UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549
                                   
                               FORM 10-K
                               ---------

   [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
    
               For The Fiscal Year Ended February 28, 1998

                  Commission File Number:     Not Applicable
                                              --------------

                        ATC GROUP SERVICES INC.
                        -----------------------
        (Exact name of Registrant as specified in its charter)

            Delaware                                         46-0399408
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(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

104 East 25th Street, 10th Floor
     New York, New York                                         10010
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(Address of principal executive offices)                     (Zip Code)
                                   
   Registrant's telephone number, including area code:   (212)  353-8280
                                                         ---------------

      Securities registered pursuant to Section 12(b) of the Act:
                                 None
                                 ----

      Securities registered pursuant to Section 12(g) of the Act:
                                 None
                                 ----
                           (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [ ] No [ ] Not applicable
                                                  --------------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (229.405 of this chapter) is not contained  herein,  and will
not be contained,  to the best of Registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

All of the voting stock is held by the Company's parent,  Acquisition  Holdings,
Inc.

The number of shares  outstanding of the  Registrant's  Common Stock,  par value
$0.01 per share, as of May 28, 1998 was 1,000.

This  report  is being  filed  voluntarily  with  the  Securities  and  Exchange
Commission (the "Commission") pursuant to the Registrants,  contract obligations
to file with the Commission all  information  that would be required to be filed
on Form 10-K,  Form 10-Q or Form 8-K.  The  Registrant  is not  required to file
reports  pursuant to Section 13 or Section 15(d) of the Securities  Exchange Act
of 1934.


<PAGE>
                                     PART 1
Item 1.  Business.
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         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 year ended
February 28, 1998 ("fiscal 1998"). No single customer represented more than 1.7%
of the Company's gross revenues  during fiscal 1998. In addition,  the Company's
ten  largest  customers  taken  together  accounted  for less than  12.4% of the
Company's gross revenues  during fiscal 1998. The Company  provides its services
through a network of 74 branch offices located in 35 states  covering  virtually
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  increased to $119.4  million in fiscal
1998 from $15.4 million in fiscal 1993.

Recent Developments

     During the fiscal year ended February 28, 1998, the company completed three
important acquisitions,  and had secured new financing facilities in May 1997 to
provide funding of prior and current year acquisitions. During the final quarter
of fiscal 1998,  the  Company's  common stock was acquired in a tender offer and
merger  transaction at which time new bank facilities were established and prior
senior indebtedness was refinanced. These transactions are as follows:

         Offering  of 12% Senior  Subordinated  Notes due 2008.  On January  29,
1998, the Company consummated the offering (the "Note Offering") of $100,000,000
aggregate  principal amount of its 12% Senior  Subordinated  Notes due 2008 (the
"Notes"), all of which principal amount is currently outstanding. The Notes were
issued  pursuant to an  indenture,  dated as of January 29, 1998, as amended and
supplemented, and are guaranteed by the Company and its subsidiaries on a senior
subordinated  basis.  The  net  proceeds  of the  Notes  Offering  were  used to
consummate the consummation of the Tender Offer (as defined herein).

         Tender  Offer and  Merger.  The  Company,  Acquisition  Holdings,  Inc.
("Holdings")  the  Company's  parent,  and  Acquisition  Corp.,  a  wholly-owned
subsidiary of Holdings,  entered into a Merger  Agreement,  dated as of November
26, 1997,  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  $42.8 million aggregated  principal amount of indebtedness of ATC
upon consummation of the Merger and related agreements, 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.
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<PAGE>
         Acquisitions Corp. used approximately  $166.8 million to consummate the
Tender Offer,  Merger and refinancing of approximately  $42.8 million  aggregate
principal  amount of indebtedness  of the Company.  These funds were provided by
the proceeds of a $20.0 million term loan (the "Term Loan")  entered into by the
Company upon the  consummation of the Tender Offer and funded at the time of the
Merger,  (ii) the sale of the Notes, (iii) a $30.7 million capital  contribution
(the "Holdings  Contribution") to Acquisition Corp. from Holdings. The remaining
obligation  will be funded from  borrowings  under a revolving  credit  facility
entered into upon  consummation  of the Tender Offer at (the  "Revolving  Credit
Facility" and together  with the Term Loan,  the "Bank Credit  Facilities")  and
cash on hand. For a discussion of the Bank Credit Facilities,  see "Management's
Discussion  and Analysis of  Financial  Conditions  and Results of  Operations -
Liquidity and Capital Resources."

         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,
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 and warrants  entitling  JNL to purchase
6.0% of the shares of common stock of Holdings on a fully  diluted basis and (d)
an equity  investment of approximately  $0.3 million in common stock of Holdings
by ATC Management and employees.  The economic value of Holdings  employee stock
options which  replaced  existing ATC options and foregone  bonus claims totaled
$1.8 million.

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 90.1% 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.

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

                                      3
<PAGE>
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.

         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.

         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  service
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


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<PAGE>
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 would 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 1996 at between $15.0 and $17.0
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

                                       5
<PAGE>
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  $1.0  million and $4.0 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.  An  additional  $50million  is
programmed for award in 1998.

         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  generally
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,

                                       6
<PAGE>
Kentucky; St. Louis, Missouri; Orange County, California;  Birmingham,  Alabama;
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

                                       7
<PAGE>
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 measure 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  a  hydrocarbon  environmental  service  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.

                                       8
<PAGE>
         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.


                                       9
<PAGE>
         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.

                                       10
<PAGE>
         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 have 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

                                       11
<PAGE>
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

                                       12
<PAGE>
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 35 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.

                                       13
<PAGE>
         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
four 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  aboveground  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

                                       14
<PAGE>
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.

Organization

         ATC is a  Delaware  corporation  and  was  incorporated  in 1987 as ATC
Environmental,  Inc. 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.  ATC's  principal  executive  offices are
located in New York, New York.  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 74 branches  located in 35 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 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.

         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 fiscal 1999.

Personnel

         As of May 1998, ATC employed  approximately  2,043 employees,  1,619 of
which were full-time  employees and 424 of which were  part-time  staff members.
ATC's employees consist of 1,602 technical and professional  personnel, 60 sales
and marketing persons and 381  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.

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 June 1, 2000, which is
subject  to  biennial  renewal,  with a  per-claim  limit of $10.0  million,  an
aggregate  limit of $20.0 million and a  self-insured  retention of $150,000 per
claim.  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 self-insured
retention  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 $600,000
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 fiscal
year 1998,  for uninsured  professional  liability  and pollution  claims (i.e.,
claims  that have not  exceeded  the  $250,000  deductible)  under the policy in
effect  prior to renewal.  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 prior year'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 June 1, 1999, and is
subject to annual renewal. ATC's policies have been renewed in each of the years
they that have been in effect. In addition,  the Company maintains a claims made
directors and officers'  liability  insurance  policy with an aggregate limit of
$10.0 million,  which was procured in February 1998. The Company also procured a
six-year  extended  reporting  period for the directors and officers'  liability
insurance policy that was in effect prior to the replacement policy. The Company
can make no assurance  that  insurance  coverage  will continue to be renewed or
available  in the future or offered at rates  similar to those under the current
policy.

                                       15
<PAGE>
Item 2.  Properties.
-------  -----------

         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 for the  premises  located in
Indianapolis,  Indiana,  Dallas, Texas and Atlanta,  Georgia 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.

         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.

Item 3.  Legal Proceedings.
-------  ------------------

General Litigation

         Irv  Richter  v. ATC Group  Services,  Inc.,  et al,  Civ.  Action  No.
16007-NC,  Court of Chancery, New Castle County,  Delaware.  Joseph I. Peters v.
George Rubin, et al, Civ.  Action No.  16026-NC,  Court of Chancery,  New Castle
County,  Delaware.  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., a Weiss Peck affiliate, 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, a Weiss Peck affiliate.  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.

         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

                                       16
<PAGE>
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 alleged to contain  defamatory  statements  which was
sent to an account  debtor of the Company by an  employee.  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.  ATC also  disputes  that the
Richters sustained damages on the grounds,  among others,  that the options were
non-transferable and because ATC's stock price never exceeded the exercise price
at any point where the options would have been exercisable.  These related cases
are in the discovery  phase.  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  securities  claims.  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 and
cash flows, 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 in
the amount of  $10,000,000  with a deductible  of $250,000.  Notice of claim has
been made under the policy regarding this action. 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 and cash flows,  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,  Corp.  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. The Company currently has
in force a professional  liability insurance policy in the amount of $10,000,000
with a  deductible  of  $250,000.  Notice  of this  claim has been made to ATC's
professional liability insurer.

     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,  Corp.  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. The Company currently has
in force a professional  liability insurance policy in the amount of $10,000,000
with a  deductible  of  $250,000.  Notice  of this  claim has been made to ATC's
professional liability insurer

         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's  law and  asserting  that it
should therefore have no liability for Con-Test's alleged 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. ATC has filed a
notice of claim with Con-Test's  insurance company which has assumed the defense
of the action.


                                       17
<PAGE>
         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  ("NYDTF") 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.   ATC's  most  recent
communications with the NYDTF indicate that it is probable that ATC will incur a
liability for back taxes in an approximate  amount of $200,000 which the Company
has recorded as a liability as of February 28, 1998.

     Professional Service Industries, Inc. v. ATC Group Services Inc. and Thomas
Bowker, Superior Court, Norfolk County,  Massachusetts,  June 19, 1997, Civ. No.
97-01146.  The  complaint  alleges that ATC  interfered  with a  non-competition
agreement between Mr. Bowker,  currently an ATC employee, and PSI. An injunction
has been issued by the court  against ATC and Mr. Bowker  prohibiting  them from
competitive acts within certain  geographic areas. The case is currently on hold
pending  mediation  between  the  parties in an  attempt to settle the case.  If
settlement  is not  achieved  through  the  mediation  process,  ATC  intends to
continue to vigorously defend the claim.

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 and a revised NOV and Proposed
Agreed  Order on April 22,  1998.  The  revised  Proposed  Agreed  Order seeks a
penalty in the amount of $78,400 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.  ATC and the
Indiana Department of Environmental Management ("IDEM") are currently engaged in
settlement  discussions.  As a result of this  settlement  process,  the Company
believes that this penalty will be reduced  although  there can be no assurances
in this regard. ATEC will be responsible for one-half of any ultimate penalty.

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.

         Bob Moore Construction/Garden  Ridge, Inc. ATC has received notice of a
potential claim arising out of ATC's performance of soil compaction  testing for
Bob Moore  Construction,  Inc.,  the  general  contractor  on a  retaining  wall
construction project for Garden Ridge, Inc., a garden supply chain, in Norcross,
Georgia. The retaining wall eventually failed. Independent consultants performed
investigations  and prepared reports to determine the cause of failure.  Reports
initially concluded that the failure was due to a flaw in the design prepared by
the wall manufacture and installation firm. Both consultants  concluded that the
soil  work  was  properly  performed.  Since  then,  consultants  have  prepared
follow-up  reports,  and the  contractor  has  requested  ATC's  involvement  in
mediation  discussions  regarding the responsibility for repairs with respect to
the various parties  involved in the project.  Total costs to repair the project
currently total $960,000.  ATC is evaluating the follow-up  reports to determine
ATC's potential liability or responsibility, if any. ATC currently believes that
it  performed  all  services  properly  and that it  should  have no  liability.
However,  in any case, ATC believes its share of liability should amount to only
a small  portion  of the total  costs.  Notice of this claim has been made under
ATC's professional  liability  insurance policy. This claim should be covered by
professional liability insurance subject to a $250,000 deductible.  Although the
Company  believes this claim will not result in a material loss, no assurance in
this regard can be given.

         Argosy  Casino,  Lawrenceburg,  Indiana.  ATC has  received  notice  of
potential claims arising out of geotechnical analyses for which American Testing

                                       18
<PAGE>
and Engineering Corporation originally provided the geotechnical analyses and on
which ATC  subsequently  performed the design of a Tensar/soil  stabilized earth
slope.  The stabilized  earth/geogrid  engineered  slope failed at the interface
between  the  compacted  subgrade  and the  first  geogrid  layer.  A  tentative
settlement reached among the parties to this claim would result in ATC's payment
of $266,000 in corrective  costs, of which ATC expects  contribution  from other
parties  in an amount of not less than  $80,000.  Notice of this  claim has been
made under ATC's  professional  liability  insurance  policy.  The  professional
liability insurance is subject to a $250,000 deductible.
 .

Item 4.  Submission of Matters to a Vote of Security Holders.
-------  ----------------------------------------------------

         Not applicable
















                                       19


<PAGE>
                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.
-------  ----------------------------------------------------------------------

         The Company's  Common Stock and Class C Common Stock Purchase  Warrants
("Class C Warrants") were listed on the NASDAQ National Market under the symbols
"ATCS" and "ATCSL,"  respectively,  through  February 5, 1998. Since February 5,
1998,  there is no public market for the  Company's  Common Stock or the Class C
Warrants.  The following table sets forth, for the quarters indicated,  the high
and low bid prices of the Company's Stock on NASDAQ National Market.
<TABLE>
<CAPTION>

                                                          Common Stock

<S>                                                                                                   <C>            <C> 

         Fiscal Year Ended February 28, 1997:                                                           HIGH           LOW
         -----------------------------------                                                            ----           ---
              First Quarter .....................................................................     $ 15-7/8      $ 11-7/8
              Second Quarter.....................................................................       15-3/8        12-1/4
              Third Quarter......................................................................       13-3/4        10-3/8
              Fourth Quarter.....................................................................       10-5/8         7-1/4

         Fiscal Year Ended February 28, 1998:
              First Quarter .....................................................................     $ 15-7/8      $ 11-7/8
              Second Quarter ....................................................................       15-3/8        12-1/4
              Third Quarter......................................................................       13-3/4        10-3/8
              Fourth Quarter  (through February 5, 1998).........................................       12            11-11/16

                                                        Class C Warrants

         Fiscal Year Ended February 28, 1997:                                                           HIGH           LOW
         -----------------------------------                                                            ----           ---
              First Quarter......................................................................     $ 5-7/8       $ 3-1/4
              Second Quarter.....................................................................       5-3/8         2-3/8
              Third Quarter......................................................................       4-1/2         2-1/4
              Fourth Quarter.....................................................................       2-1/2         7/8

         Fiscal Year Ended February 28, 1998:
              First Quarter......................................................................     $ 3-1/4       $ 1-3/8
              Second Quarter.....................................................................       3-3/16        1-13/16
              Third Quarter......................................................................       3             1-1/8
              Fourth Quarter (through February 5, 1998)..........................................       2             1-1/2
</TABLE>

         The quotations in the tables above reflect  inter-dealer prices without
retail markups, markdowns or commissions.

         On February 5, 1998,  the last  reported  sales price for the Company's
Common Stock and Class C Warrants on the NASDAQ  National Market were $12.00 and
$2.00, respectively.

         The Company had one (1) record  holder as of May 29, 1998  representing
the Company's parent, Acquisition Holdings, Inc.

         No cash dividends have been paid by ATC on its Common Stock and no such
payment is anticipated in the foreseeable future.



                                       20
<PAGE>
Item 6.  Selected Financial Data.
-------  ------------------------

         The  following  table  sets  forth,  for the  periods  and at the dates
indicated,  selected historical  consolidated financial data of the Company. The
selected  consolidated  historical  financial  data  has been  derived  from the
audited historical  consolidated  financial statements of the Company and should
be read in  conjunction  with such  financial  statements  and the notes thereto
included  elsewhere in this Annual Report.  The Predecessor 1998 period reflects
the period March 1, 1997 through  February 4, 1998.  The  Successor  1998 period
reflects  the period  February 5, 1998,  the Merger date,  through  February 28,
1998.

<TABLE>
<CAPTION>




----------------------- ---------------------------------------------------------------------------------------------------------
                                                             Years Ended February 28 (29),
                                                                                                 Predecessor       Successor
Statement of                  1994              1995             1996              1997             1998              1998
Operations Data:             (1)(2)             (3)             (4)(5)          (7)(8)(9)       (11)(12)(13)          (14)
----------------------- ----------------- ----------------- ---------------- ----------------- ---------------- -----------------
<S>                     <C>               <C>               <C>              <C>                <C>              <C>

Net Revenues                 $24,379,811     $  33,269,746     $ 40,113,691     $  95,901,469     $109,472,612     $   9,949,086

Income (loss)before
  income taxes                 3,077,048         5,300,520        5,670,998        10,397,734        4,755,930        (2,754,145)

Net income                     1,867,048         3,256,520        3,865,998         6,307,734        2,638,003        (1,789,418)

Cash dividends
  per share                          -0-               -0-              -0-               -0-              -0-               -0-


----------------------- ---------------------------------------------------------------------------------------------------------
                                                                   February 28 (29),
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------------------------
                                    Successor
Balance Sheet Data:           1994              1995             1996              1997                      1998
                             (1)(2)             (3)          (4)(5)(6)(7)     (7)(8)(9)(10))           (11)(12)(13) (14)
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------------------------

Working capital            $   6,049,013     $   8,113,738    $  24,977,316     $  27,701,694                      $  29,440,478

Long-term debt, less
  current maturities           2,182,119         3,892,766          361,944        22,123,344                        120,419,684

Total assets                  14,156,887        25,009,222       46,684,600        86,293,657                        189,055,007

Stockholders' equity       $   7,659,485     $  13,813,194    $  39,192,414     $  45,439,303                      $  26,636,181

</TABLE>

-----------

(1)  ATC rescinded the  agreement for the purchase of Bio-West,  Inc.  effective
     June 10, 1992.
(2)  ATC acquired  certain assets of BSE Management,  Inc.,  effective April 30,
     1993.
(3)  ATC acquired certain assets of Con-Test, Inc., effective October 1, 1994.
(4)  ATC  and its  parent,  Aurora  Environmental  Inc.("Aurora"),  were  merged
     effective June 29, 1995 with ATC as the surviving  corporation.  Net income
     includes a  one-time  tax  benefit  of  $350,000  from the  utilization  of
     Aurora's net operating loss carryforward.
(5)  ATC  acquired  certain  assets of the  environmental  subsidiaries  of Hill
     International Inc., effective November 10, 1995.
(6)  Working capital and  stockholders'  equity increased from net proceeds of a
     public stock offering of $21,554,461.
(7)  ATC acquired certain assets of Applied Geosciences Inc., effective February
     29, 1996.
(8)  ATC  acquired   certain   assets  of  American   Testing  and   Engineering
     Corporation, effective May 24, 1996.
(9)  ATC acquired certain assets of 3D Information Services, Inc., effective May
     28, 1996.
(10) Long-term debt increased due to bank borrowings made in connection with the
     acquisitions  of  American  Testing  and  Engineering  Corporation  and  3D
     Information Services, Inc.
(11) ATC acquired  certain assets of BCM Engineers,  Inc.,  effective August 20,
     1997.
(12) ATC acquired 90.1% of Environmental  Warranty,  Inc., effective November 4,
     1997.
(13) ATC acquired Bing Yen & Associates, effective November 26, 1997.
(14) Total assets, long-term debt, and stockholders' equity reflect the goodwill
     from  the  Tender  Offer  and  Merger,  the  issuance  of  the  12%  Senior
     Subordinated  Notes due 2008,  and the new  capital  investment  from ATC's
     parent  company,  Acquisition  Holdings,  Inc.  respectively. (See Note B-,
     Merger and Business  Acquisitions - Merger,  Note Offering and Tender Offer
     of the notes to the consolidated financial statements.)

                                       21
<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
-------  -----------------------------------------------------------------------
         of Operations.
         --------------

Recent Developments

         Tender Offer and Merger.  The Company became a wholly owned  subsidiary
of Acquisitions  Holdings,  Inc.  ("Holdings")  effective  February 5, 1998 (the
"Merger  Date"),  upon the merger of ATC with  Acquisition  Corp, a wholly owned
subsidiary of Holdings, with ATC being the surviving corporation (the "Merger").
Holdings,  through Acquisition Corp., completed an offer (the "Tender Offer") to
purchase  the  outstanding  common  stock of ATC at $12.00  per share  using the
proceeds from the issuance of 12% senior subordinated notes (the "Notes"),  bank
borrowings  under the  Company's  new bank credit  agreement  (the "Bank  Credit
Facilities")  and  new  equity  investments.   The  accompanying   statement  of
operations  for the Company from  February 5, 1998 through the fiscal  year-end,
February 28, 1998 (the "Successor  Period"),  are  attributable to operations of
the Company under the successor ownership of Holdings. The predecessor statement
of  operation,  representing  the period March 1, 1997 through  February 4, 1998
(the "Predecessor  Period"),  relates to the previous  ownership of the Company.
Prior to the Tender Offer,  Merger and execution of the Bank Credit  Facilities,
the  Company  had entered  into an  agreement  with  certain  officers  who were
beneficial  stockholders  (the  "Stockholders   Agreement").   The  Stockholders
Agreement  provided for the  resignation of the officers upon  completion of the
Merger and the terms of a non-compete agreement.  The Tender Offer, Merger, Bank
Credit Facilities and Stockholders Agreement are collectively referred to as the
"Transactions".

         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 &  Associates  ("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 Environmental  Warranty, Inc. ("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 Engineers, Inc. ("BCM") and provided engineering and consulting
services in water and wastewater  treatment,  environmental  compliance and site
investigation,  remedial  design and  engineering  and  asbestos and air quality
management.

         As a result of the Merger,  the consolidated  financial  statements for
the Successor  Period are presented on a different basis of accounting than that
of the Predecessor Period, and are therefore not directly comparable.

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 fiscal 1998.  No
single  customer  represented  more than 1.7% of the  Company's  gross  revenues
during fiscal 1998.  In addition,  the  Company's  ten largest  customers  taken
together  accounted for less than 12.4% of the Company's  gross revenues  during
fiscal 1998.  The Company  provides its services  through a network of 74 branch
offices located in 35 states covering virtually 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  increased to $119.4  million in fiscal
1998, from $15.4 million, in fiscal 1993.

         The Company's rapid growth is primarily attributable to the acquisition
of assets of American Testing and Engineering  Corporation  ("ATEC") in May 1996
and the  acquisition  of assets of BCM Engineers,  Inc.  ("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

                                       22
<PAGE>
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 $40.1
million, $95.9 million, and $119.4 million,  respectively,  in fiscal 1996, 1997
and 1998 principally  attributable to acquisitions which were accounted for on a
purchase  basis.  ATC's net income (loss) was $3.9 million,  $6.3 million,  $2.6
million and $(1.8)  million,  respectively,  in fiscal 1996 and 1997 and for the
Predecessor Period and Successor Period, respectively.

     Profitability  was  negatively  impacted  during the fourth  quarter  ended
February  28,  1998 as a result of higher  general and  administrative  charges,
partially  related to the Tender  Offer and Merger,  legal  expenses, and higher
goodwill and interest costs resulting from the Tender Offer and Merger,  and new
management  decisions  with  respect to  operational  matters and the  resulting
charges to  expenses.  Such charges  included  settlements  of  executive  bonus
claims,  losses for pending state tax claims,  the establishment of reserves for
expected  write-offs  from the expected  settlement  of certain  disputed  trade
receivables  and work in process,  and impairment of goodwill  associated with a
laboratory  operation  sold during the quarter  ended May 31, 1998.  The Company
also anticipated the  implementation of a new accounting and project  management
system  which began during  fiscal 1998 and was to have been  completed in April
1998. The system was to have eliminated many corporate  accounting  functions by
shifting such functions to the regional  offices.  The system  installation  has
encountered   several  delays  resulting  in  additional   employee  costs  from
duplicative personnel now existing in the corporate and regional offices.

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.

<TABLE>
<CAPTION>

                                                                              Fiscal Year Ended February 28 (29),
                                                                ------------------------------------------------------------
                                                                                                Predecessor        Successor
                                                                     1996          1997             1998              1998
                                                                   ------        -------          -------          --------
<S>                                                               <C>            <C>              <C>             <C>

         Revenues.........................................          112.1%         118.7%           118.1%           122.4%
           Reimbursable costs.............................           12.1           18.7             18.1             22.4
                                                                  -------        -------          -------           ------
         Net revenues.....................................          100.0          100.0            100.0            100.0
         Cost of net revenues.............................           49.0           56.0             55.1             57.6
                                                                  -------        -------          -------           ------
                Gross profit..............................           51.0           44.0             44.9             42.4
         Operating expenses:
           Selling........................................            3.8            3.3              3.8              4.5
           General and administrative.....................           32.0           27.4             32.5             47.4
           Provision for bad debts........................            0.7            1.1              1.8              5.5
                                                                 --------       --------         --------            -----
                Operating income (loss)...................           14.4           12.2              6.8            (14.9)
         Non-operating expense (income)...................
           Interest expense...............................            0.9            1.6              2.6             13.3
           Interest income................................           (0.7)          (0.2)            (0.2)            (0.4)
           Other..........................................            0.1              -                -             (0.2)
                                                                 --------       --------         ---------          -------
                Income (loss) before income taxes.........           14.1           10.8              4.3            (27.7)
         Income tax expense (benefit).....................            4.5            4.3              1.9             (9.7)
                                                                 --------       --------         ---------          -------
         Net income (loss)................................            9.6%           6.6%             2.4%           (18.0)%
                                                                 ========       ========         ========           ======= 
</TABLE>

                                       23
<PAGE>
---------------
Note: Numbers may not add due to rounding.

         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.

Fiscal 1998 Compared with Fiscal 1997
-------------------------------------

         Revenues.  Revenues in fiscal 1998  increased  by  approximately  $27.6
million,  or 24.2%,  to $141.4  million,  compared with $113.9 million in fiscal
1997. This increase was primarily  attributable to revenues  associated with the
BCM acquisition, which was effective August 20, 1997, the acquisition of EWI and
Bing Yen which were completed in November 1997, and the contribution of one full
fiscal  year of  revenues  from  the  acquisitions  of ATEC  and 3D  Information
Services, Inc. ("3D") which were completed in May 1996. Revenues attributable to
the  acquisition  of certain  assets of BCM totaled  $12.5  million,  or 8.8% of
revenues,  for fiscal 1998. Revenues  attributable to the acquisition of EWI and
Bing Yen totaled $1.2 million,  or 0.9% of revenues,  for fiscal 1998.  Revenues
associated  with the  acquisitions of ATEC and 3D totaled $70.3 million and $9.0
million,  respectively,  for fiscal  1998,  compared  to $57.7  million and $7.2
million,  respectively,  in  fiscal  1997.  Revenues  were not  affected  by the
Transactions.

         Revenues in fiscal 1998 from ATC's  branch  offices  having  comparable
operations in fiscal 1997 decreased 2.2% to $108.2 million, compared with $110.6
million,  in fiscal 1997.  Comparable  revenues included revenues of ATEC and 3D
for the nine months ended February 28, 1998 and 1997, respectively, but excluded
first quarter revenues as these  acquisitions were made during the first 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 fiscal 1998,  reimbursable  costs increased by
approximately  $4.1  million,  or 22.6%,  to $22.0  million  compared with $18.0
million,  in  fiscal  1997.  Reimbursable  costs  as a  percentage  of  revenues
decreased  to  15.6%  in  fiscal  1998  compared  with  15.8%  in  fiscal  1997.
Reimbursable  costs decreased in part due to a decrease in such costs associated
with the acquired BCM  operations.  Reimbursable  costs were not affected by the
Transactions.

                                       24
<PAGE>
     Cost of Net  Revenues.  Cost of net  revenues in fiscal 1998  increased  by
approximately  $12.3  million,  or 22.9%,  to $66.1 million  compared with $53.8
million in fiscal  1997.  Cost of net  revenues as a  percentage  of net revenue
decreased to 55.3% in fiscal 1998  compared  with 56.0% in fiscal  1997.  In the
prior year, the Company  benefited from higher than normal  productively  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 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. In
addition,  the Company has reduced cost of net  revenues as a percentage  of net
revenues due to improved labor utilization,  due in part to the Company's use of
flexible and part time  staffing.  Cost of net revenues were not affected by the
Transactions.

     Gross profit.  For the reasons set forth above, gross profit in fiscal 1998
increased by  approximately  $11.2 million,  or 26.6%, to $53.3 million compared
with $42.2 million in fiscal 1997.

         Operating  expenses.  Operating  expenses in fiscal 1998  increased  by
approximately  $17.0 million,  or 55.7%,  to $47.4 million,  compared with $30.4
million in fiscal 1997.  Operating  expenses  increased  as a percentage  of net
revenues  to 39.7% in fiscal  1998,  compared  with  31.7% in fiscal  1997.  The
increase in operating  expenses as a  percentage  of net revenue for fiscal 1998
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 and BCM'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.  The Company has also chosen to increase its investment in
its national  sales  programs,  which has  experienced  considerable  success in
generating new business.

         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  quarter  ended  November  30, 1997 in excess of
amounts previously accrued. Employee costs, consisting of wage costs and related
payroll taxes and health benefits and temporary employment personnel,  increased
66.2% to $20.6 million, or 17.2% of net revenues,  in fiscal 1998 compared with
$12.4  million,  or 12.9% of net revenues,  in fiscal 1997.  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 legal expenses,
which  totaled  $1.4  million in fiscal 1998  compared to $0.2 million in fiscal
1997, and  administrative  expenses  resulting from the growth in operations and
increased  employee  levels.  Additionally,  in  fiscal  1998,  amortization  of
goodwill and intangibles  increased to $2.4 million,  compared with $1.2 million
in fiscal 1997 reflecting the additional  goodwill  amortization  resulting from
acquisitions  and  the  Tender  Offer  and  Merger.  In  the  Successor  Period,
amortization  of  goodwill  associated  with the  Tender  Offer and  Merger  and
amortization of the recorded cost of the non-compete  agreement  pursuant to the
Stockholders  Agreement totaled  approximately  $230,000.  On a pro forma basis,
such expense would have totaled approximately $3,450,000 for fiscal 1998.

     Operating expenses for the Successor Period as a percentage of net revenues
increased  to 57.3%  compared  with the  Predecessor  Period at 38.1%.  Earnings
during this period were impacted by additional  expenses of  approximately  $2.0
million  which are not expected in future  periods.  These  additional  expenses
resulted  from new  management  and  directors  of the Company  electing to make
certain  operational  decisions which are expected to benefit future operations.
These  decisions  related  to  the  disposition  of or use  of  more  aggressive
approaches with respect to resolving pending claims and litigation,  collections
of disputed trade receivables,  and marginally profitable assets and operations.
Specifically,  (a) a liability  was provided for the  resolution  of  previously
disputed  executive  bonus  claims of  $336,000  - the amount  claimed  was $1.1
million,  however,  the executives  settled for $336,000 plus restricted  common
stock of the Company's  parent,  the value of which will be charged to operating
expenses  in  future  periods  as they  vest;  (b) a  $400,000  addition  to the
allowances for trade  receivables for  receivables  due from a client  disputing
payment  claiming,  among  other  items,  the work  performed  under a  contract
exceeded  contract  requirements  and (c) a charge to goodwill  amortization  of
$250,000 for the estimated impairment of goodwill resulting from the sale of one
of  the  Company's  laboratory  operations  subsequent  to  year-end.  Operating
expenses as a  percentage  of net revenue  were also  affected by the lower than
average  net  revenues  during  February  1998  as  operating   expenses  remain
relatively  constant  each month and do not  fluctuate  proportionally  with net
revenues  over  short-tem  periods.  Net revenues  were  impacted in part due to
seasonality factors.

     In the Successor Period, no compensation expense was recognized for certain
officers of the Company who resigned their positions  pursuant to a Stockholders
Agreement  (see  Note B -  Merger  and  Business  Acquisitions  -  Merger,  Note
Offering,  and Tender Offer Transactions).  Such compensation expense during the
Predecessor  Period  totaled  approximately   $865,000.  In  addition,  the  new


                                       25
<PAGE>
executive   officers  of  the  Company  will  be  compensated  under  employment
agreements  executed in February 1998. Under these  agreements,  the executive's
base compensation will increase by a total of $100,000 per year commencing March
1, 1998 and provide for  additional  bonuses for achieving  specified  financial
income targets. Based on the fiscal 1998 performance, no bonuses would have been
earned.

         Operating income. For the reasons set forth above,  operating income in
fiscal 1998 decreased by approximately $5.8 million,  or 49.3%, to $5.9 million,
compared  with $11.7  million in fiscal 1997.  Operating  income  decreased as a
percentage of net revenues to 5.0% in fiscal 1998, compared with 12.2% in fiscal
1997.

     Non-operating  expense.  Non-operating  expense in fiscal 1998 increased by
approximately $2.6 million to $3.9 million, compared with $1.3 million in fiscal
1997.  The  increase  in  non-operating  expense is  primarily  attributable  to
increased  interest  expense  due to  increased  notes  payable  and  bank  debt
outstanding  since May 1996 when the ATEC and 3D  acquisitions  were  completed,
issuance of the 8.18% Senior  Secured  Notes in May 1997 and the issuance of the
12% Senior  Subordinated Notes and a bank term loan issued under the Bank Credit
Facilities in January 1998 and February 1998, respectively.  Interest expense in
the  Successor  Period  resulting  from the issuance of the Notes and Bank debt,
including amortization of issuance costs, totaled approximately $1.2 million. On
a pro forma basis such costs would have been approximately $1,070,000 for fiscal
1998  reflecting the  outstanding  debt and expected bank borrowings to complete
the Tender Offer.

         Income Tax Expense. Income tax expense in fiscal 1998 was $1.2 million,
compared  with $4.1 million in fiscal  1997.  During  fiscal 1998 and 1997,  the
Company's  effective  tax rates  were  57.6%  and  39.3%,  respectively.  In the
Successor period ended February 28, 1998, the Company determined it necessary to
provide additional income tax expense to cover probable losses associated with a
pending state tax audit and related  penalties  and interest  estimated to total
$300,000.

         Net  Income.  As a result of the  foregoing,  net income in fiscal 1998
decreased by  approximately  $5.5 million,  or 86.7%, to $0.8 million,  compared
with $6.3 million in fiscal 1997.  Net income  decreased as a percentage  of net
revenues to 1.0% in fiscal 1998, compared with 6.6% in fiscal 1997.

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 certain assets of Hill  International,  Inc.'s  environmental
consulting and laboratory operations (collectively, the "Hill Businesses") ($3.4
million) and certain assets of Applied Geosciences,  Inc. ("AGI") ($2.6 million)
which were completed in November 1995 and February 1996, respectively.  Revenues
attributable  to the  acquisitions  of  certain  assets  of ATEC,  3D,  the Hill
Businesses and AGI 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 ATEC's year ended December 31, 1995,  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.

                                       26
<PAGE>
         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,
consisting  of wage costs and  related  payroll  taxes and health  benefits  and
temporary  employment  personnel,  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.

     Non-operating  Expense.  Non-operating 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 fiscal 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.

Information Systems and the Year 2000

         The Company is in the process of addressing the Year 2000 problem.  The
Company  is  currently  engaged  in  a  comprehensive  project  to  convert  its
accounting  and  management  information  system to a system  consisting  of new
hardware  and packaged  software  recently  purchased  from large vendor who has
represented   that  these  systems  are  Year  2000  compliant.   The  Company's
information  technology  segment,  which  provides  information  system  support
services to both the Company and the Company's clients,  is currently  operating
on  systems  that  are Year  2000  compliant.  ATC's  remaining  operations  are
generally  dependent only on PCs and  off-the-shelf  commercial word processing,
drafting,  spreadsheet and engineering software. Year 2000 compliant versions of
these  systems are  currently  available,  and the Company will convert to these
compliant  systems  over the next year and a half as the  Company  upgrades  its
operational  PC  systems  in the  ordinary  course to the most  recently  issued
software releases.

 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 May 28, 1998, the
Company had  approximately  $24.3  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 Bank Credit  Facilities 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.

                                       27
<PAGE>
         The 12% Senior  Subordinated Notes due 2008 impose 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 Bank Credit  Facilities  contains  other and more  restrictive
covenants effectively prohibiting the Company from prepaying the Notes. The Bank
Credit  Facilities  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 Note D
-  Debt  and  Credit   Agreements  -  Bank  Credit  Facilities  and  12%  Senior
Subordinated Notes due 2008 of the notes to consolidated financial statements.

         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.

         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 February 28, 1998, working capital was $29.4
million, compared with working capital of $27.7 million at February 28, 1997, an
increase of $1.7 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
Tender  Offer and Merger and the  Company's  acquisition  of BCM and  additional
costs  incurred  in  connection  with the ATEC  acquisition,  the  Company has a
negative  tangible  net  worth,  primarily  as  a  result  of  goodwill  amounts
recognized in connection with these transactions.

         During fiscal 1998,  net cash flows used in operating  activities  were
$3.7  million,  primarily  due to the  increase  refundable  income taxes and 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 $11.9 million,  resulting from cash used
in connection with the acquisitions of BCM, EWI, Bing Yen and ATEC and purchases
of property and equipment.  Net cash flows provided by financing activities were
$18.8 million,  primarily representing the proceeds of the Notes, Bank Term Loan
and equity investment of Holdings,  and 8.18% Senior Secured Notes less payments
for the  purchase  of the  Company's  common  stock  pursuant  to the Merger and
repayment of outstanding debt.

     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,  AGI, Con-Test and R.E.  Blattert,
additional contingent purchase obligations in connection with the BSE Management
Inc. 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 1998
and 1997,  comparable  quarterly  revenues as a  percentage  of relevant  annual
revenues were 22.2%,  24.5%, 27.0% and 26.3% and 26.8%,  25.7%, 23.8% and 23.7%,
respectively.
                                       28
<PAGE>
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
-------   -----------------------------------------------------------

         The  Company is not  required to disclose  such  information  until its
fiscal year ended February 28, 1999.

Item 8.  Financial Statements and Supplementary Data.
-------  --------------------------------------------

     The  information  required by Item 8 and an index thereto,  appears on page
F-1 of this Annual Report, which follows this page.

Item 9.  Changes in and Disagreements With Accountants on Accounting and
-------  ---------------------------------------------------------------
         Financial Disclosure.
         ---------------------

         Not applicable.













                                       29
<PAGE>

ATC GROUP SERVICES INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED FEBRUARY 28, 1998
-------------------------------------------------------------------------------
                                                                           Page

INDEPENDENT AUDITORS' REPORT ...........................................    F-2

FINANCIAL STATEMENTS:
     Consolidated Balance Sheets
       February 28, 1997 and 1998.......................................    F-3

     Consolidated Statements of Operations
       For the Years Ended February 28(29), 1996 and 1997 and Periods Ended
       February 4, 1998 and February 28, 1998...........................    F-4

     Consolidated Statements of Stockholders' Equity
       For the Years Ended February 28(29), 1996 and 1997 and Periods Ended
       February 4, 1998 and February 28, 1998...........................    F-5

     Consolidated Statements of Cash Flows
       For the Years Ended February 28(29), 1996 and 1997 and Periods Ended
       February 4, 1998 and February 28, 1998...........................    F-6

     Notes to Consolidated Financial Statements.........................    F-7

    All  financial   statement  schedules  are  omitted  because  they  are  not
applicable,  not  required,  or because  the  required  information  is included
elsewhere herein.

                                      F-1
<PAGE>


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 (the "Company") as of February 28, 1997 and 1998,
and the related consolidated statements of operations,  stockholders' equity and
cash flows for the years ended  February 29, 1996 and February 28, 1997, the 341
days  ended  February  4,  1998  ("Predecessor"  period)  and the 24 days  ended
February 28, 1998  ("Successor"  period).  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 the Company as of February 28,
1997 and 1998 and the results of its operations and its cash flows for the years
ended  February 29, 1996 and February 28, 1997,  the 341 days ended  February 4,
1998 ("Predecessor" period) and the 24 days ended February 28, 1998 ("Successor"
period), in conformity with generally accepted accounting principles.

     As discussed in Note B to the consolidated financial statements, all of the
issued and  outstanding  shares of common stock of the Company were purchased by
Acquisition Corp., a wholly-owned subsidiary of Acquisitions Holdings,  Inc., in
a business  combination  accounted  for as a purchase on February 5, 1998.  As a
result  of the  acquisition,  the  consolidated  financial  statements  for  the
Successor  period are presented on a different  basis of accounting than that of
the Predecessor period, and are therefore not directly comparable.



/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP

Omaha, Nebraska
May 29, 1998

                                      F-2
<PAGE>


ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1997 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                Predecessor           Successor
                                                                                                    1997                 1998
                                                                                                -------------        -------------
<S>                                                                                            <C>                 <C>  

ASSETS
  CURRENT ASSETS:
     Cash and cash equivalents...............................................................   $     2,003,890     $  5,268,708
     Trade accounts receivable, less allowance for doubtful accounts
        ($1,455,716 in 1997 and $3,077,829 in 1998) (Note K).................................        34,406,026       39,934,302
     Costs in excess of billings on uncompleted contracts....................................         5,191,569       10,196,397
     Prepaid expenses and other current assets...............................................         2,934,193        2,422,523
     Deferred income taxes (Note H)..........................................................           790,400        2,041,200
     Refundable income taxes ................................................................           118,340        4,232,505
                                                                                                  -------------     ------------
              Total current assets...........................................................        45,444,418       64,095,635

  PROPERTY AND EQUIPMENT, Net (Note C) ......................................................         3,784,633        5,793,928

  GOODWILL, net of accumulated amortization
      ($1,478,876 in 1997 and $3,261,108 in 1998) (Note B) ..................................        35,587,076      106,829,231
  COVENANTS NOT TO COMPETE, net of accumulated amortization
      ($455,316 in 1997 and $774,589 in 1998) (Note B).......................................           632,184        5,162,911
  DEBT ISSUANCE COSTS, net of accumulated amortization
      ($107,570 in 1998).....................................................................              -           5,808,246
  OTHER ASSETS...............................................................................           845,346        1,365,056
                                                                                                  -------------    -------------
                                                                                                  $  86,293,657    $ 189,055,007
                                                                                                  =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES:
     Short-term debt (Note D)................................................................     $     300,000   $     300,000
     Current maturities of long-term debt (Note D) ..........................................         1,986,730       1,420,816
     Accounts payable........................................................................         7,440,024       7,738,433
     Accrued compensation....................................................................         3,789,233       5,096,880
     Accrued payment obligations - ATEC acquisition (Note B).................................         1,721,594         589,026
     Tender Offer liability (Note B).........................................................             -          14,278,838
     Other accrued expenses..................................................................         2,505,143       5,231,164
                                                                                                  -------------    ------------
              Total current liabilities......................................................        17,742,724      34,655,157

  LONG-TERM DEBT, less current maturities (Note D) ..........................................        22,123,344     120,419,684
  OTHER LIABILITIES  (Note E) ...............................................................           270,386       2,737,185
  DEFERRED INCOME TAXES (Note H) ............................................................           717,900       4,606,800
                                                                                                  -------------    ------------
              Total liabilities..............................................................        40,854,354     162,418,826
                                                                                                  -------------    ------------

  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 in
         1997; par value $ .01 per share; authorized 10,000 shares in 1998;
        issued and outstanding 7,800,187 shares in 1997 and 1,000 in 1998....................            78,002              10
     Additional paid-in capital..............................................................        28,996,627      28,425,589
     Retained earnings (deficit).............................................................        16,364,674      (1,789,418)
                                                                                                 --------------    ------------
              Total stockholders' equity.....................................................        45,439,303      26,636,181
                                                                                                 --------------    ------------
                                                                                                 $   86,293,657     189,055,007
                                                                                                 ==============    ============
</TABLE>


See notes to consolidated financial statements.

                                      F-3
<PAGE>


ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28 (29), 1996 AND 1997 AND
PERIODS ENDED FEBRUARY 4, 1998 AND FEBRUARY 28, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                             Predecessor                              Successor
                                                        -------------------------------------------------------    ----------------
                                                                                                                    February 5,
                                                                                                 March 1,1997           1998
                                                                                                      To                 To
                                                                                                 February 4,        February 28,
                                                              1996                 1997              1998               1998
                                                        --------------       ---------------   -----------------  -----------------
<S>                                                    <C>                   <C>               <C>                <C>
REVENUES.............................................  $   44,964,897        $  113,855,364     $  129,260,984     $   12,175,693
   Reimbursable costs................................       4,851,206            17,953,895         19,788,372          2,226,607
                                                        -------------        --------------     --------------     --------------

NET REVENUES.........................................      40,113,691            95,901,469        109,472,612          9,949,086

COST OF NET REVENUES.................................      19,663,968            53,750,707         60,352,326          5,726,571
                                                       --------------        --------------     --------------     --------------

            Gross profit.............................      20,449,723            42,150,762         49,120,286          4,222,515

OPERATING EXPENSES:
   Selling...........................................       1,513,222             3,118,926          4,144,165            449,652
   General and administrative........................      12,850,874            26,299,172         35,595,493          4,712,200
   Provision for bad debts...........................          290,165            1,021,631          1,956,803            546,815
                                                       ---------------       --------------     --------------      -------------
                                                           14,654,261            30,439,729         41,696,461          5,708,667
                                                       --------------        --------------     --------------      -------------

           Operating income (loss)...................       5,795,462            11,711,033          7,423,825         (1,486,152)

NON-OPERATING EXPENSE (INCOME):
   Interest expense..................................         376,621             1,569,043          2,891,279          1,326,974
   Interest income ..................................        (272,463)             (230,610)          (170,421)           (39,405)
   Other, net .......................................           20,306              (25,134)           (52,963)           (19,576)
                                                       ---------------       --------------     ---------------     --------------
                                                              124,464             1,313,299          2,667,895          1,267,993
                                                       --------------        --------------     --------------      -------------

            Income (loss) before income taxes........       5,670,998            10,397,734          4,755,930         (2,754,145)

INCOME TAX EXPENSE (BENEFIT) (Note H)................       1,805,000             4,090,000          2,117,927           (964,727)
                                                       --------------        --------------     --------------     ---------------

NET INCOME (LOSS)....................................  $    3,865,998        $    6,307,734     $    2,638,003     $   (1,789,418)
                                                       ==============        ==============     ==============     ===============

</TABLE>

See notes to consolidated financial statements.

                                      F-4
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28 (29), 1996 AND 1997 AND
PERIODS ENDED FEBRUARY 4, 1998 AND FEBRUARY 28, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                           Notes -       Retained
                                                    Common Stock           Paid-in         Common        Earnings
                                              Shares          Amount       Capital         Stock        (Deficit)       Total
                                             ---------      ---------    -----------     ---------     -----------  ------------
<S>                                          <C>            <C>          <C>             <C>           <C>          <C>
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 into ATC (Note B)...        83,356            834        60,283       (30,000)               -        31,117
Common stock recovered for 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 of predecessor...............             -              -             -              -       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 of predecessor...............             -               -             -           -         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...........       668,802           6,688     2,830,294             -               -     2,836,982
Issuance of common stock in connection
   with the acquisition of Environmental
   Warranty, Inc.(Note B)...............        33,000             330       364,733             -               -       365,063
Other capital transactions..............             -               -       (61,484)            -               -       (61,484)
Net income of predecessor...............             -               -             -             -       2,638,003     2,638,003
                                             ---------      ----------   -----------     ---------     -----------  ------------

BALANCE, February 4, 1998.............       8,501,989          85,020    32,130,170            -       19,002,677    51,217,867
                                             ---------      ---------    -----------     ---------     -----------  ------------

Purchase of common stock and
   adjustments in connection with the
   Tender Offer and Merger (Note B).....    (8,501,989)        (85,020)  (32,130,170)            -     (19,002,677)  (51,217,867)
Sale of common stock to Parent..........         1,000              10    30,714,639             -               -    30,714,649
Predecessor basis adjustment............             -               -    (2,289,050)            -               -    (2,289,050)
Net loss of successor.................               -               -             -             -      (1,789,418)   (1,789,418)
                                             ---------      ---------    -----------     ---------     -----------  ------------

BALANCE, February 28, 1998.........              1,000      $     10     $28,425,589     $       -     $(1,789,418) $ 26,636,181
                                             =========      =========    ===========     =========     ===========  ============
</TABLE>

See notes to consolidated financial statements.

                                      F-5
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28 (29), 1996 AND 1997 AND
PERIODS ENDED FEBRUARY 4, 1998 AND FEBRUARY 28, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                             Predecessor                               Successor
                                                        -------------------------------------------------------     ----------------
                                                                                                                      February 5,
                                                                                                March 1, 1997            1998
                                                                                                      To                  To
                                                                                                 February 4,         February 28,
                                                              1996                 1997              1998                1998
                                                        --------------       ---------------   -----------------   -----------------
<S>                                                     <C>                  <C>               <C>                 <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................   $   3,865,998         $   6,307,734      $   2,638,003      $  (1,789,418)
Adjustments to reconcile net income (loss) to net cash
  from operating activities:
    Depreciation and leasehold amortization..........         776,917               882,803          1,168,481            141,693
    Amortization of goodwill and covenants...........         473,254             1,216,008          1,911,473            441,931
    Provision for bad debts..........................         290,165             1,021,631          1,956,803            546,815
    Deferred income taxes............................        (191,700)              171,300          2,912,020            414,071
    Other............................................        (132,700)             (143,981)           101,259           (297,869)
    Changes in  operating  assets and  liabilities,  
      net of amounts  acquired in acquisitions:
        Receivables..................................      (4,168,658)           (3,861,601)        (2,266,127)          (420,476)
        Prepaid expenses and other assets............        (434,890)             (143,679)        (1,574,328)         1,661,624
        Accounts payable and other liabilities.......      (1,199,278)           (7,931,356)        (2,545,520)         1,026,428
        Accrued payment obligations - ATEC...........               -            (4,279,406)        (4,678,273)          (889,324)
        Income taxes refundable/payable..............         (85,750)               75,858         (2,221,936)        (1,892,197)
                                                       --------------     -----------------    ----------------      -------------
          Net cash flows from operating activities...        (842,642)           (6,684,689)        (2,598,145)        (1,056,722)
                                                        --------------      ---------------    ----------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
  BCM Engineers, Inc.................................               -                     -         (5,425,539)                 -
  Bing Yen & Associates, excess acquired.............               -                     -         (2,036,320)                 -
  Environmental Warranty, Inc., excess cash acquired.               -                     -             19,350                  -
  ATEC, net of cash acquired.........................               -            (8,965,952)        (2,420,766)                 -
  3D Information Services, Inc., net of cash acquired.                                    -         (2,926,681)                 -
-
  Hill Businesses....................................      (2,517,949)                    -                  -                  -
  Applied Geosciences, Inc...........................        (589,060)              (22,324)                 -                  -
  Other acquisitions.................................        (556,711)                    -            (61,675)                 -
Property and equipment...............................        (946,206)           (1,285,695)        (1,976,605)          (134,316)
Proceeds from sale of property and equipment.........          22,987                56,328            127,234              6,018
                                                        -------------        --------------      -------------      -------------
           Net cash flows from investing activities..      (4,586,939)          (13,144,324)       (11,774,321)          (128,298)
                                                        -------------        --------------      -------------      -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net .........      21,655,080                75,157          2,821,481         30,730,150
Proceeds from issuance of long-term debt.............       2,585,125            22,270,297         41,950,000        114,084,004
Principal payments on long-term debt.................      (6,663,581)          (13,925,424)       (27,155,820)       (42,133,928)
Purchase of common stock.............................               -                     -                  -       (101,412,099)
Other capital transactions...........................         (55,462)              (56,570)           (60,234)            (1,250)
                                                        -------------        --------------      -------------      -------------
           Net cash flows from financing activities..      17,521,162             8,363,460         17,555,427          1,266,877
                                                        -------------        --------------      -------------      -------------

           Net change in cash and cash equivalents...      12,091,581           (11,465,553)         3,182,961             81,857

CASH AND CASH EQUIVALENTS, Beginning ................       1,377,862            13,469,443          2,003,890          5,186,851
                                                        -------------         -------------       ------------      -------------

CASH AND CASH EQUIVALENTS, Ending....................   $  13,469,443         $   2,003,890      $   5,186,851      $   5,268,708
                                                        =============         =============      =============      =============
</TABLE>

See notes to consolidated financial statements.

                                      F-6
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED FEBRUARY 28, 1998
--------------------------------------------------------------------------------

A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Acquisition of the Company by Acquisition  Holdings,  Inc. - ATC Groups
Services Inc. and  subsidiaries  ("ATC" or the "Company")  became a wholly owned
subsidiary of Acquisitions  Holdings,  Inc.  ("Holdings")  effective February 5,
1998 (the "Merger Date") upon the merger of the Company with Acquisition  Corp.,
a wholly owned subsidiary of Holdings,  with ATC being the surviving corporation
(the  "Merger").  Holdings,  through  Acquisition  Corp.,  completed an offer to
purchase  the  outstanding  common  stock of ATC at $12.00  per share  using the
proceeds from the issuance of 12% senior subordinated notes (the "Notes"),  bank
borrowings  (the  "Bank  Credit  Facilities")  and new equity  investments.  The
accompanying  statement  of  operations  for the Company  from  February 5, 1998
through the fiscal  year-end,  February 28, 1998 (the "Successor  Period"),  are
attributable  to  operations  of the Company  under the  successor  ownership of
Holdings. The predecessor statement of operations, representing the period March
1, 1997  through  February 4, 1998 (the  "Predecessor  Period"),  relates to the
previous ownership of the Company.

         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.

         Nature of Business - 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.

         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.

         Significant  Customer - In fiscal  1997 and 1998 there were no revenues
from a single  customer  exceeding  5%. In fiscal 1996,  revenues  from a single
customer comprised approximately 6.0% of total revenues.

         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.

         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.

                                      F-7
<PAGE>
         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.

         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.

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


B.  MERGER AND BUSINESS ACQUISITIONS

         Merger,  Note  Offering,  and Tender Offer  Transactions  - Acquisition
Holdings,  Inc.  ("Holdings"  or  "Parent")  and its  wholly  owned  subsidiary,
Acquisition  Corp.  ("Issuer"),  were organized to effect the acquisition of the
Company under the terms and conditions of a Merger  Agreement dated November 26,
1997 (the "Merger Agreement").

         Pursuant  to the Merger  Agreement,  the Issuer  offered  (the  "Tender
Offer")  to  purchase  all the issued and  outstanding  shares of the  Company's
Common Stock at a price of $12.00 per share.  The Tender  Offer was  conditioned
upon Issuer issuing  $100,000,000 of Senior Subordinated Notes (the "Notes"; see
Note D) and obtaining  sufficient  bank  financing  necessary to consummate  the
Tender Offer.  Effective February 5, 1998, (the "Merger Date") upon satisfaction
of the necessary conditions,  the Issuer was merged into ATC, with ATC being the
surviving corporation (the "Merger").

         The Merger Agreement followed the execution of a stockholders agreement
(the   "Stockholders   Agreement")   with  George   Rubin  and  Morry  F.  Rubin
(collectively  the  "Stockholders")  requiring the Stockholders to vote 14.8% of
their  interest  in the  Company in favor the  Merger.  In  connection  with the
Stockholders  Agreement,  the  Stockholders  each  agreed  to and  entered  into
Severance   Consulting   and   Non-Competition    Agreements   (the   "Severance
Agreements").  Under these  agreements,  the  Stockholders  resigned  from their
officer positions, agreed to provide certain consulting services as requested by
the  Company  for a period of three  years  following  the  consummation  of the
transactions,  and agreed to restrict the  Stockholders  from competing with the
Company's business and restricting certain other activities for a period ranging
from three to four years from the effective date of the Merger. In consideration
of the Severance  Agreements,  the Company paid the Stockholders $3.1 million on
the  Merger  Date  and  will pay  $553,430  on each of the  next six  succeeding
quarters commencing April 1, 1998.

         In connection  with the Merger and Tender Offer,  the Company,  through
the  Issuer,  entered  into a new bank credit  agreement  which  provided  for a
$20,000,000 Term Loan and $30,000,000  Revolving  Credit Facility  (collectively
the "Bank  Credit  Facilities").  The  proceeds  of the Term Loan along with the
proceeds of the Notes and equity  investments  in Holdings  were used to finance
the Tender Offer, repay certain indebtedness  including related accrued interest
and   prepayment   penalties,   pay  a  portion  of  the   Severance   Agreement
consideration, and to pay financing costs and expenses.

         The  acquisition of the Company by Holdings has been accounted for as a
purchase.  The excess of the purchase cost over the historical book value of the
net assets acquired was allocated to the Severance Agreements and the remainder,
to goodwill, is being amortized over 30 years.

