8,965,952) (2,420,766)
Purchase of 3D
Information Services,
Inc., net of cash
acquired............. -- -- (2,926,681) (2,926,681) --
Purchase of Hill
Businesses........... -- (2,517,949) -- -- --
Purchase of Applied
Geosciences, Inc..... -- (589,060) (22,324) -- --
Purchase of Con-Test,
Inc., net of cash
acquired............. (2,230,551) (169,038) -- -- --
Purchase of BSE
Management, Inc.--
contingent
consideration........ (887,325) (207,990) -- -- --
Purchase of Microbial
Environmental
Services, Inc........ (250,000) (45,307) -- -- --
Purchase of R.E.
Blattert &
Associates, net of
cash acquired........ (9,541) (134,376) -- -- --
Purchase of property
and equipment........ (756,444) (946,206) (1,285,695) (1,123,416) (1,502,618)
Other................. 34,049 22,987 56,328 (1,353) 91,887
---------- ----------- ----------- ------------ ------------
Net cash flows from
investing
activities......... (4,099,812) (4,586,939) (13,144,324) (13,017,402) (11,330,808)
---------- ----------- ----------- ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of common stock, net
of expenses.......... 2,329,948 21,655,080 75,157 69,338 289,942
Proceeds from issuance
of long-term debt and
notes payable........ 1,580,318 2,585,125 22,270,297 21,403,572 41,100,000
Principal payments on
long-term debt,
including capital
lease obligations.... (2,800,767) (6,663,581) (13,925,424) (13,592,048) (24,622,649)
Other capital
transactions......... (57,417) (55,462) (56,570) (28,570) (55,234)
---------- ----------- ----------- ------------ ------------
Net cash flows from
financing
activities......... 1,052,082 17,521,162 8,363,460 7,852,292 16,712,059
---------- ----------- ----------- ------------ ------------
Net change in cash
and cash
equivalents........ (17,027) 12,091,581 (11,465,553) 10,754,734 3,835,929
CASH AND CASH
EQUIVALENTS, Beginning
of year............... 1,394,889 1,377,862 13,469,443 13,469,443 2,003,890
---------- ----------- ----------- ------------ ------------
CASH AND CASH
EQUIVALENTS, End of
year.................. $1,377,862 $13,469,443 $ 2,003,890 $ 2,714,709 $ 5,839,819
========== =========== =========== ============ ============
SUPPLEMENTAL
DISCLOSURES OF CASH
FLOW INFORMATION:
Cash payments for:
Interest.............. $ 276,658 $ 374,466 $ 1,515,432 $ 967,711 $ 744,534
Income taxes.......... $3,023,000 $ 2,077,000 $ 4,062,000 $ 3,139,546 $ 1,753,267

See notes to consolidated financial statements.

F-7

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE NINE MONTHS ENDED NOVEMBER
30, 1997 AND 1996 (UNAUDITED)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPALS OF CONSOLIDATION--The consolidated financial statements include
the accounts of ATC Group Services Inc. (formerly ATC Environmental Inc.) and
its wholly-owned subsidiaries ATC New England Corp., ATC Blattert Inc., Hygeia
Laboratories Inc., ATC Management Inc. and ATC InSys Technology Inc. All
significant inter-company accounts and transactions have been eliminated.

In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly, in all material respects, the
financial position, the results of operations and the cash flows for the
periods presented herein. These results of operations are not necessarily
indicative of the results to be expected for the full year due to certain
seasonality factors and the effects and timing of large service projects.

NATURE OF BUSINESS--ATC Group Services Inc. and its subsidiaries ("ATC" or
the "Company") is a national business services firm providing technical and
project management services relating to environmental consulting (the
"environmental consulting and engineering" segment) and information technology
consulting services (the "information technology consulting" segment). The
Company's environmental consulting and engineering segment provides
environmental and geotechnical engineering services, architectural engineering
services, construction materials testing and analytical testing. The Company's
information technology consulting segment provides analysis and design
services and system programming services to assist clients in building new or
modifying existing computer systems. This business unit also provides support
to clients in maintaining computer systems.

SENIOR SECURED NOTES--On May 29, 1997, the Company issued $32,500,000 of
8.18% Senior Secured Notes due in annual installments beginning May, 2000,
through May, 2004, to a group of financial institutions. Interest on the
Senior Secured Notes is payable semi-annually on May 31, and November 30,
commencing on November 30, 1997. The Senior Secured Notes are collateralized
by accounts receivable, work-in-process, intangible assets and the Company's
primary depository accounts. The proceeds from the Senior Secured Notes have
in part been utilized to repay the Company's outstanding bridge credit
facility. Accordingly, at February 28, 1997, the Company classified its
$ 20,850,000 outstanding bridge credit facility as long-term debt. The bridge
facility was entered into in May, 1996, to provide capital in connection with
the Company's acquisition of American Testing and Engineering Corporation and
3D Information Services, Inc.

BANK CREDIT AGREEMENT--In connection with the Senior Secured Note offering,
the Company executed a credit agreement with the Chase Manhattan Bank and
Atlantic Bank of New York. The credit agreement provides for a $15,000,000
revolving line of credit maturing on November 30, 1999. The borrowings under
the line of credit are collateralized by the Company's cash, accounts
receivable, work in process, and intangible assets on a pari passu basis with
the Senior Secured Note holders. Under the terms of the Note and Credit
Agreements, the Company is required to comply with certain financial and
business covenants including maintaining minimum working capital levels, fixed
charge and interest ratios and restrictions on dividend payments.

REVENUE RECOGNITION--The Company generally contracts for services to
customers on the basis of a fixed fee per procedure or services performed.
Revenue is recognized as services are performed in accordance with the terms
of the contract.

COSTS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS--Costs in excess of
billings on uncompleted contracts represent unbilled services and reimbursable
expenses associated with ongoing projects.

F-8

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

SIGNIFICANT CUSTOMER--In fiscal 1997 there were no revenues from a single
customer exceeding 5%. In fiscal 1996 and 1995, revenues from a single
customer comprised approximately 6.0% and 10.6% of total revenues,
respectively.

PROPERTY AND EQUIPMENT--Property and equipment are carried at cost.
Depreciation is computed on either the straight-line or declining balance
method over the estimated useful lives of the assets, as follows:

Office equipment........................................ 5 years
Transportation equipment ............................... 4-5 years
Laboratory and field equipment.......................... 5-7 years
Leasehold improvements.................................. life of the lease

AMORTIZATION OF INTANGIBLE ASSETS--Goodwill, which represents the excess of
cost over the fair market value of net assets acquired in the Company's
acquisitions, is being amortized on a straight-line basis over a 30 year
period. The carrying value of goodwill is periodically evaluated on the basis
of management's estimates of future undiscounted operating income associated
with the acquired businesses. The covenants not to compete are being amortized
over the terms of the agreements, which are 1 to 7 year periods.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121--On March 1, 1996, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of. The
adoption of SFAS No. 121 did not have a material effect on the Company's
financial statements.

INCOME TAXES--ATC and its wholly-owned subsidiaries file a consolidated
income tax return. The liability method is used to measure deferred tax assets
and liabilities based on temporary differences between financial and taxable
income existing at each balance sheet date using enacted tax rates.

CREDIT RISK AND FINANCIAL INSTRUMENTS--Financial instruments which
potentially subject the Company to concentrations of credit risk are primarily
temporary investments and accounts receivable. The Company places its
temporary investments in highly rated financial institutions and investment
grade short-term debt instruments. Concentrations of credit risk with respect
to accounts receivable are limited due to the large number of customers, the
proportion of receivables from governmental entities, generally short payment
terms and dispersion across geographic areas.

FAIR VALUES OF FINANCIAL INSTRUMENTS--Fair values of financial instruments
have been estimated based on market prices of similar instruments and/or
valuation techniques using market assumptions. The Company assumes that the
carrying amount of short-term financial instruments approximates their fair
value. For these purposes, short-term is defined as any item that matures or
represents a cash transaction between willing parties within six months or
less of the measurement date. Unless otherwise noted, the carry value of
financial instruments approximates fair value.

EARNINGS PER COMMON SHARE AND DILUTIVE COMMON EQUIVALENT SHARE--Earnings per
common share and dilutive common equivalent share have been computed by using
the weighted average number of shares outstanding during the year. Outstanding
dilutive stock warrants and stock options are included in the computation of
weighted average number of shares.

F-9

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128, which becomes effective for financial
statements of the Company issued for fiscal years ending after December 15,
1997, replaces primary and fully diluted earnings per share, as disclosed
under current pronouncements, with basic and diluted earnings per share. Pro
forma basic earnings per share for the fiscal years 1995, 1996, and 1997 are
$.59, $.59 and $.81, respectively. Pro forma diluted earnings per share for
the fiscal years 1995, 1996, and 1997 are $.57, $.54 and $.74, respectively.
Pro forma basic earnings per share for the nine months ended November 30, 1996
and 1997 are $.68 and $.46, respectively. Pro forma diluted earnings per share
for the nine months ended November 30, 1996 and 1997 are $.65 and $.44,
respectively.

CASH AND CASH EQUIVALENTS--For purposes of reporting cash flows, the Company
considers all commercial paper, money market funds and certificates of deposit
purchased with a maturity of three months or less at acquisition to be cash
equivalents.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS--In June 1996, the Financial Accounting
Standards Board issued SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, which established
accounting and reporting standards for such transfers. The Company intends to
adopt SFAS No. 125 effective March 1, 1997, as required. Management
anticipates that the adoption of SFAS No. 125 will not have a significant
effect on the Company's financial position and results of operations.

RECLASSIFICATIONS--Certain reclassifications have been made to the prior
years' financial statements to conform to the current year's presentation.

B. BUSINESS ACQUISITIONS AND MERGER

BUSINESS ACQUISITIONS--The following acquisitions have been accounted for as
purchases. The acquired company's assets and liabilities are included in the
accompanying consolidated balance sheets at fair value at the date of
purchase. The acquired company's operations subsequent to the acquisition are
included in the accompanying consolidated statements of operations.

Fiscal 1998 (Unaudited)

Bing Yen & Associates, Inc.--On November 26, 1997 ATC purchased all of the
outstanding stock of Bing Yen & Associates, Inc. ("Bing Yen"). Bing Yen
provides geotechnical and structural forensic services to a wide variety of
clients in the western United States and is located in Tustin, California.

F-10

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

The purchase price was comprised of the following consideration:

Amounts paid to seller:
Cash........................................................... $2,200,000
Note payable at 8% due January 2, 1998......................... 550,000
Notes payable at 8% due in three annual installments commencing
January 1999.................................................. 1,150,000
----------
3,900,000
Liabilities assumed:
Current liabilities............................................ 313,254
Direct expenses of transaction................................... 50,000
----------
$4,263,254
==========

In addition, a maximum aggregate principal amount of $1,500,000 in unsecured
contingent achievement promissory notes will be issued if certain minimum net
revenue levels are achieved, resulting in a maximum total consideration to
seller of $5,400,000.

The notes payable of $1,150,000 are subject to setoffs if actual net assets
as of the closing date are below warranted amounts, for trade receivables not
collected within one year of the closing date and under certain other
specified conditions.

The preliminary purchase price allocation is as follows:

Cash............................................................. $ 163,680
Accounts receivable--net......................................... 2,292,191
Work in process.................................................. 5,122
Prepaid expense.................................................. 10,746
Property and equipment........................................... 142,241
Covenant not to compete.......................................... 50,000
Goodwill......................................................... 1,595,324
Other assets..................................................... 3,950
----------
$4,263,254
==========

Environmental Warranty, Inc.--On November 4, 1997, ATC purchased 90.9% of
the outstanding stock of Environmental Warranty, Inc. ("E.W.I."), a property
and casualty insurance brokerage firm specializing in environmental insurance
products.

The purchase price was comprised of the following consideration:

Amounts paid to sellers:
Cash........................................................... $ 150,000
Notes payable, net of imputed interest at 8.0%................. 582,424
Payment commitments............................................ 275,000
ATC Common Stock (33,000 shares)............................... 365,062
----------
1,372,486
Liabilities assumed:
Current liabilities............................................ 314,811
Direct expenses of transaction................................... 25,000
----------
$1,712,297
==========

F-11

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

The notes payable are due in three annual installments commencing November
1998 and are subject to certain setoffs. The payment commitments are also due
in three installments commencing November 1999. ATC issued 33,000 shares of
restricted common stock valued at 11 1/16 per share.

The preliminary purchaser price allocation is as follows:

Cash and equivalents............................................ $ 169,350
Receivables..................................................... 158,391
Prepaid and other current assets................................ 2,875
Property and other.............................................. 15,384
Goodwill........................................................ 1,366,297
-----------
$ 1,712,297
===========

BCM Engineers, Inc.--On August 20, 1997 ATC purchased certain assets and
assumed certain liabilities of the environmental consulting and engineering
services division of the Smith Technology Corporation which operated primarily
as BCM Engineers, Inc. ("BCM"). BCM is a leading municipal water and
wastewater environmental engineering firm and provides services in water,
resource management, environmental compliance and site investigations,
remedial design and engineering, asbestos, and air quality management. BCM
serves major industrial clients in the chemical, petrochemical, oil and gas
manufacturing, water supply, commercial development and utilities industries
from multiple locations in the east and Gulf Coast.

The purchase price was comprised of the following consideration:

Amounts paid to seller or to others on behalf of seller:
Cash.......................................................... $ 5,425,539
Notes payable................................................. 2,950,000
Less note payable offset...................................... (200,000)
Liabilities assumed:
Current liabilities........................................... 2,833,665
Non current liabilities....................................... 1,356,151
Direct expenses related to acquisition.......................... 112,133
-----------
$12,477,488
===========

Notes payable includes a $200,000 note which became due September 20, 1997
and is subject to offset for reductions in net assets and for unrecorded
liabilities arising through the closing date of the transaction. Based on the
closing balance sheet provided by the Seller, the Company will offset the
$200,000 in full. In addition, based on unrealized work in process warranted
by the seller, an additional offset of $1,172,471 has been reflected as an
offset to short term debt in the accompanying (unaudited) consolidated balance
sheet as of November 30, 1997.

The preliminary purchase price allocation is summarized as follows:

Accounts receivable, net of allowance........................... $ 4,710,960
Work in process................................................. 3,684,939
Other current assets............................................ 7,357
Other assets.................................................... 1,327,270
Covenants not to compete........................................ 100,000
Goodwill........................................................ 2,646,962
-----------
$12,477,488
===========

F-12

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

Fiscal 1997

American Testing and Engineering Corporation--On May 24, 1996 ATC purchased
certain assets and assumed certain liabilities of American Testing and
Engineering Corporation ("ATEC"), a national environmental consulting firm.
ATEC provides environmental engineering and consulting services through a
large network of branch and regional offices.

At February 28, 1997, the Company was contingently liable to ATEC for
additional purchase consideration up to $10,750,000 if certain conditions are
met. At February 28, 1997, the maximum amounts payable, if fully earned, would
be paid as follows: $3,883,333 in fiscal 1998, $3,873,333 in fiscal 1999,
$1,293,334 in fiscal 2000 and $1,700,000 in fiscal 2002. Subsequent to
February 28, 1997 the seller met the contingent consideration requirements
obligating the Company to the fiscal 1998 amount. In addition, in connection
with the issuance of the Senior Secured Notes on May 29 1997, as discussed in
Note D, the Company and seller agreed to remove certain contingent
consideration requirements, and as a result, the Company is obligated to pay
$2,420,766 and expects to be obligated to pay the remaining contingent
consideration of $2,745,900 in fiscal 1999. Additionally, the Company has the
option to purchase certain properties from the seller for $1,700,000 in fiscal
2002.

The purchase price as of February 28, 1997 and November 30, 1997 was
comprised of the following consideration:

FEBRUARY 27, 1997 NOVEMBER 30, 1997
----------------- -----------------
(UNAUDITED)

Amounts paid to seller and a majority
owner:
Cash................................. $ 9,000,000 $ 9,000,000
Payment obligations, for property and
facility rentals and
non-compete consideration........... 6,001,000 6,001,000
Contingent/additional consideration
under amended purchase agreement...... -- 9,049,000
Liabilities assumed:
Current liabilities.................. 15,731,076 15,731,076
Bank debt............................ 10,750,000 10,750,000
Direct expenses related to acquisition. 139,438 139,438
----------- -----------
$41,621,514 $50,670,514
=========== ===========
The purchase price allocation reflecting the additional consideration is
summarized as follows:

Accounts receivable and work in proc-
ess, net of allowances................ $18,957,768 $18,957,768
Other Current assets................... 2,023,996 2,023,996
Other assets........................... 548,301 1,428,617
Covenants not to compete............... 430,000 430,000
Goodwill............................... 19,661,449 27,830,133
----------- -----------
$41,621,514 $50,670,514
=========== ===========

At February 28, 1997 the Company may set-off against certain payment
obligations the amount of any uncollected accounts receivable and work in
process, net of recorded allowances, not collected within one year from the
purchase date.

F-13

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

Nine Months Ended November 30, 1997 (Unaudited)--As a result of sellers
warranties of purchased trade receivables and work in process that were not
realized, the Company is entitled to set-offs of $618,835 against the option
price to acquire certain properties in fiscal 2002. If the Company does not
exercise its option, the set-offs will be refunded by the seller. Amounts are
included in other non-current assets in the accompanying consolidated balance
sheet as of November 30, 1997.

In connection with the purchase agreement, the Company has issued an
irrevocable letter of credit in the amount of $500,000 to secure the Company's
performance of its payment obligations. The letter of credit is renewable by
the seller until such time the Company has paid all of the purchase
obligations in full. At February 28, 1997, no amounts had been drawn against
the letter of credit.

3D Information Services, Inc.--On May 28, 1996, ATC purchased certain assets
and assumed certain liabilities of 3D Information Services, Inc. ("3D"), a New
Jersey based information services company providing technical information
consulting services in all phases of information system design, development,
maintenance and management in client server and mainframe based environments.
The purchase price was comprised of the following consideration:

Amounts paid to seller:
Cash........................................................ $3,000,000
Note payable................................................ 2,500,000
Assumed liabilities........................................... 247,905
Direct expenses related to acquisition........................ 23,149
----------
$5,771,054
==========

The initial purchase price allocation is summarized as follows:

Accounts receivable........................................... $1,163,981
Work in process............................................... 279,047
Property and equipment........................................ 77,381
Other current assets.......................................... 77,560
Covenant not to compete....................................... 100,000
Goodwill ..................................................... 4,073,085
----------
$5,771,054
==========

Fiscal 1996

Hill Businesses--In November 1995, ATC purchased certain assets and assumed
certain liabilities of Kaselaan & D'Angelo Associates, Inc., Hill
Environmental, Inc. (formerly the environmental division of Gibbs & Hill,
Inc.) and Particle Diagnostics, Inc., wholly owned subsidiaries of Hill
International, Inc. (collectively the "Hill Businesses").

The Hill Businesses provide environmental consulting and engineering
services, including asbestos management, industrial hygiene and indoor air
quality consulting, environmental auditing and permitting,

F-14

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

environmental regulatory compliance, water and wastewater engineering, solid
waste landfill management and analytical laboratory services. The purchase
price was comprised of the following consideration.

Amounts paid to seller:
Cash........................................................ $2,517,949
Letter of credit, net of imputed interest (Note E).......... 700,000
Note payable at 8.75% interest (Note E)..................... 300,000
Liabilities assumed........................................... 907,884
Direct expenses related to acquisition........................ 885,538
----------
$5,311,371
==========

Direct expenses related to acquisition includes costs incurred in order to
obtain proper title to the assets from Sellers bank as described further in
Note E. In addition, the Company issued to certain selling shareholders,
50,000 stock options to purchase restricted common stock at $13.875 per share
as consideration for non compete agreements.

The purchase price allocation is summarized as follows:

Costs in excess of billings on uncompleted contracts, net of
unrealizable amounts....................................... $ 620,000
Property and equipment...................................... 175,000
Other assets................................................ 30,572
Covenants not to compete.................................... 37,500
Goodwill.................................................... 4,448,299
-----------
$ 5,311,371
===========

The Company is contingently liable to reimburse up to $150,000 of certain
facility lease costs if incurred by Hill International, Inc. The payment of
the contingent liability, which the Seller claims is now due, certain other
liabilities and the $300,000 note is being withheld pending the outcome of the
litigation (Note E).

Applied Geosciences, Inc.--Effective February 29, 1996, ATC purchased
certain assets and assumed certain liabilities of Applied Geosciences, Inc.
("AGI"), a California based environmental consulting company having offices in
San Diego, Tustin and San Jose, California. The purchase price was comprised
of the following consideration. In addition, AGI will receive contingent
consideration of up to $190,000 subject to actual collections of the purchased
trade receivables in excess of a minimum amount established under the
agreements. As of February 28, 1997 $22,324 of contingent consideration had
been earned and paid.

Cash to seller................................................. $ 147,546
Contingent consideration earned to date........................ 22,324
Cash to secured creditors of seller............................ 441,514
Liabilities assumed............................................ 225,538
Direct expenses related to acquisition......................... 31,246
---------
$ 868,168
=========

F-15

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

The purchase price allocation is summarized as follows:

Accounts receivable, net....................................... $ 474,973
Property and equipment......................................... 115,060
Covenants not to compete....................................... 30,000
Goodwill....................................................... 248,135
---------
$ 868,168
=========

Other Acquisitions

Con-Test, Inc.--On October 1, 1994, ATC acquired substantially all of the
assets and liabilities of Con-Test, Inc. ("Con-Test"), a Massachusetts based
environmental consulting company having branch offices in the New England
states, New York and Pennsylvania. The seller guaranteed the net receivables
purchased resulting in the Company reacquiring 33,130 shares of its restricted
common stock in fiscal 1996. Effective March 31, 1996, the
Company sold its East Longmeadow, MA laboratory, originally part of the
operations acquired from Con-Test, back to the Seller in exchange for cash,
12,320 shares of the Company's restricted common stock, and the assumption of
certain liabilities and facility lease obligations. The assets sold included
property and equipment, leasehold improvements, and intangible assets
including contract rights, accreditation rights, customer lists, and the use
of the Con-Test business name and logo.

R.E. Blattert & Associates--On January 13, 1995, ATC acquired substantially
all of the assets and liabilities of R.E. Blattert & Associates ("R.E.
Blattert"), an environmental consulting firm having geologic, environmental
engineering and water resource expertise with offices in Indiana and Iowa. In
addition, the purchase agreement provides for the seller to receive additional
purchase consideration based on achieving agreed upon earnings targets. At
February 28, 1997, $200,000 of additional purchase consideration had been
earned and recorded as goodwill. The Company and Seller agreed to certain
modifications to the purchase agreement which limits the contingent
consideration to amounts earned through February 28, 1997.

Microbial Environmental Services, Inc.--On January 4, 1995, ATC acquired
certain operations of Microbial Environmental Services, Inc. ("MES"). ATC
agreed to assume service performance obligations under certain contracts and a
lease obligation of MES and MES assigned its accounts receivable to ATC. ATC
additionally purchased certain field and laboratory equipment from MES and
paid a finder's fee to an unrelated party.

BSE Management, Inc.--In fiscal 1994, ATC acquired certain assets and
liabilities of BSE Management, Inc. ("BSE"), a California based environmental
consulting holding company and those of its subsidiaries, Diagnostic
Environmental Inc., Hygeia Environmental Laboratories and The Environmental
Institute Inc. The acquisition was accomplished by purchasing certain BSE
assets at a foreclosure sale, acquiring certain BSE unsecured debt from its
holder, entering into consulting and employment contracts and non-compete
agreements with certain key BSE employees, and assuming specified liabilities
of BSE. The purchase agreement provided for additional purchase consideration
contingent upon future cash receipts of the ongoing business over five years.
These contingent payments totaled $1,355,165 and have been fully earned as of
February 29, 1996 and recorded as goodwill.

AURORA ENVIRONMENTAL INC. MERGER--Effective June 29, 1995, ATC and Aurora
Environmental Inc. ("Aurora") merged, with ATC as the surviving corporation.
ATC exchanged .545 of a share of ATC common stock for each share of Aurora
stock. ATC common shares held by Aurora of 3,258,000 were canceled. The merger
has been accounted for in a manner similar to a pooling of interests. Under
this method of accounting,

F-16

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

recorded assets and liabilities of Aurora were combined with ATC and the
results of operations of ATC and Aurora were combined on the date the merger
became effective. As a result of the merger, ATC utilized Aurora's net
operating loss carryforward, which was $970,000 as of the date of the merger.
In addition, ATC's liability to Aurora was canceled at the merger date.

PRO FORMA FINANCIAL INFORMATION (UNAUDITED)--The following unaudited pro
forma information sets forth the results of operations of ATC as if the merger
of Aurora and ATC's purchase of significant subsidiaries including ATEC, 3D
and the Hill Businesses had occurred on March 1, 1995, the beginning of fiscal
1996.

PRO FORMA
-------------------------
YEAR ENDED FEBRUARY 28
(29)
-------------------------
1996 1997
------------ ------------

Revenues............................... $149,025,093 $135,331,348
Net income............................. 9,796,788 7,432,906
Earnings per share (fully diluted)..... $ 1.33 $ .87
Weighted average shares................ 7,383,746 8,508,061

PRO FORMA FINANCIAL INFORMATION (UNAUDITED)--The following unaudited pro
forma information sets forth the results of operations of ATC as if ATC's
purchase of significant subsidiaries including ATEC and 3D had occurred on
March 1, 1996:

PRO FORMA
-------------------------
NINE MONTHS ENDED
NOVEMBER 30,
-------------------------
1996 1997
------------ ------------

Revenues............................... $101,538,984 $104,263,345
Net income............................. $ 6,223,528 $ 3,604,065
Earnings per share (fully diluted)..... $ .73 $ .42
Weighted average shares (fully
diluted).............................. 8,570,170 8,548,252

C. PROPERTY AND EQUIPMENT

Property and equipment as of February 28 (29) and November 30 (unaudited)
consist of:

NOVEMBER
1996 1997 30, 1997
---------- ---------- ----------

Office equipment......................... $2,645,325 $3,339,049 $4,867,987
Laboratory and field equipment........... 3,528,410 3,335,721 3,949,395
Transportation equipment................. 267,304 207,857 542,139
Leasehold improvements................... 633,595 849,700 1,078,240
---------- ---------- ----------
7,074,634 7,732,327 10,437,761
Less accumulated depreciation............ 3,467,879 3,947,694 4,804,042
---------- ---------- ----------
Property and equipment, net.............. $3,606,755 $3,784,633 $5,633,719
========== ========== ==========

D. DEBT AND CREDIT AGREEMENTS

SHORT TERM DEBT--The February 28, 1997 balance consists of a 8.75%, $300,000
note payable issued in connection with the Company's purchase of the Hill
Businesses. The Company has withheld payment on the note pending the outcome
of the litigation with Hill as discussed in Note E. At February 29, 1996, the
Company had short-term notes payable of $1,122,552 with interest rates of 6.7%
to 8.75%.

F-17

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

LONG-TERM DEBT--Long term debt as of February (28) 29 consists of :

1996 1997
-------- -----------

Borrowings from banks under the Company's $23,000,000
bridge credit facility. Interest is payable monthly
(7.3% at February 28, 1997)............................. $ -- $20,850,000
Note payable issued in connection with the purchase of 3D
Information Services, Inc. with a fixed interest rate of
8.25%. Interest and principal are payable
quarterly through May, 1999............................. -- 1,931,193
Insurance premium financing obligation payable in fixed
monthly installments of principal and interest through
April, 1998. Interest accrues at 6.4%................... -- 781,188
Note payable issued in connection with the purchase of
Con-Test, payable in three annual installments through
September 30, 1997. Interest accrues at 8.5% and is
payable quarterly....................................... 356,667 178,333
Notes payable issued in connection with other asset
acquisitions due in installments through May 1998.
Interest rates range from the prime rate, (8.25% at
February 28, 1997) to 9.0%.............................. 123,121 146,272
Note payable assumed in connection with the purchase of
ATEC. Interest accrues
at the prime rate plus 2% (10.25% at February 28, 1997).
Principal and interest
are due May 19, 1997.................................... -- 127,095
Notes payable issued in connection with the purchase of
MES, with interest
at prime (8.25% at February 28, 1997) payable through
February, 1998.......................................... 147,619 66,667
Other notes with interest rates ranging from 7.25% to
12.4% due in monthly installments through October, 2001. 89,395 29,326
-------- -----------
716,802 24,110,074
Less current maturities.................................. 354,858 1,986,730
-------- -----------
Long-term debt, less current maturities.................. $361,944 $22,123,344
======== ===========

SENIOR SECURED NOTES--On May 29, 1997, the Company issued $32,500,000 of
8.18% Senior Secured Notes due in annual installments beginning May, 2000,
through May, 2004, to a group of financial institutions. Interest on the
Senior Secured Notes is payable semi-annually on May 31, and November 30,
commencing on November 30, 1997. The Senior Secured Notes are collateralized
by accounts receivable, work-in-process, intangible assets and the Company's
primary depository accounts. The proceeds from the Senior Secured Notes have
in part been utilized to repay the Company's outstanding bridge credit
facility. Accordingly, at February 28, 1997, the Company has classified its
$20,850,000 outstanding bridge credit facility as long-term debt. The bridge
facility was entered into in May, 1996, to provide capital in connection with
the Company's acquisition of American Testing and Engineering Corporation and
3D Information Services, Inc.

F-18

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

Aggregate maturities of long-term debt as of February 28, 1997 are as
follows: fiscal 1998--$1,986,730; fiscal 1999--$1,028,877; fiscal 2000--
$236,692; fiscal 2001--$4,174,561; fiscal 2002--$4,173,167 and thereafter
$12,510,047. Aggregate maturities of bank debt are based on the terms of the
Senior Secured Notes.

E. COMMITMENTS AND CONTINGENCIES

OPERATING LEASE COMMITMENTS--The Company leases office space, laboratory
facilities, temporary housing facilities and automobiles under operating lease
agreements which expire at varying dates through September 2007. The Company
also rents equipment on a job-by-job basis. Minimum annual rental commitments
as of February 28, 1997 are as follows: fiscal 1998--$4,188,850; fiscal 1999--
$3,827,984; fiscal 2000--$2,798,251; fiscal 2001--$1,584,226; fiscal 2002--
$1,064,121 and thereafter $2,822,804 (total $16,286,236).

Rental expense associated with facility and equipment operating leases for
fiscal years 1995, 1996 and 1997 was $1,355,410, $1,908,217 and $4,937,752
respectively.

OTHER LIABILITIES--Other liabilities consist of long-term lease commitments
and other long-term contractual obligations assumed in connection with
business acquisitions. Contractual obligations representing existing
liabilities recorded within the financial statements that are expected to be
realized during the next fiscal year are included within other accrued
expenses.

First Fidelity Bank, N.A., et al v. Hill International, Inc. et al, Superior
Court of New Jersey, Law Division, Burlington County, Docket No. Bur-L-03400-
95, filed December 19, 1995. Irvin E. Richter, et al v. ATC Group Services
Inc., et al, United States District Court, District of New Jersey, Civ. No. 96
CV 5818 (JBS) filed December 6, 1996. On December 19, 1995, a second amended
complaint was filed in the above-entitled action which joined the Company as a
defendant and included a count against the Company seeking recovery of certain
assets purchased from Hill International, Inc. ("Hill") on the grounds that
plaintiff banks hold security interests in the assets and that Hill is in
default under the security agreement creating such alleged security interests.
The original plaintiffs in this action were First Fidelity Bank, N.A. and
United Jersey Bank, N.A. The primary defendants were Hill and certain of its
subsidiaries, and Irvin Richter, David Richter, Janice Richter and William
Doyle. Irvin Richter and David Richter are officers and stockholders of Hill.
In April 1996, the Company filed a cross-claim against Hill, Irvin Richter and
David Richter alleging breach of contract, fraud, among other allegations and
seeking unspecified damages, including punitive damages and equitable relief.
In August, 1996, Hill and the Richters filed an answer denying ATC's cross
claims, a cross-claim against ATC and a third party claim against certain
members of ATC's management and an employee. The cross claim and third party
claim seek unspecified damages, including punitive damages, for defamation,
breach of the Richters' non-competition agreements and securities fraud. The
defamation claim is based on plaintiff banks' allegation of fraud against Hill
and the Richters in their amended complaint, which Hill and the Richters
allege was based on defamatory statements made by ATC in settlement
discussions with the plaintiff banks. In its answer, the Company both denies
that it made defamatory statements and asserts that the defamation allegations
fail to state a legally valid claim. The breach of contract and securities
claims are based on allegations that ATC made representations concerning a
registration rights agreement to be provided in connection with options issued
to the Richters as consideration for their non-competition agreements. In its
answer, the Company denies that an agreement concerning registration rights
was ever reached and asserts that the Richters forfeited any such rights in
any case as a result of their conduct in connection with the asset purchase.
These related cases are in their early stages with discovery yet to take
place. In January, 1997, the plaintiff banks dismissed their claim against
ATC. On December 6, 1996, Hill and the Richters commenced an action against
ATC and the same officers and employees

F-19

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

of ATC alleging essentially the same claims in federal court as in the state
action. This action is entitled Irvin E. Richter et al. v. ATC Group Services,
et al., Civ. No. 96-5818(JBS), U.S. District Court for the District of New
Jersey, December 6, 1996. ATC has answered, raising the same defenses and
additional defenses related to the timeliness of the federal claim. This is
essentially the same action as in federal court as the pending state action.
The case is currently in the discovery phase. It does not create a risk of
double recovery. In the Company's opinion, the outcome of this matter will not
have a significant effect on the Company's financial position or future
results of operations, although no assurances can be given in this regard.

Commonwealth of Massachusetts v. TLT Construction Corp. et al, Civ. Action
No. 96-02281 F, Superior Court of Middlesex County, Massachusetts. This is an
action brought by the Commonwealth of Massachusetts in April 1996, against the
architects and general contractor on a renovation and construction project on
the Suffolk County Courthouse in Massachusetts. The basis of the lawsuit is
that one or more damp-proofing products specified by the architect defendants
and installed by the contractor defendant made employees in the courthouse ill
because of the off-gassing of harmful vapors. Dennison Environmental Services
Inc., ("Dennison") an ATC subsidiary, was joined on August 13, 1996, as a third
party defendant by TLT Construction Corporation, the general contractor, because
Dennison performed some air quality testing of the air in the courthouse for the
Commonwealth of Massachusetts during the construction process. The contractor
alleges that it acted in reliance on these tests in continuing to install the
material after the test report was given to it by the state. This case is in the
discovery stage. At this point, ATC considers the case to be totally without
merit, and ATC intends to vigorously defend the action. The Company currently
has in force a professional liability insurance policy covering this claim in
the amount of $10,000,000 with a deductible of $250,000. Notice of claim has
been made regarding this action and the insurer has agreed to assume the
defense. In the Company's opinion, the outcome of this matter will not have a
significant effect on the Company's financial position or future results of
operations, although no assurances can be given in this regard.

State of New York Department of Taxation and Finance--The Company has
received a notice of audit from the New York State Department of Taxation and
Finance for the three fiscal years 1993, 1994, and 1995. The agent has issued
a preliminary audit report, which is expected to be the basis of a formal
assessment estimated to be approximately $200,000. The Company is disputing
the agents positions and intends to appeal any assessment if rendered. No
assurances can be given regarding the ultimate liability, if any, which may
result.

Cambridge Housing Authority v. Con-Test, Inc. and ATC Group Services Inc.,
Superior Court of Middlesex County, Massachusetts; October 1, 1997. This is a
claim for damages in excess of $1,000,000 alleging that Con-Test, Inc.
breached its contract with Cambridge Housing Authority and was negligent in
performing asbestos survey work preparatory to a housing project re-
modernization project. ATC is joined as a party on a successor liability
theory, even though the services giving rise to the claim occurred over two
years prior to ATC's purchase of business assets from Con-Test. Although ATC
has not yet answered the complaint, ATC intends to vigorously defend the claim
on the grounds that it is not a successor under any known precedent of
Massachusetts law. It is therefore the opinion of the Company that the
probability of material loss from this claim is low.

AS OF AND FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)

Executives Bonus Dispute--Two executives of the Company have indicated
commitments for discretionary bonuses were made to them totalling $1.1
million. They claim bonuses were to consist of approximately $300,000 of cash
and $800,000 from the issuance of stock and stock options having exercise
prices below market trading prices. They claim commitments were made pursuant
to an oral agreement. The Company had

F-20

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

discussions and negotiations concerning the possibility of such bonuses, but
no final determination had been made and no bonus arrangements were presented
to or approved by the Company's compensation committee. If the pending
Transactions are consummated, the Issuer's Board of Directors, who have
indicated their approval of such amounts, would become members of the
Company's Board of Directors, along with the executives making the claim.
Accordingly, the Company expects to record a charge against earnings of
approximately $1.1 million in the fourth quarter ending February 28, 1998.