                                      F-8
<PAGE>
         The  accompanying  consolidated  balance  sheet  reflects the following
sources  and uses of funds  related to the Tender  Offer,  Merger,  Stockholders
Agreement and the Bank Credit Facilities (collectively the "Transactions").
<TABLE>
<CAPTION>

<S>                                                                                                  <C> 
         Sources of Funds:
         Notes.......................................................................................  $100,000,000
         Bank Term Loan..............................................................................    20,000,000
         Equity investment from Holdings.............................................................    30,714,639
         Tender Offer obligations to be funded from cash on hand and revolving credit
           borrowings (The outstanding balance at February 28, 1998 was $14,278,838).................    16,082,850
                                                                                                      -------------
                                                                                                      $ 166,797,489
                                                                                                      =============

         Uses of Funds:
         Purchase of common stock, warrants and stock options........................................ $ 105,473,603
         Repay existing debt:
           Principal.................................................................................    42,076,461
           Accrued interest..........................................................................       577,345
           Accrued ATEC obligations..................................................................       754,250
         Shareholder Agreement Consideration:
           Amount paid at Merger Date................................................................     3,100,002
           Amounts payable in quarterly installments.................................................     3,320,578
         Financing costs and expenses, including debt prepayment penalty.............................    11,495,250
                                                                                                      -------------
                                                                                                      $ 166,797,489
                                                                                                      =============

         The total  consideration  paid in connection with the  Transactions and
allocation of the consideration to the historical book value of assets, covenant
not to compete and goodwill is as follows:

         Consideration:
         Purchase price of common stock, warrants, and stock options.................................$ 105,473,603
         Severance Agreements consideration..........................................................    6,420,580
         Financing costs and expenses less amount related to debt issuance...........................    4,828,614
                                                                                                       116,722,797
         Allocation of Consideration:
         Net assets acquired.........................................................................   51,214,836
         Fair value adjustments:
           Non-compete agreement.....................................................................    4,700,000
           Other.....................................................................................     (301,537)
                                                                                                     -------------
         Excess purchase consideration...............................................................   61,109,498
         Predecessor basis adjustment................................................................   (2,289,050)
                                                                                                     -------------
         Goodwill....................................................................................$  58,820,448
                                                                                                      ============
</TABLE>


         Holdings is not engaged in any  activities  other than those related to
its  ownership  interest  in ATC. A majority  interest  in  Holdings is owned by
affiliates of Weiss, Peck & Greer,  L.L.C.  ("Weiss Peck"), who was also a party
to the Merger Agreement.  Other actual and beneficial owners of Holdings include
ATC management and employees who made equity contributions or elected to receive
options  to  purchase   common  stock  of  Holdings  in   replacement  of  their
`in-the-money' ATC stock 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.

         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.   The
preliminary  purchase  price  allocation  for the fiscal 1998  acquisitions  are
subject to change when  additional  information  concerning  asset and liability
valuations  is obtained.  Therefore,  the final  allocation  may differ from the
preliminary allocation.


                                      F-9
<PAGE>
Fiscal 1998
-----------

     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.

<TABLE>
<S>                                                                                                   <C> 
         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
                                                                                                      =============
</TABLE>
         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.
<TABLE>
<CAPTION>

         The preliminary purchase price allocation is as follows:
<S>                                                                                                  <C>   

         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
                                                                                                     ==============
</TABLE>

     Environmental  Warranty, Inc. - On November 4, 1997, ATC purchased 90.1% of
the outstanding stock of Environmental Warranty, Inc. ("E.W.I."), a property and
casualty  insurance  brokerage  firm  specializing  in  environmental  insurance
products.

<TABLE>
<CAPTION>

         The purchase price was comprised of the following consideration:
<S>                                                                                                  <C>  
         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
                                                                                                       ============
</TABLE>

                                      F-10
<PAGE>
         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,  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 was 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
of short-term debt in the accompanying consolidated balance sheet.

         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
                                                                   ============

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.

         Under the original  purchase  agreement,  the Company was  contingently
liable  to ATEC for  additional  purchase  consideration  up to  $10,750,000  if
certain  conditions  were met. The seller since met certain of these  contingent
consideration  requirements  in the  quarter  ended May 31, 1997 and the Company
began to amortize  the  associated  goodwill in this  period.  In  addition,  in

                                      F-11
<PAGE>

connection  with the issuance of the Senior  Secured Notes on May 29, 1997,  the
Company and the seller executed an amendment to the original purchase  agreement
and  agreed  to  remove  or  modify  the  remaining   contingent   consideration
requirements.  As a result of the foregoing,  the Company paid $2,420,766 on May
30, 1997 and is  obligated  to make  monthly  payments  through  February  1999.
Additionally, the Company has the option to purchase certain properties from the
seller for $1,700,000 in fiscal 2002.

<TABLE>
<CAPTION>


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

         The purchase price allocation  reflecting the additional  consideration 
is summarized as follows:

         Accounts receivable and work in process, net of allowances..................................  $ 18,957,768
         Other current assets........................................................................     2,023,996
         Other assets................................................................................     1,428,617
         Covenants not to compete....................................................................       430,000
         Goodwill....................................................................................    27,830,133
                                                                                                       ------------
                                                                                                       $ 50,670,514
                                                                                                       ============

</TABLE>

         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 February 28, 1998.

         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 the purchase obligations in full. No
amounts have 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
                                                                    ===========

                                      F-12
<PAGE>
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,   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.

         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
                                                                    ===========

         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  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
                                                                  =============

         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
                                                                   ============

                                      F-13
<PAGE>
Other Acquisitions
------------------

         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.

         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.

         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,  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.

                                      F-14
<PAGE>
         Pro Forma Financial  Information  (Unaudited) - The following unaudited
pro forma  information  sets forth the  results of  operations  of ATC as if the
Merger and the Tender Offer and ATC's  purchases of ATEC,  3D, BCM, EWI and Bing
Yen had occurred on March 1, 1996, the beginning of fiscal 1997.
<TABLE>
<CAPTION>

                                                                                                            PRO FORMA
                                                                                                     Year Ended February 28,
                                                                                                 --------------------------------
                                                                                                     1997               1998
                                                                                                 -------------       ------------
<S>                                                                                             <C>                   <C> 
         Revenues............................................................................   $182,444,389          $160,628,928
         Operating Income....................................................................     15,449,440             3,336,993
         Interest Expense....................................................................     15,527,717            16,126,197
         Income(loss) before income taxes....................................................       (293,495)          (12,494,568)
         Net income (loss)...................................................................   $   (136,515)         $ (7,913,810)



C.  PROPERTY AND EQUIPMENT

         Property and equipment as of February 28 consists of:                                       1997               1998
                                                                                                 -------------       ------------

         Office equipment....................................................................   $    3,339,049       $  5,345,109
         Laboratory and field equipment......................................................        3,335,721          3,967,605
         Transportation equipment............................................................          207,857            582,524
         Leasehold improvements..............................................................          849,700          1,111,823
                                                                                                     7,732,327         11,007,061
         Less accumulated depreciation.......................................................        3,947,694          5,213,133
                                                                                                ---------------      ------------

         Property and equipment, net.........................................................   $    3,784,633       $  5,793,928
                                                                                                ==============       ============
</TABLE>



D.  DEBT AND CREDIT AGREEMENTS

         Short Term Debt - The February 28, 1997 and 1998 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 and interest
accrued through the original maturity date, April 30, 1996,  pending the outcome
of the litigation with Hill as discussed in Note E.

     As consideration for the purchase of the assets of BCM Engineers, Inc. from
BCM's parent company (the  "Seller"),  the Company issued a prime based $200,000
note payable due  September 19, 1997, a  non-interest  bearing  $2,750,000  note
payable  due March 30,  1998 and assumed a $22,000  remaining  note  obligation.
Under the terms of the purchase agreement, the Company is entitled to and served
notice to the  Seller of a  purchase  price  adjustment.  As  allowed  under the
purchase  agreement,  the Company  elected to recover a portion of the  purchase
price  adjustment as a set-off against the $200,000 note payable and reconveying
the assumed $22,000 note obligation to the seller. Accordingly, these short-term
debt  obligations  have been offset in full. The Company is also entitled to and
served  notice to the  Seller of  allowable  set-offs  relating  to  uncollected
purchased  accounts  receivable  and work in  process,  losses  incurred  by the
Company for unrecorded contract  obligations and other liabilities.  The Company
has recorded an offset for the full amount of the $2,750,000  note payable.  The
Company and Seller are disputing several matters under the purchase agreement as
discussed  in Note  E,  including  the  recorded  offsets  to  short-term  debt.
Accordingly,  the final purchase price and amount of short-term debt are subject
to the final outcome of the pending disputes.


                                      F-15
<PAGE>
<TABLE>
<CAPTION>


         Long-Term Debt - Long term debt as of February 28 consists of :
                                                                                                      1997              1998
                                                                                                  ------------      ------------
<S>                                                                                               <C>              <C>   

         Term loan under the Company's Bank Credit Facilities.  Interest rate at
           February 28, 1998 was 7.875%. Interest is payable monthly.  Quarterly
           principal  payments of $750,000  commence  February 1999 and increase
           through the loan
           maturity on January 29, 2003......................................................                      $ 20,000,000

         12% Senior Subordinated Notes due January 15, 2008.
           Interest payable semi-annually....................................................              -        100,000,000

         Notes  payable  issued in  connection  with the  purchase of Bing Yen &
           Associates  with a fixed  interest  rate of 8.0%.  The  principal  is
           payable in three installments
           commencing January 1999...........................................................              -          1,150,000

         Note payable  issued in connection  with the purchase of  Environmental
           Warranty,  Inc, net of inputed interest at 8.00%. The note is payable
           in three installments of
           $226,000 commencing October 1998..................................................              -            597,955

         Borrowings from banks under the prior bridge credit facility........................     20,850,000                  -

         Note payable issued in connection with the purchase of 3D Information
           Services, Inc. with a fixed interest rate of 8.25%. ..............................      1,931,193                  -

         Insurance premium financing obligation payable in fixed monthly
           installments of principal and interest through April, 1998.  Interest
           accrued at 6.4%...................................................................        781,188             57,749

         Note  payable  issued in  connection  with the  purchase  of  Con-Test,
           payable in three  annual  installments  through  September  30, 1997.
           Interest accrued
           at 8.5% and is payable quarterly..................................................        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%..............................................        146,272             25,000

         Note payable assumed in connection with the  purchase of ATEC.  Interest
           accrued at the prime rate plus 2% (10.25% at February 28, 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..............         66,667                  -

         Other notes with interest rates ranging from 7.25% to 12.4% due in  monthly
           installments through October, 2001................................................         29,326              9,796
                                                                                                ------------       ------------
                                                                                                  24,110,074        121,840,500
              Less current maturities........................................................      1,986,730          1,420,816
                                                                                                ------------       ------------
              Long-term debt, less current maturities........................................   $ 22,123,344       $120,419,684
                                                                                                ============       ============
</TABLE>
         Bank Credit  Facilities - On January 29, 1998, a credit  facility  with
various  lending  institutions  was  established  providing  the Company  senior
secured  credit  facilities  consisting  of a $20  million  Term  Loan and a $30
million Revolving Credit Facility (the "Bank Credit Facilities").

         The Revolving  Credit  Facility is available to the Company for working
capital,  general corporate purposes,  including certain permitted acquisitions.
Revolving loans mature on January 29, 2003. At the Company's  option,  revolving
loans  will  accrue  interest  at  either  (a) an  adjusted  rate  based  on the
Eurodollar  rate plus a margin of 2.25% or (b) the base  rate  (effectively  the
prime rate) plus a margin of 1.25%.  The loan  margins are subject to  quarterly
decreases based upon improvements in the Company's  leverage ratio.  Interest is
payable  monthly and the Company pays a revolving loan  commitment fee of 1/2 of
1% on a quarterly basis. As of February 28, 1998, the Company had  approximately
$29.5  million  of  availability  under the  Revolving  Credit  Facility  due to
outstanding letters of credit.

                                      F-16
<PAGE>
         The Term Loan amortizes quarterly commencing in February 1999 initially
at $750,000 per quarter,  increasing to $1,000,000 per quarter in February 2000,
$1,500,000  per quarter in February 2001 and  $1,750,000 per quarter in February
2002 with the final loan maturity on January 29, 2003. The initial interest rate
for the Term Loan was set at the base rate plus 1.25%  (7.875% at  February  28,
1998) and since year-end has been converted to a Eurodollar rate loan.

         The Bank Credit  Facilities  will  require the Company to meet  certain
financial tests, including minimum interest coverage and maximum leverage ratios
beginning  as of and  for the  quarter  ended  May 31,  1998.  The  Bank  Credit
Facilities  will also contain  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,  voluntary  prepay or amend
other  indebtedness,  incur liens and encumbrances and other matters customarily
restricted in loan agreements of this type.

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

         The  obligations  of the Company under the Bank Credit  Facilities  are
unconditionally  guaranteed by the  Company's  Parent and any direct or indirect
subsidiaries of the Company.  In addition,  the obligations of the Company under
the Bank Credit Facilities are secured by substantially all of the assets of the
Company.

         12% Senior  Subordinated  Notes Due 2008 - The 12% Senior  Subordinated
Notes due 2008 were issued  January 29, 1998 pursuant to an indenture  agreement
and became obligations of the Company as of the Merger Date. Interest accrues at
12% per annum and is payable semiannually in arrears on each January 15 and July
15,  commencing  July 15,  1998.  The Notes  are  unsecured  obligations  of the
Company,  ranking subordinate in right of payment to all senior indebtedness (as
defined) as of the Merger Date,  and ranking pari passu in right of payment with
any future senior  subordinated  indebtedness  and senior in right of payment to
all other subordinated obligations of the Company. The Notes will be redeemable,
in whole of in part,  at the  Company's  option on or after  January 15, 2003 at
redemption  prices set forth in the Note indenture  agreement.  Up to 35% of the
aggregate  principal  amount of the Notes may be redeemed on or prior to January
15, 2001 with the net cash proceeds of a public  offering at  redemption  prices
and terms in accordance  with the Note indenture  agreement.  The Note indenture
agreement  provides  noteholders the option to have their notes purchased in the
event of a change in control. In addition, the Note indenture contains covenants
restricting  the  incurrence of additional  indebtedness,  payment of dividends,
sales of assets,  incurrence of liens,  mergers and  acquisitions and conduct of
the business to existing businesses.

         8.18%  Senior  Secured  Notes - On May 29,  1997,  the  Company  issued
$32,500,000 of 8.18% Senior Secured Notes to a group of financial  institutions.
The proceeds were used in part to repay the Company's  outstanding bridge credit
facility outstanding as of the February 28, 1997.  Accordingly,  at February 28,
1997, the Company classified its $20,850,000 outstanding bridge loan facility as
long-term  debt.  In  connection  with the issuance of the 8.18% Senior  Secured
Notes,  the  Company  had  entered  into a bank  credit  agreement  providing  a
$15,000,000  revolving  line of  credit.  Amounts  outstanding  under  the  bank
revolver and the 8.18% Senior  Secured Notes were repaid in full using  proceeds
of the 12% Senior Subordinated Notes due 2008 and the Bank Credit Facilities.

         Aggregate  maturities - Aggregate  maturities  of long-term  debt as of
February  28,  1998 are as  follows:  fiscal  1999 -  $1,420,816;  fiscal 2000 -
$3,827,091;  fiscal 2001 - $5,092,593;  fiscal 2002 - $6,250,000,  fiscal 2003 -
$5,250,000 and thereafter $100,000,000.


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,  1998 are as  follows:  fiscal  1999 -
$4,776,616;  fiscal 2000 - $3,828,324;  fiscal 2001 - $2,221,522;  fiscal 2002 -
$1,259,135;   fiscal  2003  -  $844,843   and   thereafter   $2,173,808   (total
$15,104,250).

     Rental expense associated with facility and equipment  operating leases for
fiscal years 1996, 1997 and 1998 for the  Predecessor and Successor  Periods was
$1,389,865, $3,009,675, $3,683,058 and $426,160, respectively.

                                      F-18
<PAGE>
         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.

         Litigation - General  Litigation  - Irv Richter v. ATC Group  Services,
Inc., et al, Civ.  Action No.  16007-NC,  Court of Chancery,  New Castle County,
Delaware.  Joseph I. Peters v. George Rubin,  et al, Civ.  Action No.  16026-NC,
Court of Chancery, New Castle County,  Delaware. 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., a Weiss Peck  affiliate,  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, a Weiss Peck affiliate.  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.

         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 alleged to contain  defamatory  statements  which was
sent to an account  debtor of the Company by an  employee.  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.  ATC also  disputes  that the
Richters sustained damages on the grounds,  among others,  that the options were
non-transferable and because ATC's stock price never exceeded the exercise price
at any point where the options would have been exercisable.  These related cases
are in the discovery  phase.  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  securities  claims.  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 and
cash flows, 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


                                      F-18
<PAGE>
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 in
the amount of  $10,000,000  with a deductible  of $250,000.  Notice of claim has
been made under the policy regarding this action. 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 and cash flows,  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,  Corp.  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. The Company currently has
in force a professional  liability insurance policy in the amount of $10,000,000
with a  deductible  of  $250,000.  Notice  of this  claim has been made to ATC's
professional liability insurer.

     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,  Corp.  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. The Company currently has
in force a professional  liability insurance policy in the amount of $10,000,000
with a  deductible  of  $250,000.  Notice  of this  claim has been made to ATC's
professional liability insurer.

         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's  law and  asserting  that it
should therefore have no liability for Con-Test's alleged 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. ATC has filed a
notice of claim with Con-Test's  insurance company which has assumed the defense
of the action.

         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  ("NYDTF") 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.   ATC's  most  recent
communications with the NYDTF indicate that it is probable that ATC will incur a
liability for back taxes in an approximate  amount of $200,000 which the Company
has recorded as a liability as of February 28, 1998.

     Professional Service Industries, Inc. v. ATC Group Services Inc. and Thomas
Bowker, Superior Court, Norfolk County,  Massachusetts,  June 19, 1997, Civ. No.
97-01146.  The  complaint  alleges that ATC  interfered  with a  non-competition
agreement between Mr. Bowker,  currently an ATC employee, and PSI. An injunction
has been issued by the court  against ATC and Mr. Bowker  prohibiting  them from
competitive acts within certain  geographic areas. The case is currently on hold
pending  mediation  between  the  parties in an  attempt to settle the case.  If
settlement  is not  achieved  through  the  mediation  process,  ATC  intends to
continue to vigorously defend the claim.

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 and a revised NOV and Proposed
Agreed  Order on April 22,  1998.  The  revised  Proposed  Agreed  Order seeks a
penalty in the amount of $78,400 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.  ATC and the
Indiana Department of Environmental Management ("IDEM") are currently engaged in
settlement  discussions.  As a result of this  settlement  process,  the Company
believes that this penalty will be reduced  although  there can be no assurances
in this regard. ATEC will be responsible for one-half of any ultimate penalty.

                                      F-19
<PAGE>
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.

         Bob Moore Construction/Garden  Ridge, Inc. ATC has received notice of a
potential claim arising out of ATC's performance of soil compaction  testing for
Bob Moore  Construction,  Inc.,  the  general  contractor  on a  retaining  wall
construction project for Garden Ridge, Inc., a garden supply chain, in Norcross,
Georgia. The retaining wall eventually failed. Independent consultants performed
investigations  and prepared reports to determine the cause of failure.  Reports
initially concluded that the failure was due to a flaw in the design prepared by
the wall manufacture and installation firm. Both consultants  concluded that the
soil  work  was  properly  performed.  Since  then,  consultants  have  prepared
follow-up  reports,  and the  contractor  has  requested  ATC's  involvement  in
mediation  discussions  regarding the responsibility for repairs with respect to
the various parties  involved in the project.  Total costs to repair the project
currently total $960,000.  ATC is evaluating the follow-up  reports to determine
ATC's potential liability or responsibility, if any. ATC currently believes that
it  performed  all  services  properly  and that it  should  have no  liability.
However,  in any case, ATC believes its share of liability should amount to only
a small  portion  of the total  costs.  Notice of this claim has been made under
ATC's  professional  liability  insurance  policy.  The  professional  liability
insurance is subject to a $250,000  deductible.  Although  the Company  believes
this claim will not result in a material  loss,  no assurance in this regard can
be given.

         Argosy  Casino,  Lawrenceburg,  Indiana.  ATC has  received  notice  of
potential claims arising out of geotechnical analyses for which American Testing
and Engineering Corporation originally provided the geotechnical analyses and on
which ATC  subsequently  performed the design of a Tensar/soil  stabilized earth
slope.  The stabilized  earth/geogrid  engineered  slope failed at the interface
between  the  compacted  subgrade  and the  first  geogrid  layer.  A  tentative
settlement reached among the parties to this claim would result in ATC's payment
of $266,000 in corrective  costs, of which ATC expects  contribution  from other
parties  in an amount of not less than  $80,000.  Notice of this  claim has been
made under ATC's  professional  liability  insurance  policy.  The  professional
liability insurance is subject to a $250,000 deductible.

         Smith  Technology  Acquisition  Claims.  ATC has filed two  claims  for
recoupment  against Smith Technology  Corporation  ("Smith")  arising out of the
Agreement for Sale and Purchase of Business  Assets of August 19, 1998,  between
ATC and Smith (the  "Agreement").  The first claim asserted a recoupment against
the full  amount  of the  $200,000  30-day  note and a return  of  conditionally
assumed  liabilities  in the  total  amount of  $135,000.  These  remedies  were
asserted to partially recoup a deficiency in the Adjusted Equity Value as stated
on Smith's closing Engineering Division Balance Sheet from that warranted in the
purchase agreement.

         On March 27,  1998,  ATC  asserted  a second set of  recoupment  claims
arising under the Agreement for various value, liability, and loss issues in the
amount of $5,127,859 against the $2,750,000 note payable to Smith which had been
assigned to Chase  Manhattan  Bank.  On April 13, 1998,  ATC served a corrective
amendment to this claim  asserting an additional  claim amount of $21,475.  This
resulted in a total claim amount of $5,149,334.  The amount of claim outstanding
after set-off of the full amount of the note is $2,499,334.  Of this amount, ATC
believes that $850,000 of the amount  claimed for third party  liability  claims
should be covered by insurance, resulting in non-recoverable claim in the amount
of  $1,649,334  net of  $100,000  non-refundable  payment.  A  portion  of  this
unrecoverable claim has been expensed in the accompanying consolidated statement
of operations,  and the balance is expected to be recorded as an additional cost
associated with the acquisition as amounts are incurred.

F.  STOCK OPTIONS

         The  Company  established  stock  option  plans in 1988,  1993 and 1995
providing  for  the  granting  of  200,000,   1,000,000,   and  81,750   shares,

                                      F-20
<PAGE>
respectively,  to  employees  and certain  other  participants.  Pursuant to the
Tender Offer, all issued shares became exercisable.  Employees elected to either
receive cash for the  difference  between the offering price of $12.00 per share
and the option  exercise  price or to receive an  equivalent  option to purchase
common stock of Holdings having the same exercise price and vesting  schedule as
the  original  grant.  Non-employees  with stock  options were paid cash for the
value of their options.

         Key  employees of the Company will be eligible to receive  future stock
option  grants for the  purchase of common  stock of  Holdings.  Such grants are
expected to be issued at fair market value at the date of grant. All grants will
be subject to approval by Holdings' Board of Directors.

         The changes in the  outstanding  stock options under the 1988, 1993 and
1995 plans during fiscal years 1996, 1997 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                                                 WEIGHTED
                                                                                                             AVERAGE PRICE PER
                                                                                            OPTIONS               SHARE
                                                                                          -------------      ------------------
<S>                                                                                      <C>                <C> 
         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
          Granted......................................................................       90,050                     10.30
          Exercised....................................................................    (188,370)                      4.20
          Expired......................................................................     (27,000)                     10.90
          Acceleration and elimination of options pursuant to the Tender Offer.........    (595,020)                      9.29
                                                                                        -----------                 ----------

         BALANCE, February 5, 1998, the Merger Date....................................         -0-                 $      -0-
                                                                                        ===========                 ===========


         Options exercisable at:

         February 29, 1996............................................................      307,950
         February 28, 1997............................................................      457,550
         February 28, 1998............................................................        None
</TABLE>

     Options  granted in fiscal 1995 include 50,000  non-plan  options issued in
connection with the acquisition of the Hill Businesses (Note B).

     The Financial  Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No.
123").  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.

                                      F-21
<PAGE>
         As  described  in Note A, 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 employee  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 would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
                                                                                                  Predecessor       Successor
                                                              1996               1997                1998             1998
                                                        -----------------     ------------       -------------- ------------------
<S>                                                      <C>                  <C>                 <C>           <C>   
       Net income (loss):
            As reported............................         $ 3,865,998        $ 6,307,734         $ 2,638,003     $ (1,789,418)
            Pro forma..............................         $ 3,791,472        $ 6,129,810         $ 2,259,100     $ (1,797,007)
</TABLE>


         The Pro forma loss for the Successor Period includes options granted to
Company employees by Holdings.

         For purpose of determining  the  disclosures  required by SFAS No. 123,
the fair values of stock  options on their grant dates were  measured  using the
Black-Scholes  option pricing model.  Key assumptions used to apply this pricing
model were as follows:
<TABLE>
<CAPTION>
                                                                                                Predecessor        Successor
                                                              1996               1997              1998              1998
                                                        -----------------     -----------      --------------    -------------
<S>                                                     <C>                   <C>              <C>                <C>   
         Risk-free interest rate...................            7.8%              5.4%                6.0%             6.0%
         Expected life of option grants............          5 years            5 years             5 years         5 years
         Expected volatility of underlying stock...             48%               48%                 46%              0%

</TABLE>

     The weighted average fair value of stock options granted for the year ended
February 28(29), 1996, 1997 and 1998 were $5.01, $4.36 and $4.97, respectively.

G.  COMMON STOCK WARRANTS

         As of the Merger Date,  February 5, 1998,  all of the then  outstanding
Class  C  warrants   holders  became  eligible  to  receive  $2.00  per  warrant
representing  the Tender  Offer price per a share of common stock of $12.00 less
the Class C Warrant exercise price of $10.00 per share.


                                      F-22
<PAGE>


H.  INCOME TAXES

     Income tax expense (benefit) for the years ended February 28 (29), 1996 and
1997  and  1998  for  the  Predecessor  and  Successor  Period  consists  of the
following:
<TABLE>
<CAPTION>
                                                                                FEDERAL         STATE & LOCAL         TOTAL
                                                                             ---------------   ---------------   ---------------
<S>                                                                        <C>                 <C>              <C> 
         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
                                                                           ================    =============    ================

         1998 - Predecessor Period:
            Current........................................................$       (912,940)   $     118,847    $      (796,093)
            Deferred.......................................................       2,486,300          425,720          2,912,020
                                                                           ----------------    -------------    ---------------
             Total.........................................................$      1,573,360    $     544,597    $     2,117,927
                                                                           ================    =============    ===============

         1998 - Successor Period:
            Current........................................................$     (1,112,275)   $    (266,523)   $    (1,378,789)
            Deferred.......................................................         359,847           54,224            414,071
                                                                           ----------------    -------------    ---------------
             Total.........................................................$       (752,428)   $    (212,299)   $      (964,727)
                                                                           =================   ==============   ================
</TABLE>

     The  predecessor  Company  made  Federal and State  income tax  payments of
approximately  $2,077,000,  $4,062,000 and  $1,941,000 in fiscal 1996,  1997 and
1998, respectively.

         A reconciliation of the statutory US Federal tax rate and effective tax
rate  for the  years  ended  February  28  (29),  1996 and 1997 and 1998 for the
Predecessor and Successor Period is as follows:
<TABLE>
<CAPTION>
                                                                                                      Predecessor        Successor
                                                                     1996              1997               1998              1998
                                                                 -------------     --------------   ---------------    -------------
<S>                                                              <C>               <C>              <C>                <C> 

         Statutory US Federal rate........................             34.0%            34.0%             34.0%             34.0%
         State income taxes, net of federal benefit.......              4.3              4.5               7.6              (3.5)
         Tax benefit of Aurora's net operating loss carry
         forward..........................................             (6.2)              -                 -                 -
         Tax exempt interest income.......................             (2.4)            (1.3)             (3.6)             (6.9)
         Non-deductible expenses, primarily goodwill......              2.1              2.1               6.5              16.5
                                                                 -------------     --------------   ---------------    -------------
                                                                       31.8%             39.3%            44.5%             47.1%
                                                                 =============     ==============   ===============    =============
</TABLE>

         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.

                                      F-23
<PAGE>
         The  tax  effects  of  temporary   differences  that  give  rise  to  a
significant portion of the deferred tax assets and liabilities as of February 28
consist of the following:
<TABLE>
<CAPTION>
                                                                                                     1997                1998
                                                                                             --------------------  ---------------
<S>                                                                                          <C>                    <C>  
 
        Deferred tax assets:
            Nondeductible liabilities...................................................     $          682,900$        1,159,100
            Nondeductible bad debt reserve..............................................                453,800           988,900
                                                                                             ------------------    --------------
                                                                                                      1,136,700         2,148,000
         Deferred tax liabilities:
            Property and equipment......................................................                 95,800            47,900
            Prepaid expenses............................................................                346,400           106,800
            Intangible assets...........................................................                622,000         4,558,900
                                                                                             ------------------    --------------
                                                                                                      1,064,200         4,713,600
         Net deferred tax (liability) asset ............................................     $           72,500    $   (2,565,600)
                                                                                             ==================    ===============
</TABLE>

         The  current  portion  of net  deferred  tax  assets  of  $790,400  and
$2,041,200  at February  28,  1997 and 1998 is  classified  in the  consolidated
balance  sheets in current  assets.  The  non-current  portion is  classified in
non-current liabilities.


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 1996, 1997, and 1998.


                                      F-24
<PAGE>


J.  INDUSTRY SEGMENT DATA

         The Company provides services through its environmental  consulting and
engineering segment and its information  technology consulting segment.  Segment
data for fiscal  1996 is not  presented  as the  Company  only  operated  in the
Environmental and Engineering Segment.
<TABLE>
<CAPTION>
                                                       Environmental        Information       Adjustments &
                                                       & Engineering        Technology        Eliminations            Total
             Year Ended February 28, 1997:             --------------      -------------      -------------      --------------
             -----------------------------    
<S>                                                   <C>                   <C>               <C>                <C> 
                                       
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
 -----------------

                                                       Environmental        Information       Adjustments &
                                                       & Engineering        Technology        Eliminations            Total
             Year Ended February 28, 1997:             --------------      -------------      -------------      --------------
             -----------------------------
             Predecessor Period:
             -------------------
                                                       
Revenues.............................................. $  121,457,521       $ 8,106,871         $   (303,408)    $  129,260,984
Operating income......................................      6,986,775           437,050                    -          7,423,825
Depreciation and amortization.........................      3,039,310            40,644                    -          3,079,954

Capital expenditures..................................      1,937,379            39,226                    -          1,976,605

             Successor Period:
             -----------------

Revenues............................................... $  11,327,031            848,662        $          -      $  12,175,693
Operating income (loss)................................    (1,565,483)            79,331                   -         (1,486,152)
Depreciation and amortization..........................       578,362              5,262                   -            583,624

Capital expenditures...................................       117,472             16,844                   -            134,316

Identifiable assets as of
 February 28, 1998.....................................  $187,384,156       $ 5,768,741         $  (4,279,664)    $ 188,873,233
 -----------------
</TABLE>


                                      F-25
<PAGE>
K.  SUPPLEMENTAL INFORMATION

         Supplemental cash flow information - Supplemental cash flow information
for the years ended February 28 (29), 1996 and 1997 and 1998 for the Predecessor
and Successor Period is as follows:
<TABLE>
<CAPTION>
                                                                                                  Predecessor        Successor
                                                                   1996             1997              1998              1998
                                                               -------------    --------------    -------------     -------------
<S>                                                          <C>               <C>              <C>                 <C> 
         Cash paid for interest...........................   $      374,466    $    1,515,432   $    2,092,973        $  617,692

         Noncash investing and financing activities:

           Liabilities assumed in connection with
             business combinations........................          640,082        26,728,981        9,392,367                 -
           Common stock issued in connection with
             business combinations........................                -                 -          365,063                 -
           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........................        1,000,000         2,589,086        5,054,643
           Notes payable issued in connection with the
             Tender Offer and Merger......................                -                 -                -       120,000,000


         Supplemental analysis of valuation and qualifying accounts - Changes in
the allowance for doubtful  accounts for the years ended February 28 (29),  1996
and 1997 and 1998 for the Predecessor and Successor Period is as follows:
                                                                                                  Predecessor        Successor
                                                                   1996             1997              1998              1998
                                                               -------------    --------------    -------------     -------------

         BALANCE, beginning of period.....................  $       535,886   $       383,220     $   1,455,716    $   2,532,493

             Provision for bad debts......................          290,165         1,021,631        1,956,803           546,815
             Amounts written-off, net of recoveries.......         (309,932)         (452,836)      (1,402,940)           (1,479)
             Adjustment for allowance for doubtful
               accounts recorded on net acquired
               (rescinded) accounts receivable............         (132,899)          503,701          522,914                -
                                                            ----------------  ---------------    -------------     -------------

         BALANCE, end of period...........................  $       383,220     $   1,455,716    $   2,532,493     $   3,077,829
                                                            ===============     =============    =============     =============
</TABLE>


                                      F-26
<PAGE>
L. QUARTERLY FINANCIAL DATA (Unaudited)

         The Company's unaudited quarterly results of operations for fiscal 1997
and 1998 are as follows:
<TABLE>
<CAPTION>


          Fiscal 1997                                                 Three Months Ended
                                 ----------------------------------------------------------------------------------------------
                                       May 31            August 31         November 30                 February 28
                                        1996                1996              1996                        1997
          ---------------------- -------------------- ----------------- ------------------ ------------------------------------
<S>                              <C>                   <C>              <C>                 <C> 

         Revenues..............   $   16,645,983        $   33,922,028   $   32,848,840             $   30,438,513
         Net revenues..........       14,024,405            28,844,545       27,193,068                 25,839,451
         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

</TABLE>

<TABLE>



          Fiscal 1998                                                 Three Months Ended
                                 ----------------------------------------------------------------------------------------------
                                       May 31            August 31         November 30                 February 28
                                                                                           ------------------------------------
                                                                                              Predecessor        Successor
                                        1997                1997              1997               1998               1998
                                       (1)(3)                                  (2)                                 (3)(4)
          ---------------------- -------------------- ----------------- ------------------ ------------------ -----------------
<S>                               <C>                  <C>              <C>                <C>               <C>
         Revenues..............   $   31,374,666        $  34,722,201    $ 38,166,478       $ 24,997,639      $  12,175,693
         Net revenues..........       26,918,833           28,816,537      32,653,637         21,083,605          9,949,086
         Gross profit..........       12,257,212           13,065,475      15,125,776          8,671,823          4,222,515
         Income (loss) before
           income taxes........        1,946,316            2,063,039       2,020,710         (1,274,135)        (2,754,145)
         Net income (loss).....        1,176,316            1,248,039       1,179,710           (966,062)        (1,789,418)
</TABLE>

---------------
         The  Company's  operations  are  seasonal  in  nature,  with  a  larger
percentage of income earned in the second quarter.

(1)  Reflects the acquisition of American  Testing and  Engineering  Corporation
     and 3D Information Services,  Inc. effective May 24, 1996 and May 28, 1996,
     respectively.

(2)  Reflects the acquisition of BCM Engineers Inc.  effective  August 19, 1997,
     the acquisition of Environmental  Warranty, Inc. effective November 4, 1997
     and the acquisition of Bing Yen & Associates effective November 26, 1997.

(3)  Reflects  the  issuance of the 12% Senior  Subordinated  Notes Due 2008 and
     Bank Term Loan issued January 29, 1998 and February 5, 1998, respectively.

(4)  Reflects  losses and expense  associated  with the  settlement of executive
     bonus  claims,  expected  loss  for  pending  state  tax  claims,  reserves
     established for expected  write-offs of certain trade  receivables and work
     in process,  and the  impairment of goodwill  associated  with a laboratory
     operation sold during the quarter ended, May 31, 1998.



                                      F-27
<PAGE>
                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.
-------   ---------------------------------------------------

         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 as of February 28, 1998.

   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

         The above directors will serve until their  successors are duly elected
and  appointed.  Each of the  directors  were  appointed  on  February  5, 1998.
Officers will serve in their  capacities as determined by the Board of Directors
from time to time.

     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.  In
connection with the Transactions,  Mr. Crosby will be terminating his employment
with the Company effective September 30, 1998.

     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 Weden'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.


                                       30
<PAGE>
     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.

Employment Agreements

     In connection with the  transactions  surrounding  the Merger,  the Company
entered into  employment  agreements  with Nicholas J. Malino and Christopher P.
Vincze.  See "Item 11 -  Executive  Compensation  -  Employment  Agreements  and
Terminations of Employment Agreements."

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.


                                       31
<PAGE>
Item 11.  Executive Compensation.
--------  -----------------------

         Summary  Compensation Table - The following table provides  information
with respect to the compensation of ATC's Chief Executive  Officer (CEO) and its
four most highly compensated  executive officers,  other than the CEO, who where
serving as executive officers at the end of fiscal 1998.
<TABLE>
<CAPTION>


                                                   SUMMARY COMPENSATION TABLE

----------------------------------------------------------------------------------- ----------------------------------- ---------
                                                                                          Long Term Compensation
                               Annual Compensation                                           Awards           Payouts
----------------------------------------------------------------------------------- ------------------------- --------- ---------
             (a)                   (b)          (c)           (d)          (e)          (f)          (g)        (h)       (i)

                                                                                                    Secur-                All
                                                                          Other                   ities                  Other
                                  Year                                   Annual      Restricted     Under-      LTIP      Com-
          Name and                Ended                                  Compen        Stock        lying     Payouts     pen-
          Principal             February       Salary        Bonus       sation       Award(s)     Options      ($)      sation
          Position               28 (29)        ($)           ($)          ($)          ($)          (#)                  ($)
------------------------------ ------------ ------------- ------------ ------------ ------------- ----------- --------- ---------
<S>                            <C>           <C>           <C>         <C>          <C>            <C>         <C>       <C>

Morry F. Rubin(1)                 1998        281,096         -0-       2,239,712       -0-          -0-        -0-       -0-
                                  1997        268,750       259,943        -0-          -0-          -0-        -0-       -0-
President and                     1996        225,000       141,774        -0-          -0-          (3)        -0-       -0-
Chief Executive Officer
------------------------------ ------------ ------------- ------------ ------------ ------------- ----------- --------- ---------

George Rubin(2)                   1998        281,096         -0-        860,290        -0-          -0-        -0-       -0-
                                  1997        268,750       259,943        -0-          -0-          -0-        -0-       -0-
Chairman of the Board             1996        225,000       141,774        -0-          -0-          (4)        -0-       -0-
and Secretary
------------------------------ ------------ ------------- ------------ ------------ ------------- ----------- --------- ---------

Nicholas J. Malino,               1998        192,521       226,730        -0-          -0-          -0-        -0-       -0-
President                         1997        170,000       100,000        -0-          -0-         57,500      -0-       -0-
                                  1996        142,308         -0-          -0-          -0-         30,000      -0-       -0-

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

Christopher P. Vincze,            1998        192,521       200,000     6,125(5)        -0-          -0-        -0-       -0-
Chief Operating                   1997        170,000       100,000     6,000(5)        -0-         37,500      -0-       -0-
Officer                           1996        142,308         -0-       6,000(5)        -0-         30,000      -0-       -0-

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

John J. Goodwin                   1998        140,000       64,652         -0-          -0-          -0-        -0-       -0-
President and Director            1997        140,000       51,335         -0-          -0-          -0-        -0-       -0-
ATC InSys Technology Inc.         1996        140,000         -0-          -0-          -0-          -0-        -0-       -0-


------------------------------ ------------ ------------- ------------ ------------ ------------- ----------- --------- ---------
Donald W. Beck                    1998        119,835         -0-          -0-          -0-          -0-        -0-       -0-
Senior                            1997         89,473       29,600         -0-          -0-          -0-        -0-       -0-
Vice President                    1996         88,140       28,000         -0-          -0-          -0-        -0-       -0-

------------------------------ ------------ ------------- ------------ ------------ ------------- ----------- --------- ---------
Wayne A. Crosby                   1998         80,000       28,500         -0-          -0-          -0-        -0-       -0-
Controller                        1997         80,000       10,000         -0-          -0-          -0-        -0-       -0-
                                  1996         75,000       13,461         -0-          -0-          -0-        -0-       -0-
------------------------------ ------------ ------------- ------------ ------------ ------------- ----------- --------- ---------
</TABLE>


                                       33
<PAGE>

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

 (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  surrounding the Merger.  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).  "Other  Annual  Compensation"  represents  severance  paid in
         connection with the 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 surrounding the Merger. Mr. George Rubin has agreed
         to  provide  consulting  services  to  the  Company  on the  terms  and
         conditions  set forth in a Severance  Agreement  (as  defined  herein).
         "Other Annual  Compensation"  represents  severance  paid in connection
         with the Severance Agreements.

(3)      Does not include  options to purchase 81,750 shares of ATC Common Stock
         issued  in   replacement   of   previously   held   options  of  Aurora
         Environmental  Inc.  ("Aurora"),  ATC's former parent company which was
         merged into ATC in June, 1995, with ATC the surviving corporation.

(4)      Does not include  490,500  warrants to purchase ATC Common Stock issued
         in replacement of previously held warrants of Aurora Environmental Inc.
         ("Aurora").

(5) Represents compensation relating to a car allowance.


                                       33
<PAGE>

         Options Grants Table - The following  table provides  information  with
respect to individual  grants of stock options by ATC during fiscal 1998 to each
of the executive officers named in the preceding summary compensation table.
<TABLE>
<CAPTION>


                                                OPTION GRANTS IN LAST FISCAL YEAR

----------------------------------------------------------------------------------------------- ---------------------------------
                                                                                                              Potential
                                                                                                          Realized Value at
                                                                                                           Assumed Annual
                                                                                                         Rates of Stock Price
                                                                                                             Appreciation
                                                                                                         for Option Term
                                                                                                         Individual Grants      
                                                                                                               (2)
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------
           (a)                   (b)              (c)              (d)              (e)               (f)              (g)
<S>                          <C>             <C>              <C>             <C>                <C>               <C>

                                                  % of
                              Number of          Total
                              Securities        Options
                              Underlying       Granted to
                               Options         Employees        Exercise
                               Granted         in Fiscal          Price         Expiration
           Name                  (#)            Year (1)         ($/Sh)            Date              5% ($)          10% ($)
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


Morry  F. Rubin                  -0-              -0-              N/A              N/A               -0-              -0-
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


George Rubin                     -0-              -0-              N/A              N/A               -0-              -0-
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


Christopher P. Vincze            -0-              -0-              N/A              N/A               -0-              -0-
-------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


Nicholas  J. Malino              -0-              -0-              N/A              N/A               -0-              -0-
-------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


John J. Goodwin                  -0-              -0-              N/A              N/A               -0-              -0-
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


Donald W. Beck                   -0-              -0-              N/A              N/A               -0-              -0-
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------


Wayne A. Crosby                  -0-              -0-              N/A              N/A               -0-              -0-
--------------------------- --------------- ----------------- -------------- ------------------ ----------------- ---------------
</TABLE>


         N/A - not applicable
------------

(1)      The "% of Total  Options  Granted to Employees in Fiscal Year"  (Column
         (c)) is based upon options  granted to ATC employees  only and excludes
         options granted to non-employees.

(2)      The potential  realizable  value of each grant of options  assumes that
         the market price of ATC's Common  Stock  appreciates  in value from the
         date of grant to the end of the option term at  annualized  rates of 5%
         and 10%,  respectively,  after subtracting out the applicable  exercise
         price.



                                       34
<PAGE>


         Aggregated  Option  Exercises  and Fiscal  Year-End  Option Table - The
following  table  provides  information  with respect to each  exercise of stock
options  during  fiscal  1998 by each of the  executive  officers  named  in the
preceding  summary   compensation   table  and  the  fiscal  year-end  value  of
unexercised options.

<TABLE>
<CAPTION>


                         AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR - END OPTION VALUES

--------------------------- ------------------------- ------------------------ ------------------------- -------------------------
           (a)                        (b)                       (c)                      (d)                       (e)
                                                                                      Number of
                                                                                      Securities                 Value of
                                                                                      Underlying               Unexercised
                                                                                     Unexercised               In-the-Money
                                                                                      Options at                 Options
                                     Shares                                           FY-End (#)              at FY-End ($)
                                  Acquired on                  Value
                                    Exercise               Realized (1)              Exercisable/              Exercisable/
           Name                       (#)                       ($)               Unexercisable (1)         Unexercisable (1)
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------
<S>                         <C>                       <C>                      <C>                       <C>

Morry F. Rubin                      161,750                 $1,222,390                -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------


George Rubin                          -0-                       -0-                   -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------


Nicholas J. Malino                   69,500                   321,750                 -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------


Christopher P. Vincze                65,000                   380,618                  -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------


John J. Goodwin                       -0-                       -0-                   -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------


Donald W. Beck                       10,000                   57,500                  -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------


Wayne A. Crosby                      10,000                   45,750                  -0-  /  -0-             -0-   /  -0-
--------------------------- ------------------------- ------------------------ ------------------------- -------------------------
</TABLE>

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

(1)      The  aggregate  dollar  values in column (c) and (e) are  calculated by
         determining the difference  between the fair market value of the Common
         Stock  underlying  the options and the exercise price of the options at
         the date of exercise. ATC's last sale price at the close of business on
         February 5, 1998 was $12.00.  "Shares Acquired on Exercise"  relates to
         the exercise of stock options only and excludes warrant exercises,  but
         includes stock options  replaced with stock options for Holdings common
         stock.

(2) ATC's stock option plans were  discontinued  in  connection  with the Tender
         Offer and Merger.



                                       35
<PAGE>
Compensation of Directors

         There are no current arrangements for future compensation of directors.
See Item "10 - Directors and  Executive  Officers of the  Registrant - Directors
Compensation" for directors compensation during fiscal year 1998.

Employment Agreement and Termination of Employment Agreements

     Prior to February 5, 1998, George Rubin, Morry F. Rubin, Nicholas J. Malino
and Christopher P. Vincze received  annual salaries of  approximately  $300,000,
$300,000,  $200,000  and  $200,000,  respectively.  Salaries  of  all  executive
officers of ATC (6 persons) aggregated $865,000 as of February 5, 1998. Prior to
February 5, 1998, ATC had no employment  contracts with its executive  officers,
and all salaries and bonuses were at the discretion of the Board of Directors.

     In connection with the  transactions  surrounding  the Merger,  the Company
entered  into  employment  agreements  with  each  of  Nicholas  J.  Malino  and
Christopher  P.  Vincze  (each  employment  agreement  is  referred  to  as  the
"Employment  Agreement,"  and both the employment  agreements  are  collectively
referred  to as the  "Employment  Agreements".  Messrs.  Malino  and  Vincze are
referred  to 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  surrounding the Merger.  50% of
the options  granted to each of the  Executives are  time-vested  and 50% of the
options vest upon the Company's  attaining certain operation targets established
in the Employment agreements. In addition,  pursuant to the Employee 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.

         Upon consummation of the Merger,  the Company entered into two separate
Severance Agreements (as defined herein),  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 F. Rubin  resigned  his  position  as
President  and Chief  Executive  Office  of the  Company.  See "Item 13  Certain
Relationships and Related Transactions."

         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 the  Board  of
Directors,  make additional  contributions on behalf of the Plan's participants.
No  contributions  were made by the Company in fiscal years 1996, 1997 and 1998.
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 $100,000,  which are not directly
related to job performance or provided generally to all salaried employees.


                                       36
<PAGE>
         Ten-Year Option  Repricing - The following  table provides  information
with respect to adjustments or amendments to previously awarded stock options to
the executive officers named in the preceding summary compensation table.


<TABLE>
<CAPTION>

                                                   TEN-YEAR OPTION REPRICINGS

--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------
              (a)                    (b)            (c)              (d)              (e)             (f)              (g)
                                                  Number           Market          Exercise                         Length of
                                                    of            Price of           Price                          Original
                                                Securities        Stock at            at                           Option Term
                                                Underlying          Time              time                          Remaining
                                                  Options            of               of                           at Date of
                                                 Repriced         Repricing        Repricing          New           Repricing
                                                    or          or Amendment          or            Exercise      or Amendment
                                                  Amended            ($)         Amendment ($)       Price             (1)
              Name                   Date           (#)                                                ($)
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------
<S>                               <C>         <C>              <C>              <C>              <C>             <C>

Morry F. Rubin
President and
Chief Executive Officer              N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------

George Rubin,
Chairman   of  the   Board   and
Secretary                            N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------

Nicholas J. Malino
President                            N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------

Christopher P. Vincze
Chief Operating
Officer                              N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------

John J. Goodwin
President and Director
ATC InSys Technology Inc.            N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------

Donald W. Beck
Senior
Vice President                       N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------

Wayne A. Crosby
Controller                           N/A            N/A              N/A              N/A             N/A              N/A
--------------------------------- ----------- ---------------- ---------------- ---------------- --------------- ----------------
</TABLE>

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

(1)  The length of  original  option  term  remaining  represents  the number of
     months determined as of February 28, 1998


                                       37
<PAGE>

Compensation Committee Interlocks and Insider Participation

     Prior to February 5, 1995,  the Board of  Directors  of ATC was composed of
five members, namely, George Rubin, Chairman of the Board, Morry F. Rubin, ATC's
Chief Executive Officer ("CEO"),  Richard L. Pruitt,  Vice President,  Principal
Accounting Officer, Julia S. Heckman, Managing Director with Rodman and Renshaw,
Inc.'s Investment Banking Group and Richard S. Greenberg Esq., a director of the
Environmental  Management Group at Coopers & Lybrand. The Board of Directors had
an Audit  Committe and a  Compensation  Committe  consisting of three  directors
including Morry F. Rubin and outside directors  Richard S. Greenberg,  and Julia
S.Heckman. The Audit Committe was respomsible, among other things, for approving
any  transactions  between the Company and any of its executive  officers of the
Company and for granting any furgher options of purchase Common Stock.  Prior to
August 1995, the Board had sole  resonsibility for reviewing and determining the
annual  salary,  bonuses,  stock options  grants and other  compensation  of the
executive officers of ATC.

     Prior to February 5, 1998,  George  Rubin and Morry F. Rubin were  officers
and  directors of certain ATC's  subsideraries.  Morry F. Rubin and George Rubin
each received all of their respective cash compensation through ATC.

     George Rubin is one of the two directors of National Diversified  Services,
Inc.  ("National").  During  National's  fiscal year ended December 31, 1996, no
cash  compensations was paid to any officer of ATC, During the past fiscal year,
ATC and their subsidiaries had no business relationship with National.

     Following the Merger on February 5, 1998, the Board of Directors of ATC has
had sole  responsibility  for  reviewing  and  determining  the  annual  salary,
bonuses, stock option grants and other compensation of the executive officers of
ATC, limited by the provisions of the Employment Aggrements with Nicholas Malino
and Christopher Vincze.

Compensation Committee Report on Executive Compensation

     Prior to February 5, 1998, the Compensation Committee was composed of three
members,  namely,  Morry F. Rubin, Chief Executive Officer ("CEO"),  and outside
directors Julia S. Hechman and Richard S. Greenberg.  The compensation Committee
was responsible for reviewing and determining the annual salary,  bunuses, stock
option grants and other compensation of the executive officers of ATC.

     Following the Merger on February 5, 1998, all  compensation  determinations
has been and will be made by the Board of  Directors of ATC. At the time of this
report, the Board of Directors has not yet established a separate policy and has
continued to implement the policy  described below that had been  established by
the Compensation Committee prior to the Merger.


Comparative Performance by ATC

         ATC is presenting a chart  comparing the cumulative  total  stockholder
return on its Common Stock with the cumulative Stockholder return of (1) a broad
equity market index,  and (2) a published  industry  index or peer group for the
past five years.  Such chart compares the  performance of the ATC's Common Stock
with (1) the NASDAQ Stock Market Index and (2) a group of publish companies each
of whom are listed in the peer group  sanitary and other services and assumes an
investment  of $100 in ATC's Common Stock and on March 1, 1992 an  investment of
$100 in each of the stock  comprising  the  NASDAQ  Stock  Market  Index and the
stocks of the peer group sanitary and other services.

<PAGE>

Comparison of Five Year -Cumulative Total Returns Performance Graph for ATC
Environmental Inc.

             Prepared by the Center for Research in Security Prices
                 Produced on 05/29/98 including data to 02/27/98

            Company     Market    Market     Peer     Peer 
  Date       Index      Index     Count     Index     Count
--------    -------    -------    -----    -------    -----
02/26/93,   100.000,   100.000,    3947,   100.000,     35
03/31/93,    92.188,   102.894,    3972,    98.782,     35
04/30/93,    76.563,    98.503,    4007,    90.770,     35
05/28/93,   110.938,   104.385,    4035,    90.266,     34
06/30/93,   142.188,   104.865,    4071,    85.616,     34
07/30/93,   156.250,   104.990,    4103,    86.816,     32
08/31/93,   127.344,   110.415,    4138,    82.397,     31
09/30/93,   150.000,   113.704,    4173,    83.023,     31
10/29/93,   168.750,   116.260,    4220,    83.255,     32
11/30/93,   190.625,   112.794,    4303,    82.906,     32
12/31/93,   178.125,   115.940,    4375,    81.349,     32
01/31/94,   168.750,   119.459,    4399,    85.422,     33
02/28/94,   171.875,   118.343,    4438,    83.742,     33
03/31/94,   212.500,   111.065,    4490,    77.118,     33
04/29/94,   250.000,   109.624,    4519,    71.883,     33
05/31/94,   290.625,   109.891,    4562,    68.232,     33
06/30/94,   265.625,   105.872,    4576,    65.573,     30
07/29/94,   262.500,   108.043,    4594,    63.237,     30
08/31/94,   237.500,   114.931,    4612,    63.717,     30
09/30/94,   250.000,   114.637,    4615,    66.886,     31
10/31/94,   340.625,   116.890,    4637,    68.598,     31
11/30/94,   431.250,   113.013,    4653,    65.608,     32
12/30/94,   406.250,   113.329,    4658,    66.875,     32
01/31/95,   364.063,   113.965,    4648,    67.270,     32
02/28/95,   331.250,   119.992,    4650,    66.080,     31
03/31/95,   353.125,   123.550,    4644,    65.805,     32
04/28/95,   434.375,   127.440,    4655,    68.119,     32
05/31/95,   375.000,   130.728,    4654,    81.651,     32
06/30/95,   375.000,   141.323,    4671,    87.007,     32
07/31/95,   403.125,   151.711,    4690,   103.209,     32
08/31/95,   375.000,   154.787,    4713,   103.281,     32
09/29/95,   375.000,   158.346,    4709,   107.772,     33
10/31/95,   343.750,   157.439,    4747,   103.812,     32
11/30/95,   312.500,   161.135,    4779,   114.073,     33
12/29/95,   293.750,   160.276,    4819,   128.348,     33
01/31/96,   318.750,   161.066,    4809,   124.173,     33
02/29/96,   306.250,   167.196,    4839,   122.427,     33
03/29/96,   312.500,   167.751,    4878,   127.739,     34
04/30/96,   315.625,   181.668,    4923,   133.957,     34
05/31/96,   381.250,   190.010,    4981,   179.695,     32
06/28/96,   328.125,   181.445,    5034,   195.413,     32
07/31/96,   356.250,   165.288,    5066,   159.449,     32
08/30/96,   321.875,   174.549,    5090,   174.166,     33
09/30/96,   321.875,   187.900,    5096,   194.037,     33
10/31/96,   271.875,   185.825,    5138,   200.967,     33
11/29/96,   262.500,   197.312,    5180,   210.379,     31
12/31/96,   231.250,   197.134,    5177,   203.159,     30
01/31/97,   196.875,   211.145,    5162,   254.331,     29
02/28/97,   206.250,   199.472,    5171,   223.866,     29
03/31/97,   221.875,   186.450,    5169,   216.716,     29
04/30/97,   221.875,   192.279,    5156,   170.562,     29
05/30/97,   278.125,   214.077,    5149,   173.565,     27
06/30/97,   287.500,   220.628,    5133,   192.151,     27
07/31/97,   275.000,   243.915,    5128,   195.227,     27
08/29/97,   273.438,   243.544,    5117,   198.613,     26
09/30/97,   264.063,   257.954,    5107,   238.287,     26
10/31/97,   276.563,   244.594,    5115,   242.092,     25
11/28/97,   281.250,   245.819,    5131,   250.902,     25
12/31/97,   290.625,   241.959,    5079,   267.432,     25
01/30/98,   298.438,   249.567,    5051,   249.966,     25
02/27/98,   292.188,   272.938,    5030,   253.085,     25

<PAGE>

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"),

                                       38
<PAGE>
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,
Holdings  intends to enter into  indemnification  agreements with certain of 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 Holding or its subsidiaries, including ATC, or served
any other corporation in any capacity at the request of Holdings,  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.