Joseph I. Peters v. ATC Group Services Inc., et al., Court of Chancery of
the State of Delaware, New Castle County, C.A. No. 16026-NC, November 12,
1997. This action names ATC, ATC's board of directors, Weiss, Peck & Greer,
LLC ("WPG") and WPG Corporate Development Associates, V. L.P. ("WPG Fund") as
defendants. The suit challenges the announced offer for the acquisition of the
stock of the Company at $12 per share by a group led by certain members of
management of the Company and the WPG Fund (the "Offer").

F-21

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

The complaint seeks class status on behalf of the stockholders of the Company
and claims that the offer price for the Company's common stock is inadequate
and the defendants have breached their fiduciary duties to the plaintiffs and
the other stockholders of the Company. The suit seeks, among other things, to
enjoin the Offer and related merger transaction; to set aside the transaction
in the event that it is consumated; and to recover compensatory damages in an
unspecified amount. The Company believes the allegations contained in the
Complaint is meritless and, to the extent the actions proceed, intends to
defend the action vigorously.

Commonwealth of Massachusetts v. TLT Construction Corp. et al, Civ. Action
No. 96-02281 F, Superior Court of Middlesex County, Massachusetts. This is an
action brought by the Commonwealth of Massachusetts in April 1996, against the
architects and general contractor on a renovation and construction project on
the Suffolk County Courthouse in Massachusetts. The basis of the lawsuit is
that one or more damp-proofing products specified by the architect defendants
and installed by the contractor defendant made employees in the courthouse ill
because of the off-gassing of harmful vapors. Dennison Environmental Services
Inc., ("Dennison") an ATC subsidiary, was joined on August 13, 1996, as a
third party defendant by TLT Construction Corporation, the general contractor,
because Dennison performed some air quality testing of the air in the
courthouse for the Commonwealth of Massachusetts during the construction
process. The contractor alleges that it acted in reliance on these tests in
continuing to install the material after the test report was given to it by
the state. This case is in the discovery stage. At this point, ATC considers
the case to be totally without merit, and ATC intends to vigorously defend the
action. The Company currently has in force a professional liability insurance
policy covering this claim in the amount of $10,000,000 with a deductible of
$250,000. Notice of claim has been made regarding this action and the insurer
has agreed to assume the defense. In the Company's opinion, the outcome of
this matter will not have a significant effect on the Company's financial
position or future results of operations, although no assurances can be given
in this regard.

Barrett-Moeller et al. v. ATC Associates Inc., Civ. Action No. 97-01037D,
and Joan Spencer v. TLT Construction Et Al., Civ. Action No 97-4161C, Superior
Court of Middlesex County, Massachusetts. These actions arise out of the same
set of occurrences as Commonwealth of Massachusetts v. TLT Construction, Inc.
described above. These are suits by employees who worked in the Suffolk County
Courthouse during the period in which the off-gassing of harmful vapors was
alleged to have occurred. The suits seek damages for personal injury in
unspecified amounts. Notices of these claims have been made to ATC's
professional liability insurer, and the claims should be covered by insurance,
subject to a $250,000 deductible.

One Parkway Project. The Company has received notice of related potential
claims by R.M. Shoemaker Co., a Pennsylvania construction firm, and four of
its workers arising out of the Company's performance of asbestos abatement
survey, design and project monitoring services on a project known as the One
Parkway Project in Philadelphia. The claims allege that ATC: (i) failed to
locate certain asbestos-containing materials in a high rise building during
its inspection of the facility; (ii) failed to include these undiscovered
materials in the

F-22

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

design specifications for an asbestos abatement project in connection with a
renovation project on the building; and (iii) failed to properly clearance
inspect and test the areas on which abatement had been performed prior to
demobilization of the asbestos abatement project. The claimants allege that
the Company's acts or omissions resulted in additional corrective actions
including remobilization of certain areas, delays of the renovation project
and exposure of construction workers to asbestos contamination. R.M. Shoemaker
has alleged that it sustained damages in the amount of $1,500,000 for
additional abatement costs plus additional damages for delay. The workers'
exposure claims have not been quantified. No suit has been filed.

Indiana Department of Environmental Management v. ATC Associates Inc. ATC
received a Notice of Violation and Proposed Agreed Order, EPA I.D. No.
IND004939765, dated June 9, 1997, on June 12, 1997. The Notice of Violation
seeks a penalty amount of $120,500 for alleged violations of the federal
hazardous waste regulations and Indiana hazardous waste regulations arising
out of the handling of hazardous wastes in ATC's Indianapolis laboratory. On
January 7, 1998 ATC attended a second informal settlement conference with the
Indiana Department of Environmental Management ("IDEM"). As a result of this
meeting, a significant reduction in the penalty amount seems probable.
American Testing and Engineering Corporation will be responsible for a
significant part of any ultimate penalty. Accordingly, ATC does not believe
this case will result in a material loss.

The Company has been named or has claims pending arising out of the conduct
of its business. In the opinion of management, these matters are adequately
covered by insurance, are without merit, or are not material.

F. STOCK OPTIONS

A stock option plan, established in 1988, (the "1988 Plan") provides for the
granting of 200,000 options to employees for purchase of common stock at
prices which cannot be less than the fair market value at the time of the
grant. Options generally become exercisable at 20% per year, 50% per year for
certain participants, and expire within five years of the date of grant.

In 1993, the Board of Directors approved an additional stock option plan
(the "1993 Plan") providing for the granting of 200,000 options to employees
for purchase of common stock at prices which cannot be less than fair market
value at the time of the grant. In December 1995, the 1993 Plan was amended to
increase the number of options to 500,000 shares and in October 1996, the 1993
Plan was amended to increase the number of options to 1,000,000 shares.
Options generally become exercisable at 20% per year and expire either within
five years or ten years of the date of grant.

F-23

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

In connection with the merger of Aurora into ATC, the Board of Directors of
ATC approved a stock option plan (the "1995 Plan") having identical provisions
to Aurora's 1987 Stock Option Plan. The 1995 Plan provides for the granting of
81,750 options representing the previously outstanding Aurora stock options
after adjustment by the stock exchange rate of .545 as provided for under the
terms of the merger agreement. The 81,750 options were granted at an exercise
price of $5.32 per share in June 1995 to an officer of ATC in replacement of
previously held Aurora options. All of the options are exercisable and expire
within ten years of the date of grant.

As of February 28, 1997, under the 1988, 1993 and 1995 Plans, 1,096,400
options have been granted, 40,410 options exercised, 335,650 options expired
and 521,000 options remain available for grant. In fiscal 1995, the Board of
Directors approved the granting of 20,000 options to an unrelated consultant
for purchase of common stock at $9.50 per share (fair market value at date of
grant). These options were terminated in fiscal 1996.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation. SFAS
No. 123 defines a fair market value based method of accounting for stock based
employee compensation plans and encourages all entities to adopt that method
of accounting. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.

The Company has decided to continue to apply the intrinsic value based
method of accounting for its stock-based employee compensation plans. If
compensation cost for the Company's stock-based compensation plans had been
determined based on the fair value at the grant dates for awards under the
plans consistent with the method of SFAS No. 123, Accounting for Stock Based
Compensation, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:

1996 1997
---------- ----------

Net Income:
As reported...................................... $3,865,998 $6,307,734
Pro forma........................................ $3,759,532 $6,065,136
Primary Earnings Per Share:
As reported...................................... $ .54 $ .74
Pro forma........................................ $ .52 $ .71
Fully Diluted Earnings Per Share:
As reported...................................... $ .54 $ .74
Pro forma........................................ $ .52 $ .71

The fair value for stock options was estimated using the Black-Scholes
option pricing model with assumptions for the risk-free interest rate of 7.8%
in fiscal 1996 and 5.4% in fiscal 1997, expected volatility of 48% in fiscal
1996 and 1997, expected life of approximately 5 years in fiscal 1996 and 1997,
and no expected dividends. The weighted average fair value of options granted
during fiscal 1996 and 1997 was $5.58 per option and $4.48 per option,
respectively.

F-24

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

The changes in the outstanding stock options described above during fiscal
years 1995, 1996 and 1997 are summarized as follows:

WEIGHTED
AVERAGE
PRICE
PER
OPTIONS SHARE
-------- --------

BALANCE, February 28, 1994............................. 170,700 $ 3.17
Granted.............................................. 132,350 9.76
Exercised............................................ (6,980) 2.90
Expired.............................................. (4,650) 9.48
-------- ------
BALANCE, February 28, 1995............................. 291,420 6.03
Granted.............................................. 334,500 9.44
Exercised............................................ (6,400) 5.56
Expired.............................................. (34,800) 10.09
-------- ------
BALANCE, February 29, 1996............................. 584,720 8.51
Granted.............................................. 407,400 9.85
Exercised............................................ (14,030) 4.00
Expired.............................................. (257,750) 12.62
-------- ------
BALANCE, February 28, 1997............................. 720,340 $ 7.89
======== ======
Options exercisable at:
February 28, 1995.................................... 127,000
February 29, 1996.................................... 307,950
February 28, 1997.................................... 457,550

The following table summarizes information about stock options outstanding
and exercisable as of February 28, 1997:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------- --------------------------
RANGE OF WEIGHTED WEIGHTED AVERAGE WEIGHTED
EXERCISE NUMBER AVERAGE REMAINING NUMBER AVERAGE
PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE
- -------- ----------- -------------- ---------------- ----------- --------------

$ 1.88 -
$ 5.99 223,720 $ 3.84 0.1 years 217,340 $ 3.81
6.00 -
11.99 352,870 8.10 2.8 years 158,710 8.22
12.00 -
17.99 143,750 13.66 2.2 years 81,500 13.73
- -------- ------- ------ --------- ------- ------
$ 1.88 -
$17.99 720,340 $ 7.89 1.8 years 457,550 $ 7.11
======== ======= ====== ========= ======= ======

G. COMMON STOCK WARRANTS

At February 28, 1997, there are 568,207 Class C warrants outstanding. Each
Class C warrant entitles the holder to purchase one share of common stock at
an exercise price of $10.00. The Company has reserved common shares equal to
the outstanding warrants for issuance upon the exercise of the Class C
warrants. The expiration date of the Class C warrants is April 30, 1998.

During the year ended February 28, 1995, 284,803 of 285,817 outstanding
Class B warrants were exercised at an exercise price of $8.00 allowing the
holder to receive one share of common stock per warrant and one Class C
warrant. The Class B warrants not exercised expired as of September 30, 1994.

F-25

ATC GROUP SERVICES INC. AND SUBSIDARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

In connection with the merger of Aurora in fiscal 1996, ATC issued common
stock purchase warrants for the purchase of 523,200 shares of ATC common stock
at prices ranging from $1.03 to $2.75 per share in replacement of previously
outstanding Aurora warrants. During fiscal 1996, 32,700 warrants were
exercised at approximately $1.83 per share. The remaining warrants expire from
November 30, 2000 to January 10, 2004.

H. INCOME TAXES

Income tax expense (benefit) for the three years ended February 28, 1997
consists of the following:

STATE &
FEDERAL LOCAL TOTAL
---------- -------- ----------

1995:
Current............................... $1,725,000 $295,500 $2,020,500
Deferred.............................. 19,000 4,500 23,500
---------- -------- ----------
Total............................... $1,744,000 $300,000 $2,044,000
========== ======== ==========
1996:
Current............................... $1,700,400 $296,300 $1,996,700
Deferred.............................. (161,700) (30,000) (191,700)
---------- -------- ----------
Total............................... $1,538,700 $266,300 $1,805,000
========== ======== ==========
1997:
Current............................... $3,207,100 $711,600 $3,918,700
Deferred.............................. 168,100 3,200 171,300
---------- -------- ----------
Total............................... $3,375,200 $714,800 $4,090,000
========== ======== ==========

The Company made Federal and State income tax payments of approximately
$3,023,000, $2,077,000, and $ 4,062,000 in fiscal 1995, 1996 and 1997,
respectively.

A reconciliation of the statutory US Federal tax rate and effective tax rate
for the three years ended February 28, 1997 is as follows:

1995 1996 1997
---- ---- ----

Statutory US Federal rate.............................. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit............. 4.1 4.3 4.5
Tax benefit of Aurora's net operating loss
carryforward.......................................... -- (6.2) --
Tax exempt interest income............................. -- (2.4) (1.3)
Non-deductible expenses................................ 0.5 2.1 2.1
---- ---- ----
38.6% 31.8% 39.3%
==== ==== ====

F-26

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

The tax effects of temporary differences that give rise to a significant
portion of the deferred tax assets and liabilities as of February 28 (29)
consist of the following:

1996 1997
-------- ----------

Deferred tax assets:
Nondeductible liabilities.......................... $339,400 $ 682,900
Nondeductible bad debt reserve..................... 76,900 453,800
Aurora net operating loss carryforward............. 150,000 --
-------- ----------
566,300 1,136,700
Deferred tax liabilities:
Property and equipment............................. 108,000 95,800
Prepaid expenses................................... 125,800 346,400
Intangible assets.................................. 88,700 622,000
-------- ----------
322,500 1,064,200
-------- ----------
Net deferred tax asset............................... $243,800 $ 72,500
======== ==========

The current portion of net deferred tax assets of $440,600 and $790,400 at
February 28 (29), 1996 and 1997 is classified in the consolidated balance
sheets in current assets. The non-current portion is classified in non-current
liabilities.

During fiscal 1996, ATC utilized a one-time tax benefit of $350,000 to
offset taxable income relating to Aurora's net operating loss carryforward at
the time of the ATC and Aurora merger.

I. EMPLOYEE BENEFIT PLANS

The Company has an employee savings plan which allows for voluntary
contributions into designated investment funds by eligible employees. The
Company may, at the discretion of its Board of Directors, make additional
contributions on behalf of the Plan's participants. No Company contributions
were made in fiscal years 1995, 1996, and 1997.

F-27

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

J. INDUSTRY SEGMENT DATA

The Company provides services through its environmental consulting and
engineering segment and its information technology consulting segment. Prior
year segment data is not presented as the Company only operated in the
environmental and engineering segment prior to the acquisition of 3D in May
1996 as discussed in Note B.

ENVIRONMENTAL INFORMATION ADJUSTMENTS &
& ENGINEERING TECHNOLOGY ELIMINATIONS TOTAL
------------- ----------- ------------- ------------

YEAR ENDED FEBRUARY 28,
1997
Revenues............... $106,661,312 $7,228,755 $ (34,703) $113,855,364
Operating income....... 11,323,277 387,756 -- 11,711,033
Depreciation and
amortization.......... 1,949,711 149,100 -- 2,098,811
Capital expenditures... 1,244,756 40,939 -- 1,285,695
Identifiable assets as of
February 28, 1997....... $ 83,486,251 $6,080,060 $(3,390,994) $ 86,175,317
NINE MONTHS ENDED
NOVEMBER 30, 1997
(UNAUDITED)
Revenues............... $ 98,086,874 $6,479,879 $ (303,408) $104,263,345
Operating income....... 7,608,478 375,873 -- 7,984,351
Depreciation and amor-
tization.............. 856,910 31,719 -- 888,629
Capital expenditures... 1,446,547 56,071 -- 1,502,618
Identifiable Assets as of
November 30, 1997....... $114,456,031 $5,759,521 $(2,670,637) $117,544,915
NINE MONTHS ENDED
NOVEMBER 30, 1996
(UNAUDITED)
Revenues............... $ 78,332,311 $5,084,540 $ -- $ 83,416,851
Operating income....... 9,179,261 334,733 -- 9,513,994
Depreciation and amor-
tization.............. 634,574 8,205 -- 642,779
Capital expenditures... 1,071,339 52,077 -- 1,123,416
Identifiable Assets as of
November 30, 1996....... $ 84,594,843 $6,233,209 $(2,300,000) $ 88,528,052

K. SUPPLEMENTAL INFORMATION

Supplemental cash flow information--Supplemental cash flow information for
the years ended February 28 (29) is as follows:

1995 1996 1997
--------- --------- ----------

Cash paid for interest.......................... $ 276,658 $ 374,466 $1,515,432
Noncash investing and financing activities:
Liabilities assumed in connection with
business combinations........................ 6,056,441 640,082 26,728,981
Common stock issued in connection with
business combinations........................ 605,408 -- --
Common stock recovered in connection with the
Con-Test, Inc. acquisition................... -- 140,013 --
Common stock issued in connection with the
Aurora Merger................................ -- 61,117 --
Common stock received as consideration for
sale of assets............................... -- -- 124,432
Notes payable issued in connection with
business combinations........................ 835,000 1,000,000 2,589,086

F-28

ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)

SUPPLEMENTAL ANALYSIS OF VALUATION AND QUALIFYING ACCOUNTS--Changes in the
allowance for doubtful accounts for the three years ended February 28, 1997
are as follows:

1995 1996 1997
-------- -------- ----------

BALANCE, beginning of year..................... $167,344 $535,886 $ 383,220
Provision for bad debts...................... 188,819 290,165 1,021,631
Amounts written-off, net of recoveries....... (136,350) (309,932) (452,836)
Adjustment for allowance for doubtful
accounts recorded on net acquired
(rescinded) accounts receivable............. 316,073 (132,899) 503,701
-------- -------- ----------
BALANCE, end of year........................... $535,886 $383,220 $1,455,716
======== ======== ==========

L. QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company's unaudited quarterly results of operations for fiscal 1996 and
1997 are as follows:

THREE MONTHS ENDED
-----------------------------------------------
MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 29
FISCAL 1996 1995 1995(1) 1995(2) 1996
- ----------- ----------- ----------- ----------- -----------

Revenues...................... $10,814,953 $11,649,478 $11,223,139 $11,277,327
Gross profit.................. 5,269,542 5,529,416 5,342,623 4,308,142
Income before income taxes.... 1,462,628 1,921,617 1,811,675 475,078
Net income.................... 895,128 1,519,117 1,104,675 347,078
Earnings per common share and
dilutive common equivalent
share (4):
Primary..................... $ .15 $ .23 $ .15 $ .04
Fully diluted............... $ .15 $ .23 $ .15 $ .04

THREE MONTHS ENDED
-----------------------------------------------
MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 28
FISCAL 1997 1996(3) 1996 1996 1997
- ----------- ----------- ----------- ----------- -----------

Revenues...................... $16,645,983 $33,922,028 $32,848,840 $30,438,513
Gross profit.................. 7,282,012 12,529,814 11,287,563 11,051,373
Income before income taxes.... 2,772,303 3,485,493 2,433,278 1,706,660
Net income.................... 1,718,303 2,101,493 1,506,278 981,660
Earnings per common share and
dilutive common equivalent
share (4):
Primary..................... $ .20 $ .25 $ .18 $ .12
Fully diluted............... $ .20 $ .25 $ .18 $ .12

- --------
The Company's operations are seasonal in nature, with a larger percentage of
income earned in the second quarter.

(1) Reflects the merger of ATC and Aurora effective June 29, 1995, (Note B).
Net income includes a one-time tax benefit of $350,000 ($.05 per share)
resulting from the merger of Aurora.

(2) Reflects the acquisition of the Hill Businesses effective November 10,
1995, (Note B).

(3) Reflects the acquisition of American Testing and Engineering Corporation
and 3D Information Services, Inc. effective May 24, 1996 and May 28, 1996,
respectively.

(4) For fiscal 1996, the sum of the quarterly earnings per share is less than
the reported fiscal year earnings per share due to the averaging effect of
the 1,970,000 shares issued in connection with the Company's stock
offering in October 1995.

F-29

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION

FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 1996 AND
INDEPENDENT AUDITORS' REPORT

F-30

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Smith Technology Corporation

We have audited the accompanying balance sheet of the Engineering Division
of Smith Technology Corporation ("Smith") (formerly Smith Environmental
Technologies Corporation) as of September 30, 1996, and the related statements
of operations and Smith equity investment, and cash flows for the year then
ended. These financial statements are the responsibility of Smith's and the
Division's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Engineering Division
of Smith Technology Corporation as of September 30, 1996, and the results of
its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Engineering Division of Smith Technology Corporation will continue as a going
concern. As more fully described in Note 1, the Engineering Division is a
wholly owned division of Smith. Smith experienced significant liquidity
problems during 1996 and was in default of agreements with its Senior Lenders
at September 30, 1996. Further, certain of Smith's actions caused significant
liquidity problems at the Division. In August 1997, Smith sold substantially
all the assets and certain liabilities of the Division. In October 1997, Smith
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code.
The aforementioned conditions and actions raise substantial doubt about the
Engineering Division's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classifications of liabilities as of September 30, 1996 that may result from
the outcome of this uncertainty.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
November 17, 1997

F-31

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

BALANCE SHEET

SEPTEMBER 30, 1996
(IN THOUSANDS)

ASSETS

Current assets:
Cash.................................................................. $ 17
Accounts receivable, less allowance for doubtful accounts of $351..... 13,678
Prepaid expenses and other current assets............................. 211
-------
Total current assets.................................................... 13,906
Property and equipment:
Equipment............................................................. 3,830
Land, buildings, and improvements..................................... 149
Leasehold improvements................................................ 931
-------
Total property and equipment, at cost................................... 4,910
Less accumulated depreciation and amortization........................ 1,595
-------
Property and equipment, net............................................. 3,315
-------
Total assets........................................................ $17,221
=======
LIABILITIES AND SMITH EQUITY INVESTMENT
Current liabilities:
Accounts and subcontracts payable..................................... $ 5,760
Accrued expenses:
Legal............................................................... 746
Compensation and fringe............................................. 1,232
Other............................................................... 1,711
Deferred revenue...................................................... 430
Capital lease obligations............................................. 508
-------
Total current liabilities............................................... 10,387
Other long term liabilities............................................. 3,254
Smith equity investment................................................. 3,580
-------
Total liabilities and Smith equity investment........................... $17,221
=======

See accompanying notes.

F-32

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

STATEMENT OF OPERATIONS AND SMITH EQUITY INVESTMENT

YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)

Revenues.............................................................. $ 51,469
Direct costs.......................................................... 32,016
Indirect costs and selling, general and administrative expenses....... 17,893
Special items......................................................... 800
Amortization of intangible assets and goodwill........................ 861
Writedown of goodwill and intangible assets........................... 18,324
--------
Loss from operations.................................................. (18,425)
Interest expense...................................................... 1,660
--------
Loss before income taxes.............................................. (20,085)
Income tax expense.................................................... --
--------
Net loss.............................................................. (20,085)
Smith equity investment at October 1, 1995............................ 23,665
--------
Smith equity investment at September 30, 1996......................... $ 3,580
========

See accompanying notes.

F-33

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

STATEMENT OF CASH FLOWS

YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)

OPERATING ACTIVITIES
Net loss............................................................ $(20,085)
Adjustments to reconcile net loss to net cash used in operating
activities:
Writedown of goodwill and intangible assets....................... 18,324
Depreciation and amortization..................................... 1,860
Provision for uncollectible accounts.............................. 795
Changes in operating assets and liabilities:
Accounts receivable............................................. (150)
Prepaid expenses and other current assets....................... 903
Accounts and subcontracts payable............................... (2,046)
Accrued expenses and deferred revenue........................... (452)
--------
Net cash used in operating activities............................... (851)
INVESTING ACTIVITIES
Capital expenditures................................................ (53)
--------
Net cash used in investing activities............................... (53)
FINANCING ACTIVITIES
Net transactions with Smith......................................... 740
Repayment of capital leases......................................... (88)
--------
Net cash provided by financing activities........................... 652
--------
Net decrease in cash................................................ (252)
Cash at beginning of year........................................... 269
--------
Cash at end of year................................................. $ 17
========

See accompanying notes.

F-34

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 1996

1. BASIS OF PRESENTATION

Smith Technology Corporation (Smith) (formerly Smith Environmental
Technologies Corporation), a Delaware corporation, operates three business
divisions, the Engineering Division (referred to as the Engineering Division
or the Division), the Construction Division and the Remediation Division. The
Engineering Division provides testing, consulting, engineering, design,
project management, and training in the areas of environmental contamination,
water resources and infrastructure. The Construction and Remediation Divisions
provide remedial action including the construction and operation of required
facilities, as well as emergency response actions involving spills and
accidental releases of hazardous waste.

Principally all of the operating assets and liabilities of the Engineering
Division were purchased or assumed (the "Purchased Assets and Liabilities") by
ATC Group Services, Inc. (ATC) on August 20, 1997. The stockholders of Smith
retained the Construction and Remediation Divisions and certain assets and
liabilities of the Engineering Division. The Purchased Assets and Liabilities
of the Engineering Division were purchased by ATC for an aggregate purchase
price of $5.4 million in cash, promissory notes of $2.8 million and the
assumption of $4.3 million in liabilities, subject to certain post-sales
adjustments which may be offset against the promissory notes. The assets which
were not purchased include cash, certain accounts receivable, and certain
fixed assets. Liabilities which were not assumed include certain accounts
payable and accrued expenses, including legal obligations of Smith related to
BCM.

The Engineering Division is dependent upon Smith for financing and funding
of current operations. Smith uses a centralized cash management system to
finance the operations of its divisions. During fiscal 1996, Smith experienced
significant liquidity problems and was in default of agreements with its
Senior Lenders at September 30, 1996. Further, certain of Smith's actions,
including using the Division's cash flow for corporate overhead and other
expenses, caused significant liquidity problems at the Division. In August
1997, Smith completed the sale to ATC as described above and on October 8,
1997, Smith filed a petition for reorganization under Chapter 11 of the
Bankruptcy Code. These conditions raise substantial doubt about the
Engineering Division's ability to continue as a going concern.

The statements of operations and cash flows of the Engineering Division were
derived from the accounting records of Smith and include the revenue,
expenses, and cash flows directly attributable to the Engineering Division's
operations, as well as an allocation of Smith corporate expenses. The balance
sheet includes the assets and liabilities at Smith's historical cost basis
which are specifically identifiable to the Engineering Division. The
accompanying financial statements have been prepared on a historical basis and
do not reflect the effect of ATC's purchase. The financial information in
these financial statements is not necessarily indicative of the results that
would have occurred if the Engineering Division had been a separate stand-
alone entity during the period presented or of future results of the
Engineering Division.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates and such
differences could be material to the financial statements.

REVENUE AND COST RECOGNITION

Revenues from cost-plus fee and time and materials contracts are generally
recognized as the services are provided. Direct costs include all direct
material, labor, and subcontract costs and other direct costs related to

F-35

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

contract performance. Indirect costs, selling, general, and administrative
costs are charged to expense as incurred. Estimated losses on contracts, if
any, are recognized in the period they are determined. An amount equal to
contract costs attributable to claims, if any, is included in revenues when
realization is probable and the amount can be reasonably estimated. Revenue
from one single customer approximated 17% of the Engineering Division's total
revenues for the year ended September 30, 1996.

PROPERTY, EQUIPMENT, AND DEPRECIATION

Property and equipment are stated at cost. Depreciation is provided
primarily on the straight-line method and depreciation is based on the
following estimated useful lives:

Building and improvements.................... 30 years
Office, process, and field equipment......... 3-8 years

Leasehold improvements are amortized over the shorter of their respective
useful lives or lease terms. Assets under capital lease obligations are
$709,000 with accumulated amortization of $341,000 at September 30, 1996.

INCOME TAXES

The taxable income of the Division is included in the consolidated tax
returns of Smith. As such, separate income tax returns were not prepared or
filed by the Division. Income tax expense has been determined as if the
Division was a separate tax paying entity by applying an asset and liability
approach.

INTANGIBLE ASSETS AND GOODWILL

The Division evaluates goodwill and intangible assets to ensure that these
assets are fully recoverable from projected undiscounted cash flows of the
Division. Impairments are recognized in operating results in the period in
which a permanent diminution in value occurs. In September 1996, the Division
recorded a write-down of its goodwill and intangible assets totaling $18.3
million. These assets were determined to have been impaired based on the
current financial condition of the Division and the Division's inability to
generate sufficient cash flows to recover the value of these assets.

Prior to September 1996, goodwill was being amortized over forty years and
intangible assets which include customer lists, contract backlog and assembled
workforce were being amortized over 15 years.

3. ACCOUNTS RECEIVABLE

Accounts receivable are comprised of the following (in thousands):

Commercial and non-U.S. government customers:
Amounts billed............................... 8,603
Unbilled recoverable costs and estimated
earnings.................................... 3,442
Retention.................................... 220
-------
12,265
United States Government and agencies:
Amounts billed............................... 1,362
Unbilled recoverable costs and estimated
earnings.................................... 308
Retention.................................... 94
-------
1,764
-------
All customers.................................. 14,029
Allowance for doubtful accounts................ 351
-------
$13,678
=======

F-36

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Unbilled recoverable costs and estimated earnings represent revenue earned
and recognized on contracts which are not yet billable according to contract
terms, which usually consider the passage of time, achievement of certain
milestones, or the completion of the project.

4. LEASES

The Division leases office space and various equipment under noncancelable
leases expiring through 2004. For the year ended September 30, 1996, total
lease expense charged to operations was approximately $2,680,000 and includes
rentals under short-term cancelable leases.

As of September 30, 1996, future minimum rental payments required under
operating leases that have initial or remaining noncancelable terms in excess
of one year are as follows (in thousands):

1997................................. $ 2,917
1998................................. 2,733
1999................................. 2,516
2000................................. 1,744
2001................................. 669
Thereafter........................... 1,941
-------
$12,520
=======

5. RELATED PARTY TRANSACTIONS

SMITH'S EQUITY INVESTMENT

Smith uses a centralized cash management system to finance its operations.
Cash receipts related to the Division's operations are received by Smith, and
cash disbursements of the Division are paid by Smith. No interest has been
charged or credited on transactions with Smith. The net intercompany balance
with Smith resulting from the funding of all financial transactions will not
be settled. As a result, the net intercompany balance has been included in
Smith equity investment in the balance sheet of the Engineering Division.

CORPORATE EXPENSES

The results of operations include significant transactions with Smith
business units that are outside of the Division's operations. These
transactions involve functions and services such as selling, general, and
administrative expenses including the Division's cash management, accounting
and finance, legal services, and employee benefits administration that have
been provided to the Division by Smith. The cost of these functions and
services has been allocated to the Division based on a percentage of Division
revenues to total Smith revenues. Such charges and allocations are not
necessarily indicative of the costs that would have been incurred by the
Division as a separate entity. Corporate charges allocated to the Engineering
Division included in indirect costs and selling, general, and administrative
expenses were approximately $2,721,000 for the year ended September 30, 1996.

SPECIAL ITEMS

The Division's special items of $800,000 for the year ended September 30,
1996 include legal settlements and associated defense costs for the Division
of approximately $720,000 pertaining to cases in process at the time of
Smith's acquisition of the Division and specifically identifiable costs of
approximately $80,000 for severance and relocation costs for the Division.

F-37

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

INTEREST

The Division's interest expense represents an allocation of Smith's interest
expense. The interest expense from Smith was allocated to the Engineering
Division and the Remediation and Construction Divisions based on their
percentages of combined total assets at September 30, 1996.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Prior to September 1994, the Division provided a Supplemental Executive
Retirement Plan (SERP) for certain directors. The SERP was frozen in 1994 upon
the acquisition of the Division by Smith and no new participants are eligible
to participate. The benefits for this plan were based on the directors' years
of service and compensation. The accrued SERP liability which represents the
projected benefit obligation of $1,356,000 at September 30, 1996 is included
in other liabilities and was determined by an actuarial valuation. Net
periodic pension expense was $126,000 for the year ended September 30, 1996.
The plan is unfunded at September 30, 1996 and does not hold any assets.
Assumptions used in determining the actuarial present value of benefit
obligations reflects a weighted average discount rate of 7.5%.

INSURANCE COVERAGE

Worker's Compensation. Smith purchases workers' compensation coverage for
all its Divisions from external carriers. Premiums paid are determined based
upon claims experience subject to a stop-loss provision. Each Division is
allocated a charge based upon the application of published workers'
compensation rates to division payroll costs adjusted for claims experience.
Charges included in indirect costs and selling, general, and administrative
expenses for the year ended September 30, 1996 were approximately $80,000.

Medical. Certain medical and other related benefits are provided to active
employees of the Division. Monthly premiums are paid to insurance carriers by
Smith and reimbursed by the Division on the basis of employee headcount. These
contracts are negotiated by Smith on a Company-wide basis.

Medical charges allocated to the Division included in indirect costs and
selling, general and administrative expenses were approximately $1,330,000 for
the year ended September 30, 1996.

The above-mentioned charges and allocations are not necessarily indicative
of the costs that would have been incurred if the Division had been operating
as a separate entity.

EMPLOYEE BENEFIT PLAN

The employees of the Division are eligible to participate in Smith's defined
contribution plan. Under the plan, employees may make tax deferred voluntary
contributions which, at the discretion of Smith's Board of Directors, are
matched within certain limits by Smith. In addition, Smith may make additional
discretionary contributions to the plan as profit sharing contributions. The
Division's share of the Company's accrued matching contributions was
approximately $90,000 as of September 30, 1996 and is included in indirect
costs and selling, general and administrative expenses.

6. INCOME TAXES

There was no provision or benefit for current or deferred federal and state
income taxes.

F-38

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Significant components of the Division's deferred tax assets and liabilities
at September 30, 1996 are as follows (in thousands):

Deferred tax assets:
Bad debt allowance............................................. $ 140
Net operating loss carryforward................................ 70
Property and equipment......................................... 123
Accrued liabilities............................................ 2,125
Valuation allowance............................................ (1,549)
-------
Total deferred tax assets........................................ 909
-------
Deferred tax liabilities:
Cash to accrual (Sec. 481 Adjustment).......................... (909)
-------
Total deferred tax liabilities................................... (909)
-------
Net deferred taxes............................................... $ --
=======

For financial reporting purposes, a valuation allowance has been recorded to
reduce the deferred tax asset related to the carryforwards and other deferred
tax assets net of deferred tax liabilities, to zero since the realization of
such amounts is not assured. Future tax benefits from the carryfowards will
reduce income tax expense if and when realized.

A reconciliation of income tax expense to amounts computed using federal
statutory rates is as follows:

Income tax benefit computed at the federal statutory rate....... $(7,030)
Non deductible items:
Writedown of goodwill and intangibles......................... 6,413
Goodwill amortization......................................... 301
Increase in valuation allowance................................. 316
-------
Income tax expense.............................................. $ --
=======

7. COMMITMENTS AND CONTINGENCIES

The following litigation against the Division is related to BCM Engineers,
Inc. (BCM) a wholly-owned corporation of Smith included in the Division. As
part of the asset purchase agreement, Smith has agreed to assume all
liabilities, if any, in resolving these claims.

Transcontinental Realty Investors, Inc. filed an action against BCM and
various unrelated parties in the Superior Court of New Jersey, Burlington
County. The action sought to recover alleged damages exceeding $8 million
based on breach of contract and negligence. An agreement has been reached by
the plaintiff and the professional liability carrier of BCM to resolve all
claims. The insurance carrier will pay the agreed settlement directly to the
plaintiff. BCM's obligation is limited to reimbursing the insurance carrier
for the balance of the unexpended portion of a self-insured retention of
approximately $280,000, which is included in other liabilities at September
30, 1996, in installments of $50,000 payable quarterly beginning September 26,
1996, with final payment of any remaining balance due on September 30, 1997.
U-Max was awarded a judgment in the United States District Court for the
Middle District of Pennsylvania of $2 million against Stroud Township. The

F-39

THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Township has been granted a judgment of $1 million against BCM. Stroud
Township has appealed the judgment against the Township and the $1 million
judgment awarded in favor of the Township against BCM. BCM's insurance
coverage will respond to losses exceeding a $500,000 deductible of which
approximately $220,000 has been expended. On November 7, 1996, BCM filed a
notice of appeal to the United States Third Circuit Court of Appeals with a
motion to stay execution. BCM's counsel believes there are grounds for
reversal or modification of the judgment on appeal, however, the likelihood of
obtaining relief from the District Court judgment is unknown. The difference
between the insurance deductible and the amount expended of $280,000 is
included in other liabilities at September 30, 1996.

A settlement agreement of the claim filed in the Court of Common Pleas of
Philadelphia County, Philadelphia has been reached with Mutual Pharmaceutical
Company, Inc. whereby BCM will be required to pay the plaintiff for its out-
of-pocket costs incurred to date for the site investigation and carrying costs
amounting to $207,000. This amount is to be paid in 13 monthly installments
beginning September 12, 1996 of $16,000 in lieu of exposure to the remaining
deductible and further litigation. The claim is covered by BCM's professional
liability coverage which carries a $500,000 deductible. The insurance carrier
has approved the settlement agreement. Additionally, BCM will be responsible
for performing certain remediation services at the site to obtain a "No
Further Action" letter from the Pennsylvania Department of Environmental
Protection. The estimated cost of the services is $50,000. If BCM fails to pay
the agreed amount or perform under the agreement, the plaintiff reserves the
right to recommence the litigation and claim additional out-of-pocket costs.
The agreement leaves open a possible claim for diminution of property value up
to $420,000 for up to 10 years and requires BCM to indemnify the plaintiff for
any third-party claims not to exceed $500,000 plus costs of defense until
September 2001. BCM is unaware of any third-party claims and has not been
notified of any claim of diminution of value of the site.