                                       39
<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management.
--------  ---------------------------------------------------------------

         The Company is a wholly owned subsidiary of Acquisition Holdings,  Inc.
("Holdings").  The  following  table 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, par value $0.01 per
share owned  beneficially  as of February 28, 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.
<TABLE>
<CAPTION>


------------------------------------------------ -------------------------------------- ---------------------------------------
                                                         Holdings Common Stock                 Holdings Preferred Stock

                     Name,
                  Address and
                   Position
                      (1)
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
                                                                       Approximate                             Approximate
                                                      Number            Percent of            Number            Percent of
                                                        Of              Beneficial              Of              Beneficial
                                                      Shares            Ownership             Shares            Ownership
                                                                       Of Class (2)                              Of Class
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
<S>                                              <C>                <C>                 <C>                 <C>  

Nicholas J. Malino                                       *                  *                   -                   -
President, Director (3)
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
Christopher P.Vincze                                     *                  *                   -                   -
Chief Operating Officer, Director(3)
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
Wesley W. Lang Jr.                                   1,661,253            97.55%                -                   -
Director (4)
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
Nora E. Kerppola                                     1,661,253            97.55%                -                   -
Director (4)
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
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 Insurance Company               187,771             10.16%             100,000              100.0%
c/o PPM America, Inc. (5)
225 West Wacker Drive,
Suite 1200, Chicago, Illinois 60606
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
All directors and officers as a group (3) (6)            *                  *                   -                   -
------------------------------------------------ ------------------ ------------------- ------------------- -------------------
</TABLE>

--------------
* 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 table 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 Holdings  Common Stock  outstanding  as of
     February 28, 1998.
(3)  In addition,  directors,  officers and certain employees of ATC will own an
     equity stake in Holdings,  the parent of ATC, equal to approximately 24.1%,
     reflecting a committed investment by management of $2.1 million and options
     representing 11.7% of the fully diluted ownership of Holdings Common Stock.
(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
     Holdings Common Stock.
(5)  The beneficial ownership of shares of Holdings Common Stock indicated above
     includes  warrants to purchase  146,104  shares of  Holdings  Common  Stock
     granted to Jackson  National Life Insurance  Company in connection with its
     investment  in the Holdings  Preferred  Stock;  the warrants are  currently
     exercisable.  
(6)  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.



                                       40
<PAGE>
Item 13.  Certain Relationships and Related Transactions.
--------  -----------------------------------------------

         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.

         ATC has in the past,  and may in the  future,  enter into  transactions
with  officers,  directors  and  other  affiliates  which  may be  deemed  to be
non-arms-length  transactions (i.e.  transactions between related parties).  Any
new  transactions  would be  approved by a majority  of  disinterested  Board of
Directors  and would be  expected to be made on terms no less  favorable  to ATC
than could be arranged with independent third parties.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form  8-K.
-------   ------------------------------------------------------------------

         (a) (1)  Financial Statements
                  --------------------

         A list of the  financial  statements  filed  as a part  of this  Annual
Report is set forth in Item 8, and  appears  on Page F-1  herein;  which list is
incorporated herein by reference.

         (a) (2)  Financial Statement Schedules
                  -----------------------------

         No financial  statement schedules are in this Annual Report because the
information  required is contained in the financial  statements  incorporated by
reference in (a) (1) above.

         (a) (3)  Exhibits
                  --------

     A list of  exhibits  required  by Item 601 of  Regulation  S-K and an index
thereto appears on the following page of this Annual Report.

         (b)      Reports on Form 8-K
                  -------------------

         No  reports  on Form 8-K were  filed  during  the  three  months  ended
February 28, 1998.

                                       41
<PAGE>


EXHIBIT INDEX
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


Exhibit         Description
-----------     -----------------------------------------------------------------------------------------------------------------
<S>             <C> 

1*              Purchase Agreement, dated as of January 22, 1998, between Acquisition Corp. and BT Alex Brown Incorporated

2.1             Agreement and Plan of Merger to reincorporate in Delaware (contained in Exhibits 3.1 and 3.2, (1)

2.2             Agreement and Plan of Merger between ATC Environmental Inc. and Aurora Environmental Inc. (5)

2.3             Merger Agreement pursuant to section 7(m) of  The Purchase Agreement, dated November 26, 1997

3.1*            Articles of Incorporation of Registrant (1)

3.2*            By-Laws of the Registrant (1)

4.1*            Indenture,  dated as of January 29, 1998 among Acquisition Corp. and the 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.

10.1            Employee Savings (401(k)) Plan (2)

10.2            New York City Lease (3)

10.3            Form of Indemnity Agreement (9)

10.4            Irrevocable  Letter of Credit  executed by Atlantic  Bank of New York on November 8, 1995,  and delivered by ATC
                Environmental  Inc. on November 10, 1995,  payable on or after May 1, 1996, to Hill  International,  Inc. in the
                amount of $730,625.00 (4)

10.5            Agreement  for Sale and Purchase of Business  Assets on May 24, 1996,  among ATC  Environmental  Inc.,  American
                Testing and Engineering Corporation d/b/a ATEC Associates, Inc. and Gerald D. Mann. (10)

10.6            Assumption  of  Liabilities  Agreement on May 24,  1996,  among ATC  Environmental  Inc.,  American  Testing and
                Engineering Corporation and Gerald D. Mann. (10)

10.7            Master  Equipment  Lease  Agreement on May 24, 1996,  between ATC  Environmental  Inc. and American  Testing and
                Engineering Corporation. (10)

10.8            Master  Sublease   Agreement  on  May  24,  1996,   between  ATC
                Environmental   Inc.  and  American   Testing  and   Engineering
                Corporation  covering  premises  leases  at  Indianapolis,   IN,
                Atlanta, GA and Dallas, TX. (10)

10.9            Non-Competition  Agreement on May 24, 1996,  between ATC Environmental Inc. and American Testing and Engineering
                Corporation. (10)
</TABLE>



                                       42
<PAGE>


EXHIBIT INDEX (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


Exhibit         Description
-----------     -----------------------------------------------------------------------------------------------------------------
<S>             <C> 

10.10           Mann Non-Competition Agreement on May 24, 1996, between ATC Environmental Inc. and Gerald D. Mann. (10)

10.11           Security Agreement on May 24, 1996, among ATC Environmental Inc.,  American Testing and Engineering  Corporation
                and Gerald D. Mann. (10)

10.12           $500,000  Letter of Credit on May 24, 1996, from Chemical Bank,  N.A.  against the account of ATC  Environmental
                Inc. in favor of American Testing and Engineering Corporation. (10)

10.13           Agreement  for Sale and  Purchase  of Business  Assets on May 28,  1996,  among ATC InSys  Technology  Inc.,  3D
                Information Services Inc. and Ciro De Saro. (10)

10.14           Assumption  of  Liabilities  Agreements  on May 28, 1996,  between ATC InSys  Technology  Inc.,  3D  Information
                Services Inc. and Ciro De Saro. (10)

10.15           Stockholders  Non-Competition  Agreement on May 28, 1996, between ATC InSys Technology Inc. and the stockholders
                of 3D Information Services Inc. (10)

10.16           Three-year,  $2,500,000  Promissory Note on May 29, 1996, from ATC Environmental Inc. to 3D Information Services
                Inc. (10)

10.17*          Employment Agreement, dated as of February 16, 1998, between ATC Group Services Inc.,
                Acquisition Holdings, Inc. and Nicholas J. Malino.

10.18*          Employment Agreement, dated as of February 16, 1998, between ATC Group Services Inc.,
                Acquisition Holdings, Inc. and Christopher P. Vincze.

10.19*          Credit Agreement, dated as of January 29, 1998, among Acquisition Holdings, Inc., Acquisition
                Corp., various banks and Bankers Trust Company, as agent.

10.20*          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.

10.21*          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.

10.22*          Severance, Consulting and Non-Competition Agreement, dated as of February 5, 1998, by and between ATC Group
                Services Inc. and George Rubin.

10.23*          Severance, Consulting and Non-Competition Agreement, dated as of February 5, 1998, by and between ATC Group
                Services Inc. and Morry F. Rubin.

10.24*          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.)

10.25*          Stock Purchase Agreement, dated November 26, 1998, between ATC Group Services Inc., Bing  Yen & Associates,
                Inc. and Glenn Tofani.

10.26*          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.

</TABLE>
 



                                     43
<PAGE>

EXHIBIT INDEX (continued)
--------------------------------------------------------------------------------

Exhibit         Description
-----------     ----------------------------------------------------------------

21**            Subsidiaries of Registrant

27*             Financial Data Schedule

99.1            1988 Stock Option Plan (6)

99.2            1993 Stock Option Plan (7)

99.3            Amendment to 1993 Stock Option Plan (8)

99.4            1995 Stock Option Plan (8)

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

*    Filed herewith.

**   During the fiscal year ended  February  28,  1998,  ATC had nine  operating
     subsidiaries,  namely, Hygeia Laboratories Inc. ("Hygeia"),  ATC Management
     Inc.  ("Management  Co."), ATC New England Corp.  ("ATC New England"),  ATC
     Blattert Inc.  ("Blattert"),  ATC InSys Technology Inc. ("ATC InSys"),  ATC
     Construction  Services Inc. ("ATC  Construction"),  ATC Environmental  Inc.
     ("ATC  Environmental"),  Bing  Yen &  Associates  Inc.  ("Bing  Yen"),  and
     Environmental  Warranty  Inc.  ("EWI").  Hygeia,  Management  Co.,  ATC New
     England,  Blattert,  ATC InSys, ATC Construction,  ATC Environmental,  Bing
     Yen,  and EWI are formed  under the laws of the States of  Delaware,  South
     Dakota,  Delaware,  South  Dakota,   Delaware,   Massachusetts,   Delaware,
     California, and Connecticut,  respectively.  Effective,  February 28, 1998,
     the Board of Directors of ATC and the  respective  Boards of Management Co.
     and Blattert have approved the  dissolution  of Management Co. and Blattert
     and the  distribution  of all remaining  assets to ATC in  accordance  with
     South  Dakota  law.  The  Boards   determined  that  maintaining   separate
     subsidiaries  is no longer in the best  interests  of the  Company and that
     dissolving these  subsidiaries  eliminates  unnecessary  administrative and
     legal expenses.

                                       44

<PAGE>


EXHIBIT INDEX (continued)

Exhibits  incorporated  by reference  from  previously  filed  documents  are as
follows:

     (1)  Reference is made to the Registrant's  Registration Statement File No.
          33-19889 on Form S-1, which is  incorporated by reference and contains
          exhibits 2.1.

     (2)  Reference  is made to the  Registrant's  Form 10-K for the fiscal year
          ended  February  28,  1990  which is  incorporated  by  reference  and
          contains Exhibit 10.2.

     (3)  Reference  is made to the  Registrant's  Form 10-K for the fiscal year
          ended  February  29,  1992  which is  incorporated  by  reference  and
          contains Exhibit 10.3.

     (4)  Reference  is made to the  Registrant's  Form 8-K dated  November  10,
          1995,  as amended,  which is  incorporated  by reference  and contains
          Exhibit 10.4

     (5)   Reference  is  made  to  the   Registrant's   Form  S-4  Registration
           Statement,  file No.  33-88380 which is incorporated by reference and
           contains Exhibit 2.2.

     (6)   Reference  is  made  to  the   Registrant's   Form  S-8  Registration
           Statement,  file No.  33-55592 which is incorporated by reference and
           contains Exhibit 99.1.

     (7)   Reference  is  made  to  the   Registrant's   Form  S-8  Registration
           Statement,  File No.  33-77578 which is incorporated by reference and
           contains Exhibit 99.2.

     (8)  Reference  is made to the  Registrant's  Form 10-K for its fiscal year
          ended  February,  28, 1995,  which is  incorporated  by reference  and
          contains Exhibits 99.3 and 99.4.

     (9)  Reference  is made to the  Registrant's  Form 10-K for its fiscal year
          ended  February  28, 1995,  which is  incorporated  by  reference  and
          contains Exhibit 10.3.

     (10)  Reference is made to the Registrant's  Form 8-K dated May 24, 1996 as
           amended,  which is  incorporated  by reference and contains  Exhibits
           10.5, 10.6, 10.7, 10.8, 10.9,  10.10,  10.11,  10.12,  10.13,  10.14,
           10.15 and 10.16.


                                       45
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

      ATC GROUP SERVICES INC.
                 (Registrant)

/s/  NICHOLAS J. MALINO                                           May 29, 1998
------------------------------------------------                  ------------
     NICHOLAS J. MALINO                                               (Date)
     President

         Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.


      /s/  NICHOLAS J. MALINO                                     May 29, 1998
      ------------------------------------------                  ------------
      Nicholas J. Malino                                              (Date)
      President (Principal Executive Officer)



      /s/ WAYNE A. CROSBY                                         May 29, 1998
      ------------------------------------------                  ------------
      Wayne A. Crosby                                                 (Date)
      Controller (Principal Financial Officer)

      /s/ WESLEY W. LANG, JR.       .                             May 29, 1998
      ------------------------------------------                  ------------
      Wesley W. Lang, Jr.                                             (Date)
      Director


      /s/ NORA KERPPOLA                                           May 29, 1998
      ------------------------------------------                  ------------
      Nora Kerppola                                                   (Date)
      Director


      /s/ BENJAMIN J. JAMES                                       May 29, 1998
      ------------------------------------------                  ------------
      Benjamin J. James                                               (Date)
      Director






                                       46
<PAGE>

                                                                     EXHIBIT 1

-------------------------------------------------------------------------------
                     12% Senior Subordinated Notes due 2008
-------------------------------------------------------------------------------



                               PURCHASE AGREEMENT


                                                                January 22, 1998

BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York  10006

Ladies and Gentlemen:

                  Acquisition Corp. (the "Company"), a Delaware corporation,
hereby confirms its agreement with you (the "Initial Purchaser"), as set forth
below.

                  1. The Securities.  Subject to the terms and conditions herein
contained,  the  Company  proposes  to issue and sell to the  Initial  Purchaser
$100,000,000 aggregate principal amount of the Company's 12% Senior Subordinated
Notes due 2008 (the "Notes").  The Notes will be guaranteed  (collectively,  the
"Guarantees")  upon  consummation  of the Merger (as defined  below) on a senior
subordinated basis by each of ATC's  Subsidiaries  listed on the signature pages
hereof  (collectively,  and  together  with any  subsidiary  that in the  future
executes a supplemental  indenture  pursuant to which such subsidiary  agrees to
guarantee  the  Notes,  the  "Guarantors").  The  Notes and the  Guarantees  are
collectively  referred to herein as the  "Securities."  The Securities are to be
issued under an indenture (the "Indenture")  dated as of January 29, 1998 by and
between the Company and State  Street Bank and Trust  Company,  as trustee  (the
"Trustee").  The term "Credit  Agreement"  as used herein shall have the meaning
provided  therefor in the Indenture.  The Company,  Acquisition  Holdings,  Inc.
("Holdings")  and ATC Group  Services,  Inc.  ("ATC") have entered into a Merger
Agreement  dated as of November 26, 1997 (as in effect on the date  hereof,  the
"Merger  Agreement")  pursuant to which the Company has offered to purchase (the
"Tender  Offer"),  pursuant to the terms of that certain Offer to Purchase dated
December 4, 1997 (as in effect on the date hereof, the "Offer to Purchase"), all
of the outstanding shares (the "Shares") of common stock,


<PAGE>




                                      -2-


par value $0.01 per share, of ATC. Pursuant to the Merger Agreement, the Company
will be  merged  into and with ATC  (the  "Merger"),  with ATC as the  surviving
corporation.  Upon  effectiveness of the Merger (the "Effective Time"), ATC will
execute and deliver a supplemental  indenture (the "Supplemental  Indenture") to
the Indenture,  expressly  assuming all of the Company's  obligations  under the
Indenture.  Also at the Effective Time, the Company will cause the Guarantors to
execute and deliver the Supplemental Indenture,  the Guarantees,  this Agreement
and the Registration Rights Agreement (as defined below).

                  The  Securities  will be offered and sold to you without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on exemptions therefrom.

                  In connection with the sale of the Securities, the Company has
prepared  a  preliminary   offering   memorandum  dated  January  2,  1998  (the
"Preliminary Memorandum") and a final offering memorandum dated January 22, 1998
(the "Final  Memorandum,"  the Preliminary  Memorandum and the Final  Memorandum
each herein being  referred to as a  "Memorandum")  setting forth or including a
description  of the terms of the  Securities,  the terms of the  offering of the
Securities,  descriptions of the Company, Holdings, ATC and its subsidiaries and
any material  developments  relating to the Company,  Holdings and ATC occurring
after  the date of the most  recent  historical  financial  statements  included
therein.

                  The Company understands that the Initial Purchaser proposes to
make an  offering  of the Notes only on the terms and in the manner set forth in
the Final Memorandum and Section 8 hereof as soon as the Initial Purchaser deems
advisable  after this Agreement has been executed and  delivered,  to persons in
the United States whom the Initial Purchaser reasonably believes to be qualified
institutional buyers ("Qualified  Institutional Buyers" or "QIBs") as defined in
Rule 144A under the Act,  as such rule may be amended  from time to time  ("Rule
144A")  and  outside  the  United  States to  certain  persons  in  reliance  on
Regulation S under the Act.

                  The Initial Purchaser and its direct and indirect  transferees
of the Securities  will be entitled to the benefits of the  Registration  Rights
Agreement,  substantially  in  the  form  attached  hereto  as  Exhibit  A  (the
"Registration  Rights Agreement"),  pursuant to which the Company has agreed and
the Guarantors will agree, among other things, to file a registration  statement
(the "Registration  Statement") with the Securities and Exchange Commission (the
"Commission")  registering  the Exchange  Notes (as defined in the  Registration
Rights  Agreement)  under the Act.  Furthermore,  the Initial  Purchaser and the
affiliates,  directors,  officers, agents,  representatives and employees of the
Initial  Purchaser,  and each other  person,  if any,  who  controls the Initial
Purchaser  within  the  meaning  of  Section  15 of the Act or Section 20 of the
Securities  Exchange  Act of 1934 will be entitled to the benefits of the letter
agreement,  substantially  in the form attached hereto as Exhibit B (the "Letter
Agreement"), from ATC to the Initial Purchaser.


<PAGE>




                                      -3-


                  2.  Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Initial Purchaser that:

                  (a)  Neither  the  Final   Memorandum  nor  any  amendment  or
         supplement  thereto as of the date thereof and at all times  subsequent
         thereto  up to the  Closing  Date  (as  defined  in  Section  3  below)
         contained  or  contains  any untrue  statement  of a  material  fact or
         omitted  or  omits  to  state a  material  fact  necessary  to make the
         statements  therein, in the light of the circumstances under which they
         were  made,  not  misleading,   except  that  the  representations  and
         warranties set forth in this Section 2(a) do not apply to statements or
         omissions  made in reliance  upon and in  conformity  with  information
         relating to the Initial  Purchaser  furnished to the Company in writing
         by  the  Initial  Purchaser   expressly  for  use  in  the  Preliminary
         Memorandum,  the  Final  Memorandum  or  any  amendment  or  supplement
         thereto.

                  (b)  As of  the  Closing  Date,  the  Company  will  have  the
         authorized,  issued  and  outstanding  capitalization  set forth in the
         Final Memorandum; all of the outstanding shares of capital stock of the
         Company and each of its significant  subsidiaries within the meaning of
         Regulation   S-X  (each,   a   "Subsidiary"   and   collectively,   the
         "Subsidiaries")  have been,  and as of the  Closing  Date will be, duly
         authorized and validly  issued,  are fully paid and  nonassessable  and
         were not issued in violation of any preemptive or similar  rights;  all
         of the outstanding  shares of capital stock of the Subsidiaries will be
         free and  clear of all  liens,  encumbrances,  equities  and  claims or
         restrictions on  transferability  (other than those created pursuant to
         the Credit Agreement and those imposed by the Act and the securities or
         "Blue Sky" laws of  certain  jurisdictions)  or  voting;  except as set
         forth in the Final Memorandum, there are no, and as of the Closing Date
         there will be no, (i)  options,  warrants or other  rights to purchase;
         (ii) agreements or other  obligations to issue or (iii) other rights to
         convert any obligation  into, or exchange any securities for, shares of
         capital  stock of or  ownership  interests in the Company or any of the
         Subsidiaries outstanding.  Except for the Company's direct and indirect
         interests in the Subsidiaries  and in other wholly owned  subsidiaries,
         the Company does not own, directly or indirectly, any shares of capital
         stock or any other  equity or  long-term  debt  securities  or have any
         equity interest in any firm, partnership, joint venture or other entity
         other than as described in the Final Memorandum.

                  (c)  Each  of  the  Company  and  the   Subsidiaries  is  duly
         organized,  validly existing and in good standing under the laws of its
         jurisdiction of organization  and has all requisite  corporate or other
         power and authority to own its  properties  and conduct its business as
         now  conducted  and as described in the Final  Memorandum;  each of the
         Company and the Subsidiaries is duly qualified to do business and is in
         good standing in all other jurisdictions where the ownership or leasing
         of its properties or the conduct of its business re-


<PAGE>




                                      -4-


         quires such qualification,  except where the failure to be so qualified
         would not,  individually or in the aggregate,  be reasonably  likely to
         have a Material  Adverse  Effect on the  general  affairs,  management,
         business,  condition (financial or otherwise),  prospects or results of
         operations of the Company and the  Subsidiaries,  taken as a whole (any
         such event, a "Material Adverse Effect").

                  (d)  The  Company  has  all  requisite   corporate  power  and
         authority to execute, deliver and perform each of its obligations under
         the Notes,  the Exchange Notes and the Private  Exchange Notes (each as
         defined in the Registration  Rights  Agreement and the Indenture).  The
         Notes, when issued,  will be in the form contemplated by the Indenture.
         The Notes,  the Exchange Notes and the Private Exchange Notes have each
         been duly and validly  authorized  by the Company and, when executed by
         the Company and  authenticated  by the Trustee in  accordance  with the
         provisions  of the  Indenture  and,  in the  case  of the  Notes,  when
         delivered to and paid for by the Initial  Purchaser in accordance  with
         the terms of this Agreement,  will have been duly executed,  issued and
         delivered and will constitute valid and legally binding  obligations of
         the Company (assuming the due authorization,  execution and delivery of
         the Indenture by the Trustee and the due  authorization and delivery of
         the Notes by the Trustee in accordance with the Indenture), entitled to
         the benefits of the Indenture,  and enforceable  against the Company in
         accordance with its terms,  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).

                  (e) Each of the Guarantors has, and will have at the Effective
         Time, all requisite  corporate power and authority to execute,  deliver
         and perform each of its obligations  under the  Supplemental  Indenture
         and the  Guarantees.  The Company shall cause the Guarantees to be duly
         and validly  authorized by each  Guarantor at or prior to the Effective
         Time.  When  executed  and  delivered  by  each  such  Guarantor,   the
         Supplemental Indenture and the Guarantees will constitute the valid and
         legally binding obligations of such Guarantor, entitled to the benefits
         of the Indenture,  enforceable  against each of them in accordance with
         its terms,  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).


<PAGE>




                                      -5-


                  (f) The  Company  has and each of the the  Guarantors  has and
         will  have at the  Effective  Time all  requisite  corporate  power and
         authority  to execute,  deliver and perform its  obligations  under the
         Indenture. The Indenture meets the requirements for qualification under
         the Trust Indenture Act of 1939, as amended (the "TIA").  The Indenture
         has been duly and  validly  authorized  by the Company and will be duly
         and validly authorized at or prior to the Effective Time by each of the
         Guarantors  and, when  executed and  delivered in  accordance  with its
         terms  (assuming the due  authorization,  execution and delivery by the
         Trustee),   will  have  been  duly  executed  and  delivered  and  will
         constitute  a valid and legally  binding  agreement of the Company and,
         after due  execution of the  Supplemental  Indenture,  the  Guarantors,
         enforceable  against each of them in accordance with its terms,  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).

                  (g) Each of the Company and the  Guarantors  has all requisite
         corporate  power and  authority  to  execute,  deliver  and perform its
         obligations under the Registration  Rights Agreement.  The Registration
         Rights  Agreement  has been duly and validly  authorized by the Company
         and will be duly and validly  authorized  at or prior to the  Effective
         Time by each of the Guarantors  and, when executed and delivered by the
         Company  and  each  of  the  Guarantors  (assuming  due  authorization,
         execution  and delivery by the other parties  thereto),  will have been
         duly  executed and  delivered  and will  constitute a valid and legally
         binding   agreement  of  each  of  the  Company  and  the   Guarantors,
         enforceable  against each of them in accordance with its terms,  except
         that (A) 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) and (B) any rights to  indemnity  or  contribution
         thereunder  may be  limited by federal  and state  securities  laws and
         public policy considerations.

                  (h) Each of the Company and the  Guarantors  has all requisite
         corporate  power and  authority  to  execute,  deliver  and perform its
         obligations  under  this  Agreement  and the  Credit  Agreement  and to
         consummate  the  transactions  contemplated  hereby and  thereby.  This
         Agreement and the Credit  Agreement and the consummation by the Company
         and the Guarantors of the transactions  contemplated hereby and thereby
         have been duly and validly  authorized  by the Company and will be duly
         and


<PAGE>




                                      -6-


         validly  authorized  at or prior to the  Effective  Time by each of the
         Guarantors.  This  Agreement  and the Credit  Agreement  have been duly
         executed  and  delivered  by the Company and will be duly  executed and
         delivered by the Guarantors at or prior to the Effective Time.

                   (i) No consent, approval, authorization or order of any court
         or  governmental  agency  or body or third  party is  required  for the
         performance  of this  Agreement  by the  Company  and,  at or after the
         Effective Time, the Guarantors or the consummation by them of the other
         transactions contemplated hereby, except such (i) as have been obtained
         or made,  (ii) as would not be  reasonably  likely  to have a  Material
         Adverse  Effect,  (iii) as would not  materially  adversely  affect the
         validity of this Agreement,  the Notes, the Indenture, the Registration
         Rights  Agreement  or the  Credit  Agreement  and  (iv)  such as may be
         required under state  securities or "Blue Sky" laws in connection  with
         the purchase and resale of the Securities by the Initial  Purchaser and
         except  with  respect to the  registration  of the  Exchange  Notes and
         Private  Exchange  Notes, if applicable,  pursuant to the  Registration
         Rights Agreement and the  qualification of the Indenture under the TIA.
         Neither the Company nor any of the  Subsidiaries is (i) in violation of
         its certificate of incorporation or bylaws, (ii) in breach or violation
         of any statute,  judgment, decree, order, rule or regulation applicable
         to any of them or any of its  respective  properties or assets,  except
         for any such breach or violation  which would not,  individually  or in
         the aggregate,  be reasonably likely to have a Material Adverse Effect,
         or (iii) in  breach of or  default  under  (nor has any event  occurred
         which,  with  notice or passage  of time or both,  would  constitute  a
         default under) or in violation of any of the terms or provisions of any
         indenture,  mortgage,  deed of  trust,  loan  agreement,  note,  lease,
         license, franchise agreement,  permit,  certificate,  contract or other
         agreement or instrument to which any of them is a party or to which its
         respective   properties   or   assets   are   subject    (collectively,
         "Contracts"),  except for any such breach, default,  violation or event
         which would not, individually or in the aggregate, be reasonably likely
         to have a Material Adverse Effect.

                   (j) The  execution,  delivery and  performance by the Company
         and, at and after the Effective Time, the Guarantors of this Agreement,
         the Indenture,  the Notes, the Supplemental Indenture,  the Guarantees,
         the Exchange Notes, the Private Exchange Notes, the Registration Rights
         Agreement,  the Credit Agreement,  the consummation of the transactions
         contemplated  hereby  and  thereby,  and the  fulfillment  of the terms
         hereof and thereof, will not conflict with or constitute or result in a
         breach of or a default  under (or an event which with notice or passage
         of time or both would  constitute  a default  under) or violation of or
         cause  an  acceleration  of any  obligation  under,  or  result  in the
         imposition  or  creation of (or the  obligation  to create or impose) a
         lien on any  property or assets of the Company or any  Subsidiary  with
         respect to


<PAGE>




                                      -7-


         (i) the  terms  or  provisions  of any  Contract,  except  for any such
         conflict,  breach,  violation,   default  or  event  which  would  not,
         individually  or in the  aggregate,  be  reasonably  likely  to  have a
         Material  Adverse  Effect,  (ii) the  certificate of  incorporation  or
         bylaws of the Company or any of the  Subsidiaries,  or (iii)  (assuming
         compliance with all applicable  state securities or "Blue Sky" laws and
         assuming  the accuracy of the  representations  and  warranties  of the
         Initial Purchaser in Section 8 hereof and assuming qualification of the
         Indenture under the TIA) any statute,  judgment, decree, order, rule or
         regulation of any court or  governmental  agency or body  applicable to
         the Company,  the  Subsidiaries or any of its respective  properties or
         assets,  except for any such conflict,  breach or violation which would
         not,  individually or in the aggregate,  be reasonably likely to have a
         Material Adverse Effect.

                   (k) Each of the Indenture, the Notes, the Exchange Notes, the
         Guarantees,  the Registration Rights Agreement and the Credit Agreement
         conforms in all  material  respects to the  description  thereof in the
         Final Memorandum.

                   (l) The consolidated  financial statements of the Company and
         the related  notes  thereto  included in the Final  Memorandum  present
         fairly in all material  respects  the  financial  position,  results of
         operations  and cash  flows of the  Company  at the  dates  and for the
         periods to which they relate and have been prepared in accordance  with
         generally accepted accounting principles applied on a consistent basis,
         except  as  otherwise  stated  therein,  and  comply  as to form in all
         material  respects with the applicable  accounting  requirements of the
         Act and the rules and regulations thereunder.  The summary and selected
         financial data included in the Final  Memorandum  present fairly in all
         material  respects the information shown therein and have been prepared
         and  compiled  on  a  basis  consistent  with  the  audited   financial
         statements  included therein,  except as otherwise stated therein,  and
         comply  as to  form  in  all  material  respects  with  the  applicable
         accounting  requirements  of the  Act  and the  rules  and  regulations
         thereunder.  To the Company's knowledge, each of Deloitte & Touche LLP,
         Arthur  Andersen  LLP, and Ernst & Young LLP is an  independent  public
         accounting  firm as required  by the Act and the rules and  regulations
         thereunder.

                   (m) (i) The pro forma  financial  statements  (including  the
         notes thereto)  included in the Final  Memorandum (A) comply as to form
         in all material respects with the applicable requirements of Regulation
         S-X promulgated  under the Securities  Exchange Act of 1934, as amended
         (the  "Exchange  Act"),  (B) have been prepared in accordance  with the
         Commission's  rules and guidelines  with respect to pro forma financial
         statements and (C) have been properly  computed on the bases  described
         therein,  and (ii) the  assumptions  used in the preparation of the pro
         forma  financial  statements  included  in  the  Final  Memorandum  are
         reasonable  and the  adjustments  used therein are  appropriate to give
         effect to the transactions or circumstances referred to therein.


<PAGE>




                                      -8-


                   (n) Except as set forth in the Final Memorandum, there is not
         pending  or,  to the best  knowledge  of the  Company,  threatened  any
         action, suit, proceeding, inquiry or investigation to which the Company
         or any  Subsidiary  is a party,  or to which any of its  properties  or
         assets are  subject,  before or brought  by any  court,  arbitrator  or
         governmental  agency or body,  which,  if  determined  adversely to the
         Company  or  any  such  Subsidiary,   would,  individually  or  in  the
         aggregate,  be reasonably  likely to have a Material Adverse Effect, or
         which  seeks  to  restrain,  enjoin,  prevent  the  consummation  of or
         otherwise  challenge the issuance or sale of the  Securities to be sold
         hereunder or the  consummation of the other  transactions  described in
         the Final Memorandum.

                   (o)  Each  of  the  Company  and  the  Subsidiaries  owns  or
         possesses  adequate  licenses  or  other  rights  to use  all  patents,
         trademarks,   service  marks,  trade  names,  copyrights  and  know-how
         necessary to conduct the businesses  operated by it as described in the
         Final Memorandum except where the failure to own or possess such of the
         foregoing  would not be  reasonably  likely to have a Material  Adverse
         Effect,  and  neither  the  Company  nor  any of the  Subsidiaries  has
         received any notice of infringement of or conflict with (or knows of no
         such  infringement  of or conflict with) asserted rights of others with
         respect  to  any  patents,  trademarks,  service  marks,  trade  names,
         copyrights or know-how  which,  if such  assertion of  infringement  or
         conflict were sustained,  would,  individually or in the aggregate,  be
         reasonably likely to have a Material Adverse Effect.

                   (p) Each of the Company and the  Subsidiaries  possesses  all
         licenses, permits, certificates,  consents, orders, approvals and other
         authorizations  from,  and has made or will have made all  declarations
         and filings  with,  all federal,  state,  local and other  governmental
         authorities, all self-regulatory organizations and all courts and other
         tribunals  presently required or necessary to own or lease, as the case
         may be, and to operate its  properties  and to carry on its business as
         set forth in the Final Memorandum ("Permits"), except where the failure
         to obtain such Permits would not, individually or in the aggregate,  be
         reasonably  likely  to  have a  Material  Adverse  Effect;  each of the
         Company and the  Subsidiaries  has  fulfilled  and performed all of its
         obligations  with  respect to such  Permits  and no event has  occurred
         which allows, or after notice or lapse of time would allow,  revocation
         or termination  thereof or results in any other material  impairment of
         the  rights  of the  holder  of  any  such  Permit  except  where  such
         revocation, termination or impairment would not be reasonably likely to
         have a  Material  Adverse  Effect;  and  neither  the  Company  nor any
         Subsidiary  has  received  any  notice of any  proceeding  relating  to
         revocation or modification  of any such Permit,  except as described in
         the Final  Memorandum and except where such  revocation or modification
         would not,  individually or in the aggregate,  be reasonably  likely to
         have a Material Adverse Effect.


<PAGE>




                                      -9-


                   (q) Since the  respective  dates as of which  information  is
         given in the Final Memorandum,  except as described therein,  there has
         been no material adverse change or any fact, taken by itself,  known to
         the Company which could  reasonably be expected to result in a material
         adverse change, in the general affairs, management, business, condition
         (financial  or  otherwise)  or results of operations of the Company and
         the  Subsidiaries  taken  as a  whole,  whether  or  not  arising  from
         transactions  in the ordinary  course of  business,  or any loss of, or
         damage to,  properties  (whether or not insured) which could reasonably
         be expected to affect  materially  and adversely  the general  affairs,
         management,  business, condition (financial or otherwise) or results of
         operations of the Company and the Subsidiaries  taken as a whole. Since
         the date of the latest balance sheet presented in the Final Memorandum,
         except as  expressly  disclosed  in the Final  Memorandum,  neither the
         Company nor any of its  Subsidiaries has (i) incurred or undertaken any
         liabilities or obligations,  direct or contingent, that are material to
         the Company and the  Subsidiaries  taken as a whole other than  capital
         equipment  leases in the ordinary  course of business  consistent  with
         past practice,  (ii) entered into any material  transaction  not in the
         ordinary  course of business and consistent with past practice or (iii)
         declared or paid any dividend or made any distribution on any shares of
         its capital  stock or  redeemed,  purchased  or  otherwise  acquired or
         agreed to  redeem,  purchase  or  otherwise  acquire  any shares of its
         capital stock.

                   (r) Each of the  Company and the  Subsidiaries  has filed all
         necessary federal,  state and foreign income and franchise tax returns,
         except  where  the  failure  to  so  file  such   returns   would  not,
         individually  or in the  aggregate,  be  reasonably  likely  to  have a
         Material  Adverse Effect,  and has paid all taxes shown as due thereon;
         and  other  than  tax  deficiencies  which  the  Company  or any of the
         Subsidiaries  is  contesting in good faith and for which the Company or
         such  Subsidiary  has  provided  adequate  reserves,  there  is no  tax
         deficiency that has been asserted against the Company or any Subsidiary
         that would,  individually or in the aggregate,  be reasonably likely to
         have a Material Adverse Effect.

                   (s) The statistical and  market-related  data included in the
         Final Memorandum are based on or derived from sources which the Company
         believes to be reliable and accurate.

                   (t) Neither the Company nor any of the  Subsidiaries  nor any
         agent acting on its behalf has taken or will take any action that might
         cause  this  Agreement  or  the  sale  of  the  Securities  to  violate
         Regulation  G,  T, U or X of the  Board  of  Governors  of the  Federal
         Reserve System, in each case as in effect, or as the same may hereafter
         be in effect, on the Closing Date.


<PAGE>




                                      -10-


                   (u) Each of the Company and the  Subsidiaries  has good title
         to all personal  property  described in the Final  Memorandum  as being
         owned by it, good and valid title to all real property described in the
         Final  Memorandum  as being  owned by it and good and valid  title to a
         leasehold  estate in the real and  personal  property  described in the
         Final  Memorandum  as being  leased by it free and clear of all  liens,
         charges, encumbrances or restrictions, except as described in the Final
         Memorandum  or to the  extent  the  failure  to have such  title or the
         existence of such liens,  charges,  encumbrances or restrictions  would
         not,  individually or in the aggregate,  be reasonably likely to have a
         Material Adverse Effect. All leases,  contracts and agreements to which
         the  Company or any  Subsidiary  is a party or by which the  Company or
         such Subsidiary is bound are valid and enforceable  against the Company
         or such  Subsidiary,  to the  knowledge  of the  Company  are valid and
         enforceable  against the other party or parties thereto and are in full
         force and effect with only such  exceptions as would not,  individually
         or in the aggregate,  be reasonably  likely to have a Material  Adverse
         Effect.

                   (v) There are no legal or governmental  proceedings involving
         or  affecting  the  Company,  any of the  Subsidiaries  or any of their
         respective properties or assets which would be required to be described
         in a prospectus pursuant to the Act that are not described in the Final
         Memorandum,  nor are there any material  contracts  or other  documents
         which would be required to be described in a prospectus pursuant to the
         Act that are not described in the Final Memorandum.

                   (w) Except as described in the Final  Memorandum  or as would
         not,  individually or in the aggregate,  be reasonably likely to have a
         Material  Adverse Effect,  (A) each of the Company and the Subsidiaries
         is in  compliance  with and not subject to liability  under  applicable
         Environmental  Laws, (B) each of the Company and the  Subsidiaries  has
         made all filings and provided all notices required under any applicable
         Environmental  Law,  and  has and is in  compliance  with  all  Permits
         required under any applicable Environmental Laws and each of them is in
         full  force  and   effect,   (C)  there  is  no  civil,   criminal   or
         administrative   action,  suit,  demand,  claim,  hearing,   notice  of
         violation,  investigation,  proceeding,  notice  or  demand  letter  or
         request for  information  pending or, to the  knowledge of the Company,
         threatened   against   the   Company  or  any   Subsidiary   under  any
         Environmental Law, (D) no lien, charge,  encumbrance or restriction has
         been recorded under any  Environmental  Law with respect to any assets,
         facility or  property  owned,  operated,  leased or  controlled  by the
         Company or any  Subsidiary,  (E) neither the Company nor any Subsidiary
         has  received  notice  that it has  been  identified  as a  potentially
         responsible  party  under  the  Comprehensive  Environmental  Response,
         Compensation and Liability Act of 1980, as amended  ("CERCLA"),  or any
         comparable  state law and (F) no property or facility of the Company or
         any  Subsidiary  is (i) listed or proposed  for listing on the National
         Priorities List under


<PAGE>




                                      -11-


         CERCLA or (ii)  listed  in the  Comprehensive  Environmental  Response,
         Compensation, Liability Information System List promulgated pursuant to
         CERCLA, or on any comparable list maintained by any state or local
         governmental authority.

                  For purposes of this Agreement, "Environmental Laws" means the
         common  law  and  all  applicable  federal,  state  and  local  laws or
         regulations,  codes, orders, decrees,  judgments or injunctions issued,
         promulgated,  approved or entered thereunder,  relating to pollution or
         protection of public or employee health and safety or the  environment,
         including,   without  limitation,   laws  relating  to  (i)  emissions,
         discharges,  releases or  threatened  releases of hazardous  materials,
         into the  environment  (including,  without  limitation,  ambient  air,
         surface water,  groundwater,  land surface or subsurface strata),  (ii)
         the manufacture,  processing, distribution, use, generation, treatment,
         storage,  disposal,  transport or handling of hazardous materials,  and
         (iii)  underground and aboveground  storage tanks,  and related piping,
         and emissions, discharges, releases or threatened releases therefrom.

                   (x)  There is no  strike,  labor  dispute,  slowdown  or work
         stoppage with the employees of the Company or the Subsidiaries which is
         pending or, to the knowledge of the Company, threatened, which would be
         reasonably likely to have a Material Adverse Effect.

                   (y)  Each  of  the  Company  and  the  Subsidiaries   carries
         insurance in such  amounts and  covering  such risks as is adequate for
         the conduct of its business and the value of its properties.

                   (z) Except as set forth in the Final Memorandum,  neither the
         Company  nor any  Subsidiary  has  any  liability  for  any  prohibited
         transaction  within the  meaning of ss.406 of the  Employee  Retirement
         Income  Security  Act  of  1974,  as  amended  ("ERISA"),   or  funding
         deficiency  within the  meaning of ss.302 of ERISA or any  complete  or
         partial withdrawal liability under ss.4201 of ERISA with respect to any
         pension,  profit  sharing  or other  plan  which is subject to ERISA to
         which  the  Company  or  any  Subsidiary  makes  or  ever  has  made  a
         contribution and in which any employee of the Company or any Subsidiary
         is or  has  ever  been  a  participant,  which  prohibited  transaction
         liability  or  withdrawal  liability  is  reasonably  likely  to have a
         Material  Adverse  Effect.  With  respect  to such  plans,  each of the
         Company and the Subsidiaries is in compliance in all material  respects
         with all applicable provisions of ERISA.

                   (aa) Each of the Company and the  Subsidiaries  (i) makes and
         keeps accurate books and records and (ii) maintains internal accounting
         controls which provide  reasonable  assurance that (A) transactions are
         executed   in   accordance   with   management's   authorization,   (B)
         transactions are recorded as necessary to permit preparation of its


<PAGE>




                                      -12-


         financial statements and to maintain accountability for its assets, (C)
         access to its assets is permitted only in accordance with  management's
         authorization  and (D) the  reported  accountability  for its assets is
         compared with existing assets at reasonable intervals.

                  (bb)  Neither  the  Company  nor  any  Subsidiary  will  be an
         "investment  company" or "promoter" or "principal  underwriter"  for an
         "investment  company,"  as such  terms are  defined  in the  Investment
         Company  Act of  1940,  as  amended,  and  the  rules  and  regulations
         thereunder.

                  (cc)  Except  as set forth on  Exhibit A hereto,  no holder of
         securities of the Company (other than the Registrable Notes (as defined
         in the  Registration  Rights  Agreement)) will be entitled to have such
         securities registered under the registration  statements required to be
         filed by the Company  pursuant  to the  Registration  Rights  Agreement
         other than as expressly permitted thereby.

                  (dd)  Immediately  after the  consummation of the transactions
         contemplated  by this  Agreement,  the  fair  value  and  present  fair
         saleable value of the assets of the Company and the Subsidiaries,  on a
         consolidated  basis,  will  exceed the sum of its  consolidated  stated
         liabilities and identified contingent liabilities (after giving effect,
         in the case of each of the Guarantors,  to the limitations contained in
         each Guarantee); neither the Company nor any of the Subsidiaries is, or
         will be after giving effect to the execution,  delivery and performance
         of this Agreement and the consummation of the transactions contemplated
         hereby, (a) left with unreasonably small capital with which to carry on
         its business as it is proposed to be  conducted,  (b) unable to pay its
         debts  (contingent  or  otherwise)  as  they  mature  or (c)  otherwise
         insolvent.

                  (ee) Neither the Company nor any of the  Subsidiaries  nor any
         of its respective Affiliates (as defined in Rule 501(b) of Regulation D
         under the Act) has directly,  or through any agent,  (i) sold,  offered
         for sale, solicited offers to buy or otherwise negotiated in respect of
         any  "security" (as defined in the Act) which is or could be integrated
         with the sale of the  Securities  in a manner  that would  require  the
         registration  under the Act of the  Securities  or (ii)  engaged in any
         form of general solicitation or general advertising (as those terms are
         used in Regulation D under the Act) in connection  with the offering of
         the Securities or in any manner  involving a public offering within the
         meaning of Section 4(2) of the Act.

                  (ff)  Assuming  the  accuracy  of  the   representations   and
         warranties  of the  Initial  Purchaser  in Section 8 hereof,  it is not
         necessary  in  connection  with the  offer,  sale and  delivery  of the
         Securities to the Initial Purchaser in the manner contemplated by this


<PAGE>




                                      -13-


         Agreement to register any of the Securities under the Act or to qualify
         the Indenture under the TIA.

                  (gg)  No  securities  of the  Company  are of the  same  class
         (within the meaning of Rule 144A under the Act) as the  Securities  and
         listed on a national  securities exchange registered under Section 6 of
         the Exchange Act, or quoted in a U.S. automated  inter-dealer quotation
         system.

                  (hh)  Neither the Company nor any  Subsidiary  has taken,  nor
         will take,  directly or  indirectly,  any action  designed  to, or that
         might be reasonably  expected to, cause or result in  stabilization  or
         manipulation of the price of the Securities.

                  (ii) Neither the Company nor any of the Subsidiaries,  nor any
         of their respective Affiliates (as defined in Rule 501(b) of Regulation
         D under the Act) or any  person  acting on any of their  behalf  (other
         than  the  Initial  Purchaser,   as  to  which  the  Company  makes  no
         representation)  has engaged in any directed  selling  efforts (as that
         term is defined in  Regulation S under the Act  ("Regulation  S")) with
         respect to the  Securities;  the Company and its respective  Affiliates
         and any person  acting on any of their  behalf  (other than the Initial
         Purchaser,  as to  which  the  Company  makes no  representation)  have
         complied with the offering restrictions requirement of Regulation S.

                   (jj) As of the date specified, ATC had the authorized, issued
         and outstanding  capital stock set forth under  "Capitalization" in the
         Final Memorandum; all of the outstanding shares of capital stock of ATC
         and  each  of  its  significant  subsidiaries  within  the  meaning  of
         Regulation S-X (each, an "ATC  Subsidiary" and  collectively,  the "ATC
         Subsidiaries")  have been,  and as of the  Closing  Date will be,  duly
         authorized and validly  issued,  are fully paid and  nonassessable  and
         were not issued in violation of any preemptive or similar  rights;  all
         of the outstanding shares of capital stock of the ATC Subsidiaries will
         be free and clear of all liens,  encumbrances,  equities  and claims or
         restrictions on transferability) or voting;  except as set forth in the
         Final Memorandum, there are no (i) options, warrants or other rights to
         purchase;  (ii) agreements or other obligations to issue or (iii) other
         rights to convert any obligation  into, or exchange any securities for,
         shares of capital stock of or ownership  interests in ATC or any of the
         ATC  Subsidiaries  outstanding.  Except for ATC's  direct and  indirect
         interests in the ATC Subsidiaries,  in other wholly owned  subsidiaries
         and in Environmental Warranty, Inc. ("EWI"), ATC does not own, directly
         or  indirectly,  any  shares of  capital  stock or any other  equity or
         long-term  debt  securities  or have any equity  interest  in any firm,
         partnership,  joint  venture or other entity other than as described in
         the Final Memorandum.


<PAGE>




                                      -14-


                   (kk) Each of ATC and the ATC  Subsidiaries is duly organized,
         validly   existing  and  in  good  standing   under  the  laws  of  its
         jurisdiction of organization  and has all requisite  corporate or other
         power and authority to own its  properties  and conduct its business as
         now conducted and as described in the Final Memorandum; each of ATC and
         the ATC  Subsidiaries  is duly  qualified to do business and is in good
         standing in all other  jurisdictions  where the ownership or leasing of
         its   properties   or  the  conduct  of  its  business   requires  such
         qualification,  except where the failure to be so qualified  would not,
         individually  or in the  aggregate,  be  reasonably  likely  to  have a
         material adverse effect on the general affairs,  management,  business,
         condition (financial or otherwise),  prospects or results of operations
         of ATC and the ATC  Subsidiaries,  taken as a whole (any such event, an
         "ATC Material Adverse Effect").

                   (ll) ATC had all requisite  corporate  power and authority to
         execute,  deliver and perform each of its obligations  under the Merger
         Agreement. The Merger Agreement has been duly and validly authorized by
         ATC and  executed  and  delivered  by it, and  constitutes  a valid and
         legally  binding  obligation of ATC  (assuming  the due  authorization,
         execution  and  delivery   thereof  by  the  other  parties   thereto),
         enforceable  against ATC in accordance with its terms,  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).

                   (mm) At the Effective Time, the Notes, the Exchange Notes, if
         issued prior to the Effective  Time,  the Private  Exchange  Notes,  if
         issued prior to the Effective  Time,  the Indenture,  the  Registration
         Rights  Agreement,   the  Credit  Agreement  and  this  Agreement  will
         constitute   the  valid  and  legally   binding   obligations  of  ATC,
         enforceable  against  it in  accordance  with their  respective  terms,
         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). At the Effective  Time, the Guarantees  will have
         been duly and validly  authorized by each Guarantor,  and when executed
         and delivered by such Guarantor,  will constitute the valid and legally
         binding obligations of each such Guarantor, entitled to the benefits of
         the Indenture,  enforceable against each of them in accordance with its
         terms,  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


<PAGE>




                                      -15-


         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).

                   (nn) No  consent,  approval,  authorization  or  order of any
         court or governmental agency or body or third party is required for the
         performance of the Merger Agreement by ATC or the consummation by it of
         the  transactions  contemplated  thereby,  except such (i) as have been
         obtained or made, (ii) as would not be reasonably likely to have an ATC
         Material Adverse Effect, (iii) as would not materially adversely affect
         the  validity  of  this  Agreement,   the  Notes,  the  Indenture,  the
         Registration   Rights  Agreement  or  the  Credit  Agreement  upon  the
         effectiveness   of  the  Merger,   (iv)  except  with  respect  to  the
         registration  of the  Exchange  Notes and Private  Exchange  Notes,  if
         applicable,  pursuant  to the  Registration  Rights  Agreement  and the
         qualification  of the  Indenture  under the TIA and (v)  except for the
         requisite  vote  of ATC  stockholders  and  the  requisite  consent  by
         Acquisition Corp. to approve the Merger. Neither ATC nor any of the ATC
         Subsidiaries is (i) in violation of its certificate of incorporation or
         bylaws, (ii) in breach or violation of any statute,  judgment,  decree,
         order,  rule  or  regulation  applicable  to any of  them or any of its
         respective  properties  or  assets,  except  for  any  such  breach  or
         violation  which  would  not,  individually  or in  the  aggregate,  be
         reasonably  likely to have an ATC Material Adverse Effect,  or (iii) in
         breach of or default  under  (nor has any event  occurred  which,  with
         notice or passage of time or both, would constitute a default under) or
         in  violation  of any of the  terms  or  provisions  of any  indenture,
         mortgage,  deed  of  trust,  loan  agreement,   note,  lease,  license,
         franchise agreement,  permit, certificate,  contract or other agreement
         or  instrument  to  which  any of  them  is a  party  or to  which  its
         respective  properties  or  assets  are  subject  (collectively,   "ATC
         Contracts"),  except for any such breach,  default,  violation or event
         which would not, individually or in the aggregate, be reasonably likely
         to have an ATC Material Adverse Effect.

                   (oo) The  execution,  delivery and  performance by ATC of the
         Merger Agreement and the consummation of the transactions  contemplated
         thereby,  and the  fulfillment of the terms thereof,  will not conflict
         with or  constitute  or result in a breach of or a default under (or an
         event which with notice or passage of time or both would  constitute  a
         default  under)  or  violation  of or  cause  an  acceleration  of  any
         obligation  under,  or result in the  imposition or creation of (or the
         obligation to create or impose) a lien on any property or assets of ATC
         or any ATC  Subsidiary  with respect to (i) the terms or  provisions of
         the ATC  Contracts,  except for any such conflict,  breach,  violation,
         default or event which would not, individually or in the aggregate,  be
         reasonably  likely to have an ATC  Material  Adverse  Effect,  (ii) the
         certificate  of  incorporation  or  bylaws  of ATC  or  any of the  ATC
         Subsidiaries, or (iii) any statute, judgment, decree,


<PAGE>




                                      -16-


         order,  rule or regulation of any court or governmental  agency or body
         applicable  to ATC,  the ATC  Subsidiaries  or any of their  respective
         properties or assets, except for any such conflict, breach or violation
         which would not, individually or in the aggregate, be reasonably likely
         to have an ATC Material Adverse Effect.

                   (pp) The  consolidated  financial  statements  of ATC and the
         related notes thereto included in the Final  Memorandum  present fairly
         in all material respects the financial position,  results of operations
         and cash  flows of ATC at the dates and for the  periods  to which they
         relate and have been prepared in  accordance  with  generally  accepted
         accounting   principles  applied  on  a  consistent  basis,  except  as
         otherwise  stated  therein,  and  comply  as to  form  in all  material
         respects with the applicable accounting requirements of the Act and the
         rules and regulations  thereunder.  The summary and selected  financial
         data included in the Final  Memorandum  present  fairly in all material
         respects  the  information  shown  therein and have been  prepared  and
         compiled on a basis  consistent with the audited  financial  statements
         included therein,  except as otherwise stated therein, and comply as to
         form  in  all  material   respects  with  the   applicable   accounting
         requirements of the Act and the rules and regulations  thereunder.  The
         Company believes that Deloitte & Touche,  LLP is an independent  public
         accounting  firm as required  by the Act and the rules and  regulations
         thereunder.

                   (qq)  Except as set forth in the Final  Memorandum,  there is
         not pending or, to the best  knowledge of the Company,  threatened  any
         action, suit, proceeding,  inquiry or investigation to which ATC or any
         of the ATC  Subsidiaries  is a party, or to which any of its properties
         or assets are subject,  before or brought by any court,  arbitrator  or
         governmental  agency or body, which, if determined  adversely to ATC or
         any such ATC Subsidiary,  would,  individually or in the aggregate,  be
         reasonably  likely to have an ATC  Material  Adverse  Effect,  or which
         seeks to restrain,  enjoin,  prevent the  consummation  of or otherwise
         challenge  the  Merger or the  consummation  of the other  transactions
         described in the Final Memorandum.

                   (rr) Each of ATC and the ATC  Subsidiaries  owns or possesses
         adequate  licenses  or other  rights  to use all  patents,  trademarks,
         service  marks,  trade  names,  copyrights  and  know-how  necessary to
         conduct  the  businesses  operated  by it as  described  in  the  Final
         Memorandum  except  where the  failure  to own or  possess  such of the
         foregoing  would  not be  reasonably  likely  to have  an ATC  Material
         Adverse  Effect,  and neither ATC nor any of the ATC  Subsidiaries  has
         received any notice of infringement of or conflict with (or knows of no
         such  infringement  of or conflict with) asserted rights of others with
         respect  to  any  patents,  trademarks,  service  marks,  trade  names,
         copyrights or know-how  which,  if such  assertion of  infringement  or
         conflict were sustained,  would,  individually or in the aggregate,  be
         reasonably likely to have an ATC Material Adverse Effect.


<PAGE>




                                      -17-


                   (ss)  Each  of ATC and the  ATC  Subsidiaries  possesses  all
         licenses, permits, certificates,  consents, orders, approvals and other
         authorizations  from,  and has made or will have made all  declarations
         and filings  with,  all federal,  state,  local and other  governmental
         authorities, all self-regulatory organizations and all courts and other
         tribunals  presently required or necessary to own or lease, as the case
         may be, and to operate its  properties  and to carry on its business as
         set forth in the Final  Memorandum  ("ATC  Permits"),  except where the
         failure to obtain such ATC Permits  would not,  individually  or in the
         aggregate, be reasonably likely to have an ATC Material Adverse Effect;
         each of ATC and the ATC Subsidiaries has fulfilled and performed all of
         its obligations  with respect to such Permits and no event has occurred
         which allows, or after notice or lapse of time would allow,  revocation
         or termination  thereof or results in any other material  impairment of
         the  rights of the  holder of any such ATC  Permit  except  where  such
         revocation, termination or impairment would not be reasonably likely to
         have  an ATC  Material  Adverse  Effect;  and  neither  ATC nor any ATC
         Subsidiary  has  received  any  notice of any  proceeding  relating  to
         revocation or modification of any such ATC Permit,  except as described
         in  the  Final   Memorandum   and  except  where  such   revocation  or
         modification would not, individually or in the aggregate, be reasonably
         likely to have an ATC Material Adverse Effect.