In December 1995, BellSouth filed a complaint for unstated damages in the
Circuit Court, Jefferson County, Alabama against BCM and Smith. The complaint,
alleging professional negligence, fraudulent and negligent misrepresentation,
nondisclosure, innocent misrepresentation and breach of contract, arises out
of BCM's alleged failure to provide oversight and certification of services
performed by BellSouth's asbestos abatement contractors. The plaintiff claims
it has expended an additional $1.7 million to perform asbestos removal which
allegedly was to have been performed by its prior contractor. BCM believes its
services were performed in compliance with all legal requirements, that it has
been released from BellSouth claims, and that a substantial amount of the
claims are barred by statute of limitations. The parties to the lawsuit have
entered into a settlement agreement dated April 21, 1997, which resolved all
claims; the agreement provides for the payment by BCM of $150,000 in monthly
installments which is included in other liabilities. The settlement agreement
provided that it could be rescinded or a consent judgment could be entered if
there were default on the installments. BCM defaulted and BellSouth sought to
have the consent judgement entered, but this was blocked by the chapter 11
filing of Smith.

Stroudsburg Municipal Authority has filed a claim against BCM in the Monroe
County, Pennsylvania, Court of Common Pleas for damages exceeding $500,000
based on allegations of breach of contract and negligent performance of design
services. BCM and its professional liability carrier are investigating the
claim. The case was in the discovery stage at the time of the Smith
bankruptcy. No provision for loss, if any, has been recorded at September 30,
1996.

The Division is currently a party to other litigation and claims incidental
to its business. The Division believes that these matters are adequately
accrued or covered by insurance, are without merit, or the disposition thereof
is not anticipated to have a material effect on the Division's financial
position.

F-40

AMERICAN TESTING AND ENGINEERING CORPORATION

FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994
AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
THE THREE MONTHS ENDED DECEMBER 31, 1993
AND THE YEAR ENDED SEPTEMBER 30, 1993
AND INDEPENDENT AUDITORS' REPORT

F-41

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
American Testing and Engineering Corporation

We have audited the accompanying balance sheets of American Testing and
Engineering Corporation (the Company) as of December 31, 1995 and 1994, and
the related statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1995 and 1994, the three months ended December
31, 1993 and the year ended September 30, 1993. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994, the three months ended December 31, 1993 and the
year ended September 30, 1993 in conformity with generally accepted accounting
principles.

/s/ Deloitte & Touche LLP

Omaha, Nebraska
January 31, 1997
(June 25, 1997 as to Note 11)

F-42

AMERICAN TESTING AND ENGINEERING CORPORATION

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994

1995 1994
----------- -----------

ASSETS
Current assets:
Cash................................................ $ 46,693 $ 62,285
Receivables:
Trade accounts receivable.......................... 20,282,027 20,732,006
Unbilled revenue on work in progress............... 6,795,912 6,395,647
----------- -----------
27,077,939 27,127,653
Less allowance for doubtful accounts............... (690,500) (814,600)
----------- -----------
26,387,439 26,313,053
Collateral bonds.................................... 801,430 1,110,652
Other current assets................................ 779,722 825,214
----------- -----------
Total current assets............................. 28,015,284 28,311,204
Property and equipment, net (Note 3)................. 5,901,641 9,041,493
Other Assets:
Cash surrender value of life insurance.............. 1,824,437 1,872,902
Advances to related parties (Note 4)................ 156,712 114,141
Other............................................... 428,621 324,125
----------- -----------
2,409,770 2,311,168
----------- -----------
Total assets..................................... $36,326,695 $39,663,865
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Working capital loans (Note 5)...................... $ 1,679,756 $ 632,235
Current portion of long-term debt (Note 5).......... 11,043,881 3,548,168
Accounts payable, trade............................. 7,804,426 7,211,534
Accrued salaries, wages and other compensation...... 3,948,186 4,774,441
Accrued legal liabilities (Note 11)................. 1,288,265 1,391,875
Other accrued expenses.............................. 2,914,423 2,918,901
----------- -----------
Total current liabilities........................ 28,678,937 20,477,154
Long-term debt (Note 5).............................. 877,095 10,255,382
Performance share obligation (Notes 2 and 7)......... 688,147 1,139,894
Lease and revenue reserve............................ 187,739 76,190
Minority interest.................................... 7,173 5,011
Commitments and contingencies (Notes 5, 7 and 11)
Shareholders' equity:
Common stock, no par value, 2,000,000 shares
authorized;
1,585,000 shares issued and outstanding............ 79,250 79,250
Additional paid-in capital.......................... 633,131 633,131
Advances to shareholders (Note 4)................... (21,266) (17,947)
Retained earnings................................... 5,196,489 7,015,800
----------- -----------
Total shareholders' equity....................... 5,887,604 7,710,234
----------- -----------
Total liabilities and shareholders' equity....... $36,326,695 $39,663,865
=========== ===========

The accompanying notes are an integral part of the consolidated financial
statements.

F-43

AMERICAN TESTING AND ENGINEERING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED DECEMBER 31,
1993 AND THE YEAR ENDED SEPTEMBER 30, 1993

YEARS ENDED THREE
DECEMBER 31, MONTHS ENDED YEAR ENDED
-------------------------- DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
------------ ------------ ------------ -------------

Revenues:
Service revenue........ $95,130,122 $102,253,268 $28,354,269 $117,609,574
Cost of service revenue
(Note 2).............. 26,926,568 30,116,429 11,832,987 38,794,916
------------ ------------ ------------ ------------
Net service revenue. 68,203,554 72,136,839 16,521,282 78,814,658
------------ ------------ ------------ ------------
Cost and expenses:
Engineering and
consulting costs...... 31,064,366 31,189,662 11,122,048 35,075,967
General and
administrative
expenses.............. 37,291,935 38,760,752 10,726,126 46,082,281
Interest expense....... 1,664,066 1,539,513 398,232 1,485,275
Legal judgment (Note
11)................... -- -- 704,375 --
------------ ------------ ------------ ------------
Total costs and
expenses........... 70,020,367 71,489,927 22,950,781 82,643,523
------------ ------------ ------------ ------------
Income (loss) before
cumulative effect
of change in
accounting method.. (1,816,813) 646,912 (6,429,499) (3,828,865)
Cumulative effect of
change in accounting
method (Note 2)........ -- 470,611 -- --
------------ ------------ ------------ ------------
Net income (loss)
before minority
interest........... (1,816,813) 1,117,523 (6,429,499) (3,828,865)
Minority interest....... 2,162 (3,904) (5,814) 3,751
------------ ------------ ------------ ------------
Net income (loss)... $ (1,818,975) $ 1,121,427 $ (6,423,685) $ (3,832,616)
============ ============ ============ ============

The accompanying notes are an integral part of the consolidated financial
statements.

F-44

AMERICAN TESTING AND ENGINEERING CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED DECEMBER 31, 1993
AND THE YEAR ENDED SEPTEMBER 30, 1993

ADDITIONAL TOTAL
COMMON PAID-IN ADVANCES TO RETAINED SHAREHOLDERS'
STOCK CAPITAL SHAREHOLDERS EARNINGS EQUITY
------- ---------- ------------ ----------- -------------

Balance, September 30,
1992................... $79,250 $384,240 $ -- $15,911,335 $16,374,825
Distributions to
shareholders.......... -- -- -- (391,157) (391,157)
Advances to
shareholders.......... -- -- (70,048) -- (70,048)
Reclassification of
shareholder
distribution (Note 4). -- -- (630,496) 630,496 --
Net loss............... -- -- -- (3,832,616) (3,832,616)
------- -------- --------- ----------- -----------
Balance, September 30,
1993................... 79,250 384,240 (700,544) 12,318,058 12,081,004
Advances to
shareholder........... -- -- (11,376) -- (11,376)
Net loss............... -- -- -- (6,423,685) (6,423,685)
------- -------- --------- ----------- -----------
Balance, December 31,
1993................... 79,250 384,240 (711,920) 5,894,373 5,645,943
Shareholder
contribution.......... -- 248,891 -- -- 248,891
Repayment of
shareholder advances.. -- -- 693,973 -- 693,973
Net income............. -- -- -- 1,121,427 1,121,427
------- -------- --------- ----------- -----------
Balance, December 31,
1994................... 79,250 633,131 (17,947) 7,015,800 7,710,234
Distributions to
shareholders.......... -- -- -- (336) (336)
Advance to shareholder. -- -- (3,319) -- (3,319)
Net loss............... -- -- -- (1,818,975) (1,818,975)
------- -------- --------- ----------- -----------
Balance, December 31,
1995................... $79,250 $633,131 $ (21,266) $ 5,196,489 $ 5,887,604
======= ======== ========= =========== ===========

The accompanying notes are an integral part of the consolidated financial
statements.

F-45

AMERICAN TESTING AND ENGINEERING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED DECEMBER 31,
1993 AND THE YEAR ENDED SEPTEMBER 30, 1993

YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED YEAR ENDED
------------------------ DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
----------- ----------- ------------ -------------

Cash flows from operating
activities:
Net income (loss)....... $(1,818,975) $ 1,121,427 $ (6,423,685) $ (3,832,616)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization........... 3,913,346 4,311,092 1,174,178 5,076,527
Revenue and lease
reservations........... 111,549 76,190 -- --
Provision for doubtful
accounts............... (124,049) (1,154,000) 288,600 281,000
(Gain) loss on sale of
property and
equipment.............. 221,749 (76,446) (17,090) 176,382
Appreciation
(depreciation) in
performance share
value.................. (126,608) 217,433 -- --
Cumulative effect of
change in accounting
method................. -- (470,611) -- --
Appreciation of
performance shares
redeemed by issuance
of note payable........ -- -- -- 134,511
Changes in assets and
liabilities:
Trade accounts
receivable............ 449,979 2,095,995 3,480,946 2,756,359
Unbilled revenue on
work in progress...... (400,316) 2,452,964 (2,502,053) (2,658,219)
Accounts payable....... 175,131 1,691,361 (4,736,242) 2,256,065
Accrued salaries and
expenses.............. (779,940) (5,277,894) 7,235,340 1,206,256
Collateral bonds....... 309,222 477,656 412,304 (847,024)
Other, net............. (60,949) 427,311 107,265 (1,144,252)
----------- ----------- ------------ ------------
Net cash provided by
operating activities. 1,870,139 5,892,478 (980,437) 3,404,989
----------- ----------- ------------ ------------
Cash flows from investing
activities:
Purchase of property and
equipment.............. (1,310,662) (1,869,058) (474,064) (2,198,370)
Proceeds from sale of
property and equipment. 325,418 295,010 53,063 346,603
----------- ----------- ------------ ------------
Net cash used in
investing activities. (985,244) (1,574,048) (421,001) (1,851,767)
----------- ----------- ------------ ------------
Cash flows from financing
activities:
Net (deposits)
borrowings (to) from
cash collateral
account................ 1,047,521 (1,767,190) -- --
Proceeds from
obligations to banks
and notes payable...... 2,059,189 7,175,000 11,015,000 23,765,000
Payments on obligations
to banks and notes
payable................ (3,941,762) (8,565,195) (10,823,825) (24,545,218)
Advances and
distributions to
shareholders........... (3,655) -- (11,376) (391,157)
Performance shares
redeemed............... (479,542) (43,159) (14,517) (128,477)
Change in cash
overdraft.............. 417,762 (2,058,354) 1,215,597 (236,671)
Shareholder
contribution........... -- 248,891 -- --
Proceeds from repayment
of shareholder
advances............... -- 693,973 -- --
----------- ----------- ------------ ------------
Net cash used in
financing activities. (900,487) (4,316,034) 1,380,879 (1,536,523)
----------- ----------- ------------ ------------
Increase (decrease) in
cash................. (15,592) 2,396 (20,559) 16,699
Cash, beginning of
period.................. 62,285 59,889 80,448 63,749
----------- ----------- ------------ ------------
Cash, end of period...... $ 46,693 $ 62,285 $ 59,889 $ 80,448
=========== =========== ============ ============
Supplemental disclosures
of cash flow
information:
Cash paid during the
year for:
Interest................ $ 1,554,879 $ 1,489,863 $ 376,429 $ 1,487,936
=========== =========== ============ ============
Income taxes (Note 2)... $ -- $ -- $ -- $ 577,043
=========== =========== ============ ============

During the year ended September 30, 1993, the Company redeemed performance
shares with a recorded value of $194,726, a redemption value of $493,856, by
issuance of a note payable of $329,237 and a cash payment for the residual.
The difference between the recorded and redemption value was recorded as
compensation expense and is included in general and administrative expenses.
During the year ended December 31, 1995, the three months ended December 31,
1993 and the year ended September 30, 1993, performance shares with a value
of $154,403, $120,757 and $72,634, respectively, were issued in lieu of ac-
crued bonuses.

The accompanying notes are an integral part of the consolidated financial
statements.

F-46

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED
DECEMBER 31, 1993 AND THE YEAR ENDED SEPTEMBER 30, 1993

1. SUBSEQUENT EVENT

Effective May 23, 1996, the shareholders of American Testing and Engineering
Corporation (the Company) or ("ATEC") transferred substantially all of the
Company's tangible and intangible business assets to ATC Environmental, Inc.
("ATC"), an unrelated company. The assets sold included cash, accounts
receivable, unbilled work in progress, prepaid expenses, goodwill, customer
contract rights and customer lists. In addition, the Company leased to ATC
substantially all of its property, plant and equipment under annually
renewable leases expiring six years from the date of the closing. ATC
additionally has the right to purchase all fixed assets leased at the end of
such period. Assets retained by the Company include all nonleased fixed
assets, intercompany accounts receivable/payable, certain land, cash surrender
value of life insurance policies, and the investment in Waste Abatement
Technology, L.P. ("WATEC").

As consideration for the sale, ATC assumed essentially all of the recorded
liabilities exclusive of bank debt which was repaid concurrent with the sale
of ATEC. In addition, at closing the Company received $6,000,000 in cash and
will receive, an additional $16,750,000 in lease payments, rents, and
consideration for covenants not to compete over the next six years. In
connection with this transaction, the Company recorded a gain of approximately
$4.9 million at the closing date, and additional contingent gains
approximating $12.5 million are expected to be recorded as certain defined
contingencies lapse.

The Company's credit agreement with Bank One (Note 5) expired on April 30,
1996. In anticipation of the sale of the Company, the bank amended and
extended the credit agreement through July 31, 1996. All amounts due Bank One
in connection with the credit agreement, exclusive of WATEC borrowings of
approximately $360,000 and contingent amounts due under letters of credit,
were paid on May 24, 1996, concurrent with the sale of the Company's business
operations to ATC.

In connection with the sale, the Company recorded additional 1996 expense of
approximately $2.2 million associated with the performance shares and
performance share options (see Notes 7 and 8) in accordance with the
Performance Share and Performance Share Option Plans. During the period from
January 1, 1996 through May 23, 1996, 94,830 additional performance share
options were granted at an option price of $7.41 per share.

These financial statements are presented on the historical basis of
accounting and are not presented on the basis of a liquidation, nor do they
reflect fair value accounting principles.

2. SIGNIFICANT ACCOUNTING POLICIES

General--ATEC engages in four principal lines of business which contribute
to gross revenues. They include traditional services which consist of
engineering and materials testing, environmental, hazardous waste, and
chemical testing laboratories. The geographic concentration of the 40 plus
offices is in the eastern half of the United States. The concentration of
revenue by client is largely industrial and small business with approximately
25% of its revenue generated from federal, state and local governmental
agencies.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make
estimates and assumptions affecting the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual amounts and results could differ from the
estimated amounts and results.

F-47

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Consolidation Principles and Financial Statement Presentation--These
consolidated financial statements include the accounts of ATEC and WATEC, a
limited partnership in which the Company holds a 99% interest (together, the
"Company"). All significant intercompany accounts have been eliminated.

Property and Equipment--Property and equipment are recorded at cost and are
depreciated using the straight-line method. Estimated useful lives range from
three to ten years for machinery, equipment and office furniture and three to
seven years for vehicles. Leasehold improvements are generally amortized over
the term of the respective leases. Expenditures for normal repair and
maintenance are charged to expense as incurred. Cost and accumulated
depreciation of assets disposed are removed from the accounts, and any
resulting gain or loss is included in income.

Income Taxes--Effective October 1, 1991, the Company elected status as an S
Corporation under the provisions of the Internal Revenue Code. Accordingly, it
is generally not subject to federal or state income taxes, and the income or
loss of the Company is reflected in the personal income tax returns of its
shareholders.

Revenue and Cost Recognition--The Company's principal business is providing
professional engineering and consulting services under cost-plus-fee and
fixed-price contracts. Revenues attributable to such contracts and claims for
revenue on additional contract revisions are accounted for under the
percentage-of-completion (cost-to-cost) method of accounting and are recorded
equivalent to costs incurred plus a pro rata portion of estimated profits
expected to be realized on the contracts.

Profits expected to be realized on contracts are based on total contract
value and management's estimates of costs at completion. These estimates are
reviewed and revised periodically throughout the lives of the contracts, and
adjustments to profits resulting from such revisions are recorded in the
accounting period in which the revisions are made. Provisions for estimated
losses on contracts are recorded when they are identified.

Costs of service include all direct material and subcontract costs, and
those indirect costs related to contract performance.

Change in Accounting Method--Performance Share Obligation--Amounts
contributed by participants to the Performance Share Plan are recognized as
compensation expense when earned. Prior to January 1, 1994, the Company
recognized additional expense (appreciation of performance share value) or
other income (diminution of performance share value) upon election by the
participant to redeem units in accordance with the plan's provisions. To more
directly relate the periodic results of its operations with related changes in
the valuation of performance shares, the Company changed its method of
accounting for changes in the appreciation or diminution of performance share
value. As part of this change, during the year ended December 31, 1994, the
Company recorded a one-time cumulative benefit of $470,611, which recognizes
the cumulative difference in expense recorded under the two methods from the
inception of the plan through January 1, 1994.

Reclassification--Certain amounts in the prior year's financial statements
have been reclassified to conform to the 1995 presentation.