                   (tt) Since the  respective  dates as of which  information is
         given in the Final Memorandum,  except as described therein,  there has
         been no material adverse change or any fact, taken by itself,  known to
         the Company which could  reasonably be expected to result in a material
         adverse change, in the general affairs, management, business, condition
         (financial  or  otherwise)  or results of operations of ATC and the ATC
         Subsidiaries taken as a whole, whether or not arising from transactions
         in the  ordinary  course of  business,  or any loss of,  or damage  to,
         properties  (whether or not insured) which could reasonably be expected
         to affect  materially  and adversely the general  affairs,  management,
         business,  condition  (financial or otherwise) or results of operations
         of ATC and the ATC Subsidiaries taken as a whole. Since the date of the
         latest  balance  sheet  presented  in the Final  Memorandum,  except as
         expressly disclosed in the Final Memorandum, neither ATC nor any of the
         ATC  Subsidiaries  has (i) incurred or undertaken  any  liabilities  or
         obligations, direct or contingent, that are material to the Company and
         the ATC  Subsidiaries  taken as a whole  other than  capital  equipment
         leases  in  the  ordinary  course  of  business  consistent  with  past
         practice,  (ii)  entered  into  any  material  transaction  not  in the
         ordinary  course of business and consistent with past practice or (iii)
         declared or paid any dividend or made any distribution on any shares of
         its capital  stock or  redeemed,  purchased  or  otherwise  acquired or
         agreed to  redeem,  purchase  or  otherwise  acquire  any shares of its
         capital stock.


<PAGE>




                                      -18-


                   (uu)  Each  of ATC and the ATC  Subsidiaries  has  filed  all
         necessary federal,  state and foreign income and franchise tax returns,
         except  where  the  failure  to  so  file  such   returns   would  not,
         individually or in the aggregate,  be reasonably  likely to have an ATC
         Material  Adverse Effect,  and has paid all taxes shown as due thereon;
         and  other  than  tax  deficiencies   which  ATC  or  any  of  the  ATC
         Subsidiaries  is  contesting in good faith and for which the Company or
         such  Subsidiary  has  provided  adequate  reserves,  there  is no  tax
         deficiency  that has been  asserted  against ATC or any ATC  Subsidiary
         that would have,  individually  or in the  aggregate,  an ATC  Material
         Adverse Effect.

                   (vv) Each of ATC and the ATC  Subsidiaries  has good title to
         all personal property  described in the Final Memorandum as being owned
         by it, good and valid title to all real property described in the Final
         Memorandum as being owned by it and good and valid title to a leasehold
         estate  in the  real  and  personal  property  described  in the  Final
         Memorandum as being leased by it free and clear of all liens,  charges,
         encumbrances  or  restrictions,   except  as  described  in  the  Final
         Memorandum  or to the  extent  the  failure  to have such  title or the
         existence of such liens,  charges,  encumbrances or restrictions  would
         not, individually or in the aggregate,  be reasonably likely to have an
         ATC Material  Adverse Effect.  All leases,  contracts and agreements to
         which ATC or any ATC  Subsidiary is a party or by which ATC or such ATC
         Subsidiary is bound are valid and  enforceable  against ATC or such ATC
         Subsidiary,  to the knowledge of the Company are valid and  enforceable
         against  the other  party or parties  thereto and are in full force and
         effect with only such  exceptions as would not,  individually or in the
         aggregate, be reasonably likely to have an ATC Material Adverse Effect.

                   (ww) There are no legal or governmental proceedings involving
         or affecting ATC, any of the ATC  Subsidiaries or any of its respective
         properties  or assets  which  would be required  to be  described  in a
         prospectus  pursuant  to the Act that are not  described  in the  Final
         Memorandum,  nor are there any material  contracts  or other  documents
         which would be required to be described in a prospectus pursuant to the
         Act that are not described in the Final Memorandum.

                   (xx) Except as described in the Final  Memorandum or as would
         not, individually or in the aggregate,  be reasonably likely to have an
         ATC Material  Adverse Effect,  (A) each of ATC and the ATC Subsidiaries
         is in  compliance  with and not subject to liability  under  applicable
         Environmental  Laws, (B) each of ATC and the ATC  Subsidiaries has made
         all filings and  provided  all notices  required  under any  applicable
         Environmental  Law,  and  has and is in  compliance  with  all  Permits
         required under any applicable Environmental Laws and each of them is in
         full  force  and   effect,   (C)  there  is  no  civil,   criminal   or
         administrative action, suit, demand, claim, hearing, notice


<PAGE>




                                      -19-


         of  violation,  investigation,  proceeding,  notice or demand letter or
         request for  information  pending or, to the  knowledge of the Company,
         threatened  against ATC or any ATC Subsidiary  under any  Environmental
         Law, (D) no lien, charge,  encumbrance or restriction has been recorded
         under any  Environmental  Law with  respect to any assets,  facility or
         property  owned,  operated,  leased  or  controlled  by ATC or any  ATC
         Subsidiary,  (E) neither ATC nor any ATC Subsidiary has received notice
         that it has been  identified as a potentially  responsible  party under
         the Comprehensive  Environmental  Response,  Compensation and Liability
         Act of 1980, as amended ("CERCLA"), or any comparable state law and (F)
         no property or facility of ATC or any ATC  Subsidiary  is (i) listed or
         proposed  for listing on the National  Priorities  List under CERCLA or
         (ii) listed in the Comprehensive Environmental Response,  Compensation,
         Liability Information System List promulgated pursuant to CERCLA, or on
         any  comparable  list  maintained  by any  state or local  governmental
         authority.

                   (yy)  There is no strike,  labor  dispute,  slowdown  or work
         stoppage  with the  employees of ATC or the ATC  Subsidiaries  which is
         pending or, to the knowledge of the Company, threatened, which would be
         reasonably likely to have an ATC Material Adverse Effect.

                   (zz) Each of ATC and the ATC Subsidiaries  carries  insurance
         in such amounts and covering  such risks as is adequate for the conduct
         of its business and the value of its properties.

                   (aaa)  Except as set forth in the Final  Memorandum,  neither
         ATC  nor any  ATC  Subsidiary  has  any  liability  for any  prohibited
         transaction  within the  meaning of ss.406 of the  Employee  Retirement
         Income  Security  Act  of  1974,  as  amended  ("ERISA"),   or  funding
         deficiency  within the  meaning of ss.302 of ERISA or any  complete  or
         partial withdrawal liability under ss.4201 of ERISA with respect to any
         pension,  profit  sharing  or other  plan  which is subject to ERISA to
         which ATC or any ATC  Subsidiary  makes or ever has made a contribution
         and in which any employee of ATC or any ATC  Subsidiary  is or has ever
         been  a  participant,   which  prohibited   transaction   liability  or
         withdrawal  liability is reasonably  likely to have a Material  Adverse
         Effect.   With  respect  to  such  plans,  each  of  ATC  and  the  ATC
         Subsidiaries  is in  compliance  in  all  material  respects  with  all
         applicable provisions of ERISA.

                   (bbb)  Each of ATC and the ATC  Subsidiaries  (i)  makes  and
         keeps accurate books and records and (ii) maintains internal accounting
         controls which provide  reasonable  assurance that (A) transactions are
         executed   in   accordance   with   management's   authorization,   (B)
         transactions  are recorded as necessary  to permit  preparation  of its
         financial statements and to maintain accountability for its assets, (C)
         access to its assets is permitted only in accordance with  management's
         authorization and (D) the re-


<PAGE>




                                      -20-


         ported accountability for its assets is compared with existing assets
         at reasonable intervals.

                  (ccc)  Neither ATC nor any ATC  Subsidiary  is an  "investment
         company" or "promoter" or "principal  underwriter"  for an  "investment
         company,"  as such terms are defined in the  Investment  Company Act of
         1940, as amended, and the rules and regulations thereunder.

                  (ddd)  Except as set forth on  Exhibit A hereto,  no holder of
         securities of ATC (other than the Registrable  Notes (as defined in the
         Registration  Rights  Agreement and the Indenture)) will be entitled to
         have  such  securities  registered  under the  registration  statements
         required  to be  filed  by  ATC  pursuant  to the  Registration  Rights
         Agreement and the Indenture than as expressly permitted thereby.

                  (eee)  Immediately  after the consummation of the transactions
         contemplated by the Merger  Agreement,  the fair value and present fair
         saleable  value  of  the  assets  of ATC  and  its  subsidiaries,  on a
         consolidated  basis,  will  exceed the sum of its  consolidated  stated
         liabilities and identified contingent liabilities (after giving effect,
         in the case of each of the guarantors,  to the limitations contained in
         each Guarantee); neither ATC nor any of its subsidiaries is, or will be
         after giving effect to the execution,  delivery and  performance of the
         Merger Agreement and the consummation of the transactions  contemplated
         hereby, (a) left with unreasonably small capital with which to carry on
         its business as it is proposed to be  conducted,  (b) unable to pay its
         debts  (contingent  or  otherwise)  as  they  mature  or (c)  otherwise
         insolvent.

                  (fff) Each of the foregoing representations and warranties, as
         far as  each  relates  to ATC  and  the  ATC  Subsidiaries,  is made by
         Acquisition Corp. to the best of its knowledge; upon the Effective Time
         and the assumption by ATC of the obligations of the Company  hereunder,
         such  representations  and  warranties  shall be deemed to be have been
         made by ATC without such knowledge limitation.

                  Each of the foregoing representations and warranties,  insofar
as each relates to information  concerning ATC or any subsidiary of ATC, is made
by Acquisition  Corp. to the best of its knowledge;  upon the Effective Time and
the  assumption  by ATC of  the  obligations  of  the  Company  hereunder,  such
representations  and  warranties  shall be  deemed  to be have  been made by ATC
without such knowledge limitation.

                  Any  certificate  signed by any  officer of the Company or any
Subsidiary and delivered to the Initial  Purchaser or to counsel for the Initial
Purchaser shall be deemed a joint and several representation and warranty by the
Company and each of the Subsidiaries to each Initial Purchaser as to the matters
covered thereby.


<PAGE>




                                      -21-


                   3. Purchase,  Sale and Delivery of the Notes. On the basis of
the representations,  warranties,  agreements and covenants herein contained and
subject to the terms and  conditions  herein set forth,  the  Company  agrees to
issue and sell to the Initial  Purchaser,  and the Initial  Purchaser  agrees to
purchase, the Notes, at 97% of their principal amount.

                  One or more certificates in definitive form for the Notes that
the Initial Purchaser has agreed to purchase hereunder, and in such denomination
or denominations  and registered in such name or names as the Initial  Purchaser
requests upon notice to the Company at least 48 hours prior to the Closing Date,
shall be  delivered  by or on behalf of the  Company to the  Initial  Purchaser,
against  payment by or on behalf of the Initial  Purchaser of the purchase price
therefor by wire transfer of immediately available funds payable to such account
or account as the Company  shall  specify  prior to the Closing Date, or by such
means as the parties hereto shall agree prior to the Closing Date. Such delivery
of and payment for the  Securities  shall be made at the offices of Chadbourne &
Parke LLP, 30  Rockefeller  Plaza,  New York,  at 10:00 A.M.,  New York time, on
January 29, 1998, or at such other place,  time or date as the Initial Purchaser
and the Company may agree upon,  such time and date of delivery  against payment
being  herein  referred to as the  "Closing  Date." The  Company  will make such
certificate  or  certificates  for the  Securities  available  for  checking and
packaging by the Initial  Purchaser  at the offices of the Initial  Purchaser in
New York,  New York or such other place as the Initial  Purchaser may designate,
at least 24 hours prior to the Closing Date.

                   4. Offering by the Initial  Purchaser.  The Initial Purchaser
proposes to make an offering of the  Securities  at the price and upon the terms
set forth in the Final Memorandum as soon as practicable after this Agreement is
entered into and as in the sole judgment of the Initial Purchaser is advisable.

                   5.  Covenants of the  Company.  The Company and, at and after
the Effective Time, the Guarantors covenant and agree with the Initial Purchaser
that:

                  (a) The  Company  will  not  amend  or  supplement  the  Final
         Memorandum or any amendment or supplement  thereto of which the Initial
         Purchaser  and counsel to the Initial  Purchaser  shall not  previously
         have been advised and furnished a copy for a reasonable  period of time
         prior to the  proposed  amendment  or  supplement  and as to which  the
         Initial Purchaser shall not have given its consent, which consent shall
         not be  unreasonably  withheld.  The Company  will  promptly,  upon the
         reasonable  request of the Initial Purchaser or counsel for the Initial
         Purchaser,  make  any  amendments  or  supplements  to the  Preliminary
         Memorandum or the Final Memorandum that may be reasonably  necessary or
         advisable in connection  with the initial  resale of the  Securities by
         the Initial Purchaser.


<PAGE>




                                      -22-


                  (b) The Company will use reasonable  efforts to consummate the
         Merger as soon as possible,  taking into  account all relevant  factors
         including successful operation of the Company's business.

                  (c) The Company  and,  at and after the  Effective  Time,  the
         Guarantors  will cooperate with the Initial  Purchaser in arranging for
         the  qualification  of the  Securities  for offering and sale under the
         securities  or "Blue  Sky" laws of such  jurisdictions  as the  Initial
         Purchaser may designate and will continue such  qualification in effect
         for  as  long  as  may be  necessary  to  complete  the  resale  of the
         Securities  by  the  Initial  Purchaser;  provided,  however,  that  in
         connection  therewith the Company shall not be required to qualify as a
         foreign  corporation  or to  execute a general  consent  to  service of
         process in any  jurisdiction  or subject  the Company to any tax in any
         such jurisdiction where it is not then so subject.

                  (d)  If,  at  any  time  prior  to  the   completion   of  the
         distribution  by the  Initial  Purchaser  of the  Notes or the  Private
         Exchange  Notes,  any event occurs or  information  becomes  known as a
         result of which the Final  Memorandum  as then amended or  supplemented
         would include an untrue  statement of a material fact, or omit to state
         a material fact necessary to make the statements  therein, in the light
         of the circumstances under which they were made, not misleading,  or if
         for any other reason it is necessary at any time to amend or supplement
         the  Final  Memorandum  in order to comply  with  applicable  law,  the
         Company will  promptly  notify the Initial  Purchaser  thereof and will
         prepare, at the Company's expense, an amendment to the Final Memorandum
         that corrects such statement or omission or effects such compliance.

                  (e) The Company will,  without charge,  provide to the Initial
         Purchaser  and to counsel for the Initial  Purchaser  as many copies of
         the Preliminary Memorandum and the Final Memorandum or any amendment or
         supplement thereto as the Initial Purchaser may reasonably request.

                  (f) The Company will apply the net  proceeds  from the sale of
         the  Securities  substantially  as set forth under "Use of Proceeds" in
         the Final Memorandum.

                  (g) The Company will ensure that the capital  contribution  by
         Holdings  of the  full  amount  of the  proceeds  of  the  rollover  of
         management  and  employee  equity in ATC into  equity of  Holdings,  as
         described in the Final Memorandum,  occurs on or prior to the Effective
         Time.

                  (h) For so  long as any  Securities  remain  outstanding,  the
         Company will furnish to the Initial Purchaser copies of all reports and
         other communications  (financial or otherwise) furnished by the Company
         to the Trustee or the holders of the


<PAGE>




                                      -23-


         Securities  and,  as  soon  as  available,  copies  of any  reports  or
         financial  statements  furnished  to or filed by the  Company  with the
         Commission  or any national  securities  exchange on which any class of
         securities of the Company may be listed.

                  (i) Prior to the Closing Date, the Company will furnish to the
         Initial  Purchaser,  as soon  as  they  have  been  prepared  by or are
         available to the Company, a copy of any unaudited interim  consolidated
         financial statements of the Company or ATC for any period subsequent to
         the period covered by its most recent financial statements appearing in
         the Final Memorandum.

                  (j) None of the Company nor any of its  respective  Affiliates
         will  sell,  offer  for  sale or  solicit  offers  to buy or  otherwise
         negotiate  in respect of any  "security"  (as  defined in the Act) that
         could be  integrated  with the sale of the  Securities in a manner that
         would require the registration under the Act of the Securities.

                  (k) The Company will not,  nor will the Company  permit any of
         the  Subsidiaries  to,  engage in any form of general  solicitation  or
         general  advertising (as those terms are used in Regulation D under the
         Act) in connection with the offering of the Securities or in any manner
         involving a public  offering  within the meaning of Section 4(2) of the
         Act.

                  (l) For so long as any of the Securities  remain  outstanding,
         the Company will make  available,  upon request,  to any holder of such
         Securities  and  any  prospective  purchaser  thereof  the  information
         specified in Rule 144A(d)(4)  under the Act, unless the Company is then
         subject to Section 13 or 15(d) of the Exchange Act.

                  (m) Each of the Company and, at and after the Effective  Time,
         the Guarantors will use its commercially reasonable best efforts to (i)
         permit the Securities to be designated  PORTAL securities in accordance
         with the rules and regulations  adopted by the National  Association of
         Securities  Dealers,  Inc.  (the  "NASD")  relating  to  trading in the
         Private  Offerings,  Resales and  Trading  through  Automated  Linkages
         market  (the  "PORTAL  Market")  and (ii) permit the  Securities  to be
         eligible for  clearance and  settlement  through The  Depository  Trust
         Company.

                  (n) In  connection  with  any  Notes  offered  and  sold in an
         offshore transaction (as defined in Regulation S), the Company will not
         register  any  transfer of such Notes not made in  accordance  with the
         provisions of Regulation S and will not,  except in accordance with the
         provisions of Regulation S, if applicable,  issue any such Notes in the
         form of definitive securities.


<PAGE>




                                      -24-


                  6. Expenses.  The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement,  whether or
not the  transactions  contemplated  herein are consummated or this Agreement is
terminated  pursuant  to  Section 11 hereof,  including  all costs and  expenses
incident to: (i) the printing,  word processing or other production of documents
with  respect  to  such  transactions,  including  any  costs  of  printing  the
Preliminary   Memorandum  and  the  Final   Memorandum  and  any  amendments  or
supplements  thereto,  and any  "Blue  Sky"  memoranda,  (ii)  all  arrangements
relating to the  delivery to the Initial  Purchaser  of copies of the  foregoing
documents,  (iii) the fees and disbursements of the counsel, the accountants and
any other  experts or advisors  retained by the  Company,  (iv) the  preparation
(including  printing),  issuance  and  delivery to the Initial  Purchaser of any
certificates evidencing the Securities,  (v) the qualification of the Securities
under state securities and "Blue Sky" laws, including filing fees and reasonable
fees and  disbursements  of  counsel  up to $10,000  for the  Initial  Purchaser
relating  thereto,  (vi) the  expenses  of the  Company in  connection  with any
meetings  with  prospective  investors  in the  Securities,  (vii)  the fees and
expenses of the Trustee,  including fees and expenses of its counsel, and (viii)
all expenses and listing fees incurred in connection  with the  application  for
quotation of the  Securities  on the PORTAL  Market and (ix) any fees charged by
investment rating agencies for the rating of the Securities. If the issuance and
sale of the  Securities  provided  for  herein is not  consummated  because  any
condition  to the  obligation  of the Initial  Purchaser  set forth in Section 7
hereof is not  satisfied,  because  this  Agreement  is  terminated  pursuant to
Section 11 hereof or because of any failure, refusal or inability on the part of
the  Company  or  the  apparent  inability  of  any  Guarantor  to  perform  all
obligations  and satisfy all conditions on its part to be performed or satisfied
hereunder  (other  than by reason of a default by the Initial  Purchaser  of its
obligations  hereunder  after all  conditions  hereunder  have been satisfied in
accordance herewith),  the Company will promptly reimburse the Initial Purchaser
upon demand for all  reasonable  out-of-pocket  expenses  (including  reasonable
fees,  disbursements  and  charges of Cahill  Gordon & Reindel,  counsel for the
Initial  Purchaser)  that shall have been  incurred by the Initial  Purchaser in
connection with the proposed purchase and sale of the Securities.

                  7.  Conditions  of the Initial  Purchaser's  Obligations.  The
obligation  of the  Initial  Purchaser  to purchase  and pay for the  Securities
shall, in its sole  discretion,  be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:

                  (a) On the  Closing  Date,  the Initial  Purchaser  shall have
         received the opinion, dated as of the Closing Date and addressed to the
         Initial Purchaser,  of Chadbourne & Parke LLP, counsel for the Company,
         in form  and  substance  reasonably  satisfactory  to  counsel  for the
         Initial Purchaser, to the effect that:

                    (i) The Company is duly  incorporated;  each of the Company,
                  ATC and ATC's  subsidiaries  is validly  existing  and in good
                  standing under the laws of its  jurisdiction of  incorporation
                  and has all requisite corporate power and


<PAGE>




                                      -25-


                  authority  to own,  lease and  operate its  properties  and to
                  conduct its  business as  described  in the Final  Memorandum.
                  Each  of the  Company,  ATC  and  ATC's  subsidiaries  is duly
                  qualified  as a foreign  corporation  and in good  standing in
                  each  jurisdiction  set forth on a schedule  attached  to such
                  opinion.

                    (ii) The Company  has the  authorized  capital  stock as set
                  forth under "Capitalization" in the Final Memorandum.

                    (iii) To the knowledge of such counsel,  except as set forth
                  in the Final  Memorandum,  (A) no  options,  warrants or other
                  rights to purchase from the Company shares of capital stock or
                  ownership  interests  in the Company are  outstanding,  (B) no
                  agreements or other  obligations  of the Company to issue,  or
                  other rights to cause the Company to convert,  any  obligation
                  into, or exchange any securities  for, shares of capital stock
                  or ownership  interests in the Company are outstanding and (C)
                  no  holder  of  securities  of the  Company  (other  than  the
                  Registrable   Notes)  is  entitled  to  have  such  securities
                  registered under a registration statement filed by the Company
                  pursuant  to  the   Registration   Rights  Agreement  and  the
                  Indenture (other than as set forth on Exhibit A hereto).

                    (iv) The Indenture is in sufficient  form for  qualification
                  under  the  TIA;  the  Indenture  has been  duly  and  validly
                  authorized,   executed  and  delivered  by  the  Company,  and
                  (assuming  the  due  authorization,   execution  and  delivery
                  thereof  by the  Trustee)  constitutes  the valid and  legally
                  binding  agreement  of the  Company,  enforceable  against the
                  Company  in  accordance  with  its  terms,   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).

                    (v) The Notes are in the form of Exhibit A to the  Indenture
                  with  legends  in  the  forms  of  Exhibits  C,  D or E to the
                  Indenture.   The  Notes  have  each  been  duly  and   validly
                  authorized,  executed and  delivered by the Company and,  when
                  paid for by the Initial Purchaser in accordance with the terms
                  of this Agreement  (assuming the due authorization,  execution
                  and  delivery  of  the   Indenture  by  the  Trustee  and  due
                  authentication  and  delivery  of the Notes by the  Trustee in
                  accordance with the Indenture),  will constitute the valid and
                  legally  binding  obligations of the Company,  entitled to the
                  benefits of the Indenture, and enforceable against the Company
                  in accordance with their terms, except


<PAGE>




                                      -26-


                  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).

                    (vi) The Exchange  Notes and the Private  Exchange Notes and
                  the  Guarantees  to be  endorsed  on them  have  been duly and
                  validly authorized by the Company, and when the Exchange Notes
                  and the Private  Exchange  Notes have been duly  executed  and
                  delivered  by the  Company and the  Guarantees  have been duly
                  authorized,  executed and delivered by the Guarantors, each in
                  accordance with the terms of the Registration Rights Agreement
                  and the Indenture  (assuming the due authorization,  execution
                  and  delivery  of  the   Indenture  by  the  Trustee  and  due
                  authentication  and  delivery  of the  Exchange  Notes and the
                  Private  Exchange Notes by the Trustee in accordance  with the
                  Indenture and also assuming the due  authorization,  execution
                  and delivery of the Guarantees and the Supplemental  Indenture
                  by the  Guarantors),  will  constitute  the valid and  legally
                  binding   obligations  of  the  Company  and  the  Guarantors,
                  respectively,  entitled to the benefits of the Indenture,  and
                  enforceable   against   the   Company   and  the   Guarantors,
                  respectively,  in accordance  with its terms,  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).

                    (vii) The  Company  has all  requisite  corporate  power and
                  authority  to execute,  deliver  and  perform its  obligations
                  under the Merger  Agreement  (to the extent a party  thereto),
                  the Registration  Rights  Agreement and the Credit  Agreement;
                  the  Merger  Agreement  (to the extent a party  thereto),  the
                  Registration  Rights  Agreement and the Credit  Agreement have
                  each been duly and validly authorized,  executed and delivered
                  by the Company, and (assuming due authorization, execution and
                  delivery  thereof by the Initial  Purchaser in the case of the
                  Registration  Rights  Agreement and the banks party thereto in
                  the case of the Credit  Agreement)  constitutes  the valid and
                  legally binding agreement of the Company  enforceable  against
                  the Company in accordance with its terms,  except that (A) the
                  enforcement   thereof  may  be  subject  to  (i)   bankruptcy,
                  insolvency, reorganization,  fraudulent conveyance, moratorium
                  or other


<PAGE>




                                      -27-


                  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) and (B) any
                  rights to indemnity or contribution  thereunder may be limited
                  by  federal  and  state  securities  laws  and  public  policy
                  considerations.

                    (viii) The Company  has all  requisite  corporate  power and
                  authority  to execute,  deliver  and  perform its  obligations
                  under  this   Agreement  and  the  Merger   Agreement  and  to
                  consummate the transactions  contemplated  hereby and thereby;
                  this Agreement and the Merger  Agreement and the  consummation
                  by  the  Company  and  the  Guarantors  of  the   transactions
                  contemplated  hereby and  thereby  have been duly and  validly
                  authorized  by the  Company.  This  Agreement  and the  Merger
                  Agreement  have  been  duly  executed  and  delivered  by  the
                  Company.

                    (ix) The  Indenture,  the Notes,  the  Exchange  Notes,  the
                  Guarantees,  the  Registration  Rights  Agreement,  the Merger
                  Agreement and the Credit Agreement conform as to legal matters
                  in all material respects to the descriptions thereof contained
                  in the Final Memorandum.

                    (x) To the knowledge of such counsel, except as described in
                  the Final Memorandum, no legal or governmental proceedings are
                  pending or threatened to which the Company or any Guarantor is
                  a party or to which the  property  or assets of the Company or
                  any Guarantor is subject which would be required under the Act
                  to  be  described  in  a   registration   statement  or  in  a
                  prospectus,  or which seek to  restrain,  enjoin,  prevent the
                  consummation of or otherwise challenge the issuance or sale of
                  the  Notes to be sold  hereunder  or the  consummation  of the
                  Merger or the consummation of the other transactions described
                  in the Final Memorandum.

                    (xi) To the knowledge of such counsel, the Company is not in
                  violation  of its  certificate  of  incorporation  or  bylaws,
                  except for any such breach, default,  violation or event which
                  would not,  individually  or in the  aggregate,  be reasonably
                  likely to have a Material Adverse Effect.

                    (xii)  Except  as set  forth in the  Final  Memorandum,  the
                  execution,  delivery and  performance of this  Agreement,  the
                  Indenture,  the  Registration  Rights  Agreement,  the  Merger
                  Agreement and the Credit Agreement and the consummation of the
                  Tender Offer,  the Merger,  the issuance and sale of the Notes
                  to the Initial Purchaser,  registration of the Notes under the
                  Act, registra-


<PAGE>




                                      -28-


                  tion of the Exchange  Notes and Private  Exchange  Notes under
                  the Act and borrowings under the Credit Agreement  (expressing
                  no  opinion as to the  compliance  or  non-compliance,  or the
                  effect of non-compliance,  with any financial tests, ratios or
                  covenants)  will not  constitute  or  result  in a breach or a
                  default  under (or an event  which  with  notice or passage of
                  time or both would constitute a default under) or violation of
                  or cause an acceleration of any obligation  under or result in
                  the  imposition or creation of (or the obligation to create or
                  impose) a lien on any property or assets of the  Company,  ATC
                  or any  Guarantor  with respect to (i) the terms or provisions
                  of any of the terms or provisions of any contract described in
                  the Final Memorandum (such contracts, the "Material Contracts"
                  (expressing no opinion as to the compliance or non-compliance,
                  or the effect of  non-compliance,  with any  financial  tests,
                  ratios or covenants)),  except for any such conflict,  breach,
                  violation,  default or event which would not,  individually or
                  in the  aggregate,  be  reasonably  likely to have a  Material
                  Adverse Effect and except for requirements to prepay the 8.18%
                  Senior  Secured  Notes and  Existing  Credit  Facility  in the
                  manner described in the Final Memorandum upon  consummation of
                  the Merger, (ii) the certificate of incorporation or bylaws of
                  the Company or (iii) (assuming  compliance with all applicable
                  state  securities or "Blue Sky" laws and assuming the accuracy
                  of the representations and warranties of the Initial Purchaser
                  in Section 8 hereof, the accuracy of the  representations  and
                  warranties  of the  Company  herein,  the  performance  by the
                  Company and the Initial  Purchaser of their agreements  herein
                  and compliance with federal securities laws in connection with
                  obligations  under  the  Registration  Rights  Agreement)  any
                  statute,  judgment, decree, order, rule or regulation known to
                  such  counsel  to be  applicable  to the  Company,  ATC or any
                  Guarantor and to transactions of the type  contemplated by the
                  Final  Memorandum,  except  for any such  conflict,  breach or
                  violation  which would not,  individually or in the aggregate,
                  be reasonably likely to have a Material Adverse Effect.

                    (xiii)  Assuming  the   truthfulness  and  accuracy  of  the
                  representations  and warranties of the Company and the Initial
                  Purchaser  and  assuming  compliance  by the  Company  and the
                  Initial  Purchaser  with  their  agreements   herein,  to  the
                  knowledge of such counsel, no consent, approval, authorization
                  or order of any  governmental  authority  is required  for the
                  issuance  and sale by the  Company of the Notes to the Initial
                  Purchaser or the Merger or the Holdings Equity Contribution or
                  the Preferred Stock Offering or the rollover of management and
                  employee equity in ATC into equity of Holdings,  except (i) in
                  connection with the  registration  under the Act of the Notes,
                  and the Private Exchange Notes, if applicable, pursuant to the
                  Registration Rights Agreement, (ii) the


<PAGE>




                                      -29-


                  qualification  of the  Indenture  under the TIA in  connection
                  with  the  issuance  of  the  Notes,   (iii)  such   consents,
                  approvals,  authorizations,  orders,  registrations,  filings,
                  qualifications, licenses and permits (x) as have been obtained
                  and made,  (y) as may be required  under state  securities  or
                  blue sky  laws,  as to which  such  counsel  need  express  no
                  opinion,  or (x) as would not, if not obtained,  be reasonably
                  likely to have a Material Adverse Effect, or (iv) the approval
                  of the Merger by the shareholders of ATC and Acquisition Corp.

                    (xiv)  None  of  the  Company  or  the   Guarantors  is,  or
                  immediately  after the sale of the Notes to be sold  hereunder
                  and  the  application  of the  proceeds  from  such  sale  (as
                  described  in the Final  Memorandum  under the caption "Use of
                  Proceeds")  will be, an  "investment  company" as such term is
                  defined in the Investment Company Act of 1940, as amended.

                    (xv) No registration  under the Act of the Notes is required
                  in  connection  with  the  sale of the  Notes  to the  Initial
                  Purchaser  as  contemplated  by this  Agreement  and the Final
                  Memorandum  or in  connection  with the initial  resale of the
                  Notes by the Initial Purchaser in accordance with Section 8 of
                  this Agreement,  and prior to the commencement of the Exchange
                  Offer (as defined in the Registration Rights Agreement) or the
                  effectiveness of the Shelf Registration  Statement (as defined
                  in the Registration  Rights  Agreement),  the Indenture is not
                  required to be qualified  under the TIA, in each case assuming
                  (i) that the  purchasers  who buy  such  Notes in the  initial
                  resale  thereof  are QIBs,  (ii) the  accuracy  of the Initial
                  Purchaser's  representations  in  Section  8 and  those of the
                  Company contained in this Agreement regarding the absence of a
                  general solicitation in connection with the sale of such Notes
                  to the Initial  Purchaser and the initial resale thereof,  and
                  (iii) the due  performance  by the  Initial  Purchaser  of the
                  agreements  set forth in Section 8 hereof and the offering and
                  transfer procedures set forth in the Final Memorandum.

                    (xvi)   Neither  the   consummation   of  the   transactions
                  contemplated  by  this  Agreement  nor  the  sale,   issuance,
                  execution or delivery of the Notes will violate  Regulation G,
                  T, U or X of the Board of  Governors  of the  Federal  Reserve
                  System.

                    (xvii) To the knowledge of such counsel, except as set forth
                  in the Final Memorandum, upon the effectiveness of the Merger,
                  no holder of  securities of ATC or any ATC  Subsidiary  (other
                  than  the   Registrable   Notes)  is  entitled  to  have  such
                  securities registered under a registration  statement filed by
                  ATC pursuant to the Registration Rights Agreement.


<PAGE>




                                      -30-


                    (xviii) The Merger  Agreement and Letter Agreement have been
                  duly and validly  authorized,  executed and  delivered by ATC,
                  and  (assuming the due  authorization,  execution and delivery
                  thereof by the other parties  thereto)  constitutes  the valid
                  and legally binding agreement of ATC,  enforceable  against it
                  in  accordance  with its terms,  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).

                    (xix) To the knowledge of such counsel,  except as described
                  in the Final Memorandum,  no legal or governmental proceedings
                  are pending or threatened  to which ATC or any ATC  Subsidiary
                  is a party or to which  the  property  or assets of ATC or any
                  ATC  Subsidiary is subject  which would be required  under the
                  Act  to  be  described  in a  registration  statement  or in a
                  prospectus  or which seek to  restrain,  enjoin,  prevent  the
                  consummation of or otherwise challenge the issuance or sale of
                  the  Notes to be sold  hereunder  or the  consummation  of the
                  Merger or the consummation of the other transactions described
                  in the Final Memorandum.

                    (xx)  Except  as set  forth  in the  Final  Memorandum,  the
                  execution,  delivery and  performance of the Merger  Agreement
                  and  the  Letter   Agreement  and  the   consummation  of  the
                  transactions  contemplated  thereby  will  not  constitute  or
                  result in a breach or a default  under (or an event which with
                  notice or passage of time or both would  constitute  a default
                  under)  or  violation  of or  cause  an  acceleration  of  any
                  obligation  under or result in the  imposition  or creation of
                  (or the obligation to create or impose) a lien on any property
                  or assets of ATC or any ATC Subsidiary with respect to (i) the
                  terms or  provisions  of any  contract  described in the Final
                  Memorandum  (such  contracts,  the  "ATC  Material  Contracts"
                  (expressing no opinion as to the compliance or non-compliance,
                  or the effect of  non-compliance,  with any  financial  tests,
                  ratios or covenants)),  except for any such conflict,  breach,
                  violation,  default or event which would not,  individually or
                  in the aggregate, be reasonably likely to have an ATC Material
                  Adverse  Effect,  (ii) the  certificate  of  incorporation  or
                  bylaws  of ATC or  any  ATC  Subsidiary,  or  (iii)  (assuming
                  compliance with all applicable  state securities or "Blue Sky"
                  laws and  assuming  the  accuracy of the  representations  and
                  warranties  of the Initial  Purchaser  in Section 8 hereof and
                  assuming the accuracy of the representations and warranties of
                  ATC in the Letter  Agreement  and,  after the Effective  Time,
                  herein) any statute, judgment, decree,


<PAGE>




                                      -31-


                  order,  rule  or  regulation  known  to  such  counsel  to  be
                  applicable to ATC or any ATC Subsidiary and to transactions of
                  the type contemplated by the Final Memorandum,  except for any
                  such   conflict,   breach  or   violation   which  would  not,
                  individually or in the aggregate, be reasonably likely to have
                  an ATC Material Adverse Effect.

                    (xxi) Each of ATC and its subsidiaries is duly incorporated.

                    (xxii) Each of ATC and its  subsidiaries  has all  requisite
                  corporate power and authority to execute,  deliver and perform
                  its obligations under this Agreement,  the Registration Rights
                  Agreement, the Indenture, the Supplemental Indenture, the
                  Guarantees and the Credit Agreement.

                    (xxiii) To the  knowledge of such  counsel,  neither ATC nor
                  any of its  subsidiaries is in violation of its certificate of
                  incorporation or bylaws, except for any such breach,  default,
                  violation  or event  which would not,  individually  or in the
                  aggregate,  be  reasonably  likely  to  have  an ATC  Material
                  Adverse Effect.

                    (xxiv)  The  execution,  delivery  and  performance  of this
                  Agreement,  the Indenture,  the  Supplemental  Indenture,  the
                  Guarantees,  the  Registration  Rights  Agreement,  the Merger
                  Agreement and the Credit Agreement and the consummation of the
                  Tender  Offer,  the  Merger,  the  assumption  by ATC  and the
                  Guarantors of  obligations  under the Indenture and the Notes,
                  the Guarantee of the Notes by the Guarantors,  registration of
                  the  Securities  under the Act,  registration  of the Exchange
                  Notes and Private  Exchange Notes under the Act and borrowings
                  under the Credit Agreement, will not constitute or result in a
                  breach or violation of the  certificate  of  incorporation  or
                  bylaws of the ATC or any of its Subsidiaries.

                    (xxv) Except as set forth in the Final Memorandum, ATC owns,
                  directly  or  indirectly,  all of the  outstanding  shares  of
                  capital stock of its subsidiaries free and clear of all liens,
                  encumbrances,   equities   and  claims  or   restrictions   on
                  transferability  (other than those  imposed by the Act and the
                  securities  or "Blue  Sky" laws of certain  jurisdictions)  or
                  voting.

                  At the time the foregoing  opinion is delivered,  such counsel
         shall  additionally  state that it has participated in conferences with
         officers   and  other   representatives   of  the   Company   and  ATC,
         representatives  of the independent  public accountants for the Company
         and ATC,  representatives  of the Initial Purchaser and counsel for the
         Initial  Purchaser,  at which  conferences  the  contents  of the Final
         Memorandum and related


<PAGE>




                                      -32-


         matters were discussed, and, although it has not independently verified
         and is not passing upon and assumes no responsibility for the accuracy,
         completeness  or  fairness  of the  statements  contained  in the Final
         Memorandum (except to the extent specified in subsection  7(a)(x)),  no
         facts have come to its  attention  which  lead it to  believe  that the
         Final Memorandum, on the date thereof or at the Closing Date, contained
         an untrue  statement of a material  fact or omitted to state a material
         fact required to be stated  therein or necessary to make the statements
         contained therein,  in the light of the circumstances  under which they
         were made,  not  misleading  (it being  understood  that such firm need
         express no opinion with respect to the financial statements and related
         notes thereto and the other financial, statistical, accounting, reserve
         and well data  included in the Final  Memorandum).  The opinion of such
         counsel  described  in this  Section  shall be  rendered to the Initial
         Purchaser at the request of the Company and shall so state therein.

                  References  to the Final  Memorandum  in this  subsection  (a)
         shall  include  any  amendment  or  supplement   thereto   prepared  in
         accordance with the provisions of this Agreement at the Closing Date.

                  In rendering  such  opinion,  such counsel may state that they
         express no opinion  as to the laws of any  jurisdiction  other than the
         federal  laws of the  United  States  and the laws of the States of New
         York  and the  Delaware  General  Corporation  Law (the  "DGCL").  Such
         counsel may also state that with respect to the opinions as to the DGCL
         and the laws of  jurisdictions  other than New York,  such  counsel has
         relied on the opinion of local counsel of the Company. Such counsel may
         also state that, insofar as such opinion involves factual matters, such
         counsel have relied, to the extent they deem proper,  upon certificates
         of  officers  of  the  Company  and  ATC  and  certificates  of  public
         officials;  provided that such  certificates  have been provided to the
         Initial  Purchaser.  Furthermore,  the opinions in (xxi) through (xxv),
         above,  may be rendered by John Smith,  Esq.,  General  Counsel of ATC;
         John Smith, Esq. may also render the opinions in (i) above,  insofar as
         they relate to subsidiaries  incorporated in  jurisdictions  other than
         Delaware and New York.

                  (b) The  Initial  Purchaser  shall have  received  an opinion,
         dated the Closing  Date,  of Cahill  Gordon & Reindel,  counsel for the
         Initial  Purchaser,  with respect to certain legal matters  relating to
         this Agreement, and such other related matters as the Initial Purchaser
         may  reasonably  require.  In rendering  such opinion,  Cahill Gordon &
         Reindel  shall have  received and may rely upon such  certificates  and
         other documents and information as they may reasonably  request to pass
         upon such matters.

                  (c) The Initial  Purchaser shall have received from Deloitte &
         Touche,  LLP ("Deloitte"),  independent public accountants for ATC, and
         from Arthur Andersen LLP


<PAGE>




                                      -33-


         and Ernst & Young LLP, as independent  public  accountants  for EWI and
         BCM Engineers,  Inc.,  respectively,  comfort  letters,  dated the date
         hereof and a comfort  letter from  Deloitte  dated the Closing Date, in
         form and substance reasonably satisfactory to the Initial Purchaser and
         counsel for the Initial Purchaser.

                  (d)  The   representations   and  warranties  of  the  Company
         contained in this  Agreement  shall be true and correct in all material
         respects  on and as of the  Closing  Date  as if  made on and as of the
         Closing Date; the Company shall have performed in all material respects
         all covenants and  agreements  and satisfied all conditions on its part
         to be performed or satisfied hereunder at or prior to the Closing Date;
         and,  except  as set forth in the Final  Memorandum  (exclusive  of any
         amendment or supplement  thereto  after the date hereof)  subsequent to
         the  date  of the  most  recent  financial  statements  in  such  Final
         Memorandum,  there  shall  have  been no  event  or  development  that,
         individually or in the aggregate,  has or would be reasonably likely to
         have a Material Adverse Effect.

                  (e) The issuance and sale of the  Securities  pursuant to this
         Agreement shall not be enjoined  (temporarily  or  permanently)  and no
         restraining  order or other injunctive order shall have been issued or,
         except for the action set forth in the Final Memorandum under "Business
         -- Legal  Proceedings  --  Recent  Proceedings,"  any  action,  suit or
         proceeding  shall have been  commenced  with respect to this  Agreement
         before any court or governmental authority.

                  (f) The Initial  Purchaser  shall have received  certificates,
         dated  the  Closing  Date,  signed  on  behalf  of the  Company  by its
         President and its Secretary to the effect that, to their knowledge:

                    (i) The  representations  and  warranties  of the Company in
                  this  Agreement are true and correct in all material  respects
                  as if made on and as of the Closing Date,  and the Company has
                  performed  in  all  material   respects  all   covenants   and
                  agreements  and  satisfied  all  conditions  on its part to be
                  performed  or  satisfied  hereunder at or prior to the Closing
                  Date;

                    (ii) At the Closing Date, since the date hereof or since the
                  date of the most  recent  financial  statements  in the  Final
                  Memorandum  (exclusive of any amendment or supplement  thereto
                  after the date hereof),  no event or events have occurred,  no
                  information  has  become  known nor does any  condition  exist
                  that,  individually  or in the aggregate,  would be reasonably
                  likely to have a Material  Adverse  Effect or an ATC  Material
                  Adverse Effect; and


<PAGE>




                                      -34-


                    (iii)  The  sale of the  Securities  hereunder  has not been
                  enjoined (temporarily or permanently).

                  (g) The Initial  Purchaser  shall have received  certificates,
         dated the  Closing  Date,  signed on behalf of ATC by its  Senior  Vice
         Presidents  Nicholas Malino and Christopher  Vincze to the effect that,
         to their knowledge:

                    (i) The  representations and warranties of ATC in the Letter
                  Agreement are true and correct in all material  respects as if
                  made on and as of the Closing Date;

                    (ii) At the Closing Date, since the date hereof or since the
                  date of the most  recent  financial  statements  in the  Final
                  Memorandum  (exclusive of any amendment or supplement  thereto
                  after the date hereof),  no event or events have occurred,  no
                  information  has  become  known nor does any  condition  exist
                  that,  individually  or in the aggregate,  would be reasonably
                  likely to have a Material  Adverse  Effect or an ATC  Material
                  Adverse Effect; and

                    (iii)  The  sale of the  Securities  hereunder  has not been
                  enjoined (temporarily or permanently).

                    (iv) the  schedule  attached to the opinion of  Chadbourne &
                  Parke,  dated  the  closing  date,  sets  forth  each  of  the
                  subsidiaries of ATC and, for each of ATC and its subsidiaries,
                  each  jurisdiction  where  the  ownership  or  leasing  of its
                  properties  or the  conduct  of  its  business  requires  such
                  qualification,  except  where the  failure to be so  qualified
                  would not,  individually  or in the  aggregate,  be reasonably
                  likely to have a Material  Adverse  Effect or an ATC  Material
                  Adverse Effect.

                  (h) On the  Closing  Date,  the Initial  Purchaser  shall have
         received the Registration  Rights Agreement executed by the Company and
         such agreement  shall be in full force and effect at all times from and
         after the Closing Date.

                  (i) The Indenture  shall have been duly executed and delivered
         by the  Company  and the  Trustee,  and the Notes  shall have been duly
         executed by the Company and duly authenticated by the Trustee.

                  (j) The  Initial  Purchaser  shall  have  received  a true and
         correct copy of the Company's Credit  Agreement,  dated and executed on
         or prior to the Closing Date (the "Credit Agreement"), in substantially
         the form described in the Final Memorandum and on and as of the Closing
         Date (after giving effect to the transactions contemplated


<PAGE>




                                      -35-


         by this Agreement and the  application of the proceeds  received by the
         Company from the sale of the Notes) no condition shall exist that would
         constitute  a Default  or an Event of  Default  (each as defined in the
         Credit Agreement) under the Credit Agreement.

                  (k) The  Initial  Purchaser  shall  have  received  a true and
         correct copy of an agreement  between  Holdings and the Company,  dated
         and executed on or prior to the Closing Date, providing for the capital
         contribution,  on or  prior  to the  Effective  Time,  by  Holdings  to
         Acquisition Corp. of the full amount of the proceeds of any rollover of
         management and employee  equity in ATC into equity of Holdings,  and no
         condition shall exist on the Closing Date that is reasonably  likely to
         prevent  such  rollover  (as such  rollover is  described  in the Final
         Memorandum).

                  (l) On or prior to the  Closing  Date,  there  shall have been
         delivered  to the  Initial  Purchaser  true and  correct  copies of the
         Tender Offer  Documents,  which Tender Offer Documents  (except for any
         such  Tender  Offer  Documents  dated  and  delivered  to  the  Initial
         Purchaser  prior to the  date  hereof)  shall be in form and  substance
         reasonably  satisfactory to the Initial  Purchaser and shall be in full
         force and effect. All material conditions precedent to the consummation
         of the Tender Offer as  contained  in the Offer to Purchase  shall have
         been  satisfied  (and not waived  without  the  consent of the  Initial
         Purchaser,  which consent shall not be unreasonably withheld),  and any
         amendment  (except  for any  such  Tender  Offer  Documents  dated  and
         delivered  to the Initial  Purchaser  prior to the date  hereof) to the
         Tender Offer Documents shall be required to be reasonably  satisfactory
         in form and substance to the Initial Purchaser.

                  (m) On or prior to the  Closing  Date,  (i) the  Tender  Offer
         shall have been  consummated  in accordance  with the Offer to Purchase
         and all applicable laws, (ii) all shares that have been tendered to the
         Company  pursuant  to the Offer to  Purchase  shall  have been  validly
         tendered and not  withdrawn and shall be available for purchase by, and
         shall have been purchased by, the Company in accordance  with the terms
         and  conditions  set forth in the  Offer to  Purchase  and  (iii)  such
         tendered  Shares shall be transferable to purchaser with good title and
         shall  be free  and  clear of Liens  and  incumbencies  created  by the
         Company or its affiliates.  After giving effect to the  consummation of
         the purchase of the Shares  pursuant to the Tender  Offer,  the Company
         shall own and control  that number of shares as shall be  necessary  to
         permit the Company to approve the Merger without the  affirmative  vote
         or  approval  of any other  Person,  and there  shall be no  applicable
         statute or other  restriction  (other than  provisions  of the Delaware
         General  Corporation  Law  and  proxy  rules  under  Section  14 of the
         Securities  Exchange  Act of 1934,  as amended)  which would  prohibit,
         materially  restrict or materially delay the consummation of the Merger
         or would be reasonably  likely to make the  consummation  of the Merger
         economically unfeasible. In addition, any state


<PAGE>




                                      -36-


         anti-takeover  law regulating the Acquisition  shall have been complied
         with or shall  have been  determined  by the  Initial  Purchaser  to be
         invalid or inapplicable to the Tender Offer and the Merger. At the time
         of the  consummation  of the  Tender  Offer,  neither  the  fair  price
         provisions  under applicable law nor the fair price provisions of ATC's
         articles  of  incorporation  shall  require a higher  price be paid for
         Shares in the Merger than that paid in the Tender  Offer,  which price,
         in any event,  shall not exceed  that  amount set forth in the Offer to
         Purchase and the Merger Agreement as in effect at the Effective Time.

                  (n) The  Initial  Purchaser  shall  have  received  a true and
         correct copy of the Merger Agreement.  The Merger Agreement as received
         by the  Initial  Purchaser  shall  remain in full  force and effect and
         shall not have been amended, altered or modified and each party thereto
         shall have performed in all material  respects each of its  obligations
         thereunder  to be  performed  by it on or  prior  to the  Closing  Date
         (without giving effect to any waiver or consent to the  modification of
         any term thereof).

                  (o) The Letter  Agreement  shall have been duly  executed  and
         delivered by ATC.

                  (p) (i) Holdings shall have received gross cash proceeds of at
         least $30,000,000 from the sales of its common and preferred equity, as
         described  in the  Final  Memorandum  (the  "Equity  Financing"),  (ii)
         Holdings  shall  have  contributed  the full  amount of the gross  cash
         proceeds received by it from the Equity Financing, plus the full amount
         of  any  proceeds  received  on or  prior  to  the  Closing  Date  from
         investments in Holdings by existing management and employees of ATC, to
         the capital of Acquisition Corp. as a common equity contribution, (iii)
         Acquisition  Corp.  shall have  utilized  the full  amount of such cash
         contribution to make payments owing in connection with the Tender Offer
         and  (iv)  the  components  of  the  Equity  Financing  (including  the
         Preferred  Stock  and  Warrants)  shall  be  substantially  in the form
         described in the Final Memorandum.

                  (q) On or before the Closing Date,  the Initial  Purchaser and
         counsel for the Initial  Purchaser  shall have  received  such  further
         documents,  certificates  and schedules or instruments  relating to the
         business, corporate, legal and financial affairs of the Company and ATC
         as they shall have  heretofore  reasonably  requested from the Company,
         ATC and the Guarantors.

                  (r) On or prior to the Closing  Date,  the  Initial  Purchaser
         shall have  received a solvency  opinion from  Houlihan & Lokey,  which
         solvency opinion shall be in form and substance reasonably satisfactory
         to the  Initial  Purchaser  and shall set forth the  conclusions  that,
         after giving effect to the Transactions, each of Holdings and its


<PAGE>




                                      -37-


         Subsidiaries  on a  consolidated  basis and  Acquisition  Corp. and its
         Subsidiaries  on a consolidated  basis,  is not insolvent,  will not be
         rendered   insolvent  by  the   indebtedness   incurred  in  connection
         therewith,  will not be left with unreasonably small capital with which
         to engage in their  business  and will not have  incurred  debts beyond
         their ability to pay such debts as they mature.

                  All such documents,  opinions,  certificates  and schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably  satisfactory in all material respects to the
Initial  Purchaser  and  counsel for the Initial  Purchaser.  The Company  shall
furnish  to the  Initial  Purchaser  such  conformed  copies of such  documents,
opinions,  certificates  and schedules or instruments in such  quantities as the
Initial Purchaser shall reasonably request.

                  8.  Offering of  Securities;  Restrictions  on  Transfer.  The
Initial  Purchaser  represents  and  warrants  that  it is a  QIB.  The  Initial
Purchaser  agrees  with the  Company  that  (i) it has not and will not  solicit
offers for, or offer or sell, the Securities by any form of general solicitation
or general  advertising  (as those terms are used in Regulation D under the Act)
or in any manner  involving a public offering within the meaning of Section 4(2)
of the Act;  and (ii) it has and will  solicit  offers for the  Securities  only
from, and will offer the Securities only to (A) in the case of offers inside the
United States, persons whom the Initial Purchaser reasonably believes to be QIBs
or, if any such  person is buying  for one or more  institutional  accounts  for
which such  person is acting as  fiduciary  or agent,  only when such person has
represented  to the Initial  Purchaser  that each such account is a QIB, to whom
notice has been given that such sale or  delivery  is being made in  reliance on
Rule 144A,  and, in each case,  in  transactions  under Rule 144A and (B) in the
case of offers  outside the United  States,  to persons other than U.S.  persons
("foreign  Purchaser,"  which term shall include  dealers or other  professional
fiduciaries  in the United  States acting on a  discretionary  basis for foreign
beneficial owners (other than an estate or trust));  provided,  however, that in
the case of this clause (B), in  purchasing  such  Securities  such  persons are
deemed to have  represented  and agreed as provided under the caption  "Transfer
Restrictions" contained in the Final Memorandum.

                  9.  Indemnification and Contribution.  (a) The Company and the
Guarantors  agree,  jointly and  severally,  to indemnify  and hold harmless the
Initial   Purchaser   and   the   affiliates,   directors,   officers,   agents,
representatives  and employees of the Initial Purchaser,  and each other person,
if any, who controls the Initial  Purchaser  within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, against any losses,  claims,  damages
or  liabilities,  joint or several,  to which the Initial  Purchaser or any such
affiliate,  director,  officer, agent,  representative,  employee or controlling
person may become subject under the Act, the Exchange Act or otherwise,  insofar
as any such  losses,  claims,  damages  or  liabilities  (or  actions in respect
thereof) arise out of or are based upon:


<PAGE>




                                      -38-


           (i) any untrue  statement or alleged untrue statement of any material
         fact  contained in (A) any  Memorandum  or any  amendment or supplement
         thereto or (B) any application or other  document,  or any amendment or
         supplement  thereto,  executed by the Company or any Guarantor or based
         upon  written  information  furnished by or on behalf of the Company or
         any  Guarantor  filed  in any  jurisdiction  in order  to  qualify  the
         Securities  under the  securities  or "Blue Sky" laws  thereof or filed
         with any  securities  association  or  securities  exchange  (each,  an
         "Application"); or

           (ii) the omission or alleged  omission to state, in any Memorandum or
         any amendment or supplement  thereto,  or any  Application,  a material
         fact required to be stated  therein or necessary to make the statements
         therein,  in the light of the circumstances under which they were made,
         not misleading,

and will reimburse,  as incurred, the Initial Purchaser and each such affiliate,
director,  officer, agent, representative and employee and each such controlling
person  for any  legal or other  expenses  reasonably  incurred  by the  Initial
Purchaser, such affiliate,  director, officer, agent, representative or employee
or such controlling person in connection with  investigating,  defending against
or appearing as a third-party  witness in connection with any such loss,  claim,
damage,  liability  or  action;  provided,  however,  that the  Company  and the
Guarantors  will not be liable (i) in any such case to the extent  that any such
loss,  claim,  damage,  or  liability  arises out of or is based upon any untrue
statement or alleged  untrue  statement or omission or alleged  omission made in
any Memorandum or any amendment or supplement  thereto,  or any Application,  in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company  by the  Initial  Purchaser  specifically  for use  therein or (ii) with
respect to the Preliminary Memorandum,  to the extent that any such loss, claim,
damage or liability arises solely from the fact that the Initial  Purchaser sold
Securities  to a person to whom  there was not sent or given a copy of the Final
Memorandum (as amended or supplemented) at or prior to the written  confirmation
of such sale if the Company shall have  previously  furnished  copies thereof to
the Initial  Purchaser  in  accordance  with  Section  5(d) hereof and the Final
Memorandum  (as amended or  supplemented)  would have  corrected any such untrue
statement  or  omission.  This  indemnity  agreement  will be in addition to any
liability  that  the  Company  and  the  Guarantors  may  otherwise  have to the
indemnified  parties.  The Company and the Guarantors  shall not be liable under
this subsection (a) for any settlement of any claim or action  effected  without
its consent, which consent shall not be unreasonably withheld or delayed.