F-48

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

DECEMBER 31,
--------------------------
1995 1994
------------ ------------

Machinery and equipment.......................... $ 11,584,942 $ 12,102,895
Vehicles......................................... 6,285,807 6,828,868
Office furniture and equipment................... 9,059,094 8,508,533
Leasehold improvements........................... 3,256,232 3,660,734
Building......................................... 291,220 291,220
Land............................................. 276,480 276,480
Construction in progress......................... 102,221 427,241
------------ ------------
30,855,996 32,095,971
Less accumulated depreciation.................... (24,954,355) (23,054,478)
------------ ------------
$ 5,901,641 $ 9,041,493
============ ============

4. RELATED PARTY TRANSACTIONS

Advances to related parties are summarized as follows:

DECEMBER 31,
-----------------
1995 1994
-------- --------

Mann Realty Co............................................. $108,212 $ 68,913
Mann Technology, Inc....................................... 7,085 3,813
ATEC International......................................... 41,415 41,415
-------- --------
$156,712 $114,141
======== ========

The Company has entered into certain noncancelable operating lease
agreements for office space with Mann Realty Co., a partnership in which the
Company's president is a partner. Minimum annual rental commitments under
these leases are included in Note 9 and aggregate $464,959, $323,471,
$208,884, $100,800, $100,800, and $756,000 for the years ending December 31,
1996, 1997, 1998, 1999, 2000, and thereafter, respectively. Rents paid to Mann
Realty Co. for the years ended December 31, 1995 and 1994 and the three months
ended December 31, 1993 and the year ended September 30, 1993 were $607,913,
$546,544, $193,230 and $615,144, respectively. The Company also has $125,000
on deposit with Mann Realty Co. pursuant to lease agreements on certain
locations. No interest is earned on advances, and there are no agreements
identifying specific repayment terms.

The Company's president is an officer and shareholder of Mann Technology,
Inc., which serves as the corporate general partner and one-percent owner of
WATEC. Mann Technology, Inc.'s 1% interest and earnings therefrom have been
reflected as minority interest on the Company's consolidated balance sheets
and statements of operations. Two shareholders of the Company are also
shareholders in ATEC International. Advances to Mann Technology and ATEC
International bear no interest, and there are no agreements identifying
specific repayment terms.

The Company's interim distributions to shareholders for estimated income
taxes have been determined by the Company's management to be advances to
shareholders until such time as the actual liability is calculated. Advances
to shareholders were $21,266 and $17,947 at December 31, 1995 and 1994,
respectively. The Company reports shareholder advances as a reduction of
shareholders' equity. The Company's Credit Agreement (Note 5) requires that
any such shareholder advances in excess of the related tax liability be repaid
to the Company when corresponding refunds are received from taxing
authorities.

F-49

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. LONG-TERM DEBT AND CREDIT AGREEMENTS

Long-term debt and credit agreements are summarized as follows:

DECEMBER 31,
-------------------------
1995 1994
------------ -----------

Credit agreement:
Working capital loan--ATEC....................... $ 1,345,739 $ 332,810
Working capital loan--WATEC...................... 344,017 299,425
------------ -----------
Borrowings under working capital loans.......... $ 1,689,756 $ 632,235
============ ===========
Term loan one.................................... $ 5,214,793 $ 6,907,321
Term loan two.................................... 1,572,648 2,715,048
Term loan three.................................. 1,240,313 1,791,563
Term loan four................................... 1,709,033 1,475,000
Equipment acquisition loan....................... 1,180,000 --
------------ -----------
Borrowings under term loans..................... 10,916,787 12,888,932
Notes payable.................................... 1,004,189 914,618
------------ -----------
11,920,976 13,803,550
Less current portion............................. (11,043,881) (3,548,168)
------------ -----------
Total long-term debt............................ $ 877,095 $10,255,382
============ ===========

Credit Agreement--Under the Company's credit agreement (the "Agreement")
with Bank One, Indianapolis, N.A. ("Bank One"), substantially all assets have
been pledged as collateral. The Agreement also contains certain financial
covenants which require the Company to meet financial ratios and tests,
including a minimum current ratio, a minimum tangible capital test, a maximum
debt to tangible capital ratio, and a minimum debt service coverage ratio. The
Company was in default of substantially all financial ratio covenants as of
December 31, 1995.

On April 30, 1996, the Company and Bank One amended and extended the
Agreement (the "Amended Agreement"). The Amended Agreement established new
financial ratios and tests which the Company is required to maintain. Bank One
may, at its sole discretion, extend the maturity date of the working capital
loans. The Amended Agreement provides for the revision of a previously
established cash collateral account, whereby the Company deposits all cash
into the account to pay down working capital loans and then draws funds to
meet current operating requirements.

Under the Amended Agreement, the working capital loans bear interest,
payable monthly, at Bank One's prime rate, which was 8.5% at December 31,
1995, plus .75%, and mature on July 31, 1996. ATEC and WATEC may borrow up to
$3,000,000 and $1,000,000, respectively, under the working capital loans.
Additionally, the Agreement provides for annual short-term equipment
acquisition loans. On April 30, 1996, the due date for the equipment
acquisition loan was extended to July 31, 1996. The equipment acquisition loan
bears interest at Bank One's prime rate plus 1%.

Term loan one is due in consecutive monthly principal payments of $116,500
plus interest, with the remaining unpaid principal plus accrued interest due
March 1, 1998. The loan bears interest at Bank One's prime rate plus 1%. Term
loan two is due in consecutive monthly principal payments of $95,200 plus
interest, with the remaining balances of principal and interest due on June 1,
1997. The loan bears interest at an annual rate of 9.51% through February 28,
1996 and at Bank One's prime rate plus 1% thereafter. Term loan three is due
in

F-50

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
consecutive monthly principal payments of $45,938 plus interest, with the
remaining balance of principal and interest due on February 28, 1998. The loan
bears interest at Bank One's prime rate plus 1%. Term loan four is due in
consecutive monthly principal payments of $41,700 plus interest, with the
remaining balance of principal and interest due March 15, 1999. The loan bears
interest at Bank One's prime rate plus 1%.

The Term loans contain provisions which permit the bank to accelerate
payment terms in the event of non-compliance with covenants included in the
working capital loan.

A $6,000,000 facility for letters of credit is provided under the Agreement
with a 1.5% annual fee on outstanding letters of credit (Note 6). In addition,
up to a maximum of $5,000,000 of total indebtedness under the credit agreement
has been guaranteed by the Company's principle shareholder.

Notes Payable--The Company's principal shareholder advanced the Company
$750,000 in September 1994. The note bears interest at 12.0% and the principal
and accrued interest are due on February 1, 1997. The note is subordinated to
the interest of Bank One.

In connection with the retirement of certain performance share obligations,
a note with a principal balance of $254,189 was issued in 1995. The first
payment of $127,094 plus accrued interest is due in May 1996, with the payment
of the remaining $127,095 plus accrued interest due on May 19, 1997. Interest
is payable at the prime rate of Bank One.

6. LETTERS OF CREDIT

The Company has $5,904,353 in letters of credit outstanding at December 31,
1995, which collateralize performance bonds required under certain contracts,
certain litigation, and deductibles under workers' compensation insurance.
They expire in various amounts through November 1996.

7. PERFORMANCE SHARE OBLIGATION

The Company adopted a Performance Share Plan ("Share Plan") intended to
operate for the benefit of key employees of the Company. At the beginning of
each fiscal year, each Share Plan participant can elect to receive a portion
of his bonus payable under the ATEC Incentive Bonus Plan in the form of
Performance Shares ("Shares"), for which the Company has agreed to later pay a
formula value per Share, subject to adjustment (see below). Except as
otherwise determined by the Board, Shares issued in lieu of cash bonuses were
initially valued at twice the book value of shares of the Company's common
stock through September 30, 1992 and at one and one-half times the book value
of common stock, thereafter ("Purchase Price").

The Company will satisfy the Performance Share Obligation by cash payments
to the Share Plan participants in the event of the Share Plan participant's
death, total disability, hardship or termination from the Company, or upon
sale of 50% of the Company's common stock or substantially all of the assets
of the Company.

F-51

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The value per unit and the right to receive payment for Shares held by a
Share Plan participant are determined as follows:

EVENT CAUSING UNIT REDEMPTION SHARE VALUE DETERMINED BY

Death, total disability, hardship or The Share Purchase Price plus or
termination. minus the change in book value of
the common stock of the Company from
the date of purchase to the end of
the fiscal year immediately
preceding the event.

Sale or transfer of more than 50% of The payment received by the Company
the issued and outstanding common shareholders for each share of the
stock of the Company. Company.

Sale of substantially all of the The payment received by the Company
assets of the Company, or the shareholders for each share of the
liquidation of the Company. Company.

Activity in the years ended December 31, 1995 and 1994 and the three months
ended December 31, 1993 and the year ended September 30, 1993 was as follows:

PERFORMANCE
SHARES OBLIGATIONS
----------- -----------

Balance at September 30, 1992....................... 255,499 $1,580,560
Issued............................................ 3,721 72,634
Redeemed.......................................... (55,343) (323,203)
------- ----------
Balance at September 30, 1993....................... 203,877 1,329,991
Issued............................................ 10,677 120,757
Redeemed.......................................... (1,061) (14,517)
------- ----------
Balance at December 31, 1993........................ 213,493 1,436,231
Cumulative effect of change in accounting method
(Note 1)......................................... -- (470,611)
Issued............................................ -- --
Redeemed.......................................... (6,558) (43,159)
Appreciation in share value....................... -- 217,433
------- ----------
Balance at December 31, 1994........................ 206,935 1,139,894
Issued............................................ 20,805 154,403
Redeemed.......................................... (87,211) (479,542)
Depreciation in share value....................... -- (126,608)
------- ----------
Balance at December 31, 1995........................ 140,529 $ 688,147
======= ==========

8. PERFORMANCE SHARE OPTION PLAN

Effective May 3, 1995, the Company adopted a Performance Share Option Plan
("Option Plan") intended to offer incentives beyond current compensation to
certain officers and key employees responsible for furthering the Company's
long-term earnings growth. Performance share options are issued at the sole
discretion of the Performance Share Option Plan Committee (the "Committee").
Under the Plan, 200,000 option shares are available for grant. The option
price is determined by the Committee and for 1995 was set at $7.41 per share.
Options are exercisable only upon a "Transfer" of ownership as defined in the
Option Plan agreement. The options have no stated expiration date but will
expire upon termination of the optionee's employment. No compensation expense
was recorded during 1995, since the options were granted at fair market value.
At December 31, 1995, there were 77,250 shares under option at an option price
of $7.41 per share.

F-52

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. LEASES

Minimum annual rental commitments under noncancelable operating leases at
December 31, 1995 (primarily for office space) are as follows:

1996........................................................... $2,642,509
1997........................................................... 1,692,026
1998........................................................... 1,060,172
1999........................................................... 705,190
2000........................................................... 302,074
Thereafter..................................................... 822,097
----------
$7,224,068
==========

Total rental expense for the year ended December 31, 1995 and 1994 and the
three months ended December 31, 1993 and the year ended September 30, 1993 was
$3,404,000, $3,107,000, $775,000 and $3,216,000, respectively.

10. 401(K) PROFIT SHARING PLAN

The Company sponsors a defined contribution 401(k) Profit Sharing Plan
("Plan") covering substantially all employees. Annual contributions made by
the Company to the Plan are strictly discretionary in nature and may be
discontinued or temporarily suspended for a definite or indefinite period of
time. The Company's profit sharing contributions are allocated to the account
balance of each participant based upon the ratio of the participant's Plan
year compensation to the total Plan year compensation of all participants and
vest over a six-year period. There were no profit sharing contributions for
any of the periods presented.

During the year ended December 31, 1995, the Company contributed $331,064 to
the 401(k) portion of the Plan, equivalent to 50% of employees' pre-tax
contributions, up to 3% of each employees' pay. These contributions also vest
over a six-year period. Participant forfeitures aggregating $49,460 were
retained. The Company's contribution for the year ended December 31, 1994 was
$273,513 with forfeitures of $46,938. The Company's contributions to the Plan
were $113,850 during the three months ended December 31, 1993. During the year
ended September 30, 1993, participant forfeitures totaling $321,033 were
retained to satisfy the Company's contribution to the Plan.

11. LITIGATION

A lawsuit was filed on April 24, 1991 against the Company in the Superior
Court of Lake County, Indiana. The claim alleged negligent and careless
conduct on the part of the Company, which resulted in permanent personal
injuries being suffered by the plaintiff as a result of exposure to hazardous
materials while operating equipment at a landfill. On March 23, 1995, a trial
jury returned a verdict against the Company and awarded the plaintiff $704,375
in damages. The Company filed a motion with the Court to correct errors in May
1995 and, as a result, the Court reduced the judgment against the Company by
$70,000. Since that time, the plaintiff has accepted the Company's settlement
offer of $500,000 and such amount was paid subsequent to December 31, 1995.
The Company has pursued recovery of the settlement amount from its insurance
carrier and in June 1997 reached an agreement to recover $550,000 from the
insurance carrier related to this claim.

On March 1, 1994, the Company and another party were named as defendants in
a lawsuit filed in the Court of Common Pleas, Franklin, Ohio. The plaintiff
alleges that the Company negligently performed an environmental site
assessment which failed to indicate environmental contamination that has made
a mortgage on the property in the amount of $15 million worthless. The Company
believes it has a meritorious defense with

F-53

AMERICAN TESTING AND ENGINEERING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respect to the lawsuit and intends to vigorously defend the action. While the
ultimate outcome cannot be determined at this time, management does not
believe it will have a material adverse effect on the Company's financial
statements.

By letter dated December 12, 1993, the Company entered the Voluntary
Disclosure Program administered by the U.S. Department of Defense ("DoD"). The
bases of the disclosure are allegations that certain former Company employees
paid unlawful gratuities to a federal government inspector concerning a
contract at a federal government site. Possible violations involve the federal
Anti-Kickback Act, federal criminal law against bribery, and the federal civil
False Claims Act. The Company retained independent legal counsel to undertake
internal investigation of the matter and to prepare a report for presentation
to the Office of the Inspector General, DoD. The Company could be responsible
for the repayment of any losses suffered by the federal government related to
the gratuities, fraud or kickbacks. In January 1995, the Company submitted the
internal investigation report to DoD in which it found that the illegal
gratuities had been paid by a former Company employee. The Company paid the
federal government the losses identified in the internal investigation report.
The Company does not believe it has any additional monetary obligation to the
federal government as a result of the matters covered by the investigation;
however, the federal government accepted the funds with the express
reservation that the acceptance did not constitute a limitation of the
Company's liability. The federal government conducted a compliance audit of
the report in 1995 and requested additional information to determine if fines
should be levied against the Company or if the Company should be suspended
from participation in future government contracts. As of June 25, 1997, the
Company is negotiating a final settlement agreement with the DoD which will
include the withdrawal of the Company from all federal government contracting
work. The Company has historically derived approximately 10% of its net
service revenues from federal government sources.

A complaint was filed in December 1995 against the Company and another party
in the Circuit Court of Dade County, Florida. The plaintiff alleges that the
Company failed to update its report on the suitability of the foundation
material after a substitution in those materials was made. As a result of the
plaintiff's reliance on this report, the materials used in the foundation were
found to be inadequate and the building pad settled, resulting in damages. The
Company believes it has a meritorious defense with respect to the lawsuit and
intends to vigorously defend the action. While the ultimate outcome cannot be
determined at this time, management does not believe it will have a material
adverse effect on the Company's financial statements.

On December 5, 1996, the Company received notice of a claim by Western
Capital Corporation. Western Capital Corporation's claim against the Company
arises from a claim made by a third party. The third party allegedly received
serious bodily injuries during the removal of underground storage tanks from
Western Capital Corporation's property as a subcontracted employee of the
Company. The Company believes it has a meritorious defense with respect to the
lawsuit and intends to vigorously defend the action. While the ultimate
outcome cannot be determined at this time, management does not believe it will
have a material adverse effect on the Company's financial statements.

The Company has been named or has claims pending arising out of the ordinary
conduct of its business. In the opinion of management, these matters are
adequately covered by insurance, appropriately provided for in the
accompanying financial statements, without merit, or are not material to the
Company's financial statements.

F-54

BING YEN & ASSOCIATES, INC.

FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1996
AND INDEPENDENT AUDITORS' REPORT

F-55

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Bing Yen & Associates, Inc.
Irvine, California

We have audited the accompanying balance sheet of Bing Yen & Associates,
Inc. as of December 31, 1996, and the related statements of operations and
retained earnings and of cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Bing Yen & Associates, Inc. as of December
31, 1996 and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.

/s/ Deloitte & Touche LLP

Omaha, Nebraska
November 18, 1997

F-56

BING YEN & ASSOCIATES, INC.

BALANCE SHEET
DECEMBER 31, 1996

ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 713,991
Accounts receivable--net of allowance of $46,625.................. 1,948,991
Accounts receivable--unbilled..................................... 67,459
Prepaid expenses.................................................. 3,365
----------
Total current assets............................................ 2,733,806
----------
PROPERTY AND EQUIPMENT--net......................................... 136,077
OTHER ASSETS........................................................ 7,450
----------
TOTAL ASSETS........................................................ $2,877,333
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................. $ 213,397
Accrued expenses.................................................. 117,342
Deferred income................................................... 34,680
----------
Total current liabilities....................................... 365,419
----------
STOCKHOLDERS' EQUITY:
Capital stock:
Common, $.01 par value--authorized, issued and outstanding,
100,000 shares................................................... 1,000
Retained earnings................................................. 2,510,914
----------
Stockholders' equity............................................ 2,511,914
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................... $2,877,333
==========

See notes to financial statements.

F-57

BING YEN & ASSOCIATES, INC.

STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996

PROFESSIONAL FEES.................................................. $ 4,274,820
DIRECT PROJECT COSTS............................................... 2,059,102
INDIRECT PROJECT COSTS............................................. 568,957
-----------
Gross margin..................................................... 1,646,761
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....................... 498,485
-----------
OPERATING INCOME................................................... 1,148,276
INTEREST INCOME.................................................... 14,433
-----------
NET INCOME......................................................... 1,162,709
RETAINED EARNINGS, Beginning of year............................... 2,397,920
DIVIDENDS.......................................................... (1,049,715)
-----------
RETAINED EARNINGS, End of year..................................... $ 2,510,914
===========

See notes to financial statements.

F-58

BING YEN & ASSOCIATES, INC.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................... $ 1,162,709
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and amortization................................. 17,326
Increase in receivables--net.................................. (271,458)
Increase in prepaid assets.................................... (1,426)
Increase in accounts payable and other liabilities............ 62,260
-----------
Net cash flows from operating activities.................... 969,411
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment....................... (46,483)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid.................................................. (1,049,715)
-----------
NET DECREASE IN CASH.............................................. (126,787)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................... 840,778
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.......................... $ 713,991
===========

See notes to financial statements.

F-59

BING YEN & ASSOCIATES, INC.

NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996

1. NATURE OF OPERATIONS

Bing Yen & Associates, Inc. (the "Company") provides geothermal consulting
services (primarily litigation support) in the state of California.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue and Cost Recognition--Consulting services are generally performed on
a cost-plus fixed fee basis. Revenues are recognized as services are
performed.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents--The Company considers all highly liquid
investments with a maturity of three months or less at the date of purchase to
be cash equivalents.

Property and Equipment--Property and equipment are recorded at cost and are
depreciated using straight-line depreciation over the following estimated
useful service lives of the assets:

Leasehold improvements.............................................. 39 years
Computer and equipment.............................................. 5 years
Furniture and fixtures.............................................. 7 years
Lab and field equipment............................................. 7 years

Income Taxes--The Company elected to be taxed under Subchapter S of the
Internal Revenue Code. No income taxes are recorded in the accompanying
financial statements as the payment of the income taxes of the Company is the
responsibility of the stockholders.

3. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. A summary by classification as
of December 31, 1996 is as follows:

Computer equipment................................................. $ 86,200
Furniture and fixtures............................................. 62,960
Lab and field equipment............................................ 46,088
Leasehold improvements............................................. 25,437
Vehicles........................................................... 2,920
--------
Total property and equipment..................................... 223,605
Less accumulated depreciation...................................... 87,528
--------
Property and equipment--net...................................... $136,077
========

F-60

BING YEN & ASSOCIATES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER ASSETS

A summary of other assets at December 31, 1996 is as follows:

Investment in joint venture.......................................... $3,950
Loan to related party................................................ 3,500
------
$7,450
======

5. COMMITMENTS

The Company has entered into a lease agreement for office space with an
affiliated company owned by three officers of the Company. Rent expense related
to this lease for the year ended December 31, 1996 was $86,806. Minimum rental
commitments as of December 31, 1996 are as follows:

1997................................................................ $ 63,763
1998................................................................ 102,496
1999................................................................ 129,600
2000................................................................ 136,800
2001................................................................ 144,000
--------
Total............................................................. $576,659
========

6. EMPLOYEE BENEFIT PLAN

The Company has adopted a 401(k) plan covering all eligible employees. The
plan provides for matching contributions at the discretion of the Board of
Directors. Contribution expense for the year ended December 31, 1996 was
$21,957.

7. SUBSEQUENT EVENTS (UNAUDITED)

Effective November 26, 1997, ATC Group Services, Inc. acquired all of the
assets of the Company.

F-61

ENVIRONMENTAL WARRANTY, INC.

FINANCIAL STATEMENTS
AS OF JUNE 30, 1997 AND 1996
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

F-62

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Environmental Warranty, Inc.:

We have audited the accompanying balance sheets of Environmental Warranty,
Inc. (a Connecticut corporation) as of June 30, 1997 and 1996, and the related
statements of operations, changes in shareholders' equity and cash flows for
the years ended June 30, 1997 and 1996. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Environmental Warranty,
Inc. as of June 30, 1997 and 1996, and the results of its operations and its
cash flows for the years ended June 30, 1997 and 1996, in conformity with
generally accepted accounting principles.

As discussed in Note 2 of Notes to Financial Statements, ATC Group Services,
Inc., Environmental Warranty, Inc.'s parent effective November 4, 1997, is
committed to provide financial support to Environmental Warranty, Inc.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of general and
administrative expenses (Exhibit I) is presented for purposes of additional
analysis and is not a required part of the basic financial statements. This
information has been subjected to the auditing procedures applied in our audit
of the basic financial statements and in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

/s/ ARTHUR ANDERSEN LLP
Hartford,
Connecticut
November 20, 1997

F-63

ENVIRONMENTAL WARRANTY, INC.

BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996

1997 1996
----------- -----------

ASSETS:
Cash and cash equivalents.......................... $ 219,367 $ 18,993
Investments held to maturity (market value of $0
and $145,000,
respectively)..................................... -- 143,000
Trading account investments, at market............. 10,120 62,357
Interest receivable................................ -- 1,015
Commissions receivable............................. 157,927 117,961
Prepaid expenses................................... -- 4,747
----------- -----------
Total current assets........................... 387,414 348,073
----------- -----------
Furniture and equipment, net of accumulated depre-
ciation of $24,299 and $18,437, respectively...... 10,488 16,350
Deposits........................................... -- 9,494
Deferred costs, net of accumulated amortization of
$342,987 and $258,891, respectively............... 77,485 161,581
----------- -----------
Total assets................................... $ 475,387 $ 535,498
=========== ===========
LIABILITIES:
Accounts payable and accrued liabilities........... $ 36,366 $ 13,204
Premiums payable to insurer........................ 297,006 83,918
----------- -----------
Total current liabilities...................... 333,372 97,122
----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 5, 6 and 8)
SHAREHOLDERS' EQUITY:
Redeemable, convertible, cumulative 8% preferred
stock, 5,000 shares
authorized:
Series A, 2,668 shares issued and outstanding,
initial conversion price of $749.63 per share,
plus unpaid dividends........................... 2,747,102 2,587,103
Series B, 1,334 shares issued and outstanding,
initial conversion price of $1,491.7541 per
share, plus unpaid dividends.................... 2,397,195 2,237,995
Common stock, no par value, 15,000 shares autho-
rized, 1,100 and 800 shares issued and outstand-
ing, respectively................................. 4,000 1,000
Less--Stock subscriptions receivable............... (2,000) (1,000)
Accumulated deficit................................ (5,004,282) (4,386,722)
----------- -----------
Total shareholders' equity..................... 142,015 438,376
----------- -----------
Total liabilities and shareholders' equity..... $ 475,387 $ 535,498
=========== ===========

The accompanying notes are an integral part of these financial statements.

F-64

ENVIRONMENTAL WARRANTY, INC.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

1997 1996
--------- ---------

REVENUES:
Commissions earned..................................... $ 543,879 $ 194,210
Investment income...................................... 4,038 32,696
Other.................................................. 5,725 15,450
--------- ---------
Total revenue...................................... 553,642 242,356
EXPENSES:
General and administrative expenses.................... 850,524 1,000,286
--------- ---------
Loss before state income taxes..................... (296,882) (757,930)
Provision for state income taxes....................... 1,479 4,821
--------- ---------
Net loss........................................... $(298,361) $(762,751)
========= =========

The accompanying notes are an integral part of these financial statements.

F-65

ENVIRONMENTAL WARRANTY, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

PREFERRED STOCK, PREFERRED STOCK,
SERIES A SERIES B COMMON STOCK STOCK
----------------- ----------------- ------------- SUBSCRIPTIONS ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE DEFICIT TOTAL
------ ---------- ------ ---------- ------ ------ ------------- ----------- ----------

Shareholders' equity,
June 30, 1995.......... 2,668 $2,426,667 1,334 $2,078,359 800 $1,000 $(1,000) $(3,303,899) $1,201,127
Unpaid preferred stock
dividends.............. -- 160,436 -- 159,636 -- -- -- (320,072) --
Net loss................ -- -- -- -- -- -- -- (762,751) (762,751)
----- ---------- ----- ---------- ----- ------ ------- ----------- ----------
Shareholders' equity,
June 30, 1996.......... 2,668 2,587,103 1,334 2,237,995 800 1,000 (1,000) (4,386,722) 438,376
Unpaid preferred stock
dividends.............. -- 159,999 -- 159,200 -- -- -- (319,199) --
Stock options exercised. -- -- -- -- 300 3,000 (1,000) -- 2,000
Net loss................ -- -- -- -- -- -- -- (298,361) (298,361)
----- ---------- ----- ---------- ----- ------ ------- ----------- ----------
Shareholders' equity,
June 30, 1997.......... 2,668 $2,747,102 1,334 $2,397,195 1,100 $4,000 $(2,000) $(5,004,282) $ 142,015
===== ========== ===== ========== ===== ====== ======= =========== ==========

The accompanying notes are an integral part of these financial statements.

F-66

ENVIRONMENTAL WARRANTY, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

1997 1996
--------- ----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. $(298,361) $ (762,751)
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
Depreciation and amortization....................... 89,958 89,714
Increase in commissions receivable.................. (39,966) (97,003)
Decrease in interest receivable..................... 1,015 25,985
Decrease in deposits................................ 9,494 --
Decrease (increase) in prepaid expenses............. 4,747 (266)
Increase (decrease) in accounts payable and accrued
liabilities........................................ 23,162 (17,571)
Increase in premiums payable to insurer............. 213,088 36,821
--------- ----------
Net cash provided by (used for) operating activi-
ties............................................. 3,137 (725,071)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of trading account investments............... (145,763) (303,474)
Proceeds from sale of trading account investments..... 198,000 259,000
Proceeds from maturities of investments held to matu-
rity................................................. 243,000 4,975,000
Purchase of investments held to maturity.............. (100,000) (4,223,000)
Purchase of furniture and equipment................... -- (2,607)
--------- ----------
Cash provided by (used for) investing activities.. 195,237 704,919
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock options exercised.......... 2,000 --
--------- ----------
Cash provided by financing activities............. 2,000 --
--------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... 200,374 (20,152)
CASH AND CASH EQUIVALENTS, beginning of year............ 18,993 39,145
--------- ----------
CASH AND CASH EQUIVALENTS, end of year.................. $ 219,367 $ 18,993
========= ==========
SUPPLEMENTAL INFORMATION:
Non-cash transactions--Undeclared preferred stock div-
idends............................................... $ 319,199 $ 320,074
Cash paid for--Income taxes........................... 1,479 4,821

The accompanying notes are an integral part of these financial statements.

F-67

ENVIRONMENTAL WARRANTY, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 AND 1996
1. DESCRIPTION OF COMPANY AND BUSINESS:

Organization

Environmental Warranty, Inc. (the Company) was incorporated on April 3,
1992, and sold 1,334 shares of Preferred Stock, Series A for $1,000,000 on May
1, 1992. In April 1993, an additional 1,334 shares of Preferred Stock, Series
A were sold for $1,000,000. On April 15, 1994, the Company issued to Lawyers
Title Environmental Insurance Service Agency, Inc. (LTEISA) (the Series B
preferred shareholder and a subsidiary of Lawyers Title Corporation) 667
shares of Preferred Stock, Series B for $995,000, and obtained an
unconditional commitment for the purchase of an additional 667 shares for
$995,000, which purchase was consummated on January 15, 1995. Offering costs
of $43,580 were charged against the proceeds. As of June 30, 1997 and 1996,
the Company had issued 1,100 and 800 shares of common stock to employees of
the Company (see Note 5).

Business

The Company serves as the brokerage and program administrator for
environmental site assessment specialty insurance coverage, providing
marketing and underwriting services. Prior to March 1996, the Company had a
program administration agreement with SAFECO Corporation (SAFECO). This
agreement authorized the Company to sell environmental site assessment
insurance underwritten by SAFECO. All risk of loss was retained by SAFECO.
During 1996, the Company terminated its agreement with SAFECO and entered into
a program administration agreement with American International Surplus Lines
Agency, Inc. (AIG). This agreement authorizes the Company to sell
environmental site assessment insurance underwritten by AIG. All risk of loss
is retained by AIG. The Company collects the premiums from the insured,
retains a commission and remits the remaining premium to AIG.

The Company was a development stage enterprise which had not generated
significant operating revenues through June 30, 1996. Prior to July 1996,
expenses incurred were primarily related to development, marketing and
administration.

2. CHANGE IN COMPANY OWNERSHIP:

On November 4, 1997 (the Closing Date), ATC Group Services Inc. (ATC)
entered into and closed a Stock Purchase Agreement (the Agreement) with the
Company's preferred shareholders, whereby the Company's preferred shareholders
sold all outstanding redeemable, convertible, cumulative 8% preferred stock
(consisting of 2,668 Series A shares and 1,334 Series B shares) and 1,000
shares of outstanding common stock (100 shares of common stock were retained
by one shareholder, see Notes 5 and 8) to ATC. The purchase price consisted of
$150,000 in cash, paid the Escrow Agent, as defined in the Agreement, $678,000
in a non-interest bearing promissory note payable, maturing in equal amounts
on October 1, 1998, 1999 and 2000, for the benefit of the Qualified
Stockholders, as defined in the Agreement, and 33,000 shares of ATC
unregistered, restricted common stock.

In connection with the transaction, management of ATC is committed to
provide the necessary level of financial support to the Company to enable the
Company to pay its debts as they become due for the period from the closing
date to July 1, 1998, and believes ATC has the financial resources to fulfill
that commitment.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue recognition

The Company recognizes all commissions as earned on the effective date of
the underlying policy.

F-68

ENVIRONMENTAL WARRANTY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1997 AND 1996
Investments

The Company records investments held to maturity, representing securities
for which the Company has the positive intent and ability to hold to maturity,
at amortized cost and trading account investments, representing securities
which are held for resale in the near term, at fair value, with unrealized
gains and losses included in investment income.

The Company had investments held to maturity, recorded at cost as of June
30, 1996 which matured in July 1996. In addition, the Company holds shares of
mutual funds in trading account investments which are recorded at market
value.

For the years ended June 30, 1997 and 1996, there were no transfers of
securities to the available for sale or trading categories.

Deferred costs

Costs of $420,472, incurred in May 1993, relating to the initial formation
of the Company and product development activities, were capitalized and are
being amortized on a straight-line basis over a 60-month period.

Depreciation

Depreciation of furniture and equipment is computed on the straight-line
basis over five and seven years, respectively.

Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments in
commercial paper, with original maturities of less than 90 days.

Reclassifications

Certain reclassifications have been made to the 1996 financial statements to
conform to the 1997 presentation.

4. PREFERRED STOCK:

Conversion

Each outstanding share of preferred stock is convertible, at the option of
the holder, into one share of common stock at conversion prices (subject to
adjustment) of $749.63 for each Preferred Stock, Series A share and
$1,491.7541 for each Preferred Stock, Series B share, plus any accrued unpaid
dividends. As of June 30, 1997, the preferred stock would have been
convertible into 4,002 shares of common stock.

All of the preferred stock is automatically converted into common stock
immediately following a sale of the Company or a public offering in which the
aggregate proceeds to the Company, net of underwriting discounts and
commissions, equals or exceeds $7,500,000 without further action by the holder
of such shares (see Note 2).

Redemption

The holders of preferred stock may elect, at their option, to have the
Company redeem their outstanding preferred shares beginning May 31, 1998. The
redemption price for each share is equal to the initial conversion price per
share ($749.63 and $1,491.7541 for Series A and Series B, respectively) plus
any accrued unpaid dividends. Also, the Series B preferred shareholder may
require redemption of its shares if the marketing agreement is terminated (see
Note 6).

F-69

ENVIRONMENTAL WARRANTY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1997 AND 1996

Dividends

Holders of preferred stock are entitled to cumulative annual dividends equal
to 8% of the initial conversion price of the preferred stock upon dissolution,
conversion into common stock or redemption of the preferred stock. No
dividends have been declared or paid as of June 30, 1997; however, the Company
has accrued dividends of $319,199 and $320,076 for the years ended June 30,
1997 and 1996, respectively ($1,197,877 since inception, April 3, 1992), and
has reflected these amounts as increases in the carrying value of the
preferred stock.

Other

The holder of the Preferred Stock, Series B has the right to purchase any
Series A shares offered for sale by a preferred shareholder to another third
party.

Preferred shareholders are entitled to vote on all matters submitted to a
vote by holders of common stock. Preferred shareholders are entitled to the
number of votes equal to the number of common shares into which their
preferred shares could be converted.

5. COMMON STOCK:

Stock transactions

Prior to a shareholder selling any Company common stock, the shareholder
must offer such stock to the Company. If the Company does not repurchase the
common stock, the shareholder may sell such shares to a third party.

In the event that the Series B preferred shareholder obtains a controlling
interest, as defined, in the Company, the Company may be required to
repurchase all outstanding common stock and redeem all unexercised stock
options (see below) upon the occurrence of certain events, at a fair market
price, as defined.

Long-term incentive stock option plan

In 1993, the Company's Board of Directors (the Board) approved a long-term
stock option plan (the Plan). Under the Plan the Board has sole discretion to
award options. At June 30, 1995 and 1994, 532 shares of common stock were
reserved for issuance under the Plan and options for 475 shares at an exercise
price of $10 per share (the fair value of one share of common stock at grant
date) had been granted. Effective July 1, 1996, an additional 250 shares were
reserved for issuance under the Plan, and effective September 1, 1997,
additional options for 100 shares at an exercise price of $10 per share had
been granted. The options become exercisable over various periods up to five
years from the date the options were granted.

The options will lapse if not exercised within 15 years after the original
grant date. The term of the options may be accelerated or expired upon certain
conditions, as defined. As of June 30, 1997 and 1996, no options had been
accelerated or expired. For the years ended June 30, 1997 and 1996, options
for 300 and 0 shares, respectively, were exercised. As of June 30, 1997, the
Company had not received the proceeds from the exercise of options for 100
shares of common stock. As of June 30, 1997 and 1996, 100% and 99%,
respectively, of the options had vested. As of the Closing Date, the remaining
options for 275 shares of common stock had been terminated through termination
agreements with each option holder (see Note 2).

The Company has the right to repurchase any stock issued pursuant to these
options, including stock resulting from stock splits or other
recapitalization, upon sale of the Company or acquisition of at least two
thirds of the Company's outstanding common stock by a third-party investor. On
the Closing Date, 200 of the 300 shares issued and outstanding, due to the
exercise of options during 1997, were sold to ATC as described in Note 2. The
remaining 100 shares were retained by one common stock shareholder (see Notes
2 and 8).

F-70

ENVIRONMENTAL WARRANTY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1997 AND 1996

6. MARKETING AGREEMENT:

In January 1994, the Company entered into a marketing agreement with the
Series B preferred shareholder to assist in the marketing and sale of the
product being brokered by the Company. Under this agreement, the Company is
required to pay a 5% commission on gross premiums with respect to any product
sold by the Series B preferred shareholder on the Company's behalf. For the
years ended June 30, 1997 and 1996, the preferred shareholder's commissions
were $20,028 and $18,329, respectively. The initial agreement expires on April
14, 2004 and is subject to automatic one-year renewals unless terminated by
either party. If the marketing agreement is terminated by either party, under
defined conditions, the Series B preferred shareholder may require that the
Company redeem its preferred shares at an adjusted conversion price, as
defined, plus unpaid dividends. On October 21, 1997, the marketing agreement
was terminated by both the Company and the Series B preferred shareholder. On
the Closing Date, the Series B preferred shareholder sold all issued and
outstanding Series B preferred stock (1,334 shares) to ATC as described in
Note 2.