                  The Initial  Purchaser  shall not,  without the prior  written
consent of the Company and the  Guarantors,  effect any settlement or compromise
of any pending or threatened  proceeding in respect of which the Company and the
Guarantors are or could have been a party,  or indemnity  could have been sought
hereunder by the Company and the Guarantors, unless such settlement (A) includes
an unconditional written release of the Company and the Guarantors,  in form and
substance reasonably satisfactory to the Company and the Guaran-


<PAGE>




                                      -39-


tors,  from  all  liability  on  claims  that  are the  subject  matter  of such
proceeding  and (B) does not include any  statement as to an admission of fault,
culpability or failure to act by or on behalf of the Company or the Guarantors.

                  (b)  The  Initial  Purchaser  agrees  to  indemnify  and  hold
harmless the Company and the Guarantors,  its respective affiliates,  directors,
officers,  agents,  representatives and employees and each other person, if any,
who controls the Company and the Guarantors  within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act against any losses, claims, damages or
liabilities  to which  the  Company  or any  Guarantor  or any  such  affiliate,
director,  officer,  agent,  representative,  employee or controlling person may
become  subject  under the Act, the Exchange Act or  otherwise,  insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material  fact  contained in any  Memorandum  or any  amendments  or  supplement
thereto,  or any  Application  or (ii) the  omission or the alleged  omission to
state  therein a material  fact  required to be stated in any  Memorandum or any
amendment or supplement  thereto,  or any Application,  or necessary to make the
statements  therein not misleading,  in each case to the extent, but only to the
extent,  that such untrue  statement or alleged untrue  statement or omission or
alleged  omission  was made in  reliance  upon and in  conformity  with  written
information  concerning  the Initial  Purchaser  furnished to the Company by the
Initial Purchaser  specifically for use therein;  and, subject to the limitation
set forth immediately  preceding this clause, will reimburse,  as incurred,  any
legal or other expenses  reasonably  incurred by the Company or any Guarantor or
any such  affiliate,  director,  officer,  agent,  representative,  employee  or
controlling  person in connection  with  investigating  or defending  against or
appearing  as a third party  witness in  connection  with any such loss,  claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability  that the Initial  Purchaser may otherwise  have to
the indemnified  parties.  The Initial  Purchaser shall not be liable under this
Section  9 for any  settlement  of any  claim or  action  effected  without  its
consent, which consent shall not be unreasonably withheld or delayed.

                  The Company and the  Guarantors  shall not,  without the prior
written consent of the Initial Purchaser, effect any settlement or compromise of
any pending or threatened  proceeding in respect of which the Initial  Purchaser
is or could have been a party, or indemnity could have been sought  hereunder by
the Initial  Purchaser,  unless such  settlement  (A) includes an  unconditional
written  release of the  Initial  Purchaser,  in form and  substance  reasonably
satisfactory to the Initial Purchaser, from all liability on claims that are the
subject  matter of such  proceeding and (B) does not include any statement as to
an  admission  of fault,  culpability  or  failure to act by or on behalf of the
Initial Purchaser.

                  (c) Promptly after receipt by an indemnified  party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to in-


<PAGE>




                                      -40-


demnification  under this Section 9, such indemnified  party will, if a claim in
respect thereof is to be made against the indemnifying  party under this Section
9, notify the indemnifying party of the commencement thereof in writing; but the
omission  to so notify the  indemnifying  party (i) will not relieve it from any
liability  under  subsection  (a) or (b)  above or (d) below  unless  and to the
extent such  failure  results in the  forfeiture  by the  indemnifying  party of
substantial  rights and  defenses  and (ii) will not, in any event,  relieve the
indemnifying  party from any obligations to any indemnified party other than the
indemnification  obligation  provided  in  subsections  (a) and (b) above or (d)
below. In case any such action is brought against any indemnified  party, and it
notifies the indemnifying  party of the commencement  thereof,  the indemnifying
party will be entitled  to  participate  therein  and, to the extent that it may
wish, jointly with any other indemnifying  party similarly  notified,  to assume
the defense thereof,  with counsel  reasonably  satisfactory to such indemnified
party;  provided,  however,  that  if (i)  the  use  of  counsel  chosen  by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been  advised  by  counsel  that  there may be one or more  legal  defenses
available to it and/or other  indemnified  parties  that are  different  from or
additional  to  those  available  to  the  indemnifying   party,  or  (iii)  the
indemnifying  party shall not have employed counsel  reasonably  satisfactory to
the  indemnified  party to represent the  indemnified  party within a reasonable
time after receipt by the  indemnifying  party of notice of the  institution  of
such action,  then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such  indemnified  party
or parties and such indemnified  party or parties shall have the right to select
separate  counsel to defend such action on behalf of such  indemnified  party or
parties.  After notice from the indemnifying  party to such indemnified party of
its election so to assume the defense  thereof and approval by such  indemnified
party of counsel  appointed to defend such action,  the indemnifying  party will
not be liable to such  indemnified  party under this  Section 9 for any legal or
other  expenses,  other than  reasonable  costs of  investigation,  subsequently
incurred by such  indemnified  party in  connection  with the  defense  thereof,
unless  (i) the  indemnified  party  shall  have  employed  separate  counsel in
accordance  with the proviso to the  immediately  preceding  sentence  (it being
understood,  however, that in connection with such action the indemnifying party
shall not be liable  for the  expenses  of more than one  separate  counsel  (in
addition  to local  counsel)  in any one action or  separate  but  substantially
similar  actions  in the  same  jurisdiction  arising  out of the  same  general
allegations or  circumstances,  designated by the Initial  Purchaser in the case
subsection (a) of this Section 9 or the Company in the case of subsection (b) of
this Section 9,  representing the indemnified  parties under such subsection (a)
or  subsection  (b),  as the case may be,  who are  parties  to such  action  or
actions) or (ii) the indemnifying party has authorized in writing the employment
of counsel for the indemnified  party at the expense of the indemnifying  party.
After such notice from the  indemnifying  party to such  indemnified  party, the
indemnifying  party  will  not be  liable  for the  costs  and  expenses  of any
settlement of such action effected by


<PAGE>




                                      -41-


such  indemnified  party without the prior written  consent of the  indemnifying
party  (which  consent  shall  not  be  unreasonably   withheld),   unless  such
indemnified  party  waived in writing its rights  under this Section 9, in which
case the indemnified party may effect such a settlement without such consent.

                  (d) In circumstances in which the indemnity agreement provided
for in the  preceding  subsections  of this  Section  9 is  unavailable  to,  or
insufficient  to hold harmless,  an indemnified  party in respect of any losses,
claims,   damages  or  liabilities  (or  actions  in  respect   thereof),   each
indemnifying  party,  in order to provide for just and  equitable  contribution,
shall  contribute to the amount paid or payable by such  indemnified  party as a
result of such losses,  claims,  damages or  liabilities  (or actions in respect
thereof)  in such  proportion  as is  appropriate  to reflect  (i) the  relative
benefits  received by the indemnifying  party or parties on the one hand and the
indemnified  party on the other from the offering of the  Securities  or (ii) if
the  allocation  provided  by the  foregoing  clause  (i) is  not  permitted  by
applicable  law, not only such relative  benefits but also the relative fault of
the indemnifying  party or parties on the one hand and the indemnified  party on
the other in connection  with the statements or omissions or alleged  statements
or omissions that resulted in such losses,  claims,  damages or liabilities  (or
actions in respect  thereof).  The relative benefits received by the Company and
the  Guarantors on the one hand and the Initial  Purchaser on the other shall be
deemed to be in the same  proportion  as the total  proceeds  from the  offering
(before deducting  expenses) received by the Company bear to the total discounts
and  commissions  received by the Initial  Purchaser.  The relative fault of the
parties shall be  determined  by reference  to, among other things,  whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors on the one hand, or the Initial  Purchaser on the other,  the
parties'  relative intent,  knowledge,  access to information and opportunity to
correct or prevent such statement or omission or alleged  statement or omission,
and any other equitable  considerations  appropriate in the  circumstances.  The
Company,  the  Guarantors and the Initial  Purchaser  agree that it would not be
just and  equitable if the amount of such  contribution  were  determined by pro
rata or per capita allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the first sentence
of this subsection (d).  Notwithstanding  any other provision of this subsection
(d),  the  Initial  Purchaser  shall  not be  obligated  to  make  contributions
hereunder  that in the aggregate  exceed the total  discounts,  commissions  and
other compensation received by the Initial Purchaser under this Agreement,  less
the  aggregate  amount of any damages that the Initial  Purchaser  has otherwise
been required to pay by reason of the untrue or alleged untrue statements or the
omissions or alleged omissions to state a material fact, and no person guilty of
fraudulent  misrepresentation  (within the meaning of Section  11(f) of the Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent  misrepresentation.   For  purposes  of  this  subsection  (d),  each
affiliate,  director, officer, agent, representative and employee of the Initial
Purchaser and each person, if


<PAGE>




                                      -42-


any, who controls the Initial  Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as  the  Initial  Purchaser,  and  each  affiliate,  director,  officer,  agent,
representative  and employee of the Company and the  Guarantors and each person,
if any, who  controls the Company or an Guarantor  within the meaning of Section
15 of the Act or Section 20 of the Exchange  Act,  shall have the same rights to
contribution as the Company and the Guarantors.

                  10.   Survival   Clause.   The   respective   representations,
warranties,  agreements,  covenants,  indemnities  and other  statements  of the
Company,  the  Guarantors,  its officers and the Initial  Purchaser set forth in
this Agreement or made by or on behalf of them,  respectively,  pursuant to this
Agreement  shall  remain  in  full  force  and  effect,  regardless  of (i)  any
investigation  made by or on behalf of the Company,  the Guarantors,  any of its
officers or directors,  the Initial Purchaser or any controlling person referred
to in Section 9 hereof and (ii) delivery of and payment for the Securities.  The
respective agreements,  covenants, indemnities and other statements set forth in
Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.

                  11.  Termination.  (a) This Agreement may be terminated in the
sole discretion of the Initial Purchaser by notice to the Company given prior to
the Closing  Date in the event that the Company  shall have  failed,  refused or
been unable to perform,  in all material respects,  all obligations and satisfy,
in all  material  respects,  all  conditions  on its  part  to be  performed  or
satisfied hereunder at or prior thereto or, if at or prior to the Closing Date:

           (i)  except  in  each  case  as  described  in the  Final  Memorandum
         (exclusive  of any  amendment or  supplement  thereto),  either (x) the
         Company  or any  Guarantor  or ATC or any  ATC  Subsidiary  shall  have
         sustained any loss or  interference  with respect to its  businesses or
         properties  from fire,  flood,  hurricane,  accident or other calamity,
         whether or not covered by insurance, or from any strike, labor dispute,
         slow down or work  stoppage  or any legal or  governmental  proceeding,
         which  loss  or  interference,  in the  sole  judgment  of the  Initial
         Purchaser,  has had or has a Material  Adverse  Effect or ATC  Material
         Adverse  Effect,  or (y) there shall have been, in the sole judgment of
         the Initial Purchaser,  any event or development that,  individually or
         in the aggregate,  has or could be reasonably likely to have a Material
         Adverse Effect (including without limitation a change in control of the
         Company) or ATC Material Adverse Effect (including without limitation a
         change in control of ATC other than pursuant to the Offer to Purchase);

           (ii) trading in securities  generally on the New York Stock Exchange,
         the American  Stock Exchange or the NASDAQ  National  Market shall have
         been suspended or maximum or minimum prices shall have been established
         on any such exchange or market;


<PAGE>




                                      -43-


           (iii) a banking  moratorium  shall have been  declared by New York or
         United States authorities;

           (iv)  there  shall  have  been  (A)  an  outbreak  or  escalation  of
         hostilities  between the United States and any foreign power, or (B) an
         outbreak or  escalation  of any other  insurrection  or armed  conflict
         involving  the United  States or any other  national  or  international
         calamity  or  emergency  or (C) any  material  change in the  financial
         markets of the United States that, in the case of (A), (B) or (C) above
         and  in  the  sole  judgment  of  the  Initial   Purchaser,   makes  it
         impracticable  or  inadvisable  to  proceed  with the  offering  or the
         delivery of the Securities as contemplated by the Final Memorandum;

           (v) any  securities of the Company or ATC shall have been  downgraded
         or  placed  on  any  "watch  list"  for  possible  downgrading  by  any
         nationally recognized statistical rating organization;

           (vi) the  Company  shall  have  withdrawn  or  modified  the offer to
         purchase made pursuant to the Offer to Purchase  without the consent of
         the Initial Purchaser; or

           (vii) any party to the Merger  Agreement  shall have  terminated,  or
         taken steps to  terminate,  such Merger  Agreement  or its  obligations
         thereunder.

           (b)  Termination of this Agreement  pursuant to this Section 11 shall
be without  liability  of any party to any other  party  except as  provided  in
Section 10 hereof.

                  12.  Information  Supplied  by  the  Initial  Purchaser.   The
statements  set forth in the last  paragraph  of the cover  page and the  third,
fifth, sixth and seventh paragraphs of the section entitled "Private  Placement"
constitute  the only  information  furnished  by the  Initial  Purchaser  to the
Company for the purposes of Sections 2(a) and 9 hereof.

                  13. Notices. All communications  hereunder shall be in writing
and,  if  sent to the  Initial  Purchaser,  shall  be  mailed  or  delivered  or
telecopied and confirmed in writing to BT Alex. Brown Incorporated,  One Bankers
Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention:  Corporate
Finance  Department,  and if sent to the  Company  or the  Guarantors,  shall be
mailed,  delivered  or  telecopied  and  confirmed in writing to the Company at:
Acquisition  Corp.,  c/o Weiss,  Peck & Greer,  L.L.C.,  One New York Plaza, New
York, New York 10004, Attention: President.

                  14.  Successors.  This Agreement shall inure to the benefit of
and be binding upon the Initial Purchaser, the Company, the Guarantors and their
respective successors, assigns and legal representatives,  and nothing expressed
or  mentioned  in this  Agreement  is intended or shall be construed to give any
other person any legal or equitable right, remedy or


<PAGE>




                                      -44-


claim under or in respect of this Agreement, or any provisions herein contained;
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the Initial Purchaser,  the Company,
the   Guarantors   and   their   respective   successors,   assigns   and  legal
representatives  and for the  benefit  of no other  person  except  that (i) the
indemnities  of the Company and the  Guarantors  contained  in Section 9 of this
Agreement shall also be for the benefit of the affiliates,  directors, officers,
agents, representatives and employees of the Initial Purchaser and any person or
persons who control  the Initial  Purchaser  within the meaning of Section 15 of
the Act or  Section  20 of the  Exchange  Act and  (ii) the  indemnities  of the
Initial Purchaser contained in Section 9 of this Agreement shall also be for the
benefit of the affiliates,  directors,  officers,  agents,  representatives  and
employees  of the  Company  and the  Guarantors  and any person or  persons  who
control the Company or any Guarantor within the meaning of Section 15 of the Act
or Section 20 of the Exchange  Act. No purchaser of any of the  Securities  from
the Initial Purchaser will be deemed a successor because of such purchase.

                  15. Guarantor  Execution.  The Company shall cause each of the
Guarantors  to execute and  deliver  this  Agreement,  the  Registration  Rights
Agreement,  the Supplemental Indenture and the Guarantees  concurrently with the
Effective  Time  and the  Guarantors  shall  execute  each of the  foregoing  in
consideration  of, among other things,  consummation of the Offering and Merger;
provided,  however,  that all  obligations of the Guarantors  arising under this
Agreement  (including  indemnity  obligations)  shall  be as of the  date  first
written above and all  representations  and warranties of the Guarantors  herein
shall be as of the date first  written  above and the Closing Date. In the event
of a breach by the Company of its obligations under this Section 15, the Company
agrees that monetary damages would not be adequate  compensation for any loss or
damage  incurred by such breach and hereby  further agrees that, in the event of
an action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

                  16.  APPLICABLE LAW. THE VALIDITY AND  INTERPRETATION  OF THIS
AGREEMENT,  AND THE TERMS AND  CONDITIONS  SET FORTH HEREIN SHALL BE GOVERNED BY
AND  CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,  WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.

                  17.  Counterparts.  This  Agreement  may be executed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same instrument.


<PAGE>




                                      -45-


                  If the  foregoing  correctly  sets  forth  our  understanding,
please  indicate your  acceptance  thereof in the space  provided below for that
purpose,  whereupon this letter shall  constitute a binding  agreement among the
Company, the Guarantors and the Initial Purchaser.

                                             Very truly yours,

                                             THE COMPANY:

                                             ACQUISITION CORP.


                                             By:   /s/ Wesley W. Lang, Jr.
                                                ---------------------------
                                                Name:  Wesley W. Lang, Jr.
                                                Title: President


                                             THE GUARANTORS:


                                             ATC BLATTERT INC., a South
                                             Dakota corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC CONSTRUCTION SERVICES INC.,
                                             a Massachusetts corporation,
                                             as Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Vice President


<PAGE>




                                      -46-


                                             ATC ENVIRONMENTAL INC., a
                                             Delaware corporation, as Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC INSYS TECHNOLOGY INC., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                 ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer


                                             ATC MANAGEMENT INC., a South
                                             Dakota corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC NEW ENGLAND CORP., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             BING YEN & ASSOCIATES, INC., a
                                             California corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer


<PAGE>




                                      -47-



                                             ENVIRONMENTAL WARRANTY, INC., a
                                             Connecticut corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Vice President


                                             HYGEIA LABORATORIES INC., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


The  foregoing  Agreement is hereby  confirmed and accepted as of the date first
above written.


BT ALEX. BROWN INCORPORATED


By:   /s/ Daniel McCready
   -------------------------
   Name:  Daniel McCready
   Title: Managing Director


<PAGE>

                                                                    EXHIBIT  4.2

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



                             ATC GROUP SERVICES INC.


                                       and


                 STATE STREET BANK AND TRUST COMPANY, as Trustee


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


                          FIRST SUPPLEMENTAL INDENTURE

                          Dated as of February 5, 1998


                                       to


                                    INDENTURE


                          Dated as of January 23, 1998


                                 by and between


                          ACQUISITION CORP., as Issuer


                                       and

                 STATE STREET BANK AND TRUST COMPANY, as Trustee


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


                                  $150,000,000

                     12% Senior Subordinated Notes Due 2008

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


<PAGE>




                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I

                 ASSUMPTION OF OBLIGATIONS OF ACQUISITION CORP.

Section 1.01.  Assumption..............................................2


                                   ARTICLE II

                            MISCELLANEOUS PROVISIONS

Section 2.01.  Terms Defined...........................................2
Section 2.02.  Indenture...............................................2
Section 2.03.  Governing Law...........................................3
Section 2.04.  Successors..............................................3
Section 2.05.  Multiple Counterparts...................................3
Section 2.06.  Effectiveness...........................................3
Section 2.07.  Trustee Disclaimer......................................3


SIGNATURES.............................................................4





                                       -i-


<PAGE>




                  FIRST SUPPLEMENTAL  INDENTURE dated as of February 5, 1998, by
and  among  ATC  GROUP  SERVICES  INC.,  a  Delaware  corporation  ("ATC"),  the
guarantors set forth on the signature pages hereto (the  "Guarantors") and STATE
STREET BANK AND TRUST COMPANY as trustee under the hereafter  defined  Indenture
(the "Trustee").

                  WHEREAS,   ACQUISITION  CORP.,  a  Delaware  corporation  (the
"Company"),  heretofore executed and delivered to the Trustee an Indenture dated
as of January 23, 1998 (the  "Indenture"),  providing  for the issuance of up to
$150,000,000 aggregate principal amount of the Company's 12% Senior Subordinated
Notes Due 2008 (the "Notes"); and

                  WHEREAS,  there have been issued and are now outstanding under
the Indenture, Notes in the aggregate principal amount of $100,000,000; and

                  WHEREAS, in connection with the merger of the Company with and
into ATC  pursuant to an  Agreement  and Plan of Merger dated as of November 26,
1997, the Company has been merged with and into ATC and in connection therewith,
ATC has assumed,  by operation of law, all of the Company's debts,  liabilities,
duties and  obligations,  including the Company's  obligations in respect of the
Notes and under the Indenture; and

                  WHEREAS, ATC desires by this First Supplemental  Indenture, to
expressly  assume the covenants,  agreements and  undertakings of the Company in
the Indenture, under the Notes and in the Registration Rights Agreement; and

                  WHEREAS, the execution and delivery of this First Supplemental
Indenture has been  authorized by a resolution of the Board of Directors of ATC;
and

                  WHEREAS,  the Guarantors  desire,  by this First  Supplemental
Indenture,  to expressly  assume,  jointly and  severally,  the  obligations  of
Guarantors under the Indenture and under Guarantees attached to the Notes; and

                  WHEREAS, the execution and delivery of this First Supplemental
Indenture has been  authorized by a resolution of the Board of Directors of each
of the several Guarantors; and

                  WHEREAS,  all  conditions and  requirements  necessary to make
this First  Supplemental  Indenture  a valid,  binding and legal  instrument  in
accordance  with its terms have been  performed  and  fulfilled  by the  parties
hereto and the execution and de-


<PAGE>




                                      -2-


livery thereof have been in all respects duly authorized by the parties hereto.

                  NOW, THEREFORE,  in consideration of the above premises,  each
party  agrees,  for the  benefit  of the  others  and for the equal and  ratable
benefit of the Holders of the Notes, as follows:


                                    ARTICLE I

                 ASSUMPTION OF OBLIGATIONS OF ACQUISITION CORP.


                  Section   1.01.   Assumption.   ATC   hereby   expressly   and
unconditionally  assumes each and every  covenant,  agreement and undertaking of
the Company in the Indenture and the Registration Rights Agreement as if ATC had
been  the  original  issuer  of  the  Notes,   and  also  hereby  expressly  and
unconditionally  assumes each and every  covenant,  agreement and undertaking in
each Note outstanding on the date of this First  Supplemental  Indenture and any
Notes  delivered  hereafter.  Any Notes  delivered  after the date of this First
Supplemental  Indenture,  including  Notes delivered in substitution or exchange
for any  outstanding  Notes,  as provided in the Indenture,  may be executed and
delivered by ATC in its own name, with such  notations,  legends or endorsements
required  by law,  stock  exchange  rules or usage,  and each  such  Note  shall
constitute the obligation of ATC.


                                   ARTICLE II

                            MISCELLANEOUS PROVISIONS


                  Section 2.01.  Terms  Defined.  For all purposes of this First
Supplemental  Indenture,  except as  otherwise  defined  or unless  the  context
otherwise  requires,  terms used in capitalized form in this First  Supplemental
Indenture  and  defined in the  Indenture  have the  meanings  specified  in the
Indenture.

                  Section 2.02. Indenture. Except as amended hereby, the
Indenture and the Notes are in all respects ratified and confirmed and all the
terms shall remain in full force and effect.

                  Section 2.03. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE
SHALL BE GOVERNED BY AND CONSTRUED IN


<PAGE>




                                      -3-


ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND  PERFORMED  WITHIN THE STATE OF NEW YORK,  WITHOUT  REGARD TO  PRINCIPLES OF
CONFLICT  OF  LAWS.  Each  of  the  parties  hereto  agrees  to  submit  to  the
jurisdiction  of the courts of the State of New York in any action or proceeding
arising out of or relating to this First Supplemental  Indenture,  provided that
such jurisdiction shall be non-exclusive.

                  Section 2.04. Successors.  All agreements of ATC in this First
Supplemental  Indenture and the Notes shall bind its successors.  All agreements
of each of the Guarantors in this First  Supplemental  Indenture,  the Notes and
the Guarantees shall jointly and severally bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.

                  Section 2.05. Multiple Counterparts. The parties may sign
multiple counterparts of this First Supplemental Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent the
same agreement.

                  Section  2.06.  Effectiveness.  The  provisions  of this First
Supplemental  Indenture  will take effect  immediately  upon its  execution  and
delivery by the Trustee in accordance with the provisions of Section 8.06 of the
Indenture.

                  Section  2.07.  Trustee  Disclaimer.  The Trustee  accepts the
amendment of the  Indenture  effected by his First  Supplemental  Indenture  and
agrees to execute the trust  created by the  Indenture and agrees to execute the
trust  created by the Indenture as hereby  amended,  but only upon the terms and
conditions  set forth in the  Indenture,  including  the  terms  and  provisions
defining and limiting the liabilities and responsibilities of the Trustee, which
terms and provisions  shall in like manner define and limit its  liabilities and
responsibilities  in the  performance  of the trust  created by the Indenture as
hereby  amended,  and without  limiting the  generality  of the  foregoing,  the
Trustee shall not be responsible in any manner whatsoever for or with respect to
any of the recitals or statements  contained  herein,  all of which  recitals or
statements are made solely by ATC, or for or with respect to (i) the validity or
sufficiency  of  this  First  Supplemental  Indenture  or any of  the  terms  or
provisions  hereof,  (ii)  the  proper  authorization  hereof  by ATC  and  each
Guarantor by corporate  action or otherwise,  (iii) the due execution  hereof by
ATC and each Guarantor,  (iv) the  consequences  (direct or indirect and whether
deliberate or inadvertent) of any amendment herein provided for, and the Trustee
makes no representation with respect to any such matters.


<PAGE>




                                      -4-

                                   SIGNATURES

                  IN WITNESS WHEREOF,  the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.


                                             ATC GROUP SERVICES INC.


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer


                                             THE GUARANTORS:


                                             ATC BLATTERT INC., a South
                                             Dakota corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC CONSTRUCTION SERVICES INC.,
                                             a Massachusetts corporation,
                                             as Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Vice President


<PAGE>




                                      -5-


                                             ATC ENVIRONMENTAL INC., a
                                             Delaware corporation, as Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC INSYS TECHNOLOGY INC., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                 ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer


                                             ATC MANAGEMENT INC., a South
                                             Dakota corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC NEW ENGLAND CORP., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


<PAGE>




                                      -6-


                                             BING YEN & ASSOCIATES, INC., a
                                             California corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer



                                             ENVIRONMENTAL WARRANTY, INC., a
                                             Connecticut corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Vice President


                                             HYGEIA LABORATORIES INC., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             THE TRUSTEE:

                                             STATE STREET BANK AND TRUST
                                               COMPANY, as Trustee


                                             By:   /s/ Kathy A. Larimore
                                                ----------------------------
                                                Name:  Kathy A. Larimore
                                                Title: Assistant Vice President


<PAGE>



                                                                     Exhibit 4.4

                                                      CONFORMED AS EXECUTED
   ----------------------------------------------------------------------------



                          REGISTRATION RIGHTS AGREEMENT

                          Dated as of January 29, 1998

                                      Among

                                ACQUISITION CORP.

                                       and

                           THE GUARANTORS NAMED HEREIN

                                   as Issuers


                                       and

                           BT ALEX. BROWN INCORPORATED

                              as Initial Purchaser


                     12% Senior Subordinated Notes due 2008



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


<PAGE>




                          REGISTRATION RIGHTS AGREEMENT


                  This Registration Rights Agreement (this "Agreement") is dated
as of January 29, 1998,  among  ACQUISITION  CORP., a Delaware  corporation (the
"Company"),  as issuer,  ATC  BLATTERT  INC., a South  Dakota  corporation,  ATC
CONSTRUCTION SERVICES INC., a Massachusetts corporation, ATC ENVIRONMENTAL INC.,
a Delaware corporation,  ATC INSYS TECHNOLOGY INC., a Delaware corporation,  ATC
MANAGEMENT INC., a South Dakota  corporation,  ATC NEW ENGLAND CORP., a Delaware
corporation,   BING  YEN  &   ASSOCIATES,   INC.,  a   California   corporation,
ENVIRONMENTAL WARRANTY INC., a Connecticut corporation,  and HYGEIA LABORATORIES
INC., a Delaware corporation, as guarantors (the "Guarantors," and together with
the  Company,  the  "Issuers"),  and BT ALEX.  BROWN  INCORPORATED,  as  initial
purchaser (the "Initial Purchaser").

                  This Agreement is entered into in connection with the Purchase
Agreement,  dated as of January  22,  1998,  among the  Issuers  and the Initial
Purchaser (the "Purchase Agreement"), which provides for the sale by the Company
to the Initial  Purchaser  of  $100,000,000  aggregate  principal  amount of the
Company's 12% Senior  Subordinated  Notes due 2008 (the "Notes"),  guaranteed by
the Guarantors (the  "Guarantees").  In order to induce the Initial Purchaser to
enter into the  Purchase  Agreement,  the  Issuers  have  agreed to provide  the
registration  rights set forth in this  Agreement for the benefit of the Initial
Purchaser and any subsequent  holder or holders of the Notes.  The execution and
delivery of this Agreement is a condition to the Initial Purchaser's  obligation
to purchase the Notes under the Purchase Agreement.

                  The parties hereby agree as follows:

                  1. Definitions

                  As used in this Agreement,  the following terms shall have the
following meanings:

                  Additional Interest: See Section 4 hereof.

                  Advice: See the last paragraph of Section 5 hereof.

                  Agreement: See the introductory paragraphs hereto.

                  Applicable Period: See Section 2 hereof.

                  Effectiveness Date: The 130th day after the Issue Date

                  Effectiveness Period: See Section 3(a) hereof.


<PAGE>




                                      -2-


                  Event Date: See Section 4(b) hereof.

                  Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.

                  Exchange Notes: See Section 2 hereof.

                  Exchange Offer: See Section 2 hereof.

                  Exchange Offer Registration Statement: See Section 2 hereof.

                  Filing Date: (A) If no Exchange Offer  Registration  Statement
has been filed by the Issuers pursuant to this Agreement, the 60th day after the
Issue Date; provided, however, that if a Shelf Notice is given within 10 days of
the  Filing  Date,  then the  Filing  Date with  respect  to the  Initial  Shelf
Registration shall be the 30th calendar day after the date of the giving of such
Shelf   Notice;   and  (B)  in  each  other  case   (which  may  be   applicable
notwithstanding  the consummation of the Exchange Offer), the 30th day after the
delivery of a Shelf Notice.

                  Holder: Any holder of a Registrable Note or Registrable Notes.

                  Indemnified Person: See Section 7(c) hereof.

                  Indemnifying Person: See Section 7(c) hereof.

                  Indenture: The Indenture, dated as of January 29, 1998, by and
among the Issuers and State Street Bank and Trust Company, as Trustee,  pursuant
to which the  Notes and the  Guarantees  are  being  issued,  as the same may be
amended or supplemented from time to time in accordance with the terms thereof.

                  Initial Purchaser: See the introductory paragraphs hereto.

                  Initial Shelf Registration: See Section 3(a) hereof.

                  Inspectors: See Section 5(n) hereof.

                  Issue Date: January 29, 1998, the date of original issuance of
the Notes.

                  Issuers: See the introductory paragraphs hereto.

                  NASD: See Section 5(r) hereof.


<PAGE>




                                      -3-


                  Offering Memorandum: The final offering memorandum of the
Company dated January 22, 1998, in respect of the offering of the Notes.

                  Participant: See Section 7(a) hereof.

                  Participating Broker-Dealer: See Section 2(b) hereof.

                  Person: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.

                  Private Exchange: See Section 2(b) hereof.

                  Private Exchange Notes: See Section 2(b) hereof.

                  Prospectus:   The  prospectus  included  in  any  Registration
Statement (including,  without limitation,  any prospectus subject to completion
and a  prospectus  that  includes  any  information  previously  omitted  from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under  the  Securities  Act),  as  amended  or  supplemented  by any
prospectus  supplement,   and  all  other  amendments  and  supplements  to  the
Prospectus,  including post-effective  amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

                  Purchase Agreement: See the introductory paragraphs hereof.

                  Records: See Section 5(m) hereof.

                  Registrable Notes: Each Note upon its original issuance and at
all times  subsequent  thereto,  each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent  thereto
and each Private  Exchange Note upon original  issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange  Note as to which Section  2(c)(iv)  hereof is  applicable,  the
Exchange  Offer  Registration  Statement)  covering such Note,  Exchange Note or
Private  Exchange  Note has been  declared  effective  by the SEC and such Note,
Exchange  Note or such  Private  Exchange  Note,  as the case  may be,  has been
disposed of in accordance with such effective Registration Statement,  (ii) such
Note has been  exchanged  pursuant to the Exchange Offer for an Exchange Note or
Exchange  Notes that may be resold  without  restriction  other than  prospectus
delivery  requirements for Participating  Broker/Dealers under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture or (iv) such
Note,  Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.


<PAGE>




                                      -4-


                  Registration  Statement:  Any  registration  statement  of the
Company and/or the Guarantors  that covers any of the Notes,  the Exchange Notes
or the Private  Exchange Notes (and the related  Guarantees)  filed with the SEC
under the Securities Act,  including the Prospectus,  amendments and supplements
to  such  registration  statement,   including  post-effective  amendments,  all
exhibits,   and  all  material   incorporated  by  reference  or  deemed  to  be
incorporated by reference in such registration statement.

                  Rule 144: Rule 144  promulgated  under the Securities  Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation  hereafter adopted by the SEC providing for offers and sales
of  securities  made in  compliance  therewith  resulting in offers and sales by
subsequent  holders  that are not  affiliates  of the issuer of such  securities
being free of the  registration  and  prospectus  delivery  requirements  of the
Securities Act.

                  Rule 144A: Rule 144A promulgated  under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.

                  Rule 415: Rule 415  promulgated  under the Securities  Act, as
such Rule may be amended from time to time,  or any similar  rule or  regulation
hereafter adopted by the SEC.

                  SEC: The Securities and Exchange Commission.

                  Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.

                  Shelf Notice: See Section 2(c) hereof.

                  Shelf Registration: See Section 3(b) hereof.

                  Subsequent Shelf Registration: See Section 3(b) hereof.

                  TIA: The Trust Indenture Act of 1939, as amended.

                  Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange
Notes.

                  Underwritten   registration   or  underwritten   offering:   A
registration  in which  securities  of one or more of the Issuers are sold to an
underwriter for reoffering to the public.


<PAGE>




                                      -5-


                  2. Exchange Offer

                  (a) The  Issuers  shall  file with the SEC,  no later than the
         Filing Date, a Registration Statement (the "Exchange Offer Registration
         Statement")  on an  appropriate  registration  form with  respect  to a
         registered offer (the "Exchange  Offer") to exchange any and all of the
         Registrable Notes for a like aggregate principal amount of notes of the
         Company,  guaranteed  by the  Guarantors,  that  are  identical  in all
         material  respects to the Notes,  except that the Exchange  Notes shall
         contain no restrictive legend thereon (the "Exchange Notes"), and which
         are  entitled to the  benefits of the  Indenture  or a trust  indenture
         which is  identical in all material  respects to the  Indenture  (other
         than  such  changes  to the  Indenture  or  any  such  identical  trust
         indenture as are necessary to comply with the TIA) and which, in either
         case, has been qualified under the TIA. The Exchange Offer shall comply
         with all  applicable  tender  offer  rules  and  regulations  under the
         Exchange  Act and other  applicable  law.  The Issuers  shall use their
         commercially  reasonable  best efforts to (x) cause the Exchange  Offer
         Registration  Statement to be declared  effective  under the Securities
         Act on or before the  Effectiveness  Date;  (y) keep the Exchange Offer
         open for at least 20 days (or longer if  required  by  applicable  law)
         after the date that notice of the Exchange  Offer is mailed to Holders;
         and (z)  consummate  the  Exchange  Offer  on or  prior to the 45th day
         following the date on which the Exchange Offer  Registration  Statement
         is  declared  effective  by the  SEC.  If,  after  the  Exchange  Offer
         Registration  Statement is initially declared effective by the SEC, the
         Exchange  Offer or the issuance of the  Exchange  Notes  thereunder  is
         interfered  with by any  stop  order,  injunction  or  other  order  or
         requirement of the SEC or any other  governmental  agency or court, the
         Exchange  Offer  Registration  Statement  shall be  deemed  not to have
         become effective for purposes of this Agreement.

                  Each Holder that  participates  in the Exchange  Offer will be
         required, as a condition to its participation in the Exchange Offer, to
         represent  to the  Company in writing  (which may be  contained  in the
         applicable  letter  of  transmittal)  that  any  Exchange  Notes  to be
         received by it will be acquired in the ordinary course of its business,
         that at the time of the  consummation of the Exchange Offer such Holder
         will  have  no  arrangement  or   understanding   with  any  Person  to
         participate in the  distribution  of the Exchange Notes in violation of
         the  provisions of the  Securities  Act, and that such Holder is not an
         affiliate of the Company within the meaning of the Securities Act.

                  Upon  consummation  of the Exchange  Offer in accordance  with
         this Section 2, the  provisions  of this  Agreement  shall  continue to
         apply, mutatis mutandis,  solely with respect to Registrable Notes that
         are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv)
         is applicable and Exchange Notes held by  Participating  Broker-Dealers
         (as  defined),  and the  Issuers  shall have no further  obligation  to
         register


<PAGE>




                                      -6-

         Registrable  Notes (other than Private Exchange Notes and other than in
         respect  of any  Exchange  Notes as to  which  clause  2(c)(iv)  hereof
         applies)  pursuant to Section 3 hereof.  No  securities  other than the
         Exchange Notes and  Guarantees  shall be included in the Exchange Offer
         Registration Statement.

                  (b) The Issuers shall include within the Prospectus  contained
         in the Exchange Offer  Registration  Statement a section entitled "Plan
         of Distribution," reasonably acceptable to the Initial Purchaser, which
         shall contain a summary  statement of the  positions  taken or policies
         made  by  the  staff  of  the  SEC  with   respect  to  the   potential
         "underwriter"  status of any broker-dealer that is the beneficial owner
         (as defined in Rule 13d-3  under the  Exchange  Act) of Exchange  Notes
         received by such  broker-dealer in the Exchange Offer (a "Participating
         Broker-Dealer"),  whether such positions or policies have been publicly
         disseminated  by the  staff of the SEC or such  positions  or  policies
         represent the  prevailing  views of the staff of the SEC. Such "Plan of
         Distribution"  section  shall  also  expressly  permit,  to the  extent
         permitted by applicable policies and regulations of the SEC, the use of
         the  Prospectus  by all  Persons  subject  to the  prospectus  delivery
         requirements of the Securities Act, including,  to the extent permitted
         by applicable  policies and  regulations of the SEC, all  Participating
         Broker-Dealers,  and include a statement  describing the means by which
         Participating   Broker-Dealers   may  resell  the  Exchange   Notes  in
         compliance with the Securities Act.

                  The  Issuers  shall use  their  commercially  reasonable  best
         efforts to keep the Exchange Offer Registration Statement effective and
         to amend and supplement the  Prospectus  contained  therein in order to
         permit such Prospectus to be lawfully  delivered by all Persons subject
         to the prospectus delivery  requirements of the Securities Act for such
         period  of  time as is  necessary  to  comply  with  applicable  law in
         connection  with any  resale of the  Exchange  Notes  covered  thereby;
         provided, however, that such period shall not exceed 45 days after such
         Exchange Offer  Registration  Statement is declared  effective (or such
         longer period if extended  pursuant to the last  paragraph of Section 5
         hereof) (the "Applicable Period").

                  If, prior to consummation  of the Exchange  Offer,  any Holder
         holds any Notes acquired by it that have, or that are reasonably likely
         to be  determined  to have,  the  status of an unsold  allotment  in an
         initial  distribution,  or  any  Holder  is  not  entitled  by  law  to
         participate in the Exchange Offer,  the Company upon the request of any
         such Holder  shall  simultaneously  with the  delivery of the  Exchange
         Notes in the Exchange Offer,  issue and deliver to any such Holder,  in
         exchange  (the  "Private  Exchange")  for such  Notes  held by any such
         Holder, a like principal amount of notes (the "Private Exchange Notes")
         of the Company, guaranteed by the Guarantors, if applicable, that are


<PAGE>




                                      -7-


         identical in all material respects to the Exchange Notes except for the
         placement of a restrictive  legend on such Private  Exchange Notes. The
         Private  Exchange Notes shall be issued  pursuant to the same indenture
         as the  Exchange  Notes and bear the same CUSIP  number as the Exchange
         Notes.

                  In connection with the Exchange Offer, the Issuers shall:

                    (i) mail,  or cause to be mailed,  to each  Holder of record
                  entitled to  participate  in the Exchange  Offer a copy of the
                  Prospectus  forming  part of the Exchange  Offer  Registration
                  Statement,  together with an appropriate letter of transmittal
                  and related documents;

                    (ii) use their commercially  reasonable best efforts to keep
                  the  Exchange  Offer  open for not less than 20 days after the
                  date that  notice of the  Exchange  Offer is mailed to Holders
                  (or longer if required by applicable law);

                    (iii) utilize the services of a depositary  for the Exchange
                  Offer with an address in the Borough of Manhattan, The City of
                  New York;

                    (iv) permit  Holders to withdraw  tendered Notes at any time
                  prior to the close of  business,  New York  time,  on the last
                  business  day on which the  Exchange  Offer shall remain open;
                  and

                    (v)  otherwise  comply  in all  material  respects  with all
                  applicable laws, rules and regulations.

                  As soon as  practicable  after the close of the Exchange Offer
         and the Private Exchange, if any, the Issuers shall:

                    (x)  accept  for  exchange  all  Registrable  Notes  validly
                  tendered  and not validly  withdrawn  pursuant to the Exchange
                  Offer and the Private Exchange, if any;

                    (y) deliver to the Trustee for cancellation all Registrable
                  Notes so accepted for exchange; and

                    (z) cause the Trustee to authenticate  and deliver  promptly
                  to each Holder of Notes,  Exchange  Notes or Private  Exchange
                  Notes,  as the case may be, equal in  principal  amount to the
                  Notes of such Holder so accepted for exchange.


<PAGE>




                                      -8-


                  The  Exchange  Offer  and the  Private  Exchange  shall not be
         subject to any  conditions,  other than that (i) the Exchange  Offer or
         Private Exchange,  as the case may be, does not violate  applicable law
         or any  applicable  interpretation  of the  staff of the  SEC,  (ii) no
         action or  proceeding  shall have been  instituted or threatened in any
         court or by any governmental  agency which might materially  impair the
         ability  of the  Issuers  to  proceed  with the  Exchange  Offer or the
         Private  Exchange,  and no  material  adverse  development  shall  have
         occurred  in any  existing  action or  proceeding  with  respect to the
         ability  of the  Issuers  to so  proceed  and  (iii)  all  governmental
         approvals  shall have been obtained,  which  approvals the Issuers deem
         necessary  for  the  consummation  of the  Exchange  Offer  or  Private
         Exchange.

                  The  Exchange  Notes and the Private  Exchange  Notes shall be
         issued under (i) the  Indenture  or (ii) an indenture  identical in all
         material  respects to the Indenture and which, in either case, has been
         qualified under the TIA or is exempt from such  qualification and shall
         provide  that the  Exchange  Notes shall not be subject to the transfer
         restrictions  set  forth  in  the  Indenture.  The  Indenture  or  such
         indenture shall provide that the Exchange Notes,  the Private  Exchange
         Notes and the Notes shall vote and  consent  together on all matters as
         one class and that none of the  Exchange  Notes,  the Private  Exchange
         Notes or the Notes will have the right to vote or consent as a separate
         class on any matter.

                  (c) If,  (i)  because  of any  change  in law or in  currently
         prevailing interpretations of the staff of the SEC, the Issuers are not
         permitted to effect the Exchange Offer,  (ii) the Exchange Offer is not
         consummated  within  175 days of the Issue  Date,  (iii) any  holder of
         Private  Exchange Notes so requests in writing to the Company within 60
         days after the  consummation of the Exchange Offer, or (iv) in the case
         of any Holder that participates in the Exchange Offer, such Holder does
         not receive Exchange Notes on the date of the exchange that may be sold
         without restriction under state and federal securities laws (other than
         due solely to the status of such Holder as an  affiliate of the Company
         within the  meaning  of the  Securities  Act and other than  prospectus
         delivery  requirements for Participating  Broker/Dealers),  then in the
         case of each of clauses (i) to and including (iv) of this sentence, the
         Company shall promptly  deliver to the Holders and the Trustee  written
         notice thereof (the "Shelf Notice") and shall file a Shelf Registration
         pursuant to Section 3 hereof.

                  3. Shelf Registration

                  If at any time a Shelf Notice is delivered as  contemplated by
Section 2(c) hereof, then:


<PAGE>




                                      -9-


                  (a) Shelf Registration.  The Issuers shall file with the SEC a
         Registration Statement for an offering to be made on a continuous basis
         pursuant  to  Rule  415  covering  all of  the  Registrable  Notes  not
         exchanged in the Exchange  Offer,  Private  Exchange Notes and Exchange
         Notes as to which Section  2(c)(iv) is applicable  (the "Initial  Shelf
         Registration").  The Issuers  shall use their  commercially  reasonable
         best efforts to file with the SEC the Initial Shelf  Registration on or
         before the applicable Filing Date. The Initial Shelf Registration shall
         be on Form S-1 or another  appropriate form permitting  registration of
         such  Registrable  Notes for resale by Holders in the manner or manners
         designated  by  them  (including,   without  limitation,  one  or  more
         underwritten  offerings).  The Issuers shall not permit any  securities
         other than the  Registrable  Notes to be included in the Initial  Shelf
         Registration or any Subsequent Shelf Registration (as defined below).

                  Subject to the last sentence of Section 5(j) the Issuers shall
         use their  commercially  reasonable  best  efforts to cause the Initial
         Shelf Registration to be declared effective under the Securities Act on
         or  prior to the  Effectiveness  Date  and to keep  the  Initial  Shelf
         Registration  continuously effective under the Securities Act until the
         date  which  is two  years  from the  Issue  Date  (the  "Effectiveness
         Period"),  or such shorter period ending when (i) all Registrable Notes
         covered by the Initial Shelf  Registration have been sold in the manner
         set forth and as contemplated in the Initial Shelf Registration or (ii)
         a Subsequent Shelf  Registration  covering all of the Registrable Notes
         covered  by and not sold under the  Initial  Shelf  Registration  or an
         earlier Subsequent Shelf Registration has been declared effective under
         the Securities Act; provided, however, that the Effectiveness Period in
         respect of the  Initial  Shelf  Registration  shall be  extended to the
         extent  required  to  permit  dealers  to  comply  with the  applicable
         prospectus  delivery  requirements of Rule 174 under the Securities Act
         and as otherwise provided herein.

                  (b)  Subsequent  Shelf  Registrations.  If the  Initial  Shelf
         Registration  or  any  Subsequent  Shelf  Registration   ceases  to  be
         effective  for any reason at any time during the  Effectiveness  Period
         (other  than  because of the sale of all of the  securities  registered
         thereunder),  the Issuers shall use their commercially  reasonable best
         efforts to obtain the prompt  withdrawal  of any order  suspending  the
         effectiveness  thereof,  and in any event shall  within 30 days of such
         cessation of  effectiveness  amend the Initial Shelf  Registration in a
         manner  to  obtain  the   withdrawal  of  the  order   suspending   the
         effectiveness  thereof,  or file  an  additional  "shelf"  Registration
         Statement  pursuant to Rule 415 covering all of the  Registrable  Notes
         covered  by and not sold under the  Initial  Shelf  Registration  or an
         earlier  Subsequent  Shelf  Registration  (each,  a  "Subsequent  Shelf
         Registration").  If a  Subsequent  Shelf  Registration  is  filed,  the
         Issuers shall use their  commercially  reasonable best efforts to cause
         the Subsequent Shelf Registration


<PAGE>




                                      -10-

         to  be  declared   effective  under  the  Securities  Act  as  soon  as
         practicable  after  such  filing  and to  keep  such  subsequent  Shelf
         Registration  continuously  effective in the  Effectiveness  Period. As
         used  herein the term  "Shelf  Registration"  means the  Initial  Shelf
         Registration and any Subsequent Shelf Registration.

                  (c)  Supplements  and  Amendments.  The Issuers shall promptly
         supplement and amend any Shelf  Registration  if required by the rules,
         regulations or instructions  applicable to the  registration  form used
         for such Shelf  Registration,  if required by the Securities Act, or if
         reasonably  requested  by  the  Holders  of  a  majority  in  aggregate
         principal amount of the Registrable  Notes covered by such Registration
         Statement or by any underwriter of such Registrable Notes.

                  4. Additional Interest

                  (a) The  Issuers  and the  Initial  Purchaser  agree  that the
         Holders  will  suffer  damages if the  Issuers  fail to  fulfill  their
         obligations  under  Section 2 or Section 3 hereof and that it would not
         be feasible to ascertain  the extent of such  damages  with  precision.
         Accordingly,   the  Company  agrees  to  pay,  as  liquidated  damages,
         additional  interest  on the Notes  ("Additional  Interest")  under the
         circumstances and to the extent set forth below (each of which shall be
         given independent effect):

                             (i) if (A) neither the Exchange Offer  Registration
                  Statement nor the Initial Shelf Registration has been filed on
                  or prior to the applicable Filing Date or (B)  notwithstanding
                  that the  Issuers  have  consummated  or will  consummate  the
                  Exchange  Offer,  the  Issuers  are  required  to file a Shelf
                  Registration  and such Shelf  Registration  is not filed on or
                  prior to the Filing Date applicable thereto,  then, commencing
                  on the day after any such  Filing  Date,  Additional  Interest
                  shall accrue on the principal amount of the Notes at a rate of
                  0.50% per annum  for the first 90 days  immediately  following
                  each such Filing Date, and such Additional Interest rate shall
                  increase by an additional  0.50% per annum at the beginning of
                  each subsequent 90-day period; or

                             (ii) if (A) neither the Exchange Offer Registration
                  Statement  nor the  Initial  Shelf  Registration  is  declared
                  effective by the SEC on or prior to the relevant Effectiveness
                  Date or (B) notwithstanding  that the Issuers have consummated
                  or  will  consummate  the  Exchange  Offer,  the  Issuers  are
                  required  to  file  a  Shelf   Registration   and  such  Shelf
                  Registration is not declared  effective by the SEC on or prior
                  to the  date  which  is 100 days  from  the  date  such  Shelf
                  Registration was filed, then, commencing on the day after such
                  required effective date,  Additional  Interest shall accrue on
                  the principal amount of the Notes at a rate of 0.50% per annum
                  for the first 90 days immediately following such


<PAGE>




                                      -11-


                  date, and such  Additional  Interest rate shall increase by an
                  additional 0.50% per annum at the beginning of each subsequent
                  90-day period; or

                             (iii)  if  (A)  the  Issuers  have  not   exchanged
                  Exchange  Notes for all Notes  validly  tendered in accordance
                  with the terms of the  Exchange  Offer on or prior to the 45th
                  day after the date on which the  Exchange  Offer  Registration
                  Statement  relating  thereto was declared  effective or (B) if
                  applicable,  a Shelf  Registration has been declared effective
                  and such Shelf Registration ceases to be effective at any time
                  it is required to be kept effective  during the  Effectiveness
                  Period, then Additional Interest shall accrue on the principal
                  amount of the Notes at a rate of 0.50% per annum for the first
                  90 days  commencing  on the (x) 46th day after such  effective
                  date,  in the case of (A)  above,  or (y) the day  such  Shelf
                  Registration  ceases to be effective in the case of (B) above,
                  and  such  Additional  Interest  rate  shall  increase  by  an
                  additional  0.50%  per  annum at the  beginning  of each  such
                  subsequent 90-day period;

         provided,  however,  that the Additional Interest rate on the Notes may
         not exceed at any one time in the aggregate  1.0% per annum;  provided,
         further,  however,  that (1) upon the filing of the applicable Exchange
         Offer  Registration  Statement or the applicable Shelf  Registration as
         required hereunder (in the case of clause (i) above of this Section 4),
         (2) upon the effectiveness of the Exchange Offer Registration Statement
         or the applicable Shelf  Registration  Statement as required  hereunder
         (in the  case of  clause  (ii) of this  Section  4),  or (3)  upon  the
         exchange of the  applicable  Exchange  Notes for all Notes tendered (in
         the  case  of  clause   (iii)(A)  of  this  Section  4),  or  upon  the
         effectiveness of the applicable Shelf Registration  Statement which had
         ceased to remain effective (in the case of (iii)(B) of this Section 4),
         Additional Interest on the Notes in respect of which such events relate
         as a result of such clause (or the relevant subclause thereof),  as the
         case may be, shall cease to accrue.

                  (b) The Company shall notify the Trustee within three business
         days after  each and every date on which an event  occurs in respect of
         which Additional Interest is required to be paid (an "Event Date"). Any
         amounts of  Additional  Interest  due  pursuant  to (a)(i),  (a)(ii) or
         (a)(iii) of this Section 4 will be payable in cash semiannually on each
         July 15 and  January  15 (to the  holders  of  record on the July 1 and
         January 1 immediately preceding such dates),  commencing with the first
         such date occurring  after any such  Additional  Interest  commences to
         accrue.  The  amount  of  Additional  Interest  will be  determined  by
         multiplying  the applicable  Additional  Interest rate by the principal
         amount  of  the  Registrable  Notes,  multiplied  by  a  fraction,  the
         numerator of which is the number of days such Additional  Interest rate
         was applicable during such period (determined on the basis of a 360-day
         year comprised of twelve 30-day months


<PAGE>




                                      -12-


         and,  in the  case  of a  partial  month,  the  actual  number  of days
         elapsed), and the denominator of which is 360.

                  5. Registration Procedures

                  In connection  with the filing of any  Registration  Statement
pursuant to Sections 2 or 3 hereof,  the Issuers shall effect such registrations
to permit the sale of the  securities  covered  thereby in  accordance  with the
intended method or methods of disposition  thereof,  and pursuant thereto and in
connection with any Registration  Statement filed by the Issuers  hereunder each
of the Issuers shall:

                  (a)  Prepare  and file  with the SEC  prior to the  applicable
         Filing Date, a  Registration  Statement or  Registration  Statements as
         prescribed  by  Sections  2 or  3  hereof,  and  use  its  commercially
         reasonable  best efforts to cause each such  Registration  Statement to
         become  effective and remain  effective as provided  herein;  provided,
         however,  that, if (1) such filing is pursuant to Section 3 hereof,  or
         (2) a Prospectus contained in the Exchange Offer Registration Statement
         filed  pursuant to Section 2 hereof is required to be  delivered  under
         the Securities Act by any Participating Broker-Dealer who seeks to sell
         Exchange Notes during the Applicable  Period relating  thereto,  before
         filing any  Registration  Statement or Prospectus or any  amendments or
         supplements  thereto,  the  Issuers  shall  furnish  to and  afford the
         Holders  of  the  Registrable   Notes  included  in  such  Registration
         Statement  or each such  Participating  Broker-Dealer  who has provided
         written  notice  to  the  Company  that  it  will  be  a  Participating
         Broker-Dealer,  as the  case may be,  their  counsel  and the  managing
         underwriters,  if any, a reasonable opportunity to review copies of all
         such documents (including,  to the extent requested by any such Holder,
         copies of any documents to be incorporated by reference therein and all
         exhibits thereto) proposed to be filed (in each case at least five days
         prior to such  filing,  or such later date as is  reasonable  under the
         circumstances).  The Issuers shall not file any Registration  Statement
         or Prospectus or any amendments or  supplements  thereto if the Holders
         of a majority in aggregate  principal  amount of the Registrable  Notes
         included  in such  Registration  Statement,  or any such  Participating
         Broker-Dealer,  as the  case may be,  their  counsel,  or the  managing
         underwriters, if any, shall reasonably object on a timely basis.

                  (b)  Prepare  and  file  with  the  SEC  such  amendments  and
         post-effective  amendments  to each  Shelf  Registration  Statement  or
         Exchange Offer  Registration  Statement,  as the case may be, as may be
         necessary to keep such Registration  Statement  continuously  effective
         for the Effectiveness  Period or the Applicable Period, as the case may
         be; during the Effectiveness  Period or Applicable  Period, as the case
         may  be,  cause  the  related  Prospectus  to be  supplemented  by  any
         Prospectus   supplement   required  by   applicable   law,  and  as  so
         supplemented to be filed pursuant to Rule 424 (or


<PAGE>




                                      -13-


         any similar  provisions then in force) promulgated under the Securities
         Act; and during the Effectiveness  Period and Applicable Period, as the
         case may be, comply with the  provisions of the  Securities Act and the
         Exchange Act applicable to each of them with respect to the disposition
         of all securities covered by such Registration  Statement as so amended
         or in such  Prospectus  as so  supplemented  and  with  respect  to the
         subsequent  resale  of any  securities  being  sold by a  Participating
         Broker-Dealer  covered by any such  Prospectus.  The  Issuers  shall be
         deemed not to have used their  commercially  reasonable best efforts to
         keep a Registration Statement effective during the Effectiveness Period
         or the Applicable  Period,  as the case may be, relating thereto if any
         Issuer  voluntarily  takes any  action  that  would  result in  selling
         Holders of the  Registrable  Notes  covered  thereby  or  Participating
         Broker-Dealers  seeking to sell  Exchange  Notes not being able to sell
         such Registrable Notes or such Exchange Notes during that period unless
         such  action  is  required  by  applicable  law or  permitted  by  this
         Agreement.

                  (c) If (1) a Shelf Registration is filed pursuant to Section 3
         hereof,   or  (2)  a  Prospectus   contained  in  the  Exchange   Offer
         Registration  Statement  filed pursuant to Section 2 hereof is required
         to  be  delivered  under  the  Securities  Act  by  any   Participating
         Broker-Dealer  who seeks to sell Exchange  Notes during the  Applicable
         Period  relating  thereto  from whom the Company has  received  written
         notice that it will be a  Participating  Broker-Dealer  in the Exchange
         Offer,  notify the selling  Holders of  Registrable  Notes  (during the
         Effectiveness Period), or each such Participating Broker-Dealer (during
         the  Applicable  Period),  as the case may be,  their  counsel  and the
         managing  underwriters,  if any,  promptly (but in any event within one
         day), and confirm such notice in writing,  (i) when a Prospectus or any
         Prospectus supplement or post-effective  amendment has been filed, and,
         with  respect  to  a  Registration   Statement  or  any  post-effective
         amendment,  when the same has become effective under the Securities Act
         (including in such notice a written statement that any such Holder may,
         upon request, obtain, at the sole expense of the Issuers, one conformed
         copy  of  such  Registration  Statement  or  post-effective   amendment
         including financial statements and schedules, documents incorporated or
         deemed to be  incorporated  by  reference  and  exhibits),  (ii) of the
         issuance by the SEC of any stop order suspending the effectiveness of a
         Registration Statement or of any order preventing or suspending the use
         of any preliminary  prospectus or the initiation of any proceedings for
         that  purpose,  (iii) if at any time when it has been  notified by such
         Holder  that a  prospectus  is  required  by the  Securities  Act to be
         delivered in connection with sales of the Registrable  Notes or resales
         of Exchange Notes by Participating  Broker-Dealers the  representations
         and warranties of the Issuers contained in any agreement (including any
         underwriting agreement) contemplated by Section 5(l) hereof cease to be
         true and correct in all material  respects,  (iv) of the receipt by any
         Issuer  of any  notification  with  respect  to the  suspension  of the
         qualification or exemption from qualification of a Registration State-


<PAGE>




                                      -14-


         ment or any of the  Registrable  Notes or the Exchange Notes to be sold
         by  any   Participating   Broker-Dealer   for  offer  or  sale  in  any
         jurisdiction,  or the  initiation or  threatening of any proceeding for
         such purpose,  (v) of the happening of any event,  the existence of any
         condition or any  information  becoming  known that makes any statement
         made  in such  Registration  Statement  or  related  Prospectus  or any
         document incorporated or deemed to be incorporated therein by reference
         untrue in any  material  respect  or that  requires  the  making of any
         changes in or amendments or supplements to such Registration Statement,
         Prospectus  or  documents  so  that,  in the  case of the  Registration
         Statement,  it will not contain any untrue statement of a material fact
         or omit to state any  material  fact  required to be stated  therein or
         necessary to make the statements  therein not  misleading,  and that in
         the case of the Prospectus, it will not contain any untrue statement of
         a  material  fact or omit to state any  material  fact  required  to be
         stated therein or necessary to make the statements therein, in light of
         the circumstances under which they were made, not misleading,  and (vi)
         of the  Issuers'  determination  that a  post-effective  amendment to a
         Registration Statement would be appropriate.

                  (d) If (1) a Shelf Registration is filed pursuant to Section 3
         hereof,   or  (2)  a  Prospectus   contained  in  the  Exchange   Offer
         Registration  Statement  filed pursuant to Section 2 hereof is required
         to  be  delivered  under  the  Securities  Act  by  any   Participating
         Broker-Dealer  who seeks to sell Exchange  Notes during the  Applicable
         Period and has provided written notice to the Company that it will be a
         Participating  Broker-Dealer,  use  its  commercially  reasonable  best
         efforts during the  Effectiveness  Period or Applicable  Period, as the
         case may be,  to  prevent  the  issuance  of any order  suspending  the
         effectiveness of a Registration Statement or of any order preventing or
         suspending the use of a Prospectus or suspending the  qualification (or
         exemption from  qualification)  of any of the Registrable  Notes or the
         Exchange Notes to be sold by any Participating Broker-Dealer,  for sale
         in any  jurisdiction,  and,  if any such  order is  issued,  to use its
         commercially  reasonable  best efforts to obtain the  withdrawal of any
         such order at the earliest possible moment.

                  (e) If a Shelf Registration is filed pursuant to Section 3 and
         if requested by the managing  underwriter or underwriters (if any), the
         Holders of a majority in aggregate  principal amount of the Registrable
         Notes being sold in  connection  with an  underwritten  offering or any
         Participating  Broker-Dealer,  (i) as promptly as  practicable,  to the
         extent  required by law,  incorporate  in a  prospectus  supplement  or
         post-effective  amendment such information as the managing  underwriter
         or underwriters (if any), such Holders, any Participating Broker-Dealer
         or counsel for any of them reasonably  request to be included  therein,
         (ii) make all required  filings of such  prospectus  supplement or such
         post-effective amendment as soon as practicable after an Issuer has


<PAGE>




                                      -15-


         received  notification  of  such  matters  to be  incorporated  in such
         prospectus supplement or post-effective amendment.

                  (f) If (1) a Shelf Registration is filed pursuant to Section 3
         hereof,   or  (2)  a  Prospectus   contained  in  the  Exchange   Offer
         Registration  Statement  filed pursuant to Section 2 hereof is required
         to  be  delivered  under  the  Securities  Act  by  any   Participating
         Broker-Dealer  who seeks to sell Exchange  Notes during the  Applicable
         Period, furnish to each selling Holder of Registrable Notes and to each
         such   Participating   Broker-Dealer  who  so  requests  and  to  their
         respective counsel and each managing  underwriter,  if any, at the sole
         expense  of  the  Issuers,  one  conformed  copy  of  the  Registration
         Statement or Registration Statements and each post-effective  amendment
         thereto,   including  financial  statements  and  schedules,   and,  if
         requested,  all  documents  incorporated  or deemed to be  incorporated
         therein by reference and all exhibits.

                  (g) If (1) a Shelf Registration is filed pursuant to Section 3
         hereof,   or  (2)  a  Prospectus   contained  in  the  Exchange   Offer
         Registration  Statement  filed pursuant to Section 2 hereof is required
         to  be  delivered  under  the  Securities  Act  by  any   Participating
         Broker-Dealer  who seeks to sell Exchange  Notes during the  Applicable
         Period,  deliver to each selling Holder of Registrable  Notes,  or each
         such Participating  Broker-Dealer who so requests,  as the case may be,
         their respective  counsel,  and the  underwriters,  if any, at the sole
         expense  of  the  Issuers,   as  many  copies  of  the   Prospectus  or
         Prospectuses  (including each form of preliminary  prospectus) and each
         amendment  or  supplement  thereto and any  documents  incorporated  by
         reference therein as such Persons may reasonably request;  and, subject
         to the last  paragraph of this Section 5, the Issuers hereby consent to
         the use of such Prospectus and each amendment or supplement  thereto by
         each  of  the  selling  Holders  of  Registrable  Notes  or  each  such
         Participating  Broker-Dealer,  as the case may be, and the underwriters
         or  agents,  if any,  and  dealers  (if any),  in  connection  with the
         offering and sale of the  Registrable  Notes covered by, or the sale by
         Participating  Broker-Dealers  of the Exchange  Notes pursuant to, such
         Prospectus and any amendment or supplement thereto.

                  (h) Prior to any public  offering of Registrable  Notes or any
         delivery of a Prospectus  contained in the Exchange Offer  Registration
         Statement by any Participating Broker-Dealer who seeks to sell Exchange
         Notes during the Applicable  Period, and has provided written notice to
         the  Company  that  it will be a  Participating  Broker-Dealer  use its
         commercially  reasonable  best  efforts to register or qualify,  and to
         cooperate with the selling  Holders of  Registrable  Notes or each such
         Participating   Broker-Dealer,   as  the  case  may  be,  the  managing
         underwriter or underwriters,  if any, and their  respective  counsel in
         connection with the  registration or  qualification  (or exemption from
         such registration or qualification) of such Registrable Notes for offer
         and sale under the  securities  or Blue Sky laws of such  jurisdictions
         within the United States


<PAGE>




                                      -16-


         as  any  selling  Holder,  such  Participating  Broker-Dealer,  or  the
         managing  underwriter or  underwriters  reasonably  request in writing;
         provided, however, that where Exchange Notes held by such Participating
         Broker-Dealers  or Registrable  Notes are offered other than through an
         underwritten  offering,  the Issuers  agree to cause  their  counsel to
         perform   Blue   Sky   investigations   and  file   registrations   and
         qualifications required to be filed pursuant to this Section 5(h), keep
         each  such  registration  or  qualification  (or  exemption  therefrom)
         effective during the period such Registration  Statement is required to
         be kept  effective  and do any and all other acts or things  reasonably
         necessary or advisable to enable the disposition in such  jurisdictions
         of the  Exchange  Notes  held by  Participating  Broker-Dealers  or the
         Registrable  Notes covered by the  applicable  Registration  Statement;
         provided,  however,  that no Issuer  shall be  required  to (A) qualify
         generally  to do business in any  jurisdiction  where it is not then so
         qualified, (B) take any action that would subject it to general service
         of process in any such jurisdiction  where it is not then so subject or
         (C) subject  itself to taxation in excess of a nominal dollar amount in
         any such jurisdiction where it is not then so subject.

                  (i) If a Shelf  Registration  is filed  pursuant  to Section 3
         hereof, cooperate with the selling Holders of Registrable Notes and the
         managing underwriter or underwriters,  if any, to facilitate the timely
         preparation and delivery of certificates representing Registrable Notes
         to be sold, which certificates  shall not bear any restrictive  legends
         and shall be in a form eligible for deposit with The  Depository  Trust
         Company;  and enable such Registrable Notes to be in such denominations
         and   registered  in  such  names  as  the  managing   underwriter   or
         underwriters, if any, or Holders may request.

                  (j) If (1) a Shelf Registration is filed pursuant to Section 3
         hereof,   or  (2)  a  Prospectus   contained  in  the  Exchange   Offer
         Registration  Statement  filed pursuant to Section 2 hereof is required
         to  be  delivered  under  the  Securities  Act  by  any   Participating
         Broker-Dealer  who seeks to sell Exchange  Notes during the  Applicable
         Period and has provided written notice to the Company that it will be a
         Participating   Broker-Dealer,   upon  the   occurrence  of  any  event
         contemplated by paragraph  5(c)(v) or 5(c)(vi)  hereof,  as promptly as
         practicable  prepare and (subject to Section 5(a) hereof) file with the
         SEC, at the sole expense of the Issuers, a supplement or post-effective
         amendment to the Registration  Statement or a supplement to the related
         Prospectus or any document  incorporated  or deemed to be  incorporated
         therein by reference,  or file any other required  document so that, as
         thereafter  delivered to the purchasers of the Registrable  Notes being
         sold thereunder or to the purchasers of the Exchange Notes to whom such
         Prospectus will be delivered by such a Participating Broker-Dealer, any
         such Prospectus will not contain an untrue statement of a material fact
         or omit to state a  material  fact  required  to be stated  therein  or
         necessary to make the statements


<PAGE>




                                      -17-


         therein,  in light of the circumstances under which they were made, not
         misleading.  Notwithstanding  the  foregoing,  the Issuers shall not be
         required to amend or supplement a Registration  Statement,  any related
         Prospectus or any document  incorporated  therein by reference,  in the
         event that,  and for a period not to exceed an  aggregate of 60 days in
         any calendar year if, (i) an event occurs and is continuing as a result
         of which the Shelf  Registration  would,  in the  Company's  good faith
         judgment,  contain an untrue  statement  of a material  fact or omit to
         state a  material  fact  necessary  in  order  to make  the  statements
         therein,  in the light of the circumstances under which they were made,
         not misleading,  and (ii) (a) the Company  determines in its good faith
         judgment  that the  disclosure  of such event at such time would have a
         material adverse effect on the business, operations or prospects of the
         Company or (b) the disclosure  otherwise  relates to a pending material
         business transaction that has not yet been publicly disclosed.

                  (k)  Prior to the  effective  date of the  first  Registration
         Statement  relating to the Registrable  Notes,  (i) provide the Trustee
         with  certificates  for the  Registrable  Notes in a form  eligible for
         deposit  with The  Depository  Trust  Company and (ii)  provide a CUSIP
         number for the Registrable Notes.

                  (l)  In   connection   with  any   underwritten   offering  of
         Registrable  Notes  pursuant  to a Shelf  Registration,  enter  into an
         underwriting  agreement as is customary  in  underwritten  offerings of
         debt securities  similar to the Notes in form and substance  reasonably
         satisfactory  to the  Company  and take all such  other  actions as are
         reasonably  requested by the managing  underwriter or  underwriters  in
         order to expedite or facilitate the  registration or the disposition of
         such  Registrable  Notes  and,  in  such  connection,   (i)  make  such
         representations and warranties to, and covenants with, the underwriters
         with respect to the business of the Company and the subsidiaries of the
         Company  (including  any acquired  business,  properties or entity,  if
         applicable) and the Registration  Statement,  Prospectus and documents,
         if any, incorporated or deemed to be incorporated by reference therein,
         in each case, as are  customarily  made by issuers to  underwriters  in
         underwritten  offerings of debt securities  similar to the Notes but in
         no event more onerous than those  contained in the Purchase  Agreement,
         and  confirm  the same in  writing  if and when  requested  in form and
         substance  reasonably  satisfactory  to the  Company;  (ii)  obtain the
         written  opinions of counsel to the Company and written updates thereof
         in form,  scope and substance  reasonably  satisfactory to the managing
         underwriter or underwriters, addressed to the underwriters covering the
         matters  customarily  covered  in  opinions  reasonably   requested  in
         underwritten  offerings  and such other  matters  as may be  reasonably
         requested by the managing  underwriter or  underwriters;  (iii) use its
         best efforts to obtain "cold  comfort"  letters and updates  thereof in
         form, scope and substance reasonably satisfactory to the managing


<PAGE>




                                      -18-


         underwriter or underwriters from the independent  public accountants of
         the  Company  (and,  if  necessary,   any  other   independent   public
         accountants  of the Company,  any  subsidiary  of the Company or of any
         business  acquired by the Company for which  financial  statements  and
         financial data are, or are required to be,  included or incorporated by
         reference  in the  Registration  Statement),  addressed  to each of the
         underwriters, such letters to be in customary form and covering matters
         of the type customarily covered in "cold comfort" letters in connection
         with underwritten offerings of debt securities similar to the Notes and
         such other matters as reasonably  requested by the managing underwriter
         or underwriters as permitted by the Statement on Auditing Standards No.
         72; and (iv) if an  underwriting  agreement is entered  into,  the same
         shall  contain  indemnification   provisions  and  procedures  no  less
         favorable to the sellers and underwriters, if any, than those set forth
         in Section 7 hereof (or such other provisions and procedures acceptable
         to Holders of a majority in aggregate  principal  amount of Registrable
         Notes  covered  by  such   Registration   Statement  and  the  managing
         underwriter or underwriters or agents, if any). The above shall be done
         at each closing  under such  underwriting  agreement,  or as and to the
         extent required thereunder.

                  (m) If (1) a Shelf Registration is filed pursuant to Section 3
         hereof,   or  (2)  a  Prospectus   contained  in  the  Exchange   Offer
         Registration  Statement  filed pursuant to Section 2 hereof is required
         to  be  delivered  under  the  Securities  Act  by  any   Participating
         Broker-Dealer  who seeks to sell Exchange  Notes during the  Applicable
         Period,  make  available for  inspection by any selling  Holder of such
         Registrable Notes being sold, or each such Participating Broker-Dealer,
         as  the  case  may  be,  any  underwriter  participating  in  any  such
         disposition of Registrable Notes, if any, and any attorney,  accountant
         or  other  agent  retained  by any such  selling  Holder  or each  such
         Participating  Broker-Dealer,  as  the  case  may  be,  or  underwriter
         (collectively,  the "Inspectors"),  at the offices where normally kept,
         during  reasonable  business  hours and upon  reasonable  notice to the
         Company, all financial and other records, pertinent corporate documents
         and  instruments  of  the  Company  and  subsidiaries  of  the  Company
         (collectively,  the  "Records")  as shall be  reasonably  necessary  to
         enable them to exercise any applicable due diligence  responsibilities,
         and cause the officers,  directors and employees of the Company and any
         of its subsidiaries to supply all information  reasonably  requested by
         any such Inspector in connection with such  Registration  Statement and
         Prospectus. Each Inspector shall agree in writing that it will keep the
         Records  confidential  and that it will not disclose any of the Records
         that the Company  determines,  in good faith,  to be  confidential  and
         notifies  the  Inspectors  in writing are  confidential  unless (i) the
         disclosure  of such Records is necessary to avoid or correct a material
         misstatement  or material  omission in such  Registration  Statement or
         Prospectus,  (ii) the release of such Records is ordered  pursuant to a
         subpoena  or other  order from a court of  competent  jurisdiction,  or
         (iii) the information in such Records has been made generally available


<PAGE>




                                      -19-


         to the public;  provided,  however, that prior notice shall be provided
         as soon as  practicable  to the Company of the potential  disclosure of
         any  information by such  Inspector  pursuant to clauses (i) or (ii) of
         this  sentence to permit the Company to obtain a  protective  order (or
         waive the  provisions of this  paragraph  (m)) and that such  Inspector
         shall take such  actions as are  reasonably  necessary  to protect  the
         confidentiality of such information (if practicable) to the extent such
         action is otherwise  not  inconsistent  with,  an  impairment  of or in
         derogation of the rights and interests of the Holder or any Inspector.

                  (n) Provide an indenture  trustee for the Registrable Notes or
         the Exchange  Notes, as the case may be, and cause the Indenture or the
         trust  indenture  provided for in Section 2(a) hereof,  as the case may
         be, to be qualified  under the TIA not later than the effective date of
         the first Registration Statement relating to the Registrable Notes; and
         in  connection  therewith,  cooperate  with the trustee  under any such
         indenture  and the  Holders of the  Registrable  Notes,  to effect such
         changes to such  indenture as may be required for such  indenture to be
         so qualified in accordance with the terms of the TIA; and execute,  and
         use its  commercially  reasonable best efforts to cause such trustee to
         execute,  all documents as may be required to effect such changes,  and
         all other  forms and  documents  required  to be filed  with the SEC to
         enable such indenture to be so qualified in a timely manner.

                  (o) Comply in all material  respects with all applicable rules
         and  regulations  of  the  SEC  and  make  generally  available  to its
         securityholders with regard to any applicable Registration Statement, a
         consolidated  earnings  statement  satisfying the provisions of Section
         11(a) of the  Securities  Act and Rule 158  thereunder  (or any similar
         rule promulgated  under the Securities Act) no later than 60 days after
         the  end of any  fiscal  quarter  (or  120  days  after  the end of any
         12-month  period if such period is a fiscal year) (i) commencing at the
         end of any  fiscal  quarter  in  which  Registrable  Notes  are sold to
         underwriters in a firm commitment or best efforts underwritten offering
         and (ii) if not sold to underwriters in such an offering, commencing on
         the first day of the first  fiscal  quarter  of the  Company  after the
         effective  date of a Registration  Statement,  which  statements  shall
         cover said 12-month periods.

                  (p) Upon  consummation  of the  Exchange  Offer  or a  Private
         Exchange,  obtain an  opinion  of  counsel  to the  Company,  in a form
         customary for underwritten  transactions,  addressed to the Trustee for
         the benefit of all Holders of Registrable  Notes  participating  in the
         Exchange  Offer or the Private  Exchange,  as the case may be, that the
         Exchange  Notes or  Private  Exchange  Notes,  as the case may be,  the
         related  Guarantees and the related indenture  constitute legal,  valid
         and binding  obligations  of the Issuers,  enforceable  against them in
         accordance with their respective terms, subject to customary exceptions
         and qualifications.


<PAGE>




                                      -20-


                  (q) If the  Exchange  Offer  or a  Private  Exchange  is to be
         consummated,  upon delivery of the Registrable  Notes by Holders to the
         Company (or to such other Person as directed by the Issuer) in exchange
         for the Exchange Notes or the Private  Exchange  Notes, as the case may
         be, the Company shall mark, or cause to be marked,  on such Registrable
         Notes that such  Registrable  Notes are being  canceled in exchange for
         the Exchange Notes or the Private  Exchange  Notes, as the case may be;
         in no event shall such Registrable Notes be marked as paid or otherwise
         satisfied.

                  (r) Cooperate with each seller of Registrable Notes covered by
         any Registration Statement and each underwriter,  if any, participating
         in the  disposition  of such  Registrable  Notes and  their  respective
         counsel in  connection  with any  filings  required to be made with the
         National Association of Securities Dealers, Inc. (the "NASD").

                  (s) Use its  commercially  reasonable best efforts to take all
         other steps  reasonably  necessary  to effect the  registration  of the
         Exchange  Notes  and/or  Registrable  Notes  covered by a  Registration
         Statement contemplated hereby.

                  The Company may require each seller of Registrable Notes as to
which  any  registration  is being  effected  to  furnish  to the  Company  such
information regarding such seller and the distribution of such Registrable Notes
as the  Company  may,  from time to time,  reasonably  request.  The Company may
exclude from such  registration  the Registrable  Notes of any seller so long as
such seller fails to furnish  such  information  within a reasonable  time after
receiving such request.  Each seller as to which any Shelf Registration is being
effected agrees to furnish  promptly to the Company all information  required to
be  disclosed  in order  to make the  information  previously  furnished  to the
Company by such seller not materially misleading.

                  If any such  Registration  Statement  refers to any  Holder by
name or otherwise  as the holder of any  securities  of the  Company,  then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance  reasonably  satisfactory to such Holder,  to the effect that
the  holding  by such  Holder of such  securities  is not to be  construed  as a
recommendation  by such  Holder  of the  investment  quality  of the  securities
covered  thereby  and that such  holding  does not imply that such  Holder  will
assist in meeting any future financial  requirements of the Company,  or (ii) in
the event  that  such  reference  to such  Holder  by name or  otherwise  is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the  reference to such Holder in any  amendment or supplement to the
Registration  Statement  filed or  prepared  subsequent  to the time  that  such
reference ceases to be required.

                  Each  Holder  of  Registrable  Notes  and  each  Participating
Broker-Dealer  agrees by its acquisition of such  Registrable  Notes or Exchange
Notes to be sold by such Participat-


<PAGE>




                                      -21-


ing  Broker-Dealer,  as the case may be, that, upon actual receipt of any notice
from the Company of the happening of any event of the kind  described in Section
5(c)(ii),  5(c)(iv),  5(c)(v),  or 5(c)(vi)  hereof,  such Holder will forthwith
discontinue  disposition of such Registrable  Notes covered by such Registration
Statement  or  Prospectus  or  Exchange  Notes  to be  sold by  such  Holder  or
Participating  Broker-Dealer,  as the  case  may  be,  until  such  Holder's  or
Participating  Broker-Dealer's  receipt  of the  copies of the  supplemented  or
amended  Prospectus  contemplated by Section 5(j) hereof, or until it is advised
in  writing  (the  "Advice")  by the  Company  that  the  use of the  applicable
Prospectus  may be  resumed,  and  has  received  copies  of any  amendments  or
supplements  thereto.  In the event that the Company shall give any such notice,
the  Applicable  Period  shall be  extended  by the number of days  during  such
periods  from  and  including  the  date of the  giving  of such  notice  to and
including  the date  when each  seller  of  Registrable  Notes  covered  by such
Registration  Statement  or  Exchange  Notes  to be sold  by such  Participating
Broker-Dealer,  as the case may be,  shall have  received  (x) the copies of the
supplemented  or amended  Prospectus  contemplated by Section 5(j) hereof or (y)
the Advice.

                  6. Registration Expenses

                  All  fees  and  expenses  incident  to the  performance  of or
compliance  with this  Agreement  by the Issuers  (other  than any  underwriting
discounts  or  commissions)  shall be borne by the  Company  whether  or not the
Exchange  Offer  Registration  Statement or any Shelf  Registration  is filed or
becomes  effective  or the Exchange  Offer is  consummated,  including,  without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) reasonable fees and expenses of compliance
with state securities or Blue Sky laws (including,  without limitation, fees and
disbursements  of  counsel in  connection  with Blue Sky  qualifications  of the
Registrable  Notes or Exchange Notes and determination of the eligibility of the
Registrable  Notes or  Exchange  Notes  for  investment  under  the laws of such
jurisdictions  (x) where the holders of  Registrable  Notes are located,  in the
case of the Exchange  Notes,  or (y) as provided in Section 5(h) hereof,  in the
case of  Registrable  Notes  or  Exchange  Notes  to be sold by a  Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation,  expenses of printing  certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository  Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing  underwriter or  underwriters,  if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating  Broker-Dealer  during the Applicable  Period, as the case may be,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and  reasonable  fees and  disbursements  of one special
counsel for all of the sellers of  Registrable  Notes  (exclusive of any counsel
retained  pursuant  to  Section 7  hereof),  (v) fees and  disbursements  of all
independent certi-


<PAGE>




                                      -22-


fied public  accountants  referred to in Section  5(l)(iii)  hereof  (including,
without limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such  performance),  (vi)  Securities  Act  liability
insurance, if the Company desires such insurance, (vii) fees and expenses of all
other Persons  retained by the Issuer,  (viii) internal  expenses of the Company
(including,  without  limitation,  all  salaries  and  expenses of officers  and
employees  of the  Company  performing  legal or  accounting  duties),  (ix) the
expense of any annual audit of the Company,  (x) any fees and expenses  incurred
in  connection  with the  listing  of the  securities  to be  registered  on any
securities  exchange,  and the obtaining of a rating of the securities,  in each
case, if applicable, and (xi) the expenses relating to printing, word processing
and   distributing  all  Registration   Statements,   underwriting   agreements,
indentures  and any  other  documents  necessary  in order to  comply  with this
Agreement.

                  7. Indemnification

                  (a) Each of the  Issuers,  jointly  and  severally,  agrees to
         indemnify and hold harmless each Holder of  Registrable  Notes and each
         Participating   Broker-Dealer   selling   Exchange   Notes  during  the
         Applicable    Period,    the    affiliates,     officers,    directors,
         representatives,  employees  and agents of each such  Person,  and each
         Person,  if any,  who  controls  any such Person  within the meaning of
         either  Section 15 of the  Securities Act or Section 20 of the Exchange
         Act (each,  a  "Participant"),  from and  against  any and all  losses,
         claims,  damages,  judgments,   liabilities  and  expenses  (including,
         without  limitation,  the  reasonable  legal  fees and  other  expenses
         actually  incurred in connection with any suit, action or proceeding or
         any claim asserted)  caused by, arising out of or based upon any untrue
         statement or alleged  untrue  statement of a material fact contained in
         any Registration Statement (or any amendment thereto) or Prospectus (as
         amended  or  supplemented  if the  Company  shall  have  furnished  any
         amendments or supplements  thereto) or any preliminary  prospectus,  or
         caused  by,  arising  out of or based  upon  any  omission  or  alleged
         omission to state therein a material fact required to be stated therein
         or  necessary  to  make  the  statements  therein,  in the  case of the
         Prospectus  in light of the  circumstances  under which they were made,
         not  misleading,  except  insofar as such  losses,  claims,  damages or
         liabilities  are caused by any untrue  statement or omission or alleged
         untrue  statement or omission  made in reliance  upon and in conformity
         with information  relating to any Participant  furnished to the Company
         in writing  by such  Participant  expressly  for use  therein  and with
         respect to any  preliminary  Prospectus,  to the  extent  that any such
         loss,  claim,  damage or liability arises solely from the fact that any
         Participant  sold Notes to a person to whom there was not sent or given
         a copy of the  Prospectus (as amended or  supplemented)  at or prior to
         the  written  confirmation  of such  sale  if the  Company  shall  have
         previously  furnished  copies thereof to the  Participant in accordance
         herewith and the Prospectus


<PAGE>




                                      -23-


         (as amended or supplemented) would have corrected any such untrue
         statement or omission.

                  (b) Each  Participant  agrees,  severally and not jointly,  to
         indemnify and hold harmless the Issuers,  their respective  affiliates,
         officers,  directors,  representatives,  employees  and  agents of each
         Issuer and each Person who controls  each Issuer  within the meaning of
         Section 15 of the  Securities  Act or Section 20 of the Exchange Act to
         the  same  extent  (but on a  several,  and not  joint,  basis)  as the
         foregoing indemnity from the Issuers to each Participant, but only with
         reference to information relating to such Participant  furnished to the
         Company  in  writing  by  such  Participant  expressly  for  use in any
         Registration  Statement or  Prospectus,  any  amendment  or  supplement
         thereto,   or  any  preliminary   prospectus.   The  liability  of  any
         Participant  under this paragraph shall in no event exceed the proceeds
         received  by such  Participant  from  sales  of  Registrable  Notes  or
         Exchange Notes giving rise to such obligations.

                  (c)  If  any   suit,   action,   proceeding   (including   any
         governmental  or  regulatory  investigation),  claim or demand shall be
         brought or asserted  against  any Person in respect of which  indemnity
         may be sought pursuant to either of the two preceding paragraphs,  such
         Person (the  "Indemnified  Person") shall  promptly  notify the Persons
         against whom such indemnity may be sought (the "Indemnifying  Persons")
         in  writing,  and  the  Indemnifying   Persons,  upon  request  of  the
         Indemnified Person, shall retain counsel reasonably satisfactory to the
         Indemnified  Person to represent the Indemnified  Person and any others
         the  Indemnifying  Persons may reasonably  designate in such proceeding
         and shall pay the fees and expenses  actually  incurred by such counsel
         related to such proceeding;  provided,  however, that the failure to so
         notify  the  Indemnifying  Persons  (i)  will not  relieve  it from any
         liability  under  paragraph  (a) or (b) above  unless and to the extent
         such failure  results in the forfeiture by the  Indemnifying  Person of
         substantial  rights  and  defenses  and (ii)  will not,  in any  event,
         relieve the Indemnifying Person from any obligations to any Indemnified
         Person other than the indemnification obligation provided in paragraphs
         (a) and (b) above. In any such proceeding, any Indemnified Person shall
         have the right to retain its own counsel,  but the fees and expenses of
         such counsel shall be at the expense of such Indemnified  Person unless
         (i) the  Indemnifying  Persons and the  Indemnified  Person  shall have
         mutually agreed to the contrary,  (ii) the  Indemnifying  Persons shall
         have  failed  within a  reasonable  period  of time to  retain  counsel
         reasonably  satisfactory to the  Indemnified  Person or (iii) the named
         parties  in any  such  proceeding  (including  any  impleaded  parties)
         include both any Indemnifying  Person and the Indemnified Person or any
         affiliate  thereof  and  representation  of both  parties  by the  same
         counsel  would be  inappropriate  due to actual or potential  differing
         interests between them. It is understood that the Indemnifying  Persons
         shall not, in connection with such proceeding or separate but


<PAGE>




                                      -24-


         substantially  similar  related  proceeding  in the  same  jurisdiction
         arising out of the same general allegations, be liable for the fees and
         expenses  of more  than one  separate  firm (in  addition  to any local
         counsel)  for all  Indemnified  Persons,  and that  all  such  fees and
         expenses  shall be reimbursed  promptly as they are incurred.  Any such
         separate  firm  for  the  Participants  and  such  control  Persons  of
         Participants  shall be designated in writing by Participants who sold a
         majority in interest of  Registrable  Notes and Exchange  Notes sold by
         all  such  Participants  and  shall  be  reasonably  acceptable  to the
         Company, and any such separate firm for the Issuers,  their affiliates,
         officers,  directors,  representatives,  employees  and agents and such
         control  Persons of such Issuer shall be  designated  in writing by the
         Company and shall be reasonably acceptable to the Holders.

                  The   Indemnifying   Persons  shall  not  be  liable  for  any
         settlement of any proceeding effected without its prior written consent
         (which consent shall not be unreasonably  withheld or delayed),  but if
         settled  with  such  consent  or if  there  be a  final  non-appealable
         judgment for the plaintiff for which the Indemnified Person is entitled
         to indemnification pursuant to this Agreement, each of the Indemnifying
         Persons agrees to indemnify and hold harmless each  Indemnified  Person
         from and against any loss or liability by reason of such  settlement or
         judgment.  No  Indemnifying  Person  shall,  without the prior  written
         consent  of  the  Indemnified  Persons  (which  consent  shall  not  be
         unreasonably withheld or delayed),  effect any settlement or compromise
         of any  pending  or  threatened  proceeding  in  respect  of which  any
         Indemnified  Person is or could have been a party,  or indemnity  could
         have been sought  hereunder  by such  Indemnified  Person,  unless such
         settlement  (A)  includes  an  unconditional  written  release  of such
         Indemnified  Person, in form and substance  reasonably  satisfactory to
         such  Indemnified  Person,  from all  liability  on claims that are the
         subject  matter  of  such  proceeding  and (B)  does  not  include  any
         statement as to an admission of fault, culpability or failure to act by
         or on behalf of such Indemnified Person.

                  (d) If the  indemnification  provided  for  in the  first  and
         second  paragraphs of this Section 7 is for any reason  unavailable to,
         or insufficient to hold harmless,  an Indemnified  Person in respect of
         any losses,  claims,  damages or liabilities referred to therein,  then
         each Indemnifying Person under such paragraphs, in lieu of indemnifying
         such Indemnified Person thereunder and in order to provide for just and
         equitable contribution,  shall contribute to the amount paid or payable
         by such Indemnified Person as a result of such losses,  claims, damages
         or  liabilities  in such  proportion as is  appropriate  to reflect the
         relative  fault of the  Indemnifying  Person or Persons on the one hand
         and the  Indemnified  Person or Persons on the other in connection with
         the  statements or omissions or alleged  statements  or omissions  that
         resulted in such losses,  claims, damages or liabilities (or actions in
         respect thereof) as well as any other rele-


<PAGE>




                                     -25-


         vant equitable considerations.  The relative fault of the parties shall
         be determined  by reference to, among other things,  whether the untrue
         or alleged  untrue  statement  of a material  fact or the  omission  or
         alleged  omission  to state a  material  fact  relates  to  information
         supplied  by the  Issuers on the one hand or such  Participant  or such
         other  Indemnified  Person,  as the  case  may be,  on the  other,  the
         parties'  relative  intent,   knowledge,   access  to  information  and
         opportunity to correct or prevent such  statement or omission,  and any
         other equitable considerations appropriate in the circumstances.

                  (e) The parties  agree that it would not be just and equitable
         if contribution  pursuant to this Section 7 were determined by pro rata
         allocation  (even if the  Participants  were  treated as one entity for
         such purpose) or by any other method of  allocation  that does not take
         account of the equitable  considerations referred to in the immediately
         preceding  paragraph.  The amount  paid or  payable  by an  Indemnified
         Person  as  a  result  of  the  losses,  claims,  damages,   judgments,
         liabilities  and  expenses  referred  to in the  immediately  preceding
         paragraph  shall be deemed to include,  subject to the  limitations set
         forth above, any reasonable legal or other expenses  actually  incurred
         by  such  Indemnified   Person  in  connection  with  investigating  or
         defending any such action or claim.  Notwithstanding  the provisions of
         this  Section  7,  in no  event  shall a  Participant  be  required  to
         contribute  any  amount  in  excess  of the  amount  by which  proceeds
         received  by such  Participant  from  sales  of  Registrable  Notes  or
         Exchange  Notes,  as the case may be, exceeds the amount of any damages
         that such Participant has otherwise been required to pay or has paid by
         reason of such  untrue or  alleged  untrue  statement  or  omission  or
         alleged  omission.  No Person  guilty of  fraudulent  misrepresentation
         (within the meaning of Section  11(f) of the  Securities  Act) shall be
         entitled  to  contribution  from any  Person who was not guilty of such
         fraudulent misrepresentation.

                  (f) Any losses, claims,  damages,  liabilities or expenses for
         which  an  indemnified   party  is  entitled  to   indemnification   or
         contribution  under  this  Section 7 shall be paid by the  Indemnifying
         Person to the  Indemnified  Person  as such  losses,  claims,  damages,
         liabilities  or expenses are incurred.  The indemnity and  contribution
         agreements  contained  in this  Section 7 and the  representations  and
         warranties  of the Issuers  set forth in this  Agreement  shall  remain
         operative  and  in  full  force  and  effect,  regardless  of  (i)  any
         investigation  made by or on behalf of any  Holder  or any  person  who
         controls a Holder,  the Issuer, its directors,  officers,  employees or
         agents or any person controlling an Issuer, and (ii) any termination of
         this Agreement.

                  (g) The indemnity  and  contribution  agreements  contained in
         this  Section  7  will  be in  addition  to  any  liability  which  the
         Indemnifying  Persons may  otherwise  have to the  Indemnified  Persons
         referred to above.


<PAGE>




                                      -26-


                  8. Rules 144 and 144A

                  Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and  regulations  adopted by the SEC thereunder in a timely manner
in accordance  with the  requirements of the Securities Act and the Exchange Act
and,  if at any time such  Issuer is not  required  to file such  reports,  such
Issuer will,  upon the request of any Holder or beneficial  owner of Registrable
Notes,  make  available such  information  necessary to permit sales pursuant to
Rule 144A under the Securities  Act. Each of the Issuers  further  covenants and
agrees,  for so long as any Registrable  Notes remain  outstanding  that it will
take such  further  action as any  Holder of  Registrable  Notes may  reasonably
request,  all to the extent  required from time to time to enable such holder to
sell Registrable Notes without  registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities  Act,  as such  Rules may be  amended  from time to time,  or (b) any
similar rule or regulation hereafter adopted by the SEC.

                  9. Underwritten Registrations

                  If  any  of  the  Registrable   Notes  covered  by  any  Shelf
Registration are to be sold in an underwritten  offering,  the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate  principal  amount of such
Registrable  Notes included in such offering and shall be reasonably  acceptable
to the Issuer.

                  No  Holder  of  Registrable   Notes  may  participate  in  any
underwritten  registration  hereunder unless such Holder (a) agrees to sell such
Holder's   Registrable   Notes  on  the  basis  provided  in  any   underwriting
arrangements  approved  by  the  Persons  entitled  hereunder  to  approve  such
arrangements  and (b)  completes  and  executes  all  questionnaires,  powers of
attorney,  indemnities,  underwriting  agreements and other  documents  required
under the terms of such underwriting arrangements.

                  10. Miscellaneous

                 (a) No Inconsistent Agreements. The Issuers have not, as of the
         date  hereof,  and  the  Issuers  shall  not,  after  the  date of this
         Agreement,  enter  into  any  agreement  with  respect  to  any  of its
         securities that is inconsistent  with the rights granted to the Holders
         of Registrable Notes in this Agreement or otherwise  conflicts with the
         provisions  hereof.  The rights granted to the Holders hereunder do not
         in any way  conflict  with and are not  inconsistent  with  the  rights
         granted to the holders of the  Issuers'  other  issued and  outstanding
         securities under any such  agreements.  The Issuers will not enter into
         any agreement with respect to any of their securities which will


<PAGE>




                                      -27-


         grant to any Person piggy-back registration rights with respect to any
         Registration Statement.

                  (b) Adjustments Affecting Registrable Notes. The Issuers shall
         not,  directly  or  indirectly,  take any  action  with  respect to the
         Registrable Notes as a class that would adversely affect the ability of
         the Holders of Registrable Notes to include such Registrable Notes in a
         registration undertaken pursuant to this Agreement.

                  (c) Amendments  and Waivers.  The provisions of this Agreement
         may not be amended,  modified or supplemented,  and waivers or consents
         to departures  from the provisions  hereof may not be given,  otherwise
         than with the prior written  consent of (I) the Company and (II)(A) the
         Holders of not less than a majority in  aggregate  principal  amount of
         the then outstanding  Registrable  Notes and (B) in circumstances  that
         would   adversely   affect  the   Participating   Broker-Dealers,   the
         Participating  Broker-Dealers  holding  not  less  than a  majority  in
         aggregate   principal   amount  of  the  Exchange  Notes  held  by  all
         Participating  Broker-Dealers;  provided,  however,  that Section 7 and
         this Section 10(c) may not be amended, modified or supplemented without
         the  prior  written  consent  of each  Holder  and  each  Participating
         Broker-Dealer  (including any person who was a Holder or  Participating
         Broker-Dealer  of Registrable  Notes or Exchange Notes, as the case may
         be, disposed of pursuant to any Registration Statement) affected by any
         such  amendment,   modification  or  supplement.   Notwithstanding  the
         foregoing,  a waiver or consent to depart  from the  provisions  hereof
         with  respect to a matter  that  relates  exclusively  to the rights of
         Holders of Registrable  Notes whose  securities are being sold pursuant
         to a  Registration  Statement  and that does not directly or indirectly
         affect,  impair,  limit or  compromise  the rights of other  Holders of
         Registrable  Notes may be given by Holders  of at least a  majority  in
         aggregate principal amount of the Registrable Notes being sold pursuant
         to such Registration Statement.

                  (d) Notices. All notices and other communications  (including,
         without limitation, any notices or other communications to the Trustee)
         provided  for or  permitted  hereunder  shall  be  made in  writing  by
         hand-delivery,  registered  first-class  mail,  next-day air courier or
         facsimile:

                    (i)  if  to  a  Holder  of  the  Registrable  Notes  or  any
                  Participating  Broker-Dealer,  at the most current  address of
                  such Holder or  Participating  Broker-Dealer,  as the case may
                  be,  set  forth on the  records  of the  registrar  under  the
                  Indenture.


<PAGE>




                                      -28-


                    (ii) if to the Issuers, at the address as follows:

                         c/o   Weiss, Peck & Greer, L.L.C.
                               One New York Plaza
                               New York, New York
                               Facsimile No.: (212) 908-0112
                             Attention: Wesley Lang

                  All such  notices and  communications  shall be deemed to have
         been duly given: when delivered by hand, if personally delivered;  five
         business days after being deposited in the mail,  postage  prepaid,  if
         mailed; one business day after being timely delivered to a next-day air
         courier; and when receipt is acknowledged by the addressee,  if sent by
         facsimile.

                  Copies of all such  notices,  demands or other  communications
         shall be  concurrently  delivered by the Person  giving the same to the
         Trustee at the address and in the manner specified in such Indenture.

                  (e) Successors and Assigns.  This Agreement shall inure to the
         benefit of and be binding  upon the  successors  and assigns of each of
         the parties hereto, the Holders and the Participating Broker-Dealers.

                  (f) Counterparts. This Agreement may be executed in any number
         of  counterparts  and by the parties  hereto in separate  counterparts,
         each of which when so executed  shall be deemed to be an  original  and
         all  of  which  taken  together  shall  constitute  one  and  the  same
         agreement.

                  (g) Guarantor  Execution.  The Company shall cause each of the
         Guarantors to execute and deliver this Agreement  concurrently with the
         Effective  Time and the  Guarantors  shall  execute  this  Agreement in
         consideration  of,  among  other  things,  consummation  of the Merger;
         provided, however, that all obligations of the Guarantors arising under
         this Agreement  (including  indemnity  obligations)  shall be as of the
         date first written above and all  representations and warranties of the
         Guarantors  herein shall be as of the date first written above.  In the
         event of a breach by the Company of its obligations  under this Section
         10(g),  the Company agrees that monetary  damages would not be adequate
         compensation  for any loss or damage incurred by such breach and hereby
         further agrees that, in the event of an action for specific performance
         in respect of such breach,  it shall waive the defense that a remedy at
         law would be adequate.


<PAGE>




                                      -29-


                  (h)  Headings.   The  headings  in  this   Agreement  are  for
         convenience of reference  only and shall not limit or otherwise  affect
         the meaning hereof.

                  (i)  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY AND
         CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW  YORK,  AS
         APPLIED TO CONTRACTS  MADE AND PERFORMED  ENTIRELY  WITHIN THE STATE OF
         NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
         PARTIES  HERETO AGREES TO SUBMIT TO THE  JURISDICTION  OF THE COURTS OF
         THE STATE OF NEW YORK IN ANY  ACTION OR  PROCEEDING  ARISING  OUT OF OR
         RELATING TO THIS AGREEMENT.

                  (j)  Severability.   If  any  term,  provision,   covenant  or
         restriction  of  this  Agreement  is  held  by  a  court  of  competent
         jurisdiction  to  be  invalid,  illegal,  void  or  unenforceable,  the
         remainder of the terms,  provisions,  covenants  and  restrictions  set
         forth  herein shall remain in full force and effect and shall in no way
         be affected, impaired or invalidated,  and the parties hereto shall use
         their best efforts to find and employ an  alternative  means to achieve
         the same or substantially  the same result as that contemplated by such
         term, provision,  covenant or restriction.  It is hereby stipulated and
         declared  to be the  intention  of the  parties  that they  would  have
         executed the remaining  terms,  provisions,  covenants and restrictions
         without  including any of such that may be hereafter  declared invalid,
         illegal, void or unenforceable.

                  (k) Securities Held by the Company or Its Affiliates. Whenever
         the  consent  or  approval  of  Holders of a  specified  percentage  of
         Registrable Notes is required hereunder,  Registrable Notes held by the
         Company  or its  affiliates  (as such term is defined in Rule 405 under
         the Securities  Act) shall not be counted in  determining  whether such
         consent  or  approval  was  given  by  the  Holders  of  such  required
         percentage.

                  (l) Third-Party  Beneficiaries.  Holders of Registrable  Notes
         and Participating Broker-Dealers are intended third-party beneficiaries
         of this Agreement, and this Agreement may be enforced by such Persons.

                  (m)  Entire  Agreement.  This  Agreement,  together  with  the
         Purchase  Agreement and the Indenture,  is intended by the parties as a
         final and exclusive statement of the agreement and understanding of the
         parties  hereto in respect of the subject matter  contained  herein and
         therein   and  any  and  all   prior   oral  or   written   agreements,
         representations,    or    warranties,    contracts,     understandings,
         correspondence,  conversations and memoranda between the Holders on the
         one hand and the Issuers on the other,  or between or among any agents,
         representatives, parents, subsidiaries, affili-


<PAGE>




                                     -30-


         ates,  predecessors  in interest or successors in interest with respect
         to the subject matter hereof and thereof are merged herein and replaced
         hereby.


<PAGE>




                  IN  WITNESS   WHEREOF,   the  parties   have   executed   this
Registration Rights Agreement as of the date first written above.


                                             THE COMPANY:

                                             ACQUISITION CORP.


                                             By:   /s/ Wesley W. Lang, Jr.
                                                ---------------------------
                                                Name:  Wesley W. Lang, Jr.
                                                Title: President


                                             THE GUARANTORS:


                                             ATC BLATTERT INC., a South
                                             Dakota corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC CONSTRUCTION SERVICES INC.,
                                             a Massachusetts corporation,
                                             as Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Vice President


                                             ATC ENVIRONMENTAL INC., a
                                             Delaware corporation, as Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


<PAGE>




                                      -2-


                                             ATC INSYS TECHNOLOGY INC., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                 ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer


                                             ATC MANAGEMENT INC., a South
                                             Dakota corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             ATC NEW ENGLAND CORP., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


                                             BING YEN & ASSOCIATES, INC., a
                                             California corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ----------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Chief Executive Officer


                                             ENVIRONMENTAL WARRANTY, INC., a
                                             Connecticut corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: Vice President


<PAGE>




                                      -3-


                                             HYGEIA LABORATORIES INC., a
                                             Delaware corporation, as
                                             Guarantor


                                             By:   /s/ Nicholas J. Malino
                                                ---------------------------
                                                Name:  Nicholas J. Malino
                                                Title: President


The foregoing  Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.

BT ALEX. BROWN INCORPORATED


By:   /s/ Daniel McCready
   -------------------------
   Name:  Daniel McCready
   Title: Managing Director


<PAGE>




                                                                       Exhibit B

                             ATC Group Services Inc.
                        104 East 25th Street, 10th Floor
                            New York, New York 10010


                                                                January 22, 1998


BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York  10006

Ladies and Gentlemen:

                  This letter agreement (this "Agreement") is being executed and
delivered by ATC Group Services Inc.  ("Company")  pursuant to the  requirements
of, and in order to induce you to enter into and perform,  that certain Purchase
Agreement dated as of January 22, 1998 between Acquisition Corp. ("Acquisition")
and BT Alex. Brown  Incorporated  ("Initial  Purchaser").  All terms used herein
which are not otherwise  defined herein shall have the meaning provided therefor
in the Purchase Agreement.

                  1. The Company  hereby  represents  and warrants to and agrees
with the Initial Purchaser that:

                  (a) the  representations  and  warranties  of the  Company set
         forth in the Merger  Agreement  are true and correct on the date hereof
         and will be true and correct at the Closing Date; provided,  that (this
         representation  (a) shall expire at the  Effective  Time and  provided,
         further,  that upon the Effective  Time, the Initial  Purchaser and its
         Affiliates waive any cause of action or exercise of right that they may
         have  had  arising   from  any  breach  of  this   representation   and
         warranty(a).

                  (b) the representations and warranties of Acquisition (whether
         or not made by it on a  knowledge  basis)  set  forth  in the  Purchase
         Agreement with respect to the Company and its  subsidiaries and related
         matters  are true and  correct on the date  hereof and will be true and
         correct  at  the  Closing   Date  (upon  the   Effective   Time,   such
         representations  and  warranties  shall be  deemed to be have been made
         without any knowledge basis limitation); and


<PAGE>




                                      -2-


                  (c)  neither  the  Final   Memorandum  nor  any  amendment  or
         supplement  thereto as of the date thereof and at all times  subsequent
         thereto  up to the  Closing  Date  contained  or  contains  any  untrue
         statement  of a  material  fact or omitted or omits to state a material
         fact  necessary  to make the  statements  therein,  in the light of the
         circumstances  under which they were made, not misleading,  except that
         the  representations and warranties set forth in this clause (c) do not
         apply  to  statements  or  omissions  made  in  reliance  upon  and  in
         conformity  with  information   relating  solely  to  (x)  the  Initial
         Purchaser  furnished to Acquisition in writing by the Initial Purchaser
         expressly  for  use  in  the  Final  Memorandum  or  any  amendment  or
         supplement   thereto  or  (y)  Acquisition   furnished  in  writing  by
         Acquisition  expressly for use the Final Memorandum or any amendment or
         supplement thereto.

                  (d) The  statistical and  market-related  data included in the
         Final Memorandum are based on or derived from sources which the Company
         believes to be reliable and accurate.

                  2. (a) The  Company  and the  Guarantors  agree,  jointly  and
severally,  to  indemnify  and  hold  harmless  the  Initial  Purchaser  and the
affiliates,  directors,  officers, agents,  representatives and employees of the
Initial  Purchaser,  and each other  person,  if any,  who  controls the Initial
Purchaser  within  the  meaning  of  Section  15 of the Act or Section 20 of the
Exchange  Act,  against any losses,  claims,  damages or  liabilities,  joint or
several,  to  which  the  Initial  Purchaser  or any such  affiliate,  director,
officer,  agent,  representative,  employee  or  controlling  person  may become
subject  under the Act,  the  Exchange  Act or  otherwise,  insofar  as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:

                  (i) any untrue  statement or alleged  untrue  statement of any
         material  fact  contained  in (A) any  Memorandum  or any  amendment or
         supplement  thereto or (B) any  application or other  document,  or any
         amendment  or  supplement  thereto,  executed  by  the  Company  or any
         Guarantor or based upon written  information  furnished by or on behalf
         of the Company or any Guarantor  filed in any  jurisdiction in order to
         qualify the Securities  under the securities or "Blue Sky" laws thereof
         or filed with any securities  association or securities exchange (each,
         an "Application"); or


<PAGE>




                                      -3-


                  (ii)  the  omission  or  alleged  omission  to  state,  in any
         Memorandum or any amendment or supplement  thereto, or any Application,
         a material fact required to be stated  therein or necessary to make the
         statements  therein, in the light of the circumstances under which they
         were made, not misleading; or

                  (iii) any breach of any representation,  warranty or agreement
         of the Company or any Guarantor contained in this Agreement,

and will jointly and severally reimburse, as incurred, the Initial Purchaser and
each such affiliate,  director,  officer, agent, representative and employee and
each such controlling person for any legal or other expenses reasonably incurred
by  the  Initial   Purchaser,   such  affiliate,   director,   officer,   agent,
representative  or  employee  or such  controlling  person  in  connection  with
investigating,  defending  against  or  appearing  as a  third-party  witness in
connection with any such loss,  claim,  damage,  liability or action;  provided,
however,  that the Company and the Guarantors will not be liable (i) in any such
case to the extent that any such loss, claim, damage, or liability arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Memorandum or any amendment or supplement  thereto,
or any Application,  in reliance upon and in conformity with written information
furnished to Acquisition by the Initial  Purchaser  specifically for use therein
or (ii) with respect to the Preliminary Memorandum,  to the extent that any such
loss,  claim,  damage or liability  arises solely from the fact that the Initial
Purchaser sold Securities to a person to whom there was not sent or given a copy
of the Final  Memorandum (as amended or supplemented) at or prior to the written
confirmation of such sale if Acquisition shall have previously  furnished copies
thereof to the Initial  Purchaser in accordance with the Purchase  Agreement and
the Final Memorandum (as amended or supplemented)  would have corrected any such
untrue  statement or omission.  This indemnity  agreement will be in addition to
any liability  that the Company and the  Guarantors  may  otherwise  have to the
indemnified  parties.  The Company and the Guarantors  shall not be liable under
this subsection (a) for any settlement of any claim or action  effected  without
their consent, which consent shall not be unreasonably withheld or delayed.

                  The Initial  Purchaser  shall not,  without the prior  written
consent of the Company and the  Guarantors,  effect any settlement or compromise
of any pending or threatened  proceeding in respect of which the Company and the
Guarantors are or


<PAGE>




                                      -4-


could have been a party,  or indemnity  could have been sought  hereunder by the
Company and the Guarantors, unless such settlement (A) includes an unconditional
written  release  of the  Company  and the  Guarantors,  in form  and  substance
reasonably satisfactory to the Company and the Guarantors, from all liability on
claims that are the subject  matter of such  proceeding and (B) does not include
any statement as to an admission of fault,  culpability  or failure to act by or
on behalf of the Company or the Guarantors.

                  (b)  The  Initial  Purchaser  agrees  to  indemnify  and  hold
harmless the Company and the Guarantors,  its respective affiliates,  directors,
officers,  agents,  representatives and employees and each other person, if any,
who controls the Company and the Guarantors  within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act against any losses, claims, damages or
liabilities  to which  the  Company  or any  Guarantor  or any  such  affiliate,
director,  officer,  agent,  representative,  employee or controlling person may
become  subject  under the Act, the Exchange Act or  otherwise,  insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material  fact  contained in any  Memorandum  or any  amendments  or  supplement
thereto,  or any  Application  or (ii) the  omission or the alleged  omission to
state  therein a material  fact  required to be stated in any  Memorandum or any
amendment or supplement  thereto,  or any Application,  or necessary to make the
statements  therein not misleading,  in each case to the extent, but only to the
extent,  that such untrue  statement or alleged untrue  statement or omission or
alleged  omission  was made in  reliance  upon and in  conformity  with  written
information  concerning  the Initial  Purchaser  furnished to Acquisition by the
Initial Purchaser  specifically for use therein;  and, subject to the limitation
set forth immediately  preceding this clause, will reimburse,  as incurred,  any
legal or other expenses  reasonably  incurred by the Company or any Guarantor or
any such  affiliate,  director,  officer,  agent,  representative,  employee  or
controlling  person in connection  with  investigating  or defending  against or
appearing  as a third party  witness in  connection  with any such loss,  claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability  that the Initial  Purchaser may otherwise  have to
the indemnified  parties.  The Initial  Purchaser shall not be liable under this
Section  2 for any  settlement  of any  claim or  action  effected  without  its
consent, which consent shall not be unreasonably withheld or delayed.