7. INCOME TAXES:

For the years ended June 30, 1997 and 1996, the provision for income taxes
consisted of the following:

1997 FEDERAL STATE TOTAL
---- ------- ----------- ----------

Current provision....................... $ -- $ 1,479 $ 1,479
Deferred benefit........................ -- -- --
----- ----------- ----------
$ -- 1,479 $ 1,479
===== =========== ==========
1996
----
Current provision....................... $ -- $ 4,821 $ 4,821
Deferred benefit........................ -- -- --
----- ----------- ----------
$ -- $ 4,821 $ 4,821
===== =========== ==========

As of June 30, 1997 and 1996, the components of the deferred income tax asset
included in current and deferred income taxes in the accompanying balance sheet
were:

1997 1996
----------- ----------

Total deferred tax asset........................ $ 1,512,395 $1,408,830
Total deferred tax liabilities.................. (17,253) (33,724)
Total valuation reserve......................... (1,495,142) (1,375,106)
----------- ----------
Net deferred tax asset.......................... $ -- $ --
=========== ==========

The deferred tax asset is the result of net operating loss carryforwards,
and the deferred tax liabilities are the result of temporary differences
between book and tax depreciation and amortization. A valuation reserve has
been established for the net deferred tax asset.

As of June 30, 1997, the Company had net operating loss carryforwards of
approximately $3,700,000 for federal income tax return purposes (expiring from
2008 through 2012) and approximately $3,700,000 for state income tax return
purposes (expiring from 1998 through 2002). Under the Internal Revenue Code,
with the change in Company ownership in 1997 (see Note 2), the ability to
utilize the net operating loss carryforwards will be limited.

F-71

ENVIRONMENTAL WARRANTY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1997 AND 1996
8. COMMITMENTS:

Litigation reserve

As of June 30, 1997, the Company was involved in a litigation action by a
former employee and common stock shareholder for severance and vacation pay
claimed upon the termination of his employment. (This shareholder did not sell
his shares of common stock on the Closing Date (see Notes 2 and 5)).
Management, based on discussions with legal counsel, cannot determine the
likely outcome of this action; however, it believes the Company has
meritorious defenses. Management believes that the potential liability ranges
from $0 to approximately $60,000. Since the outcome of this matter is
uncertain, no provision for liability was reflected in the accompanying
financial statements as of June 30, 1997.

Leases

The Company previously leased its office facilities under a non-cancelable
operating lease with a monthly rental of approximately $4,800, which lease
term ended July 31, 1997. Subsequently, the Company moved to a different
location with a lease term of one year and monthly payments of $2,875.

Employment agreements

As of June 30, 1997, the Company had employment agreements with three key
employees. These agreements are subject to automatic one-year renewals and may
be terminated by the Company for cause. The agreements include noncompetition
covenants in the event of termination, as defined by the agreements. These
agreements were terminated prior to the Closing Date.

F-72

EXHIBIT I

ENVIRONMENTAL WARRANTY, INC.

SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

1997 1996
-------- ----------

Salaries............................................. $457,866 $ 603,190
Benefits............................................. 21,971 31,409
-------- ----------
479,837 634,599
-------- ----------
Travel and entertainment............................. 29,910 41,957
Depreciation and amortization........................ 89,959 89,714
Professional services................................ 80,349 30,312
Advertising and promotion............................ 4,868 38,726
Rent................................................. 56,387 58,035
Insurance............................................ 33,435 37,929
Commissions.......................................... 20,028 18,329
Consulting........................................... 15,893 12,429
Telephone............................................ 14,368 14,080
Insurance filings and license bonds.................. 9,023 4,380
Postage.............................................. 7,683 9,054
Printing and supplies................................ 6,523 5,404
Subscriptions........................................ 131 329
Taxes................................................ 917 1,270
Miscellaneous........................................ 1,213 3,739
-------- ----------
370,687 365,687
-------- ----------
$850,524 $1,000,286
======== ==========

The accompanying notes are an integral part of this schedule.

F-73

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPEC-
TUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SUBSIDIARY GUARAN-
TOR. NEITHER THE MAKING OF THE EXCHANGE OFFER PURSUANT TO THIS PROSPECTUS NOR
THE ACCEPTANCE OF PRIVATE NOTES FOR SURRENDER FOR EXCHANGE PURSUANT THERETO
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY SUBSIDIARY GUARANTOR SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

----------------

TABLE OF CONTENTS

PAGE
----

Available Information..................................................... 3
Summary................................................................... 5
Risk Factors.............................................................. 20
The Company............................................................... 26
No Cash Proceeds to the Company........................................... 28
Capitalization............................................................ 29
The Exchange Offer........................................................ 30
Unaudited Pro Forma Combined Condensed Financial Data..................... 37
Selected Historical Financial Data........................................ 44
Management's Discussion and Analysis of Financial Condition and Results of
Operation................................................................ 45
Business.................................................................. 54
Management................................................................ 75
Principal Stockholders.................................................... 80
Certain Relationships and Related Transactions............................ 81
Description of the New Credit Facility.................................... 82
Description of the Notes.................................................. 83
Certain U.S. Federal Income Tax Considerations............................ 112
Plan of Distribution...................................................... 112
Legal Matters............................................................. 113
Experts................................................................... 113
Index to Financial Statements............................................. F-1

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

ATC GROUP SERVICES INC.

12% SENIOR SUBORDINATED NOTES DUE 2008 FOR ALL OUTSTANDING
12% SUBORDINATED NOTES DUE 2008

----------------

OFFER TO EXCHANGE
----------------

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by the Delaware General Corporation Law, ATC's Certificate of
Incorporation provides that a director of ATC will not be personally liable to
ATC or its Stockholders for monetary damages for breach of the fiduciary duty
of care as a director, except under certain circumstances including breach of
the director's duty of loyalty to ATC or its Stockholders or any transaction
from which the director derived an improper personal benefit.

ATC's By-Laws provide for the indemnification of ATC's officers and
directors to the fullest extent permitted by Delaware law. In this respect,
ATC entered into indemnification agreements with its officers and directors to
hold them harmless and to indemnify each person from and against all fines,
amounts paid in settlements and expenses, including attorneys' fees incurred
as a result of or in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal or administrative or
investigative, by reason of the fact that the person was a director or officer
of ATC or served any other corporation in any capacity at the request of ATC,
in the manner and to the extent permitted by law.

ATC has been advised that it is the opinion of the Commission that insofar
as the foregoing provisions may be invoked to disclaim liability for damages
arising under the federal securities laws, that such provisions are against
public policy as expressed in such securities laws and are therefore
unenforceable.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

1.1 Purchase Agreement, dated as of January 22, 1998, between Acquisition
Corp. and BT Alex. Brown Incorporated.
3.1 Articles of Incorporation of the Company.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of January 29, 1998 among Acquisition Corp. and
State Street Bank and Trust Company, as trustee.
4.2 First Supplemental Indenture, dated as of February 5, 1998, by and
among ATC Group Services Inc., the Guarantors named therein and State
Street Bank and Trust Company.
4.3 Form of Exchange Note (included in Exhibit 4.1)
4.4 Registration Rights Agreement, dated as of January 29, 1998, between
Acquisition Corp., the Guarantors named therein and BT Alex. Brown
Incorporated.
*5.1 Opinion and Consent of Chadbourne & Parke LLP regarding validity of the
Exchange Notes.
*8.1 Tax Opinion of Chadbourne & Parke LLP (included in Exhibit 5.1).
10.1 Employment Agreement, dated as of February 16, 1998, between ATC Group
Services Inc., Acquisition Holdings, Inc. and Nicholas J. Malino.
10.2 Employment Agreement, dated as of February 16, 1998, between ATC Group
Services Inc., Acquisition Holdings, Inc. and Christopher P. Vincze.
10.3 Credit Agreement, dated as of January 29, 1998, among Acquisition
Holdings, Inc., Acquisition Corp., various banks and Bankers Trust
Company, as agent.

II-1

10.4 First Amendment, dated as of February 5, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the lenders party to the
Credit Agreement (Exhibit 4.1) and Bankers Trust Company, as agent.
10.5 Second Amendment, dated as of February 27, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the banks party to the
Credit Agreement (Exhibit 4.1), Bankers Trust Company, as agent, and
each of the lenders listed on Schedule A thereto.
10.6 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and George
Rubin.
10.7 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and Morry F.
Rubin.
10.8 Agreement for Sale and Purchase of Business Assets, dated August 18,
1997, by and among ATC Group Services Inc., Smith Technology
Corporation, BCM Engineers Inc. (DE. Corp.), BCM Engineers Inc. (PA.
Corp.), BCM Engineers Inc. (AL. Corp.) and BCM Engineers Inc. (W. VA.
Corp.)
10.9 Stock Purchase Agreement, dated November 26, 1998, between ATC Group
Services Inc., Bing Yen & Associates, Inc. and Glenn Tofani.
10.10 Stock Purchase Agreement, dated as of November 4, 1997, by and among
ATC Group Services Inc., Conning Insurance Capital Limited
Partnership II, Conning Insurance Capital International Partners II,
Cullinane & Donnelly Venture Partners, Limited Partnership, Lawyers
Title Environmental Insurance Services Agency, Inc. and Charles L.
Perry, Jr.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ernst & Young LLP
23.3 Consent of Arthur Andersen LLP
*23.4 Consent of Chadbourne & Parke LLP (included in Ex. 5.1).
24.1 Power of Attorney (included on signature page).
*25.1 Statement of Eligibility of State Street Bank and Trust Company, as
Trustee.
**27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.

(b) FINANCIAL STATEMENTS AND SCHEDULES

Schedule II--Valuation and Qualifying Accounts
- --------
* To be filed by amendment.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.

ITEM 22. UNDERTAKINGS

1. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.

II-2

2. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a) (3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

3. The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim of indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

4. The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II-3

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.

ATC Group Services Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino President and March 30,
_____________________________________ Director(Principal 1998
NICHOLAS J. MALINO Executive Officer)

/s/ Christopher P. Vincze Chief Operating Officer March 30,
_____________________________________ and Director (Principal 1998
CHRISTOPHER P. VINCZE Executive Officer)

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

/s/ Wesley W. Lang, Jr. Director March 30,
_____________________________________ 1998
WESLEY W. LANG, JR.

/s/ Nora E. Kerppola Director March 30,
_____________________________________ 1998
NORA E. KERPPOLA

/s/ Benjamin J. James Director March 30,
_____________________________________ 1998
BENJAMIN J. JAMES

II-4

SIGNATURES

ATC Blattert Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements
to any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino President and Director March 30,
_____________________________________ (Principal Executive 1998
NICHOLAS J. MALINO Officer)

/s/ Wayne A. Crosby Controller and March 30,
_____________________________________ Director(Principal 1998
WAYNE A. CROSBY Financial and Accounting
Officer)

/s/ John J. Smith Secretary and Director March 30,
_____________________________________ 1998
JOHN J. SMITH

II-5

SIGNATURES

ATC Construction Services Inc.

/s/ Christopher P. Vincze
By: _________________________________
Name: Christopher P. Vincze
Title:President

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Christopher P. Vincze, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements
to any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Christopher P. Vincze President and Director March 30,
_____________________________________ (Principal Executive 1998
CHRISTOPHER P. VINCZE Officer)

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

/s/ P. Douglas Burgess Director March 30,
_____________________________________ 1998
P. DOUGLAS BURGESS

/s/ Kevin F. Drinan Director March 30,
_____________________________________ 1998
KEVIN F. DRINAN

/s/ James A. Cleveland Director March 30,
_____________________________________ 1998
JAMES A. CLEVELAND

II-6

SIGNATURES

ATC Environmental Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino President and March 30,
_____________________________________ Director(Principal 1998
NICHOLAS J. MALINO Executive Officer)

/s/ Christopher P. Vincze Vice President and March 30,
_____________________________________ Director 1998
CHRISTOPHER P. VINCZE

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

II-7

SIGNATURES

ATC Insys Technology Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino Chief Executive Officer March 30,
_____________________________________ and Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)

/s/ John J. Goodwin President, Chief Operating March 30,
_____________________________________ Officer and Director 1998
JOHN J. GOODWIN

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

II-8

SIGNATURES

ATC Management Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this registration
statement and all amendments and supplements to any prospectus relating thereto
and any other documents and instruments incidental thereto, and any
registration statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that said attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino President and Director March 30,
_____________________________________ (Principal Executive 1998
NICHOLAS J. MALINO Officer)

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

/s/ Mary J. Tounsley Vice President, Secretary March 30,
_____________________________________ and Director 1998
MARY J. TOUNSLEY

/s/ John J. Smith Treasurer and Director March 30,
_____________________________________ 1998
JOHN J. SMITH

II-9

SIGNATURES

ATC New England Corp.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino President, Secretary and March 30,
_____________________________________ Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)

/s/ Christopher P. Vincze Vice President, Treasurer March 30,
_____________________________________ and Director (Principal 1998
CHRISTOPHER P. VINCZE Executive Officer)

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

II-10

SIGNATURES

Bing Yen & Associates, Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:Chief Executive Officer

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this registration
statement and all amendments and supplements to any prospectus relating thereto
and any other documents and instruments incidental thereto, and any
registration statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that said attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino Chief Executive Officer March 30,
_____________________________________ and Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)

/s/ Bing C. Yen President and March 30,
_____________________________________ Director(Principal 1998
BING C. YEN Executive Officer)

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

/s/ John W. Cowdery Vice President, Secretary, March 30,
_____________________________________ Treasurer, Chairman of 1998
JOHN W. COWDERY the Board and Director

/s/ Christopher P. Vincze Director March 30,
_____________________________________ 1998
CHRISTOPHER P. VINCZE

II-11

SIGNATURES

Environmental Warranty, Inc.

/s/ Christopher P. Vincze
By: _________________________________
Name: Christopher P. Vincze
Title:Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Christopher P. Vincze Chief Executive March 30,
_____________________________________ Officer,Secretary and 1998
CHRISTOPHER P. VINCZE Director (Principal
Executive Officer)

/s/ Charles L. Perry, Jr. President, Chief Operating March 30,
_____________________________________ Officer and Director 1998
CHARLES L. PERRY, JR. (Principal Executive
Officer)

/s/ Wayne A. Crosby Controller and March 30,
_____________________________________ Director(Principal 1998
WAYNE A. CROSBY Financial and Accounting
Officer)

/s/ Nicholas J. Malino Vice President and March 30,
_____________________________________ Director 1998
NICHOLAS J. MALINO

II-12

SIGNATURES

Hygeia Laboratories Inc.

/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President

Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON MARCH 30, 1998.

SIGNATURE TITLE DATE

/s/ Nicholas J. Malino President, Treasurer and March 30,
_____________________________________ Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)

/s/ Christopher P. Vincze Secretary and March 30,
_____________________________________ Director(Principal 1998
CHRISTOPHER P. VINCZE Executive Officer)

/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)

II-13

INDEX TO EXHIBITS

EXHIBIT
NUMBER
-------

(a) 1.1 Purchase Agreement, dated as of January 22, 1998, between
Acquisition Corp. and BT Alex. Brown Incorporated.
3.1 Articles of Incorporation of the Company.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of January 29, 1998, among Acquisition Corp. and
State Street Bank and Trust Company, as trustee.
4.2 First Supplemental Indenture, dated as of February 5, 1998, by and
among ATC Group Services Inc., the Guarantors named therein and
State Street Bank and Trust Company.
4.3 Form of Exchange Note (included in Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of January 29, 1998, between
Acquisition Corp., the Guarantors named therein and BT Alex. Brown
Incorporated (included in Exhibit 1.1).
*5.1 Opinion and Consent of Chadbourne & Parke LLP regarding validity of
the Exchange Notes.
*8.1 Tax Opinion of Chadbourne & Parke LLP (included in Exhibit 5.1).
10.1 Employment Agreement, dated as of February 16, 1998, between ATC
Group Services Inc., Acquisition Holdings, Inc. and Nicholas J.
Malino.
10.2 Employment Agreement, dated as of February 16, 1998, between ATC
Group Services Inc., Acquisition Holdings, Inc. and Christopher P.
Vincze.
10.3 Credit Agreement, dated as of January 29, 1998, among Acquisition
Holdings, Inc., Acquisition Corp., various banks and Bankers Trust
Company, as agent.
10.4 First Amendment, dated as of February 5, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the lenders party to the
Credit Agreement (Exhibit 4.1) and Bankers Trust Company, as agent.
10.5 Second Amendment, dated as of February 27, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the banks party to the
Credit Agreement (Exhibit 4.1), Bankers Trust Company, as agent, and
each of the lenders listed on Schedule A thereto.
10.6 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and George
Rubin.
10.7 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and Morry
F. Rubin.
10.8 Agreement for Sale and Purchase of Business Assets, dated August 18,
1997, by and among ATC Group Services Inc., Smith Technology
Corporation, BCM Engineers Inc. (DE. Corp.), BCM Engineers Inc. (PA.
Corp.), BCM Engineers Inc. (AL. Corp.) and BCM Engineers Inc. (W.
VA. Corp.)
10.9 Stock Purchase Agreement, dated November 26, 1998, between ATC Group
Services Inc., Bing Yen & Associates, Inc. and Glenn Tofani.
10.10 Stock Purchase Agreement, dated as of November 4, 1997, by and among
ATC Group Services Inc., Conning Insurance Capital Limited
Partnership II, Conning Insurance Capital International Partners II,
Cullinane & Donnelly Venture Partners, Limited Partnership, Lawyers
Title Environmental Insurance Services Agency, Inc. and Charles L.
Perry, Jr.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.

EXHIBIT
NUMBER
-------

23.2 Consent of Ernst & Young LLP.
23.3 Consent of Arthur Andersen LLP.
*23.4 Consent of Chadbourne & Parke LLP (included in Ex. 5.1).
24.1 Power of Attorney (included on signature page).
*25.1 Statement of Eligibility of State Street Bank and Trust Company, as
Trustee.
**27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.
(b) Financial Statement and Schedules
Schedule II--Valuation and Qualifying Accounts

- --------
* To be filed by amendment.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.