<PAGE>




                                      -5-


                  The Company and the  Guarantors  shall not,  without the prior
written consent of the Initial Purchaser, effect any settlement or compromise of
any pending or threatened  proceeding in respect of which the Initial  Purchaser
is or could have been a party, or indemnity could have been sought  hereunder by
the Initial  Purchaser,  unless such  settlement  (A) includes an  unconditional
written  release of the  Initial  Purchaser,  in form and  substance  reasonably
satisfactory to the Initial Purchaser, from all liability on claims that are the
subject  matter of such  proceeding and (B) does not include any statement as to
an  admission  of fault,  culpability  or  failure to act by or on behalf of the
Initial Purchaser.

                  (c) Promptly after receipt by an indemnified  party under this
Section 2 of notice of the commencement of any action for which such indemnified
party is  entitled to  indemnification  under this  Section 2, such  indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 2, notify the  indemnifying  party of the  commencement
thereof in writing;  but the  omission to so notify the  indemnifying  party (i)
will not relieve it from any liability under  subsection (a) or (b) above unless
and to the extent such failure  results in the  forfeiture  by the  indemnifying
party of  substantial  rights  and  defenses  and (ii) will not,  in any  event,
relieve the  indemnifying  party from any obligations to any  indemnified  party
other than the  indemnification  obligation  provided in subsections (a) and (b)
above. In case any such action is brought against any indemnified  party, and it
notifies the indemnifying  party of the commencement  thereof,  the indemnifying
party will be entitled  to  participate  therein  and, to the extent that it may
wish, jointly with any other indemnifying  party similarly  notified,  to assume
the defense thereof,  with counsel  reasonably  satisfactory to such indemnified
party;  provided,  however,  that  if (i)  the  use  of  counsel  chosen  by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been  advised  by  counsel  that  there may be one or more  legal  defenses
available to it and/or other  indemnified  parties  that are  different  from or
additional  to  those  available  to  the  indemnifying   party,  or  (iii)  the
indemnifying  party shall not have employed counsel  reasonably  satisfactory to
the  indemnified  party to represent the  indemnified  party within a reasonable
time after receipt by the  indemnifying  party of notice of the  institution  of
such action,  then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party


<PAGE>




                                      -6-


or parties and such indemnified  party or parties shall have the right to select
separate  counsel to defend such action on behalf of such  indemnified  party or
parties.  After notice from the indemnifying  party to such indemnified party of
its election so to assume the defense  thereof and approval by such  indemnified
party of counsel  appointed to defend such action,  the indemnifying  party will
not be liable to such  indemnified  party under this  Section 2 for any legal or
other  expenses,  other than  reasonable  costs of  investigation,  subsequently
incurred by such  indemnified  party in  connection  with the  defense  thereof,
unless  (i) the  indemnified  party  shall  have  employed  separate  counsel in
accordance  with the proviso to the  immediately  preceding  sentence  (it being
understood,  however, that in connection with such action the indemnifying party
shall not be liable  for the  expenses  of more than one  separate  counsel  (in
addition  to local  counsel)  in any one action or  separate  but  substantially
similar  actions  in the  same  jurisdiction  arising  out of the  same  general
allegations or  circumstances,  designated by the Initial  Purchaser in the case
subsection (a) of this Section 2 or the Company in the case of subsection (b) of
this Section 2,  representing the indemnified  parties under such subsection (a)
or  subsection  (b),  as the case may be,  who are  parties  to such  action  or
actions) or (ii) the indemnifying party has authorized in writing the employment
of counsel for the indemnified  party at the expense of the indemnifying  party.
After such notice from the  indemnifying  party to such  indemnified  party, the
indemnifying  party  will  not be  liable  for the  costs  and  expenses  of any
settlement of such action effected by such  indemnified  party without the prior
written  consent  of  the  indemnifying   party  (which  consent  shall  not  be
unreasonably  withheld),  unless such  indemnified  party  waived in writing its
rights under this Section 2, in which case the indemnified party may effect such
a settlement without such consent.

                  (d) In circumstances in which the indemnity agreement provided
for in the  preceding  subsections  of this  Section  2 is  unavailable  to,  or
insufficient  to hold harmless,  an indemnified  party in respect of any losses,
claims,   damages  or  liabilities  (or  actions  in  respect   thereof),   each
indemnifying  party,  in order to provide for just and  equitable  contribution,
shall  contribute to the amount paid or payable by such  indemnified  party as a
result of such losses,  claims,  damages or  liabilities  (or actions in respect
thereof)  in such  proportion  as is  appropriate  to reflect  (i) the  relative
benefits  received by the indemnifying  party or parties on the one hand and the
indemnified  party on the other from the offering of the  Securities  or (ii) if
the  allocation  provided  by the  foregoing  clause  (i) is  not  permitted  by
applicable law, not only such relative


<PAGE>




                                      -7-


benefits but also the relative fault of the indemnifying party or parties on the
one  hand  and the  indemnified  party  on the  other  in  connection  with  the
statements or omissions or alleged statements or omissions that resulted in such
losses,  claims,  damages or liabilities  (or actions in respect  thereof).  The
relative benefits received by the Company and the Guarantors on the one hand and
the Initial  Purchaser on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (before deducting  expenses) received by
Acquisition bear to the total discounts and commissions  received by the Initial
Purchaser.  The relative  fault of the parties  shall be determined by reference
to,  among other  things,  whether the untrue or alleged  untrue  statement of a
material  fact or the  omission  or alleged  omission  to state a material  fact
relates to  information  supplied by the Company and the  Guarantors  on the one
hand,  or the Initial  Purchaser  on the other,  the parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission or alleged statement or omission,  and any other equitable
considerations appropriate in the circumstances. The Company, the Guarantors and
the  Initial  Purchaser  agree  that it would not be just and  equitable  if the
amount of such contribution were determined by pro rata or per capita allocation
or by any  other  method of  allocation  that  does not take  into  account  the
equitable  considerations  referred to in the first sentence of this  subsection
(d).  Notwithstanding  any other  provision of this  subsection (d), the Initial
Purchaser  shall not be obligated to make  contributions  hereunder  that in the
aggregate,  together with contributions made by it under the Purchase Agreement,
exceed the total discounts,  commissions and other compensation  received by the
Initial Purchaser under the Purchase Agreement, less the aggregate amount of any
damages that the Initial  Purchaser has otherwise been required to pay by reason
of the untrue or alleged untrue statements or the omissions or alleged omissions
to state a material fact,  and no person guilty of fraudulent  misrepresentation
(within  the  meaning  of  Section  11(f)  of the  Act)  shall  be  entitled  to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation.   For  purposes  of  this  subsection  (d),  each  affiliate,
director,  officer, agent,  representative and employee of the Initial Purchaser
and each person,  if any, who controls the Initial  Purchaser within the meaning
of Section 15 of the Act or Section 20 of the  Exchange  Act shall have the same
rights to contribution as the Initial Purchaser,  and each affiliate,  director,
officer,  agent,  representative  and employee of the Company and the Guarantors
and each person,  if any,  who  controls  the Company or a Guarantor  within the
meaning of Section 15 of


<PAGE>




                                      -8-


the Act or  Section  20 of the  Exchange  Act,  shall  have the same  rights  to
contribution as the Company and the Guarantors.

                  3. The  representations,  warranties,  agreements,  covenants,
indemnities  and other  statements  of the  Company and the  Guarantors  and its
officers  set  forth  in  this  Agreement  or  made  by or on  behalf  of  them,
respectively,  pursuant to this Agreement  shall remain in full force and effect
regardless  of (i)  any  investigation  made  by or on  behalf  of  the  Initial
Purchaser or any controlling person of the Initial  Purchaser,  (ii) delivery of
and payment for the Securities and (iii) any  termination or cancellation of the
Purchase Agreement.

                  4. This Agreement may not be amended, modified or supplemented
except by a writing  specifically  referring  hereto which is signed by both the
Initial Purchaser and the Company.

                  5.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of New York,  without giving effect to any
provisions relating to conflicts of laws.

                  6. This Agreement may be executed in two or more counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

                  7. All  communications  hereunder  shall be in writing and, if
sent to the Initial  Purchaser,  shall be mailed or delivered or telecopied  and
confirmed in writing to BT Alex.  Brown  Incorporated,  One Bankers Trust Plaza,
130 Liberty  Street,  New York,  New York 10006,  Attention:  Corporate  Finance
Department,  and if sent to the  Company  or any  Guarantor,  shall  be  mailed,
delivered  or  telecopied  and  confirmed  in  writing  to the  Company  or such
Guarantor  at 104 East  25th  Street,  10th  Floor,  New York,  New York  10010,
Attention: President.

                  8. This Agreement shall inure to the benefit of and be binding
upon the Initial  Purchaser,  the Company,  the Guarantors and their  respective
successors,  assigns  and  legal  representatives,   and  nothing  expressed  or
mentioned in this  Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions  hereof being intended to be and being for the sole and exclusive
benefit  of the  Initial  Purchaser,  the  Company,  the  Guarantors  and  their
respective successors, assigns and legal representatives and


<PAGE>




                                      -9-


for the  benefit  of no other  person  except  that (i) the  indemnities  of the
Company and the  Guarantors  contained in this  Agreement  shall also be for the
benefit of the affiliates,  directors,  officers,  agents,  representatives  and
employees  of the  Initial  Purchaser  and any person or persons who control the
Initial  Purchaser  within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnities of the Initial Purchaser  contained in
this  Agreement  shall  also be for the  benefit of the  affiliates,  directors,
officers, agents, representatives and employees of the Company and the Guarantor
and any person or persons who control the Company  within the meaning of Section
15 of the Act of Section 20 of the  Exchange  Act.  No  purchaser  of any of the
Securities from the Initial Purchaser will be deemed a successor because of such
purchase.


<PAGE>




                  If the  foregoing  correctly  sets  forth  our  understanding,
please  indicate your  acceptance  thereof in the space  provided below for that
purpose,  whereupon this letter shall  constitute a binding  agreement among the
Company and the Initial Purchaser.

                                                  Very truly yours,

                                                  THE COMPANY:

                                                  ATC GROUP SERVICES INC.,
                                                    on behalf of itself and
                                                    each of the Guarantors


                                                  By:   /s/ Nicholas J. Malino
                                                     --------------------------
                                                     Name:  Nicholas J. Malino
                                                     Title: President


Accepted and agreed to
as of the date first
above written.

THE INITIAL PURCHASER:

BT ALEX. BROWN INCORPORATED


By:   /s/ Daniel McCready
   ---------------------------
   Name:  Daniel McCready
   Title: Managing Director


<PAGE>



                                                                   EXHIBIT 10.19

                                CREDIT AGREEMENT


                                      among


                           ACQUISITION HOLDINGS, INC.,


                               ACQUISITION CORP.,


                                  VARIOUS BANKS


                                       and


                             BANKERS TRUST COMPANY,
                                    as AGENT


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


                          Dated as of January 29, 1998

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

<PAGE>




                                TABLE OF CONTENTS



                                                                            Page

SECTION 1.  Amount and Terms of Credit.....................................  1
         1.01  The Commitments.............................................  1
         1.02  Minimum Amount of Each Borrowing............................  4
         1.03  Notice of Borrowing.........................................  4
         1.04  Disbursement of Funds.......................................  5
         1.05  Notes.......................................................  6
         1.06  Conversions.................................................  7
         1.07  Pro Rata Borrowings.........................................  8
         1.08  Interest....................................................  8
         1.09  Interest Periods............................................  9
         1.10  Increased Costs, Illegality, etc............................ 11
         1.11  Compensation................................................ 13
         1.12  Change of Lending Office.................................... 13
         1.13  Replacement of Banks........................................ 14

SECTION 2.  Letters of Credit.............................................. 15
         2.01  Letters of Credit........................................... 15
         2.02  Maximum Letter of Credit Outstandings; Final Maturities..... 16
         2.03  Letter of Credit Requests; Minimum Stated Amount............ 16
         2.04  Letter of Credit Participations............................. 17
         2.05  Agreement to Repay Letter of Credit Drawings................ 19
         2.06  Increased Costs............................................. 20

SECTION 3.  Commitment Commission; Fees; Reductions of Commitment.......... 21
         3.01  Fees........................................................ 21
         3.02  Voluntary Termination of Unutilized Revolving Loan
                  Commitments.............................................. 22
         3.03  Mandatory Reduction of Commitments.......................... 23

SECTION 4.  Prepayments; Payments; Taxes................................... 24
         4.01  Voluntary Prepayments....................................... 24
         4.02  Mandatory Repayments and Commitment Reductions.............. 25


                                       (i)


<PAGE>




                                                                            Page

         4.03  Method and Place of Payment................................. 29
         4.04  Net Payments................................................ 29

SECTION 5.  Conditions Precedent to Credit Events on the Initial
            Borrowing Date................................................. 31
         5.01  Execution of Agreement; Notes............................... 31
         5.02  Officer's Certificate....................................... 31
         5.03  Opinions of Counsel......................................... 32
         5.04  Corporate Documents; Proceedings; etc....................... 32
         5.05  Plans; Shareholders' Agreements; Management Agreements;
                 Employment Agreements; Non-Compete Agreements;
                 Collective Bargaining Agreements; Tax Sharing
                 Agreements; Existing Indebtedness Agreements.............. 32
         5.06  Financings; etc............................................. 34
         5.07  Tender Offer; Merger; etc................................... 34
         5.08  Refinancing................................................. 35
         5.09  ATEC Subordination Agreement................................ 36
         5.10  Adverse Change, etc......................................... 36
         5.11  Litigation.................................................. 37
         5.12  Pledge Agreement............................................ 37
         5.13  Security Agreement.......................................... 37
         5.14  Subsidiaries Guaranty....................................... 38
         5.15  Acknowledgment and Joinder Agreement........................ 38
         5.16  Financial Statements; Pro Forma Financial Statements,
                  Projections.............................................. 38
         5.17  Solvency Opinion; Insurance Certificates.................... 39
         5.18  Fees, etc................................................... 39

SECTION 6.  Conditions Precedent to All Credit Events...................... 39
         6.01  No Default; Representations and Warranties.................. 39
         6.02  Notice of Borrowing; Letter of Credit Request............... 40

SECTION 7.  Representations, Warranties and Agreements..................... 40
         7.01  Corporate Status............................................ 40
         7.02  Corporate and Other Power and Authority..................... 41
         7.03  No Violation................................................ 41
         7.04  Approvals................................................... 41
         7.05  Financial Statements; Financial Condition; Undisclosed
                  Liabilities; Projections; etc............................ 42
         7.06  Litigation.................................................. 43
         7.07  True and Complete Disclosure................................ 44


                                      (ii)


<PAGE>




                                                                            Page

         7.08  Use of Proceeds; Margin Regulations......................... 44
         7.09  Tax Returns and Payments.................................... 44
         7.10  Compliance with ERISA....................................... 45
         7.11  The Security Documents...................................... 46
         7.12  Representations and Warranties in the Documents............. 47
         7.13  Properties.................................................. 47
         7.14  Capitalization.............................................. 47
         7.15  Subsidiaries................................................ 48
         7.16  Compliance with Statutes, etc............................... 48
         7.17  Investment Company Act...................................... 49
         7.18  Public Utility Holding Company Act.......................... 49
         7.19  Environmental Matters....................................... 49
         7.20  Labor Relations............................................. 50
         7.21  Patents, Licenses, Franchises and Formulas.................. 50
         7.22  Indebtedness................................................ 50
         7.23  Tender Offer................................................ 51
         7.24  Merger...................................................... 51
         7.25  Issuance of the Senior Subordinated Notes................... 51
         7.26  Special Purpose Corporations................................ 52
         7.27  Insurance................................................... 52
         7.28  Senior Subordinated Notes................................... 52

SECTION 8.  Affirmative Covenants.......................................... 52
         8.01  Information Covenants....................................... 53
                  (a)  Monthly Reports..................................... 53
                  (b)  Quarterly Financial Statements...................... 53
                  (c)  Annual Financial Statements......................... 53
                  (d)  Management Letters.................................. 54
                  (e)  Budgets and Projections............................. 54
                  (f)  Officer's Certificates.............................. 54
                  (g)  Notice of Default or Litigation..................... 54
                  (h)  Other Reports and Filings........................... 54
                  (i)  Environmental Matters............................... 55
                  (j)  Other Information................................... 56
         8.02  Books, Records, Inspections and Annual Meetings............. 56
         8.03  Maintenance of Property; Insurance.......................... 56
         8.04  Corporate Franchises........................................ 57
         8.05  Compliance with Statutes, etc............................... 57
         8.06  Compliance with Environmental Laws.......................... 58
         8.07  ERISA....................................................... 59
         8.08  End of Fiscal Years; Fiscal Quarters........................ 60


                                      (iii)


<PAGE>




                                                                            Page

         8.09  Performance of Obligations.................................. 60
         8.10  Payment of Taxes............................................ 60
         8.11  Additional Security; Further Assurances..................... 60
         8.12  Contributions............................................... 61

SECTION 9.  Negative Covenants............................................. 62
         9.01  Liens....................................................... 62
         9.02  Consolidation, Merger, Purchase or Sale of Assets, etc...... 65
         9.03  Dividends................................................... 68
         9.04  Indebtedness................................................ 69
         9.05  Advances, Investments and Loans............................. 71
         9.06  Transactions with Affiliates................................ 72
         9.07  Capital Expenditures........................................ 73
         9.08  Consolidated Interest Coverage Ratio........................ 74
         9.09  Maximum Leverage Ratio...................................... 75
         9.10  Limitation on Payments of Certain Indebtedness,;
                  Modifications of Certain Indebtedness; Modifications
                  of Certificate of Incorporation, By-Laws and Certain
                  Other Agreements; etc.................................... 76
         9.11  Limitation on Certain Restrictions on Subsidiaries.......... 77
         9.12  Limitation on Issuance of Capital Stock..................... 77
         9.13  Business.................................................... 77
         9.14  Limitation on Creation of Subsidiaries...................... 78
         9.15  Senior Subordinated Notes................................... 79

SECTION 10.  Events of Default............................................. 79
         10.01  Payments................................................... 79
         10.02  Representations, etc....................................... 79
         10.03  Covenants.................................................. 79
         10.04  Default Under Other Agreements............................. 79
         10.05  Bankruptcy, etc............................................ 80
         10.06  ERISA...................................................... 80
         10.07  Security Documents......................................... 81
         10.08  Guaranties................................................. 81
         10.09  Judgments.................................................. 81
         10.10  Change of Control.......................................... 81
         10.11  ATEC Subordination Agreement............................... 81

SECTION 11.  Definitions and Accounting Terms.............................. 82
         11.01  Defined Terms.............................................. 82


                                      (iv)


<PAGE>




                                                                            Page

SECTION 12.  The Agent.................................................... 109
         12.01  Appointment............................................... 109
         12.02  Nature of Duties.......................................... 109
         12.03  Lack of Reliance on the Agent............................. 110
         12.04  Certain Rights of the Agent............................... 110
         12.05  Reliance.................................................. 110
         12.06  Indemnification........................................... 110
         12.07  The Agent in its Individual Capacity...................... 111
         12.08  Holders................................................... 111
         12.09  Resignation by the Agent.................................. 111

SECTION 13.  Miscellaneous................................................ 112
         13.01  Payment of Expenses, etc.................................. 112
         13.02  Right of Setoff........................................... 113
         13.03  Notices................................................... 114
         13.04  Benefit of Agreement; Assignments; Participations......... 114
         13.05  No Waiver; Remedies Cumulative............................ 116
         13.06  Payments Pro Rata......................................... 117
         13.07  Calculations; Computations; Accounting Terms.............. 118
         13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION;
                   VENUE; WAIVER OF JURY TRIAL............................ 118
         13.09  Counterparts.............................................. 119
         13.10  Effectiveness............................................. 119
         13.11  Headings Descriptive...................................... 120
         13.12  Amendment or Waiver; etc.................................. 120
         13.13  Survival.................................................. 121
         13.14  Domicile of Loans......................................... 121
         13.15  Register.................................................. 122
         13.16  Confidentiality........................................... 122

SECTION 14.  Parent Guaranty.............................................. 123
         14.01  Guaranty.................................................. 123
         14.02  Bankruptcy................................................ 124
         14.03  Nature of Liability....................................... 124
         14.04  Independent Obligation.................................... 124
         14.05  Authorization............................................. 124
         14.06  Reliance.................................................. 126
         14.07  Subordination............................................. 126
         14.08  Waiver.................................................... 126
         14.09  Nature of Liability....................................... 128


                                       (v)


<PAGE>




SCHEDULE I             Commitments
SCHEDULE II            Bank Addresses
SCHEDULE III           Real Properties
SCHEDULE IV            Plans
SCHEDULE V             Subsidiaries
SCHEDULE VI            Existing Indebtedness
SCHEDULE VII           Insurance
SCHEDULE VIII          Existing Liens
SCHEDULE IX            Existing Investments
SCHEDULE X             Indebtedness to be Refinanced
SCHEDULE XI            Litigation
SCHEDULE XII           Certain Contingent Liabilities
SCHEDULE XIII          Certain Matters


EXHIBIT A              Form of Notice of Borrowing
EXHIBIT B-1            Form of Term Note
EXHIBIT B-2            Form of Revolving Note
EXHIBIT B-3            Form of Swingline Note
EXHIBIT C              Form of Letter of Credit Request
EXHIBIT D              Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1            Form of Opinion of Chadbourne & Parke LLP,
                         Special Counsel to the Credit Parties
EXHIBIT E-2            Form of Opinion of John J. Smith, Esq., General Counsel
                         to the Borrower
EXHIBIT F              Form of Officers' Certificate
EXHIBIT G              Form of Pledge Agreement
EXHIBIT H              Form of Security Agreement
EXHIBIT I              Form of Subsidiaries Guaranty
EXHIBIT J              Form of Acknowledgment and Joinder Agreement
EXHIBIT K              Form of Assignment and Assumption Agreement
EXHIBIT L              Form of Intercompany Note


                                      (vi)


<PAGE>




                  CREDIT  AGREEMENT,   dated  as  of  January  29,  1998,  among
ACQUISITION  HOLDINGS,  INC., a Delaware corporation  ("Holdings"),  ACQUISITION
CORP., a Delaware corporation ("Acquisition Corp."), the Banks party hereto from
time to time, and BANKERS TRUST COMPANY,  as Agent (all  capitalized  terms used
herein and defined in Section 11 are used herein as therein defined).

                              W I T N E S S E T H :

                  WHEREAS,  subject  to and upon the  terms and  conditions  set
forth  herein,  the Banks are  willing to make  available  to the  Borrower  the
respective credit facilities provided for herein;

                  NOW, THEREFORE, IT IS AGREED:

                  SECTION 1.  Amount and Terms of Credit

     1.01 The Commitments.  (a) Subject to and upon the terms and conditions set
forth herein,  each Bank with a Term Loan Commitment  severally agrees to make a
term loan or term loans (each a "Term Loan" and, collectively, the "Term Loans")
to the  Borrower,  which Term Loans (i) only may be incurred by the  Borrower on
the Initial  Borrowing  Date,  (ii)  shall,  at the option of the  Borrower,  be
incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar
Loans,  provided that (A) except as otherwise  specifically  provided in Section
1.10(b),  all Term Loans  comprising the same Borrowing shall at all times be of
the same Type and (B)  unless the Agent has  determined  (and has  notified  the
Borrower) that the Syndication  Date has occurred (at which time this clause (B)
shall no longer be applicable),  no more than three  Borrowings of Term Loans to
be maintained as  Eurodollar  Loans may be incurred  prior to the 90th day after
the Effective Date (each of which  Borrowings of Eurodollar  Loans may only have
an Interest Period of one month,  and the first of which  Borrowings may only be
made on the  Initial  Borrowing  Date or on or prior to the sixth  Business  Day
after the Initial  Borrowing  Date,  the second of which  Borrowings may only be
made on the last day of the Interest  Period of the first such Borrowing and the
third of  which  Borrowings  may  only be made on the  last day of the  Interest
Period of the second such  Borrowing)  and (iii) shall be made by each such Bank
in that  aggregate  principal  amount  which  does  not  exceed  the  Term  Loan
Commitment of such Bank on the Initial  Borrowing  Date (before giving effect to
the  termination  thereof on such date  pursuant to Section  3.03(b)(ii)).  Once
repaid, Term Loans incurred hereunder may not be reborrowed.


<PAGE>




                  (b) (A) Subject to and upon the terms and conditions set forth
herein, each Bank with a Revolving Loan Commitment  severally agrees to make, at
any time and from time to time on and after the Initial Borrowing Date and prior
to the Revolving Loan Maturity Date, a revolving loan or revolving loans (each a
"Revolving  Loan" and,  collectively,  the  "Revolving  Loans") to the Borrower,
which Revolving Loans (i) shall, at the option of the Borrower,  be incurred and
maintained  as, and/or  converted  into,  Base Rate Loans or  Eurodollar  Loans,
provided that (A) except as otherwise  specifically provided in Section 1.10(b),
all Revolving  Loans  comprising the same Borrowing shall at all times be of the
same  Type and (B)  unless  the  Agent  has  determined  (and has  notified  the
Borrower) that the Syndication  Date has occurred (at which time this clause (B)
shall no longer be applicable), no more than three Borrowings of Revolving Loans
to be maintained as Eurodollar Loans may be incurred prior to the 90th day after
the Effective Date (each of which  Borrowings of Eurodollar  Loans may only have
an Interest Period of one month,  and the first of which  Borrowings may only be
made on the same day as the first day of the first  Interest  Period of the Term
Loans that are maintained as Eurodollar  Loans,  the second of which  Borrowings
may  only be made on the last  day of the  Interest  Period  of the  first  such
Borrowing and the third of which  Borrowings may only be made on the last day of
the  Interest  Period of the  second  such  Borrowing),  (ii) may be repaid  and
reborrowed in accordance with the provisions hereof,  (iii) shall not exceed for
any such Bank at any time  outstanding  that aggregate  principal  amount which,
when added to the  product of (x) such Bank's RL  Percentage  and (y) the sum of
(I) the  aggregate  amount of all Letter of Credit  Outstandings  (exclusive  of
Unpaid Drawings which are repaid with the proceeds of, and  simultaneously  with
the incurrence of, the  respective  incurrence of Revolving  Loans) at such time
and (II) the aggregate  principal  amount of all Swingline  Loans  (exclusive of
Swingline Loans which are repaid with the proceeds of, and  simultaneously  with
the  incurrence  of,  the  respective   incurrence  of  Revolving   Loans)  then
outstanding,  equals the Revolving Loan Commitment of such Bank at such time and
(iv) shall not exceed for all such Banks at any time  outstanding that aggregate
principal amount which, when added to the sum of (I) the aggregate amount of all
Letter of Credit  Outstandings  (exclusive of Unpaid  Drawings  which are repaid
with the proceeds of, and simultaneously  with the incurrence of, the respective
incurrence  of Revolving  Loans) at such time and (II) the  aggregate  principal
amount of all Swingline  Loans  (exclusive  of Swingline  Loans which are repaid
with the proceeds of, and simultaneously  with the incurrence of, the respective
incurrence of Revolving Loans) then outstanding, equals the Total Revolving Loan
Commitment at such time.  Notwithstanding  anything to the contrary contained in
this Agreement,  no more than $9,000,000 of Revolving Loans in the aggregate may
be incurred on the Initial Borrowing Date.

                  (B) Revolving  Loans may not be incurred as Acquisition  Loans
if after giving effect  thereto the aggregate  outstanding  principal  amount of
Acquisition Loans would exceed the Acquisition  Sub-Limit then in effect. Except
to the extent made pursuant to a Mandatory Borrowing, Revolving Loans may not be
incurred as Working  Capital Loans if after giving effect  thereto the aggregate
outstanding principal amount of Working Capital Loans


                                      -2-


<PAGE>




would exceed the Working Capital Sub-Limit then in effect.

                  (c)  Subject  to and upon the terms and  conditions  set forth
herein,  the  Swingline  Bank agrees to make,  at any time and from time to time
after the Initial  Borrowing  Date and prior to the  Swingline  Expiry  Date,  a
revolving loan or revolving  loans (each a "Swingline  Loan" and,  collectively,
the "Swingline Loans") to the Borrower,  which Swingline Loans (i) shall be made
and  maintained  as Base  Rate  Loans,  (ii) may be  repaid  and  reborrowed  in
accordance  with the  provisions  hereof,  (iii)  shall not exceed in  aggregate
principal  amount at any time  outstanding,  when  combined  with the  aggregate
principal  amount of all  Revolving  Loans then  outstanding  and the  aggregate
amount of all Letter of Credit Outstandings at such time, an amount equal to the
Total  Revolving  Loan  Commitment  at such  time,  and (iv) shall not exceed in
aggregate principal amount at any time outstanding the Maximum Swingline Amount.
Notwithstanding  anything to the contrary contained in this Section 1.01(c), (x)
the Swingline Bank shall not be obligated to make any Swingline  Loans at a time
when  a  Bank  Default  exists  unless  the  Swingline  Bank  has  entered  into
arrangements  satisfactory  to it and the  Borrower to eliminate  the  Swingline
Bank's risk with respect to the  Defaulting  Bank's or Banks'  participation  in
such Swingline Loans,  including by cash  collateralizing such Defaulting Bank's
or Banks' RL Percentage of the outstanding Swingline Loans and (y) the Swingline
Bank shall not make any Swingline Loan after it has received written notice from
the  Borrower,  any other  Credit  Party or the  Required  Banks  stating that a
Default or an Event of Default  exists and is continuing  until such time as the
Swingline Bank shall have received  written notice (I) of rescission of all such
notices from the party or parties  originally  delivering such notice or (II) of
the waiver of such Default or Event of Default by the Required Banks.

                  (d) On any Business Day, the  Swingline  Bank may, in its sole
discretion,  give notice to the Banks with Revolving Loan  Commitments  that the
Swingline  Bank's  outstanding  Swingline Loans shall be funded with one or more
Borrowings of Revolving Loans (provided that such notice shall be deemed to have
been automatically given upon the occurrence of a Default or an Event of Default
under Section 10.05 or upon the exercise of any of the remedies  provided in the
last paragraph of Section 10), in which case one or more Borrowings of Revolving
Loans   constituting  Base  Rate  Loans  (each  such  Borrowing,   a  "Mandatory
Borrowing")  shall be made on the  immediately  succeeding  Business  Day by all
Banks with a Revolving Loan Commitment (without giving effect to any termination
thereto  pursuant  to the last  paragraph  of Section 10) pro rata based on each
such Bank's RL Percentage (determined before giving effect to any termination of
the Revolving Loan Commitments pursuant to the last paragraph of Section 10) and
the proceeds  thereof shall be applied  directly by the Swingline  Bank to repay
the Swingline Bank for such outstanding  Swingline Loans.  Each such Bank hereby
irrevocably  agrees to make  Revolving  Loans  upon one  Business  Day's  notice
pursuant to each Mandatory  Borrowing in the amount and in the manner  specified
in the preceding sentence and on the date specified in writing by


                                      -3-


<PAGE>
the Swingline Bank notwithstanding (i) the amount of the Mandatory Borrowing may
not comply with the Minimum Borrowing Amount otherwise required hereunder,  (ii)
whether any conditions specified in Section 6 are then satisfied,  (iii) whether
a Default or an Event of Default  then exists,  (iv) the date of such  Mandatory
Borrowing  and (v) the amount of the Total  Revolving  Loan  Commitment  at such
time. In the event that any Mandatory Borrowing cannot for any reason be made on
the date otherwise required above (including, without limitation, as a result of
the  commencement of a proceeding  under the Bankruptcy Code with respect to the
Borrower),  then each such Bank hereby agrees that it shall  forthwith  purchase
(as of the date the Mandatory  Borrowing  would  otherwise  have  occurred,  but
adjusted for any payments  received  from the Borrower on or after such date and
prior to such  purchase)  from the  Swingline  Bank such  participations  in the
outstanding  Swingline  Loans as shall be necessary to cause such Banks to share
in such  Swingline  Loans  ratably based upon their  respective  RL  Percentages
(determined  before  giving  effect to any  termination  of the  Revolving  Loan
Commitments pursuant to the last paragraph of Section 10), provided that (x) all
interest  payable  on the  Swingline  Loans  shall  be for  the  account  of the
Swingline  Bank  until  the date as of which  the  respective  participation  is
required  to be  purchased  and,  to the extent  attributable  to the  purchased
participation,  shall be payable to the participant from and after such date and
(y) at the time any  purchase of  participations  pursuant  to this  sentence is
actually made,  the purchasing  Bank shall be required to pay the Swingline Bank
interest on the principal  amount of  participation  purchased for each day from
and including the day upon which the Mandatory  Borrowing  would  otherwise have
occurred to but  excluding  the date of payment for such  participation,  at the
overnight  Federal Funds Rate for the first three days and at the rate otherwise
applicable to Revolving  Loans  maintained as Base Rate Loans hereunder for each
day thereafter.

     1.02 Minimum Amount of Each Borrowing.  The aggregate  principal  amount of
each  Borrowing of Loans under a respective  Tranche  shall not be less than the
Minimum Borrowing Amount for such Tranche.  More than one Borrowing may occur on
the same  date,  but at no time  shall  there be  outstanding  more  than  eight
Borrowings of Eurodollar Loans.

     1.03 Notice of  Borrowing.  (a) Whenever the Borrower  desires to incur (x)
Eurodollar  Loans  hereunder,  the  Borrower  shall give the Agent at the Notice
Office at least three Business Days' prior notice of each  Eurodollar Loan to be
incurred hereunder and (y) Base Rate Loans hereunder  (excluding Swingline Loans
and Revolving Loans made pursuant to a Mandatory Borrowing),  the Borrower shall
give the Agent at the Notice Office at least one Business  Day's prior notice of
each Base Rate Loan to be incurred  hereunder,  provided that (in each case) any
such  notice  shall be deemed to have been given on a certain  day only if given
before 11:00 A.M.  (New York time) on such day. Each such notice (each a "Notice
of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be
irrevocable  and shall be given by the  Borrower  in  writing,  or by  telephone
promptly confirmed in writing, in the form of Exhibit A, appropriately completed


                                      -4-


<PAGE>




to  specify  (i) the  aggregate  principal  amount of the  Loans to be  incurred
pursuant to such  Borrowing,  (ii) the date of such Borrowing  (which shall be a
Business Day), (iii) whether the Loans being incurred pursuant to such Borrowing
shall  constitute  Term Loans or Revolving  Loans,  (iv) whether the Loans being
incurred pursuant to such Borrowing are to be initially  maintained as Base Rate
Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar
Loans,  the  initial  Interest  Period  to be  applicable  thereto  and  (v) the
respective portion of any Borrowing of Revolving Loans to constitute Acquisition
Loans and/or Working Capital Loans, as the case may be. The Agent shall promptly
give each Bank which is required to make Loans of the Tranche  specified  in the
respective  Notice of  Borrowing,  notice of such  proposed  Borrowing,  of such
Bank's  proportionate  share  thereof and of the other  matters  required by the
immediately preceding sentence to be specified in the Notice of Borrowing.

                  (b)(i) Whenever the Borrower  desires to incur Swingline Loans
hereunder,  the Borrower  shall give the Swingline  Bank no later than 1:00 P.M.
(New York time) on the date that a  Swingline  Loan is to be  incurred,  written
notice or telephonic notice promptly confirmed in writing of each Swingline Loan
to be incurred  hereunder.  Each such notice shall be irrevocable and specify in
each case (A) the date of Borrowing  (which shall be a Business Day) and (B) the
aggregate  principal  amount of the Swingline  Loans to be incurred  pursuant to
such Borrowing.

                  (ii)  Mandatory  Borrowings  shall  be made  upon  the  notice
specified in Section 1.01(d),  with the Borrower  irrevocably  agreeing,  by its
incurrence of any Swingline  Loan, to the making of the Mandatory  Borrowings as
set forth in Section 1.01(d).

                  (c) Without in any way limiting the obligation of the Borrower
to confirm in writing any  telephonic  notice of any  Borrowing or prepayment of
Loans,  the Agent or the  Swingline  Bank,  as the case may be, may act  without
liability  upon the basis of telephonic  notice of such Borrowing or prepayment,
as the case may be, believed by the Agent or the Swingline Bank, as the case may
be, in good faith to be from the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer or any Assistant Treasurer of the Borrower,  or
from any other authorized  officer of the Borrower  designated in writing by the
Borrower to the Agent as being authorized to give such notices, prior to receipt
of written confirmation. In each such case, the Borrower hereby waives the right
to  dispute  the  Agent's  or  Swingline  Bank's  record  of the  terms  of such
telephonic  notice of such Borrowing or prepayment of Loans, as the case may be,
absent manifest error.

     1.04 Disbursement of Funds. No later than 12:00 Noon (New York time) on the
date  specified  in each Notice of  Borrowing  (or (x) in the case of  Swingline
Loans, no later than 3:00 P.M. (New York time) on the date specified pursuant to
Section  1.03(b)(i)  or (y) in the case of Mandatory  Borrowings,  no later than
1:00 P.M. (New York time) on the date specified in Section  1.01(d)),  each Bank
with a Commitment of the


                                      -5-


<PAGE>
respective  Tranche  will make  available  its pro rata portion  (determined  in
accordance  with Section  1.07) of each such  Borrowing  requested to be made on
such  date (or in the case of  Swingline  Loans,  the  Swingline  Bank will make
available the full amount  thereof).  All such amounts will be made available in
Dollars and in immediately  available funds at the Payment  Office,  and, except
for  Revolving  Loans made  pursuant  to a Mandatory  Borrowing,  the Agent will
promptly  thereafter  make  available to the Borrower at the Payment  Office the
aggregate of the amounts so made available by the Banks.  Unless the Agent shall
have been  notified  by any Bank prior to the date of  Borrowing  that such Bank
does not  intend to make  available  to the Agent  such  Bank's  portion  of any
Borrowing to be made on such date,  the Agent may assume that such Bank has made
such amount  available to the Agent on such date of Borrowing  and the Agent may
(but  shall  not be  obligated  to),  in  reliance  upon such  assumption,  make
available to the Borrower a corresponding  amount. If such corresponding  amount
is not in fact made  available  to the Agent by such  Bank,  the Agent  shall be
entitled to recover such corresponding  amount on demand from such Bank. If such
Bank does not pay such  corresponding  amount  forthwith upon the Agent's demand
therefor,  the Agent shall  promptly  notify the Borrower and the Borrower shall
immediately pay such corresponding  amount to the Agent. The Agent also shall be
entitled  to recover on demand from such Bank or the  Borrower,  as the case may
be, interest on such  corresponding  amount in respect of each day from the date
such corresponding  amount was made available by the Agent to the Borrower until
the date such  corresponding  amount is  recovered  by the Agent,  at a rate per
annum equal to (i) if recovered  from such Bank, at the overnight  Federal Funds
Rate and (ii) if recovered from the Borrower, the rate of interest applicable to
the respective  Borrowing,  as determined  pursuant to Section 1.08.  Nothing in
this  Section  1.04 shall be deemed to relieve any Bank from its  obligation  to
make Loans  hereunder  or to  prejudice  any rights  which the Borrower may have
against  any  Bank  as a  result  of any  failure  by such  Bank  to make  Loans
hereunder.
     1.05 Notes.  (a) The  Borrower's  obligation  to pay the  principal of, and
interest on, the Loans made by each Bank shall be  evidenced  (i) if Term Loans,
by a promissory  note duly executed and delivered by the Borrower  substantially
in the form of Exhibit B-1,  with blanks  appropriately  completed in conformity
herewith  (each a "Term  Note" and,  collectively,  the "Term  Notes"),  (ii) if
Revolving  Loans,  by a  promissory  note duly  executed  and  delivered  by the
Borrower  substantially  in the form of Exhibit B-2,  with blanks  appropriately
completed in conformity herewith (each a "Revolving Note" and, collectively, the
"Revolving  Notes") and (iii) if  Swingline  Loans,  by a  promissory  note duly
executed and  delivered by the Borrower  substantially  in the form Exhibit B-3,
with blanks  appropriately  completed in  conformity  herewith  (the  "Swingline
Note").

                  (b) The Term  Note  issued  to each  Bank that has a Term Loan
Commitment or outstanding Term Loans shall (i) be executed by the Borrower, (ii)
be  payable  to such Bank or its  registered  assigns  and be dated the  Initial
Borrowing  Date (or, if issued after the Initial  Borrowing  Date,  be dated the
date of the issuance thereof), (iii) be in a stated


                                      -6-


<PAGE>
principal  amount  equal  to the Term  Loans  made by such  Bank on the  Initial
Borrowing Date (or, if issued after the Initial  Borrowing  Date, be in a stated
principal amount equal to the outstanding principal amount of Term Loans of such
Bank at such time) and be payable in the  outstanding  principal  amount of Term
Loans  evidenced  thereby,  (iv) mature on the Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar  Loans,  as the case may be,  evidenced  thereby,
(vi) be subject to  voluntary  prepayment  as  provided  in  Section  4.01,  and
mandatory  repayment as provided in Section  4.02,  and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.

                  (c)  The  Revolving  Note  issued  to  each  Bank  that  has a
Revolving Loan  Commitment or outstanding  Revolving Loans shall (i) be executed
by the Borrower,  (ii) be payable to such Bank or its registered  assigns and be
dated the  Initial  Borrowing  Date (or, if issued  after the Initial  Borrowing
Date, be dated the date of the issuance thereof), (iii) be in a stated principal
amount equal to the Revolving Loan  Commitment of such Bank (or, if issued after
the  termination  thereof,  be  in  a  stated  principal  amount  equal  to  the
outstanding  Revolving  Loans of such Bank at such  time) and be  payable in the
outstanding  principal  amount of the Revolving  Loans evidenced  thereby,  (iv)
mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the
appropriate  clause  of  Section  1.08 in  respect  of the Base  Rate  Loans and
Eurodollar  Loans,  as the case may be,  evidenced  thereby,  (vi) be subject to
voluntary  prepayment  as provided in Section 4.01,  and mandatory  repayment as
provided  in  Section  4.02,  and  (vii) be  entitled  to the  benefits  of this
Agreement and the other Credit Documents.

                  (d) The Swingline  Note issued to the Swingline Bank shall (i)
be  executed  by the  Borrower,  (ii) be  payable to the  Swingline  Bank or its
registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated
principal  amount  equal to the Maximum  Swingline  Amount and be payable in the
outstanding  principal amount of the Swingline Loans evidenced thereby from time
to time, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided
in the  appropriate  clause of  Section  1.08 in  respect of the Base Rate Loans
evidenced  thereby,  (vi) be subject to  voluntary  prepayment  as  provided  in
Section 4.01, and mandatory  repayment as provided in Section 4.02, and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.

                  (e) Each Bank will note on its internal  records the amount of
each Loan made by it and each  payment in respect  thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced  thereby.  Failure to make any such notation
or any error in such notation  shall not affect the  Borrower's  obligations  in
respect of such Loans.

     1.06  Conversions.  The Borrower  shall have the option to convert,  on any
Business Day occurring after the Initial  Borrowing Date, all or a portion equal
to at least


                                      -7-


<PAGE>
the Minimum Borrowing Amount of the outstanding principal amount of Loans (other
than Swingline  Loans which may not be converted  pursuant to this Section 1.06)
made pursuant to one or more  Borrowings (so long as of the same Tranche) of one
or more Types of Loans into a Borrowing (of the same Tranche) of another Type of
Loan,  provided  that,  (i) except as  otherwise  provided  in Section  1.10(b),
Eurodollar  Loans may be converted  into Base Rate Loans only on the last day of
an Interest  Period  applicable to the Loans being converted and no such partial
conversion of Eurodollar Loans shall reduce the outstanding  principal amount of
such  Eurodollar  Loans made  pursuant  to a single  Borrowing  to less than the
Minimum  Borrowing Amount applicable  thereto,  (ii) Base Rate Loans may only be
converted into Eurodollar Loans if no Default under Section 10.01 or 10.05 is in
existence or no Event of Default is in existence (in either case) on the date of
the  conversion,  (iii)  unless the Agent has  determined  (and has notified the
Borrower)  that the  Syndication  Date has  occurred  (at which time this clause
(iii) shall no longer be applicable),  prior to the 90th day after the Effective
Date,  conversions of Base Rate Loans into Eurodollar  Loans may only be made if
any such conversion is effective on the first day of the first,  second or third
Interest  Period  referred to in clause (B) of each of Sections  1.01(a)(ii) and
1.01(b)(i) and so long as such conversion does not result in a greater number of
Borrowings of Eurodollar Loans prior to the 90th day after the Effective Date as
are  permitted  under such  Sections  and (iv) no  conversion  pursuant  to this
Section 1.06 shall result in a greater number of Borrowings of Eurodollar  Loans
than is permitted under Section 1.02. Each such conversion  shall be effected by
the Borrower by giving the Agent at the Notice  Office prior to 11:00 A.M.  (New
York  time) at least  three  Business  Days'  prior  notice  (each a "Notice  of
Conversion")  specifying  the  Loans  to  be  so  converted,  the  Borrowing  or
Borrowings  pursuant to which such Loans were made and, if to be converted  into
Eurodollar Loans, the Interest Period to be initially  applicable  thereto.  The
Agent  shall  give  each Bank  prompt  notice  of any such  proposed  conversion
affecting any of its Loans.  Upon any such conversion the proceeds  thereof will
be deemed to be applied  directly  on the day of such  conversion  to prepay the
outstanding principal amount of the Loans being converted.

     1.07 Pro Rata Borrowings.  All Borrowings of Term Loans and Revolving Loans
under this  Agreement  shall be incurred from the Banks pro rata on the basis of
their Term Loan Commitments or Revolving Loan  Commitments,  as the case may be.
It is understood  that no Bank shall be responsible for any default by any other
Bank of its  obligation  to make  Loans  hereunder  and that each Bank  shall be
obligated to make the Loans  provided to be made by it hereunder,  regardless of
the failure of any other Bank to make its Loans hereunder.

     1.08  Interest.  (a) The Borrower  agrees to pay interest in respect of the
unpaid  principal  amount of each  Base  Rate  Loan  from the date of  Borrowing
thereof until the earlier of (i) the maturity  thereof  (whether by acceleration
or  otherwise)  and (ii) the  conversion  of such Base Rate Loan to a Eurodollar
Loan pursuant to Section 1.06, at a rate


                                      -8-


<PAGE>
per annum  which  shall be equal to the sum of the  Applicable  Base Rate Margin
plus the Base Rate in effect from time to time.

                  (b) The  Borrower  agrees to pay  interest  in  respect of the
unpaid  principal  amount of each  Eurodollar  Loan  from the date of  Borrowing
thereof until the earlier of (i) the maturity  thereof  (whether by acceleration
or otherwise)  and (ii) the  conversion of such  Eurodollar  Loan to a Base Rate
Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable,  at a rate per annum
which shall, during each Interest Period applicable thereto, be equal to the sum
of the  Applicable  Eurodollar  Rate  Margin plus the  Eurodollar  Rate for such
Interest Period.

                  (c) Overdue  principal  and, to the extent  permitted  by law,
overdue  interest in respect of each Loan and any other overdue  amount  payable
hereunder  shall,  in each case,  bear interest at a rate per annum equal to the
greater  of (x) the rate  which is 2% in excess  of the rate then  borne by such
Loans and (y) the rate which is 2% in excess of the rate otherwise applicable to
Base Rate Loans of such Tranche from time to time.  Interest which accrues under
this Section 1.08(c) shall be payable on demand.

                  (d) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan,  quarterly  in arrears on each  Quarterly
Payment Date, (ii) in respect of each  Eurodollar  Loan, on the last day of each
Interest  Period  applicable  thereto and, in the case of an Interest  Period in
excess of three months,  on each date occurring at three month  intervals  after
the first day of such Interest  Period and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid),  at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.

                  (e) Upon each  Interest  Determination  Date,  the Agent shall
determine the Eurodollar Rate for each Interest Period  applicable to Eurodollar
Loans and shall promptly  notify the Borrower and the Banks  thereof.  Each such
determination  shall, absent manifest error, be final and conclusive and binding
on all parties hereto.

     1.09  Interest  Periods.  At the time the  Borrower  gives  any  Notice  of
Borrowing  or Notice of  Conversion  in respect of the making of, or  conversion
into, any Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or on the third  Business  Day prior to the  expiration  of an Interest
Period  applicable  to  such  Eurodollar  Loan  (in the  case of any  subsequent
Interest  Period),  the  Borrower  shall have the right to elect,  by giving the
Agent notice thereof, the interest period (each an "Interest Period") applicable
to such  Eurodollar  Loan,  which  Interest  Period shall,  at the option of the
Borrower (but otherwise subject to the limitation set forth in clause (B) of the
proviso in each of Sections 1.01(a)(ii) and 1.01(b)(i)), be a one, two, three or
six-month period, provided that:


                                      -9-


<PAGE>




                 (i) all Eurodollar  Loans  comprising a Borrowing  shall at all
         times have the same Interest Period;

                 (ii) the initial  Interest Period for any Eurodollar Loan shall
         commence on the date of Borrowing of such  Eurodollar  Loan  (including
         the date of any  conversion  thereto  from a Base  Rate  Loan) and each
         Interest Period occurring thereafter in respect of such Eurodollar Loan
         shall commence on the day on which the next preceding  Interest  Period
         applicable thereto expires;

                (iii) if any Interest  Period for a Eurodollar  Loan begins on a
         day for which there is no numerically corresponding day in the calendar
         month at the end of such Interest  Period,  such Interest  Period shall
         end on the last Business Day of such calendar month;

                 (iv)  if  any  Interest  Period  for a  Eurodollar  Loan  would
         otherwise  expire on a day which is not a Business  Day,  such Interest
         Period  shall expire on the next  succeeding  Business  Day,  provided,
         however,  that if any  Interest  Period  for a  Eurodollar  Loan  would
         otherwise  expire on a day which is not a Business  Day but is a day of
         the month  after  which no further  Business  Day occurs in such month,
         such Interest Period shall expire on the next preceding Business Day;

                  (v) no  Interest  Period  may be  selected  at any time when a
         Default  under  Section 10.01 or 10.05 is then in existence or an Event
         of Default is then in existence;

                 (vi) no  Interest  Period in  respect of any  Borrowing  of any
         Tranche of Loans shall be selected  which extends beyond the respective
         Maturity Date for such Tranche of Loans; and

                (vii) no  Interest  Period in respect of any  Borrowing  of Term
         Loans  shall be  selected  which  extends  beyond any date upon which a
         mandatory  repayment  of Term Loans will be  required  to be made under
         Section 4.02(b),  if the aggregate principal amount of Term Loans which
         have  Interest  Periods  which will  expire  after such date will be in
         excess of the aggregate principal amount of Term Loans then outstanding
         less the aggregate amount of such required repayment.

                  If upon the expiration of any Interest Period  applicable to a
Borrowing of  Eurodollar  Loans,  the  Borrower  has failed to elect,  or is not
permitted to elect,  a new Interest  Period to be applicable to such  Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such  Eurodollar  Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.


                                      -10-


<PAGE>




     1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank shall
have determined (which  determination shall, absent manifest error, be final and
conclusive  and binding upon all parties  hereto but, with respect to clause (i)
below, may be made only by the Agent):

                  (i) on any Interest  Determination Date that, by reason of any
         changes  arising  after  the  date  of  this  Agreement  affecting  the
         interbank  Eurodollar market,  adequate and fair means do not exist for
         ascertaining the applicable  interest rate on the basis provided for in
         the definition of Eurodollar Rate; or

                 (ii) at any time, that such Bank shall incur increased costs or
         reductions in the amounts received or receivable hereunder with respect
         to any Eurodollar Loan because of (x) any change since the date of this
         Agreement  in any  applicable  law or  governmental  rule,  regulation,
         order, guideline or request (whether or not having the force of law) or
         in the  interpretation  or  administration  thereof and  including  the
         introduction of any new law or governmental  rule,  regulation,  order,
         guideline or request,  such as, for example,  but not limited to: (A) a
         change in the basis of taxation of payment to any Bank of the principal
         of or  interest  on the Notes or any other  amounts  payable  hereunder
         (except for changes in the rate of tax on, or  determined  by reference
         to, the net income or profits of such Bank  pursuant to the laws of the
         jurisdiction  in which such Bank is  organized  or in which such Bank's
         principal  office  or  applicable  lending  office  is  located  or any
         subdivision thereof or therein), but without duplication of any amounts
         payable  to such Bank  pursuant  to  Section  4.04,  or (B) a change in
         official reserve requirements,  but, in all events,  excluding reserves
         required under  Regulation D to the extent  included in the computation
         of the Eurodollar Rate and/or (y) other circumstances since the date of
         this Agreement affecting the interbank Eurodollar market; or

                (iii)  at any  time,  that  the  making  or  continuance  of any
         Eurodollar  Loan has been made (x) unlawful by any law or  governmental
         rule,  regulation or order, (y) impossible by compliance by any Bank in
         good faith with any  governmental  request (whether or not having force
         of law) or (z)  impracticable  as a result of a  contingency  occurring
         after the date of this Agreement which materially and adversely affects
         the interbank Eurodollar market;

then, and in any such event,  such Bank (or the Agent, in the case of clause (i)
above) shall promptly give notice (by telephone  promptly  confirmed in writing)
to the  Borrower  and,  except in the case of clause (i) above,  to the Agent of
such  determination  (which notice the Agent shall promptly  transmit to each of
the other  Banks).  Thereafter  (x) in the case of clause (i) above,  Eurodollar
Loans shall no longer be  available  until such time as the Agent  notifies  the
Borrower and the Banks that the circumstances  giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given


                                      -11-


<PAGE>




by the  Borrower  with  respect  to  Eurodollar  Loans  which  have not yet been
incurred  (including  by way of  conversion)  shall be deemed  rescinded  by the
Borrower,  (y) in the case of clause (ii) above,  the Borrower shall pay to such
Bank, upon such Bank's written request therefor, such additional amounts (in the
form of an increased rate of, or a different method of calculating,  interest or
otherwise  as such  Bank in its sole  discretion  shall  determine)  as shall be
required to  compensate  such Bank for such  increased  costs or  reductions  in
amounts received or receivable  hereunder (a written notice as to the additional
amounts  owed to such  Bank,  showing  in  reasonable  detail  the basis for the
calculation  thereof,  submitted  to the  Borrower  by such Bank  shall,  absent
manifest  error,  be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause  (iii) above,  the Borrower  shall take one of the
actions  specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.

                  (b) At any time that any  Eurodollar  Loan is  affected by the
circumstances  described in Section  1.10(a)(ii) or (iii), the Borrower may (and
in the case of a  Eurodollar  Loan  affected by the  circumstances  described in
Section  1.10(a)(iii)  shall) either (x) if the affected Eurodollar Loan is then
being made  initially  or pursuant to a  conversion,  cancel such  Borrowing  by
giving the Agent telephonic  notice (confirmed in writing) on the same date that
the Borrower was notified by the affected Bank or the Agent  pursuant to Section
1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding,
upon at least three  Business  Days'  written  notice to the Agent,  require the
affected Bank to convert such  Eurodollar  Loan into a Base Rate Loan,  provided
that, (A) to the extent permitted by applicable law or any governmental  request
(whether or not having the force of law), any such  outstanding  Eurodollar Loan
may be continued as such until the end of the then current  Interest  Period for
such Eurodollar Loan and (B) if more than one Bank is affected at any time, then
all affected Banks must be treated the same pursuant to this Section 1.10(b).

                  (c) If any  Bank  determines  that  after  the  date  of  this
Agreement  the   introduction  of  or  any  change  in  any  applicable  law  or
governmental rule, regulation,  order, guideline,  directive or request (whether
or not having the force of law) concerning  capital  adequacy,  or any change in
interpretation or administration thereof by any governmental authority,  central
bank or  comparable  agency,  will have the effect of  increasing  the amount of
capital  required or expected to be maintained  by such Bank or any  corporation
controlling  such  Bank  based  on the  existence  of  such  Bank's  Commitments
hereunder or its  obligations  hereunder,  then the  Borrower  shall pay to such
Bank,  upon its written demand  therefor,  such  additional  amounts as shall be
required to  compensate  such Bank or such other  corporation  for the increased
cost to such Bank or such  other  corporation  or the  reduction  in the rate of
return to such Bank or such other  corporation  as a result of such  increase of
capital. In determining such additional  amounts,  each Bank will act reasonably
and in good  faith and will use  averaging  and  attribution  methods  which are
reasonable,  provided that such Bank's determination of compensation owing under
this Section 1.10(c) shall, absent


                                      -12-


<PAGE>




manifest  error,  be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this  Section  1.10(c),  will  give  prompt  written  notice  thereof  to the
Borrower, which notice shall show in reasonable detail the basis for calculation
of such additional amounts.

                  (d) Notwithstanding anything to the contrary contained in this
Section  1.10,  unless a Bank gives notice to the Borrower  that the Borrower is
obligated  to pay any amount  under this  Section 1.10 within 180 days after the
later of (x) the  date  such  Bank  incurs  the  respective  increased  costs or
reduction  in return  the rate of  return  or (y) the date such Bank has  actual
knowledge of its  incurrence of the respective  increased  costs or reduction in
the rate of return,  then such Bank shall only be entitled to be compensated for
such  amount by the  Borrower  pursuant to this  Section  1.10 to the extent the
respective  increased  costs or  reduction in the rate of return are incurred or
suffered  on or after the date which  occurs 180 days prior to such Bank  giving
notice  to the  Borrower  that it is  obligated  to pay the  respective  amounts
pursuant to this Section 1.10.

     1.11  Compensation.  The  Borrower  shall  compensate  each Bank,  upon its
written  request (which  request shall set forth in reasonable  detail the basis
for  requesting  such  compensation),  for all reasonable  losses,  expenses and
liabilities  (including,  without  limitation,  any loss,  expense or  liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required  by such  Bank to fund  its  Eurodollar  Loans  but  excluding  loss of
anticipated  profits) which such Bank may sustain:  (i) if for any reason (other
than a default by such Bank or the Agent) a Borrowing of, or conversion  from or
into,  Eurodollar Loans does not occur on a date specified  therefor in a Notice
of Borrowing or Notice of  Conversion  (whether or not withdrawn by the Borrower
or  deemed  withdrawn  pursuant  to  Section  1.10(a));  (ii)  if any  repayment
(including  any repayment  made  pursuant to Section 4.01,  Section 4.02 or as a
result of an  acceleration of the Loans pursuant to Section 10) or conversion of
any of its  Eurodollar  Loans  occurs on a date  which is not the last day of an
Interest  Period with respect  thereto;  (iii) if any  prepayment  of any of its
Eurodollar  Loans is not made on any date  specified  in a notice of  prepayment
given by the Borrower;  or (iv) as a consequence of (x) any other default by the
Borrower to repay its Loans when required by the terms of this  Agreement or any
Note held by such Bank or (y) any election made pursuant to Section 1.10(b).

     1.12 Change of Lending  Office.  Each Bank agrees that on the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) or (iii),  Section
1.10(c),  Section 2.06 or Section 4.04 with  respect to such Bank,  it will,  if
requested by the Borrower,  use  reasonable  efforts  (subject to overall policy
considerations  of such Bank) to designate  another lending office for any Loans
or Letters of Credit affected by such event,  provided that such  designation is
made on such terms that such Bank and its  lending  office  suffer no  economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Section.  Nothing in this Section
1.12 shall


                                      -13-


<PAGE>
affect or postpone  any of the  obligations  of the Borrower or the right of any
Bank provided in Sections 1.10, 2.06 and 4.04.

     1.13  Replacement  of Banks.  (x) If any Bank becomes a Defaulting  Bank or
otherwise  defaults in its obligations to make Loans, (y) upon the occurrence of
an event giving rise to the operation of Section  1.10(a)(ii) or (iii),  Section
1.10(c),  Section 2.06 or Section 4.04 with respect to any Bank which results in
such Bank  charging  to the  Borrower  increased  costs in excess of those being
generally  charged by the other  Banks or (z) in the case of a refusal by a Bank
to consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks as (and
to the extent) provided in Section 13.12(b),  the Borrower shall have the right,
if no Event of Default then exists (or, in the case of preceding  clause (z), no
Event  of  Default  will  exist   immediately   after  giving   effect  to  such
replacement),  to replace such Bank (the "Replaced Bank") with one or more other
Eligible  Transferees,  none of whom shall  constitute a Defaulting  Bank at the
time of such replacement (collectively, the "Replacement Bank") and each of whom
shall be required to be reasonably acceptable to the Agent, provided that (i) at
the time of any replacement  pursuant to this Section 1.13, the Replacement Bank
shall enter into one or more  Assignment and Assumption  Agreements  pursuant to
Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to
be paid by the Replacement  Bank) pursuant to which the  Replacement  Bank shall
acquire  all of the  Commitments  and  outstanding  Loans  of,  and in each case
participations  in Letters of Credit by, the  Replaced  Bank and, in  connection
therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal
to the sum of (I) an amount equal to the principal of, and all accrued  interest
on, all  outstanding  Loans of the  Replaced  Bank,  (II) an amount equal to all
Unpaid  Drawings that have been funded by (and not  reimbursed to) such Replaced
Bank,  together with all then unpaid  interest with respect thereto at such time
and (III) an amount equal to all accrued,  but theretofore unpaid, Fees owing to
the Replaced Bank pursuant to Section 3.01, (y) the Issuing Bank an amount equal
to such Replaced  Bank's RL Percentage of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) to the extent such amount was not theretofore  funded
by such Replaced Bank to such Issuing Bank and (z) the Swingline  Bank an amount
equal to such Replaced  Bank's RL  Percentage of any Mandatory  Borrowing to the
extent  such  amount was not  theretofore  funded by such  Replaced  Bank to the
Swingline  Bank and (ii) all  obligations  of the  Borrower due and owing to the
Replaced  Bank at such time (other than those  specifically  described in clause
(i) above in  respect of which the  assignment  purchase  price has been,  or is
concurrently  being,  paid)  shall  be  paid  in  full  to  such  Replaced  Bank
concurrently  with  such  replacement.  Upon  the  execution  of the  respective
Assignment  and  Assumption  Agreement,  the  payment of amounts  referred to in
clauses  (i) and (ii)  above  and,  if so  requested  by the  Replacement  Bank,
delivery to the Replacement  Bank of the  appropriate  Note or Notes executed by
the  Borrower,  the  Replacement  Bank  shall  become a Bank  hereunder  and the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without limitation,


                                      -14-


<PAGE>




Sections 1.10, 1.11,  2.06,  4.04,  12.06 and 13.01),  which shall survive as to
such  Replaced  Bank with respect to any  liabilities  incurred by such Replaced
Bank  relating to periods  prior to the date such  Replaced  Bank ceased to be a
Bank hereunder.


                  SECTION 2.  Letters of Credit.

     2.01  Letters of Credit.  (a) Subject to and upon the terms and  conditions
set forth herein,  the Borrower may request that the Issuing Bank issue,  at any
time and from time to time on and after the Initial  Borrowing Date and prior to
the 30th day prior to the Revolving  Loan Maturity  Date, for the account of the
Borrower  and for the  benefit  of any holder  (or any  trustee,  agent or other
similar  representative for any such holders) of L/C Supportable  Obligations of
the  Borrower  or any of its  Subsidiaries,  an  irrevocable  standby  letter of
credit,  in a form customarily used by the Issuing Bank or in such other form as
has been  approved by the Issuing  Bank (each such standby  letter of credit,  a
"Letter of Credit") in support of such L/C Supportable Obligations.  All Letters
of Credit shall be  denominated  in Dollars and shall be issued on a sight basis
only.

                  (b)  Subject  to and upon the terms and  conditions  set forth
herein,  the Issuing Bank agrees that it will, at any time and from time to time
on and after the Initial  Borrowing  Date and prior to the 30th day prior to the
Revolving Loan Maturity Date,  following its receipt of the respective Letter of
Credit  Request,  issue for the account of the Borrower,  one or more Letters of
Credit in support of such L/C Supportable  Obligations of the Borrower or any of
its Subsidiaries as are permitted to remain outstanding without giving rise to a
Default or an Event of Default, provided that the Issuing Bank shall be under no
obligation to issue any Letter of Credit of the types  described above if at the
time of such issuance:

                   (i)  any  order,  judgment  or  decree  of  any  governmental
         authority  or  arbitrator  shall  purport  by its  terms to  enjoin  or
         restrain  the Issuing  Bank from  issuing  such Letter of Credit or any
         requirement  of law  applicable  to the Issuing  Bank or any request or
         directive   (whether   or  not  having  the  force  of  law)  from  any
         governmental  authority with  jurisdiction  over the Issuing Bank shall
         prohibit,  or request that the Issuing Bank refrain from,  the issuance
         of letters of credit  generally or such Letter of Credit in  particular
         or shall  impose upon the Issuing  Bank with  respect to such Letter of
         Credit any restriction or reserve or capital requirement (for which the
         Issuing Bank is not  otherwise  compensated)  not in effect on the date
         hereof,  or any  unreimbursed  loss,  cost  or  expense  which  was not
         applicable or in effect with respect to the Issuing Bank as of the date
         hereof and which the Issuing  Bank  reasonably  and in good faith deems
         material to it; or


                                      -15-


<PAGE>




                  (ii) the  Issuing  Bank shall have  received  notice  from the
         Borrower,  any other Credit  Party or the  Required  Banks prior to the
         issuance of such Letter of Credit of the type  described  in the second
         sentence of Section 2.03(b).

     2.02   Maximum   Letter   of   Credit   Outstandings;   Final   Maturities.
Notwithstanding  anything to the contrary  contained in this  Agreement,  (i) no
Letter of Credit shall be issued the Stated  Amount of which,  when added to the
Letter of Credit Outstandings  (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the  respective  Letter of Credit) at
such time would exceed either (x)  $2,000,000 or (y) when added to the aggregate
principal  amount of all  Revolving  Loans then  outstanding  and the  aggregate
principal amount of all Swingline Loans then outstanding, an amount equal to the
Total  Revolving  Loan  Commitment  at such time and (ii) each  Letter of Credit
shall by its terms  terminate  on or before  the  earlier  of (x) the date which
occurs  12 months  after the date of the  issuance  thereof  (although  any such
Letter of Credit may be extendable  for  successive  periods of up to 12 months,
but not beyond the third Business Day prior to the Revolving Loan Maturity Date,
on terms  acceptable to the Issuing  Bank) and (y) three  Business Days prior to
the Revolving Loan Maturity Date.

     2.03 Letter of Credit  Requests;  Minimum Stated  Amount.  (a) Whenever the
Borrower desires that a Letter of Credit be issued for its account, the Borrower
shall give the Agent and the Issuing Bank at least five Business  Days' (or such
shorter  period as is acceptable to the Issuing  Bank) written  notice  thereof.
Each notice shall be in the form of Exhibit C  appropriately  completed  (each a
"Letter of Credit Request").

                  (b) The  making  of each  Letter of  Credit  Request  shall be
deemed to be a  representation  and warranty by the Borrower that such Letter of
Credit may be issued in accordance  with, and will not violate the  requirements
of, Section 2.02. Unless the Issuing Bank has received notice from the Borrower,
any other Credit Party or the Required Banks before it issues a Letter of Credit
that one or more of the  conditions  specified  in  Section  5 or 6 are not then
satisfied,  or that the issuance of such Letter of Credit would violate  Section
2.02,  then the Issuing Bank shall,  subject to the terms and conditions of this
Agreement,  issue the requested Letter of Credit for the account of the Borrower
in accordance  with the Issuing Bank's usual and customary  practices.  Upon its
issuance of or amendment or  modification  to any Letter of Credit,  the Issuing
Bank  shall  promptly  notify  the  Borrower  and the  Agent  of such  issuance,
amendment or modification and such  notification  shall be accompanied by a copy
of the issued  Letter of Credit or  amendment or  modification.  Notwithstanding
anything to the contrary  contained in this Agreement,  in the event that a Bank
Default  exists,  the Issuing  Bank shall not be required to issue any Letter of
Credit unless the Issuing Bank has entered into an arrangement  satisfactory  to
it and the  Borrower to  eliminate  the Issuing  Bank's risk with respect to the
participation in Letters of Credit by the Defaulting Bank or Banks, including by
cash  collateralizing  such  Defaulting  Bank's or Banks' RL  Percentage  of the
Letter of Credit Outstandings.


                                      -16-


<PAGE>




                  (c) The initial  Stated  Amount of each Letter of Credit shall
not be less than  $100,000 or such lesser amount as is acceptable to the Issuing
Bank.

     2.04 Letter of Credit Participations.  (a) Immediately upon the issuance by
the Issuing  Bank of any Letter of Credit,  the Issuing  Bank shall be deemed to
have sold and transferred to each Bank with a Revolving Loan  Commitment,  other
than the Issuing Bank (each such Bank, in its capacity  under this Section 2.04,
a  "Participant"),  and each such  Participant  shall be deemed  irrevocably and
unconditionally  to have  purchased and received from the Issuing Bank,  without
recourse or warranty, an undivided interest and participation,  to the extent of
such  Participant's  RL  Percentage,  in such Letter of Credit,  each drawing or
payment made thereunder and the obligations of the Borrower under this Agreement
with respect thereto,  and any security therefor or guaranty pertaining thereto.
Upon any change in the Revolving Loan Commitments or RL Percentages of the Banks
pursuant to Section 1.13 or 13.04, it is hereby agreed that, with respect to all
outstanding  Letters of Credit and Unpaid Drawings,  there shall be an automatic
adjustment  to the  participations  pursuant to this Section 2.04 to reflect the
new RL Percentages of the assignor and assignee Bank, as the case may be.

                  (b) In determining  whether to pay under any Letter of Credit,
the Issuing Bank shall not have an obligation  relative to the other Banks other
than to confirm that any documents required to be delivered under such Letter of
Credit  appear to have been  delivered  and that  they  appear to  substantially
comply on their face with the requirements of such Letter of Credit.  Any action
taken or omitted to be taken by the Issuing Bank under or in connection with any
Letter of Credit if taken or  omitted  in the  absence  of gross  negligence  or
willful misconduct (as finally determined by a court of competent jurisdiction),
shall not create for the Issuing Bank any  resulting  liability to the Borrower,
any other Credit Party, any Bank or any other Person.

                  (c) In the event that the Issuing Bank makes any payment under
any Letter of Credit and the Borrower shall not have  reimbursed  such amount in
full to the Issuing  Bank  pursuant to Section  2.05(a),  the Issuing Bank shall
promptly notify the Agent,  which shall promptly notify each Participant of such
failure,  and each  Participant  shall promptly and  unconditionally  pay to the
Issuing Bank the amount of such Participant's RL Percentage of such unreimbursed
payment in Dollars  and in same day funds.  If the Agent so  notifies,  prior to
11:00 A.M. (New York time) on any Business Day, any Participant required to fund
a payment under a Letter of Credit, such Participant shall make available to the
Issuing Bank in Dollars such  Participant's  RL Percentage of the amount of such
payment  on such  Business  Day in same day  funds.  If and to the  extent  such
Participant  shall  not have so made its RL  Percentage  of the  amount  of such
payment  available to the Issuing Bank,  such  Participant  agrees to pay to the
Issuing Bank,  forthwith on demand such amount,  together with interest thereon,
for each day from such date  until the date such  amount is paid to the  Issuing
Bank at the overnight Federal Funds Rate for the first three


                                      -17-


<PAGE>




days and at the interest rate applicable to Revolving  Loans  maintained as Base
Rate  Loans for each day  thereafter.  The  failure of any  Participant  to make
available to the Issuing Bank its RL  Percentage of any payment under any Letter
of Credit shall not relieve any other Participant of its obligation hereunder to
make  available to the Issuing Bank its RL Percentage of any Letter of Credit on
the date required,  as specified above, but no Participant  shall be responsible
for the failure of any other  Participant  to make available to the Issuing Bank
such other Participant's RL Percentage of any such payment.

                  (d)  Whenever  the  Issuing  Bank  receives  a  payment  of  a
reimbursement  obligation  as to which it has  received  any  payments  from the
Participants  pursuant to clause (c) above,  the Issuing  Bank shall pay to each
Participant which has paid its RL Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount  originally  funded by such Participant to the aggregate amount
funded  by all  Participants)  of the  principal  amount  of such  reimbursement
obligation  and interest  thereon  accruing after the purchase of the respective
participations.

                  (e) Upon the  request of any  Participant,  the  Issuing  Bank
shall  furnish to such  Participant  copies of any Letter of Credit issued by it
and such other documentation as may reasonably be requested by such Participant.

                  (f) The  obligations of the  Participants  to make payments to
the  Issuing  Bank with  respect  to  Letters  of  Credit  issued by it shall be
irrevocable  and not subject to any  qualification  or exception  whatsoever and
shall be made in  accordance  with the terms and  conditions  of this  Agreement
under all circumstances,  including,  without  limitation,  any of the following
circumstances:

                   (i) any lack of validity or enforceability of this Agreement
         or any of the other Credit Documents;

                  (ii) the  existence  of any  claim,  setoff,  defense or other
         right  which the  Borrower or any of its  Subsidiaries  may have at any
         time against a beneficiary named in a Letter of Credit,  any transferee
         of any Letter of Credit (or any Person for whom any such transferee may
         be acting), the Agent, any Participant, or any other Person, whether in
         connection with this Agreement,  any Letter of Credit, the transactions
         contemplated  herein  or  any  unrelated  transactions  (including  any
         underlying  transaction  between the Borrower or any  Subsidiary of the
         Borrower and the beneficiary named in any such Letter of Credit);

                 (iii) any draft,  certificate or any other  document  presented
         under any Letter of Credit proving to be forged, fraudulent, invalid or
         insufficient  in any respect or any  statement  therein being untrue or
         inaccurate in any respect;


                                      -18-


<PAGE>




                  (iv) the  surrender  or  impairment  of any  security  for the
         performance  or  observance  of any of the  terms of any of the  Credit
         Documents; or

                   (v) the occurrence of any Default or Event of Default.

     2.05 Agreement to Repay Letter of Credit Drawings.  (a) The Borrower agrees
to reimburse  the Issuing Bank,  by making  payment to the Agent in  immediately
available funds at the Payment Office,  for any payment or disbursement  made by
the Issuing  Bank under any Letter of Credit  (each such  amount,  so paid until
reimbursed,  an "Unpaid  Drawing"),  not later than one Business  Day  following
receipt by the Borrower of notice of such payment or disbursement (provided that
no such notice shall be required to be given if a Default or an Event of Default
under  Section 10.05 shall have  occurred and be  continuing,  in which case the
Unpaid Drawing shall be due and payable immediately without presentment, demand,
protest or notice of any kind (all of which are hereby waived by the Borrower)),
with  interest on the amount so paid or  disbursed by the Issuing  Bank,  to the
extent  not  reimbursed  prior to 12:00 Noon (New York time) on the date of such
payment or  disbursement,  from and  including the date paid or disbursed to but
excluding the date the Issuing Bank was reimbursed by the Borrower therefor at a
rate per annum which shall be the Base Rate in effect from time to time plus the
Applicable  Base Rate Margin for  Revolving  Loans;  provided,  however,  to the
extent such  amounts are not  reimbursed  prior to 12:00 Noon (New York time) on
the third  Business Day  following the receipt by the Borrower of notice of such
payment or  disbursement or following the occurrence of a Default or an Event of
Default under Section 10.05,  interest shall thereafter accrue on the amounts so
paid or disbursed by the Issuing Bank (and until  reimbursed by the Borrower) at
a rate per annum  which  shall be the Base Rate in effect from time to time plus
the Applicable  Base Rate Margin for Revolving Loans plus 2%, in each such case,
with interest to be payable on demand.  The Issuing Bank shall give the Borrower
prompt written notice of each Drawing under any Letter of Credit,  provided that
the failure to give any such notice  shall in no way affect,  impair or diminish
the Borrower's obligations hereunder.

                  (b) The obligations of the Borrower under this Section 2.05 to
reimburse the Issuing Bank with respect to Unpaid Drawings  (including,  in each
case,  interest thereon) shall be absolute and  unconditional  under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the  Borrower  may have or have had  against  any Bank  (including  in its
capacity  as issuer of the  Letter  of  Credit  or as  Participant),  including,
without  limitation,  any defense  based upon the failure of any drawing under a
Letter of Credit  (each a  "Drawing")  to  conform to the terms of the Letter of
Credit  or  any  nonapplication  or  misapplication  by the  beneficiary  of the
proceeds of such  Drawing;  provided,  however,  that the Borrower  shall not be
obligated  to reimburse  the Issuing  Bank for any wrongful  payment made by the
Issuing  Bank  under a  Letter  of  Credit  as a  result  of  acts or  omissions
constituting  willful  misconduct or gross negligence on the part of the Issuing
Bank (as finally determined by a court of competent jurisdiction).


                                      -19-


<PAGE>




     2.06 Increased  Costs. (a) If at any time after the date of this Agreement,
the  introduction  of or any change in any  applicable  law,  rule,  regulation,
order,  guideline or request or in the interpretation or administration  thereof
by any governmental  authority charged with the interpretation or administration
thereof,  or compliance by the Issuing Bank or any Participant  with any request
or  directive  by any such  authority  (whether or not having the force of law),
shall either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar  requirement against letters of credit issued by the Issuing
Bank or participated in by any  Participant,  or (ii) impose on the Issuing Bank
or any Participant any other  conditions  relating,  directly or indirectly,  to
this  Agreement;  and the result of any of the foregoing is to increase the cost
to the Issuing Bank or any Participant of issuing,  maintaining or participating
in any Letter of Credit,  or reduce the amount of any sum received or receivable
by the Issuing Bank or any Participant hereunder or reduce the rate of return on
its capital with respect to Letters of Credit (except for changes in the rate of
tax on, or  determined by reference to, the net income or profits of the Issuing
Bank or such Participant pursuant to the laws of the jurisdiction in which it is
organized  or in which its  principal  office or  applicable  lending  office is
located or any subdivision  thereof or therein),  then, upon the delivery of the
certificate  referred  to  below  to the  Borrower  by the  Issuing  Bank or any
Participant  (a copy of which  certificate  shall be sent by the Issuing Bank or
such  Participant  to the Agent),  the Borrower shall pay to the Issuing Bank or
such Participant such additional  amount or amounts as will compensate such Bank
for such  increased  cost or reduction in the amount  receivable or reduction on
the rate of return on its  capital.  The Issuing Bank or any  Participant,  upon
determining that any additional amounts will be payable pursuant to this Section
2.06,  will give prompt  written  notice  thereof to the Borrower,  which notice
shall  include a  certificate  submitted  to the Borrower by the Issuing Bank or
such Participant (a copy of which  certificate shall be sent by the Issuing Bank
or such Participant to the Agent),  setting forth in reasonable detail the basis
for the calculation of such additional amount or amounts necessary to compensate
the Issuing Bank or such Participant.  The certificate  required to be delivered
pursuant  to this  Section  2.06  shall,  absent  manifest  error,  be final and
conclusive and binding on the Borrower.

                  (b) Notwithstanding anything to the contrary contained in this
Section  2.06,  unless the Issuing  Bank or a  Participant  gives  notice to the
Borrower  that the  Borrower is  obligated  to pay any amount under this Section
2.06  within 180 days after the later of (x) the date the  Issuing  Bank or such
Participant  incurs the  respective  increased  costs or reduction in return the
rate of  return  or (y) the  date  the  Issuing  Bank  or such  Participant  has
acknowledge of its incurrence of the respective  increased costs or reduction in
the rate of return,  then the  Issuing  Bank or such  Participant  shall only be
entitled  to be  compensated  for such amount by the  Borrower  pursuant to this
Section 2.06 to the extent the  respective  increased  costs or reduction in the
rate of return are  incurred or  suffered on or after the date which  occurs 180
days prior to the Issuing Bank or such Participant giving notice to the Borrower
that it is  obligated  to pay the  respective  amounts  pursuant to this Section
2.06.


                                      -20-


<PAGE>




                  SECTION 3.  Commitment Commission; Fees; Reductions of
                              Commitment.

     3.01 Fees. (a) The Borrower agrees to pay to the Agent for  distribution to
each  Non-Defaulting Bank with a Term Loan Commitment,  a commitment  commission
(the "Term Loan  Commitment  Commission")  for the period from and including the
Effective Date to but excluding the date on which the Total Term Loan Commitment
shall  have  been  terminated,  computed  at a rate for  each  day  equal to the
Applicable Commitment Commission Percentage on the daily Term Loan Commitment of
such Non-Defaulting  Bank. Accrued Term Loan Commitment  Commission shall be due
and payable  quarterly in arrears on each Quarterly Payment Date and on the date
on which the Total Term Loan Commitment shall have been terminated.

                  (b) The Borrower  agrees to pay to the Agent for  distribution
to each  Non-Defaulting  Bank with a Revolving  Loan  Commitment,  a  commitment
commission (the "Revolving Loan Commitment  Commission") for the period from and
including the Effective  Date to but excluding the Revolving  Loan Maturity Date
(or such earlier date on which the Total  Revolving Loan  Commitment  shall have
been  terminated),  computed  at a rate  for each  day  equal to the  Applicable
Commitment  Commission Percentage on the daily average Unutilized Revolving Loan
Commitment  of such  Non-Defaulting  Bank.  Accrued  Revolving  Loan  Commitment
Commission  shall be due and  payable  quarterly  in arrears  on each  Quarterly
Payment Date and on the  Revolving  Loan  Maturity Date (or such earlier date on
which the Total Revolving Loan Commitment shall have been terminated).

                  (c) The Borrower  agrees to pay to the Agent for  distribution
to each Bank  with a  Revolving  Loan  Commitment  (based  on each  such  Bank's
respective  RL  Percentage)  a fee in  respect of each  Letter of Credit  issued
hereunder  (the  "Letter of Credit Fee") for the period from and  including  the
date of  issuance  of  such  Letter  of  Credit  to and  including  the  date of
termination or expiration of such Letter of Credit, computed at a rate per annum
equal to the  Applicable  Eurodollar  Rate Margin then in effect with respect to
Revolving  Loans on the daily  Stated  Amount of such Letter of Credit.  Accrued
Letter of Credit  Fees  shall be due and  payable  quarterly  in arrears on each
Quarterly  Payment Date and on the first day after the  termination of the Total
Revolving Loan Commitment upon which no Letters of Credit remain outstanding.

                  (d) The Borrower  agrees to pay to the Issuing  Bank,  for its
own account,  a facing fee in respect of each Letter of Credit issued  hereunder
(the  "Facing  Fee") for the period from and  including  the date of issuance of
such  Letter of  Credit to and  including  the date of the  termination  of such
Letter of Credit,  computed  at a rate equal to 1/4 of 1% per annum on the daily
Stated  Amount of such Letter of Credit,  provided that in any event the minimum
amount of the Facing  Fee  payable  in any 12 month  period  for each  Letter of
Credit  shall be $500;  it being  agreed  that,  on the date of  issuance of any
Letter of Credit


                                      -21-


<PAGE>




and on each  anniversary  thereof  prior to the  termination  of such  Letter of
Credit,  if $500 will  exceed the amount of Facing  Fees that will  accrue  with
respect to such Letter of Credit for the immediately succeeding 12 month period,
the full $500 shall be payable on the date of  issuance of such Letter of Credit
and on each such  anniversary  thereof.  Except  as  otherwise  provided  in the
proviso to the immediately preceding sentence,  accrued Facing Fees shall be due
and payable  quarterly  in arrears on each  Quarterly  Payment Date and upon the
first day after the  termination  of the Total  Revolving Loan  Commitment  upon
which no Letters of Credit remain outstanding.

                  (e) The Borrower  agrees to pay to the Issuing  Bank,  for its
own account,  upon each payment under,  issuance of, or amendment to, any Letter
of Credit,  such amount as shall at the time of such event be the administrative
charge and the reasonable  expenses which the Issuing Bank is generally imposing
in connection  with such  occurrence with respect to letters of credit issued by
it.

                  (f)  The  Borrower  agrees  to pay to the  Agent,  for its own
account,  such other fees as have been agreed to in writing by the  Borrower and
the Agent.

     3.02 Voluntary  Termination of Unutilized  Revolving Loan Commitments.  (a)
Upon at least one Business Day's prior written notice to the Agent at the Notice
Office  (which notice the Agent shall  promptly  transmit to each of the Banks),
the  Borrower  shall have the right,  at any time or from time to time,  without
premium or penalty, to terminate the Total Unutilized Revolving Loan Commitment,
in whole or in part,  pursuant to this Section 3.02(a),  in an integral multiple
of $500,000, in the case of partial reductions to the Total Unutilized Revolving
Loan  Commitment,  which  notice  shall  specify  the  portion of the  specified
reduction  which shall apply to the  Unutilized  Acquisition  Sub-Limit  and the
Unutilized  Working  Capital  Sub-Limit,  respectively,  provided that each such
reduction shall apply  proportionately  to permanently reduce the Revolving Loan
Commitment of each Bank with such a Commitment.

                  (b) In the event of a refusal  by a Bank to consent to certain
proposed  changes,  waivers,  discharges  or  terminations  with respect to this
Agreement  which have been approved by the Required Banks as (and to the extent)
provided in Section  13.12(b),  the Borrower may, subject to its compliance with
the  requirements  of Section  13.12(b),  upon five Business Days' prior written
notice to the Agent at the Notice Office (which notice the Agent shall  promptly
transmit to each of the Banks) terminate all of the Commitments of such Bank, so
long as all Loans, together with accrued and unpaid interest, Fees and all other
amounts,  owing to such Bank are repaid  concurrently  with the effectiveness of
such termination  pursuant to Section 4.01(b) (at which time Schedule I shall be
deemed  modified to reflect such changed  amounts),  and at such time, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement,  except with
respect to


                                      -22-


<PAGE>
indemnifications under this Agreement (including,  without limitation,  Sections
1.10, 1.11, 2.06, 4.04, 12.06 and 13.01),  which shall survive as to such repaid
Bank.

     3.03 Mandatory Reduction of Commitments. (a) The Total Commitment (and each
of the  Commitments  of each Bank) shall  terminate in its entirety on March 31,
1998 unless the Initial Borrowing Date has occurred on or before such date.

                  (b) In addition to any other mandatory  commitment  reductions
pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment  of each Bank) shall  terminate in its entirety on the earlier of (i)
the date on which a Change of Control occurs and (ii) the Initial Borrowing Date
(after  giving  effect  to the  incurrence  of the  Term  Loans  on the  Initial
Borrowing Date).

                  (c) In addition to any other mandatory  commitment  reductions
pursuant to this Section 3.03,  the Total  Revolving  Loan  Commitment  (and the
Revolving Loan  Commitment of each Bank) shall  terminate in its entirety on the
earlier  of (i) the  date on  which a  Change  of  Control  occurs  and (ii) the
Revolving Loan Maturity Date.

                  (d) In addition to any other mandatory  commitment  reductions
pursuant  to this  Section  3.03,  the  Total  Term  Loan  Commitment  shall  be
permanently  reduced on the dates,  and in the  amounts,  required  by  Sections
4.02(c),  (d), (e) and (g).  Each  reduction  to the Total Term Loan  Commitment
pursuant to this Section 3.03(d) shall be applied proportionately to permanently
reduce the Term Loan Commitment of each Bank with such a Commitment.

                  (e) In addition to any other mandatory  commitment  reductions
pursuant to this Section 3.03, on each date after the Effective  Date upon which
a mandatory  repayment of Term Loans (or a mandatory reduction to the Total Term
Loan Commitment, as the case may be) pursuant to any of Sections 4.02(c) through
(g),  inclusive,  is required  (and  exceeds in amount the  aggregate  principal
amount of Term Loans then  outstanding  (or the Total Term Loan  Commitment  was
then in  effect,  as the case may be)) or would be  required  if Term Loans were
then  outstanding (or the Total Term  Commitment as then in effect,  as the case
may be), the Total Revolving Loan Commitment shall be permanently reduced by the
amount,  if any,  by which the amount  required  to be applied  pursuant to said
Sections  (determined  as if an  unlimited  amount of Term Loans  were  actually
outstanding (or the Total Term Loan  Commitment was then in effect,  as the case
may be)) exceeds the aggregate  principal  amount of Term Loans then outstanding
(or the Total Term Loan Commitment as then in effect, as the case may be).
 Each reduction to the Total Revolving Loan Commitment  pursuant to this Section
3.03(e) shall be applied  proportionately  to  permanently  reduce the Revolving
Loan Commitment of each Bank with such a Commitment.


                                      -23-


<PAGE>


                  SECTION 4.  Prepayments; Payments; Taxes.

    4.01 Voluntary Prepayments.  (a) The Borrower shall have the right to prepay
the Loans,  without premium or penalty, in whole or in part at any time and from
time to time on the following terms and conditions:  (i) the Borrower shall give
the Agent prior to 12:00 Noon (New York time) at the Notice  Office (x) at least
one Business Day's prior written notice (or telephonic notice promptly confirmed
in  writing)  of its intent to prepay Base Rate Loans (or same day notice in the
case of a prepayment of Swingline  Loans) and (y) at least three  Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay  Eurodollar  Loans,  whether  Term  Loans,  Revolving  Loans or
Swingline Loans shall be prepaid, the amount of such prepayment and the Types of
Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing
or Borrowings  pursuant to which made,  which notice the Agent shall,  except in
the case of Swingline Loans,  promptly  transmit to each of the Banks;  (ii) (x)
each partial  prepayment of Term Loans pursuant to this Section 4.01(a) shall be
in an aggregate  principal amount of at least $500,000 and in integral multiples
of $100,000 in excess  thereof,  (y) each partial  prepayment of Revolving Loans
pursuant to this Section 4.01(a) shall be in an aggregate principal amount of at
least $250,000 and in integral multiples of $100,000 in excess thereof,  and (z)
each partial  prepayment  of Swingline  Loans  pursuant to this Section  4.01(a)
shall be in an aggregate  principal  amount of at least  $50,000 and in integral
multiples of $50,000 in excess thereof,  provided that if any partial prepayment
of Eurodollar  Loans made pursuant to any Borrowing shall reduce the outstanding
principal  amount of  Eurodollar  Loans made  pursuant to such  Borrowing  to an
amount less than the Minimum  Borrowing  Amount  applicable  thereto,  then such
Borrowing  may not be  continued  as a  Borrowing  of  Eurodollar  Loans and any
election of an Interest  Period with respect thereto given by the Borrower shall
have no force or effect;  (iii) each prepayment pursuant to this Section 4.01(a)
in respect of any Loans made  pursuant to a Borrowing  shall be applied pro rata
among such Loans,  provided that at the Borrower's  election in connection  with
any  prepayment  of  Revolving  Loans  pursuant to this  Section  4.01(a),  such
prepayment shall not, so long as no Default or Event of Default then exists,  be
applied  to any  Revolving  Loan  of a  Defaulting  Bank;  (iv)  each  voluntary
prepayment  of Term Loans  pursuant to this Section  4.01(a) shall be applied to
reduce the then remaining Scheduled Repayments of Term Loans on a pro rata basis
(based  upon the then  remaining  unpaid  principal  amounts  of such  Scheduled
Repayments  after giving effect to all prior reductions  thereto);  and (v) with
respect to each  prepayment of any Revolving Loans made pursuant to this Section
4.01(a), such prepayment shall, unless otherwise directed by the Borrower at the
time of prepayment,  first be deemed applied to any outstanding  Working Capital
Loans and then to any outstanding Acquisition Loans.

                  (b) In the event of a refusal  by a Bank to consent to certain
proposed  changes,  waivers,  discharges  or  terminations  with respect to this
Agreement  which have been approved by the Required Banks as (and to the extent)
provided in Section 13.12(b),


                                      -24-


<PAGE>
the Borrower may, upon five Business  Days' prior written notice to the Agent at
the Notice Office (which notice the Agent shall promptly transmit to each of the
Banks) repay all Loans of, together with accrued and unpaid  interest,  Fees and
other  amounts  owing to,  such Bank in  accordance  with,  and  subject  to the
requirements  of,  said  Section  13.12(b)  so  long  as (A) in the  case of the
repayment of Revolving  Loans of any Bank  pursuant to this Section  4.01(b) the
Revolving  Loan  Commitment  of such Bank is terminated  concurrently  with such
repayment  pursuant to Section 3.02(b) (at which time Schedule I shall be deemed
modified  to  reflect  the  changed  Revolving  Loan  Commitments)  and  (B) the
consents,  if any,  required  under  Section  13.12(b)  in  connection  with the
repayment pursuant to this clause (b) have been obtained.

     4.02 Mandatory Repayments and Commitment Reductions.  (a) (i) On any day on
which the sum of the  aggregate  outstanding  principal  amount of the Revolving
Loans,  Swingline Loans and the Letter of Credit Outstandings  exceeds the Total
Revolving Loan  Commitment as then in effect,  the Borrower shall prepay on such
day the principal of Swingline  Loans and,  after all Swingline  Loans have been
repaid in full (or if no Swingline Loans are outstanding), Revolving Loans in an
amount equal to such excess.  If, after giving  effect to the  prepayment of all
outstanding  Swingline Loans and Revolving  Loans,  the aggregate  amount of the
Letter of Credit  Outstandings  exceeds the Total  Revolving Loan  Commitment as
then in effect,  the  Borrower  shall pay to the Agent at the Payment  Office on
such day an amount of cash and/or Cash  Equivalents  equal to the amount of such
excess (up to a maximum  amount  equal to the Letter of Credit  Outstandings  at
such time),  such cash and/or Cash  Equivalents  to be held as security  for all
obligations  of the  Borrower to the Issuing  Bank and the Banks  hereunder in a
cash  collateral  account to be  established  by the Agent.  All  repayments  of
Revolving  Loans pursuant to this Section  4.02(a)(i)  shall be applied to repay
outstanding  Acquisition  Loans and Working Capital Loans in proportion to their
respective  outstanding  amounts except to the extent that such repayment  would
result in the outstanding  principal  amount of (x) Acquisition  Loans exceeding
the  Acquisition  Sub-Limit  as then in  effect  or (y)  Working  Capital  Loans
exceeding the Working  Capital  Sub-Limit as then in effect,  in which case such
repayment will be applied to Acquisition  Loans and/or Working  Capital Loans in
such  allocation  as will best  result  in the  respective  Sub-Limit  not being
exceeded.

                  (ii) If, after giving effect to any prepayment then being made
pursuant to Section  4.02(a)(i),  on any day on which the aggregate  outstanding
principal amount of Working Capital Loans exceeds the Working Capital  Sub-Limit
as then in  effect,  the  Borrower  shall  prepay on such day the  principal  of
Working Capital Loans in an amount equal to such excess.

                  (iii) If, after  giving  effect to any  prepayment  then being
made pursuant to Section 4.02(a)(i), on any day on which the aggregate


                                      -25-


<PAGE>




outstanding  principal  amount of  Acquisition  Loans  exceeds  the  Acquisition
Sub-Limit as then in effect, the Borrower shall prepay on such day the principal
of Acquisition Loans in an amount equal to such excess.

                  (b) In addition to any other mandatory  repayments pursuant to
this Section 4.02, on each date set forth below,  the Borrower shall be required
to repay that principal amount of Term Loans, to the extent then outstanding, as
is set forth opposite such date below (each such  repayment,  as the same may be
reduced as provided in Sections 4.01(a) and 4.02(h), a "Scheduled Repayment"):

Scheduled Repayment Date                               Amount
------------------------                              --------

February 28, 1999                                    $750,000
May 31, 1999                                         $750,000
August 31, 1999                                      $750,000
November 30, 1999                                    $750,000

February 29, 2000                                  $1,000,000
May 31, 2000                                       $1,000,000
August 31, 2000                                    $1,000,000
November 30, 2000                                  $1,000,000

February 28, 2001                                  $1,500,000
May 31, 2001                                       $1,500,000
August 31, 2001                                    $1,500,000
November 30, 2001                                  $1,500,000

February 28, 2002                                  $1,750,000
May 31, 2002                                       $1,750,000
November 30, 2002                                  $1,750,000
Term Loan Maturity Date                            $1,750,000


                  (c)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this  Section  4.02,  on each date after the
Effective Date upon which Holdings or any of its Subsidiaries  receives any cash
proceeds  from any  capital  contribution  or any sale or issuance of its equity
(other than cash  proceeds  received (i) as part of the Equity  Financing,  (ii)
from the  issuance  by Holdings of shares of its common  stock  (including  as a
result of the  exercise  of any  options  with  regard  thereto),  or options to
purchase to shares of its common stock, to officers,  directors and employees of
Holdings and its  Subsidiaries in an aggregate  amount not to exceed $500,000 in
any fiscal year of Holdings or (iii) from equity contributions to any Subsidiary
of Holdings to the extent made by Holdings or another  Subsidiary  of Holdings),
an amount equal to 50% of the Net Equity


                                      -26-


<PAGE>




Proceeds of such  capital  contribution  or sale or issuance of equity  shall be
applied as a mandatory  repayment of principal of  outstanding  Term (or, if the
Initial  Borrowing  Date has not yet occurred,  as a mandatory  reduction to the
Total  Term  Loan  Commitment)  Loans in  accordance  with the  requirements  of
Sections 4.02(h) and (i).

                  (d)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this Section  4.02, on each date on or after
the Effective Date upon which Holdings or any of its  Subsidiaries  receives any
cash proceeds  from any  incurrence  by Holdings or any of its  Subsidiaries  of
Indebtedness  for borrowed  money (other than  Indebtedness  for borrowed  money
permitted  to be incurred  pursuant to Section 9.04 as such Section is in effect
on the Effective  Date), an amount equal to 100% of the Net Debt Proceeds of the
respective  incurrence of Indebtedness shall be applied as a mandatory repayment
of principal of  outstanding  Term Loans (or, if the Initial  Borrowing Date has
not yet occurred, as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(h) and (i).

                  (e)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this Section  4.02, on each date on or after
the Effective Date upon which Holdings or any of its  Subsidiaries  receives any
cash  proceeds  from any Asset  Sale,  an  amount  equal to 100% of the Net Sale
Proceeds  from such Asset Sale shall be  applied  as a  mandatory  repayment  of
principal of outstanding  Term Loans (or, if the Initial  Borrowing Date has not
yet occurred,  as a mandatory  reduction to the Total Term Loan  Commitment)  in
accordance with the requirements of Sections 4.02(h) and (i); provided that with
respect to no more than  $1,500,000 in the aggregate of cash proceeds from Asset
Sales in any fiscal year of Holdings, such Net Sale Proceeds therefrom shall not
be  required to be so applied on such date so long as no Default  under  Section
10.01 or 10.05 then exists or no Event of Default  then exists and  Holdings has
delivered a certificate  to the Agent on or prior to such date stating that such
Net Sale Proceeds shall be used to purchase  replacement  assets within 300 days
following  the date of such Asset Sale  (which  certificate  shall set forth the
estimates of the proceeds to be so expended),  and provided further, that if all
or any  portion  of such Net Sale  Proceeds  not  required  to be applied to the
repayment  of  outstanding  Term  Loans  (or  to  reduce  the  Total  Term  Loan
Commitment,  as the case may be) are not so  reinvested  in  replacement  assets
within such 300 day period,  such remaining portion shall be applied on the last
day of such period as a mandatory  repayment of principal  of  outstanding  Term
Loans  as  provided  above  in  this  Section  4.02(e)  without  regard  to  the
immediately preceding proviso.

                  (f) In addition to any other mandatory  repayments pursuant to
this  Section  4.02,  on each Excess Cash Payment  Date,  an amount equal to the
Applicable  Excess Cash Flow Percentage of the Excess Cash Flow for the relevant
Excess  Cash  Payment  Period  shall be  applied  as a  mandatory  repayment  of
principal of  outstanding  Term Loans in  accordance  with the  requirements  of
Sections 4.02(h) and (i).


                                      -27-


<PAGE>




                  (g)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this Section 4.02,  within 10 days following
each  date on or after the  Effective  Date upon  which  Holdings  or any of its
Subsidiaries receives any cash proceeds from any Recovery Event, an amount equal
to 100% of the Net Insurance  Proceeds from such Recovery Event shall be applied
as a mandatory  repayment  of principal  of  outstanding  Term Loans (or, if the
Initial  Borrowing  Date has not yet occurred,  as a mandatory  reduction to the
Total Term Loan  Commitment)  in accordance  with the  requirements  of Sections
4.02(h) and (i),  provided  that so long as no Default  under  Section  10.01 or
10.05 then  exists or no Event of  Default  then  exists and such Net  Insurance
Proceeds do not exceed  $2,500,000,  such Net  Insurance  Proceeds  shall not be
required to be so applied on such date to the extent that Holdings has delivered
a  certificate  to the  Agent on or prior to such  date  stating  that  such Net
Insurance  Proceeds shall be used to replace or restore any properties or assets
in  respect  of which  such Net  Insurance  Proceeds  were paid  within 300 days
following  the  date  of the  receipt  of such  Net  Insurance  Proceeds  (which
certificate  shall set forth the  estimates of the proceeds to be so  expended),
and  provided  further,  that (i) if the amount of such Net  Insurance  Proceeds
exceeds $2,500,000,  then the entire amount of such Net Insurance Proceeds,  and
not just the portion of such Net  Insurance  Proceeds  in excess of  $2,500,000,
shall be applied as a  mandatory  repayment  of Term Loans (or,  if the  Initial
Borrowing Date has not yet occurred,  as a mandatory reduction to the Total Term
Loan Commitment) as provided above in this Section 4.02(g) without regard to the
immediately  preceding  proviso  and  (ii) if all or any  portion  of  such  Net
Insurance  Proceeds not required to be applied to the  repayment of  outstanding
Term  Loans (or to reduce the Total  Term Loan  Commitment,  as the case may) be
pursuant to the  immediately  preceding  proviso are not so used within 300 days
after the date of the receipt of such Net  Insurance  Proceeds,  such  remaining
portion shall be applied on the last day of such period as a mandatory repayment
of principal of outstanding Term Loans as provided above in this Section 4.02(g)
without regard to the immediately preceding proviso.

                  (h) Each amount  required  to be applied to repay  outstanding
Term Loans (or, if the Initial  Borrowing  Date has not yet occurred,  to reduce
the  Total  Term  Loan  Commitment,  as the case may be)  pursuant  to  Sections
4.02(c),  (d),  (e),  (f) and (g) shall be applied to reduce the then  remaining
Scheduled  Repayments on a pro rata basis (based upon the then remaining  unpaid
principal amounts of such Scheduled  Repayments after giving effect to all prior
reductions thereto).

                  (i) With respect to each  repayment of Loans  required by this
Section 4.02,  the Borrower may  designate the Types of Loans of the  respective
Tranche  which  are to be  repaid  and,  in the case of  Eurodollar  Loans,  the
specific  Borrowing or Borrowings of the  respective  Tranche  pursuant to which
made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section
4.02 may only be made on the last day of an Interest Period  applicable  thereto
unless all  Eurodollar  Loans of the  respective  Tranche with Interest  Periods
ending on such date of required repayment and all Base Rate Loans of the respec-


                                      -28-


<PAGE>




tive Tranche have been paid in full;  (ii) if any repayment of Eurodollar  Loans
made  pursuant to a single  Borrowing  shall reduce the  outstanding  Eurodollar
Loans  made  pursuant  to such  Borrowing  to an amount  less  than the  Minimum
Borrowing Amount  applicable  thereto,  such Borrowing shall be converted at the
end of the then current Interest Period into a Borrowing of Base Rate Loans; and
(iii) each repayment of any Loans made pursuant to a Borrowing  shall be applied
pro rata among such Loans.  In the absence of a  designation  by the Borrower as
described in the preceding sentence, the Agent shall, subject to the above, make
such designation in its sole discretion.

                  (j) Notwithstanding anything to the contrary contained in this
Agreement or in any other Credit Document, (i) all then outstanding Loans of any
Tranche shall be repaid in full on the respective Maturity Date for such Tranche
of Loans and (ii) all then outstanding Loans shall be repaid in full on the date
on which a Change of Control occurs.

     4.03 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement or under any Note shall be made to the
Agent for the account of the Bank or Banks entitled thereto not later than 12:00
Noon  (New  York  time) on the date  when due and  shall be made in  Dollars  in
immediately  available funds at the Payment  Office.  Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business  Day, the due date thereof  shall be extended to the next  succeeding
Business  Day and,  with  respect to payments of  principal,  interest  shall be
payable at the applicable rate during such extension.

     4.04 Net Payments. (a) All payments made by the Borrower hereunder or under
any Note will be made without setoff,  counterclaim or other defense.  Except as
provided in Section  4.04(b),  all such payments will be made free and clear of,
and without  deduction or withholding for, any present or future taxes,  levies,
imposts,  duties,  fees,  assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political  subdivision or taxing
authority  thereof or therein  with  respect to such  payments  (but  excluding,
except as  provided  in the second  succeeding  sentence,  any tax imposed on or
measured by the net income or profits of a Bank,  or any  franchise tax based on
the net income or profits of a Bank,  in either case pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the principal
office or applicable  lending office of such Bank is located or any  subdivision
thereof or therein)  and all  interest,  penalties or similar  liabilities  with
respect to such non-excluded taxes, levies,  imposts,  duties, fees, assessments
or other charges (all such non-excluded taxes,  levies,  imposts,  duties, fees,
assessments or other charges being referred to collectively as "Taxes").  If any
Taxes are so levied or imposed,  the  Borrower  agrees to pay the full amount of
such  Taxes,  and such  additional  amounts  as may be  necessary  so that every
payment  of all  amounts  due under  this  Agreement  or under  any Note,  after
withholding  or deduction for or on account of any Taxes,  will not be less than
the amount  provided  for herein or in such Note.  If any amounts are payable in
respect of Taxes pursuant to the pre-


                                      -29-


<PAGE>




ceding  sentence,  the Borrower  agrees to reimburse each Bank, upon the written
request of such Bank,  for taxes  imposed  on or  measured  by the net income or
profits of such Bank pursuant to the laws of the jurisdiction in which such Bank
is organized or in which the principal  office or applicable  lending  office of
such Bank is located or under the laws of any  political  subdivision  or taxing
authority of any such  jurisdiction  in which such Bank is organized or in which
the principal  office or applicable  lending  office of such Bank is located and
for any  withholding  of taxes as such Bank shall  determine  are payable by, or
withheld from,  such Bank, in respect of such amounts so paid to or on behalf of
such Bank pursuant to the preceding  sentence and in respect of any amounts paid
to or on  behalf of such Bank  pursuant  to this  sentence.  The  Borrower  will
furnish to the Agent  within 45 days after the date the  payment of any Taxes is
due pursuant to applicable law certified copies of tax receipts  evidencing such
payment by the Borrower. The Borrower agrees to indemnify and hold harmless each
Bank,  and reimburse  such Bank within 15 days of its written  request,  for the
amount of any Taxes so levied or imposed and paid by such Bank.

                  (b) Each Bank that is not a United States person (as such term
is defined  in  Section  7701(a)(30)  of the Code) for U.S.  Federal  income tax
purposes  agrees to  deliver  to the  Borrower  and the Agent on or prior to the
Effective Date, or in the case of a Bank that is an assignee or transferee of an
interest  under this  Agreement  pursuant to Section  1.13 or 13.04  (unless the
respective  Bank  was  already  a  Bank  hereunder  immediately  prior  to  such
assignment  or  transfer),  on the date of such  assignment  or transfer to such
Bank, (i) two accurate and complete  original signed copies of Internal  Revenue
Service  Form  4224 or 1001  (or  successor  forms)  certifying  to such  Bank's
entitlement  to a complete  exemption  from United States  withholding  tax with
respect to payments to be made under this  Agreement and under any Note, or (ii)
if the Bank is not a "bank"  within the meaning of Section  881(c)(3)(A)  of the
Code and cannot deliver either  Internal  Revenue  Service Form 1001 or 4224 (or
successor forms) pursuant to clause (i) above,  (x) a certificate  substantially
in the  form  of  Exhibit  D  (any  such  certificate,  a  "Section  4.04(b)(ii)
Certificate")  and (y) two  accurate  and  complete  original  signed  copies of
Internal  Revenue Service Form W-8 (or successor form) certifying to such Bank's
entitlement  to a complete  exemption  from United States  withholding  tax with
respect to payments of  interest to be made under this  Agreement  and under any
Note.  In addition,  each Bank agrees that from time to time after the Effective
Date,  when a lapse in time or  change in  circumstances  renders  the  previous
certification  obsolete or  inaccurate in any material  respect,  such Bank will
deliver to the Borrower  and the Agent two new  accurate  and complete  original
signed  copies of  Internal  Revenue  Service  Form  4224 or 1001 (or  successor
forms), or Form W-8 (or successor form) and a Section  4.04(b)(ii)  Certificate,
as the case may be, and such other  forms as may be required in order to confirm
or  establish  the  entitlement  of such Bank to a continued  exemption  from or
reduction in United States  withholding  tax with respect to payments under this
Agreement and any Note, or such Bank shall  immediately  notify the Borrower and
the Agent of its  inability  to deliver any such Form or  Certificate,  in which
case such Bank shall not be  required  to deliver  any such Form or  Certificate
pursuant to this Section


                                      -30-


<PAGE>




4.04(b).  Notwithstanding anything to the contrary contained in Section 4.04(a),
but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the
Borrower  shall be  entitled,  to the extent it is  required to do so by law, to
deduct or withhold  income or similar taxes imposed by the United States (or any
political  subdivision  or taxing  authority  thereof or therein) from interest,
Fees or other amounts payable hereunder for the account of any Bank which is not
a United  States person (as such term is defined in Section  7701(a)(30)  of the
Code) for U.S.  Federal income tax purposes to the extent that such Bank has not
provided to the Borrower U.S.  Internal  Revenue  Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated  pursuant to Section 4.04(a) hereof to gross-up  payments to be
made to a Bank in  respect  of income or  similar  taxes  imposed  by the United
States if (I) such Bank has not provided to the  Borrower  the Internal  Revenue
Service Forms  required to be provided to the Borrower  pursuant to this Section
4.04(b)  or (II) in the  case  of a  payment,  other  than  interest,  to a Bank
described in clause (ii) above, to the extent that such Forms do not establish a
complete exemption from withholding of such taxes.  Notwithstanding  anything to
the contrary  contained in the  preceding  sentence or elsewhere in this Section
4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay any
additional amounts and to indemnify each Bank in the manner set forth in Section
4.04(a)  (without  regard to the  identity  of the  jurisdiction  requiring  the
deduction or  withholding) in respect of any Taxes deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes after
the Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof,  relating to the deducting
or withholding of such Taxes.


                  SECTION  5.  Conditions  Precedent  to  Credit  Events  on the
Initial  Borrowing  Date.  The  obligation  of each Bank to make Loans,  and the
obligation  of the  Issuing  Bank to issue  Letters  of Credit,  on the  Initial
Borrowing  Date,  is  subject  at the time of the  making  of such  Loans or the
issuance  of  such  Letters  of  Credit  to the  satisfaction  of the  following
conditions:

     5.01 Execution of Agreement;  Notes.  On or prior to the Initial  Borrowing
Date,  (i) the Effective Date shall have occurred and (ii) there shall have been
delivered to the Agent for the account of each of the Banks the appropriate Term
Note and/or  Revolving Note executed by the Borrower and to the Swingline  Bank,
the  Swingline  Note  executed  by the  Borrower,  in each case,  in the amount,
maturity and as otherwise provided herein.

     5.02 Officer's Certificate.  On the Initial Borrowing Date, the Agent shall
have  received a  certificate,  dated the Initial  Borrowing  Date and signed on
behalf of the Borrower by the Chairman of the Board,  the  President or any Vice
President of the  Borrower,  stating on behalf of the  Borrower  that all of the
conditions in Sections 5.06, 5.07, 5.08, 5.10, 5.11 and 6.01 have been satisfied
on such date.


                                      -31-


<PAGE>




     5.03 Opinions of Counsel.  On the Initial  Borrowing  Date, the Agent shall
have received  from (i)  Chadbourne & Parke LLP,  special  counsel to the Credit
Parties, an opinion addressed to the Agent, the Collateral Agent and each of the
Banks and dated the Initial  Borrowing  Date  covering  the matters set forth in
Exhibit  E-1 and such other  matters  incident to the  transaction  contemplated
herein as the Agent  may  reasonably  request,  and (ii)  John J.  Smith,  Esq.,
general  counsel  to the  Borrower,  an  opinion  addressed  to the  Agent,  the
Collateral  Agent and each of the Banks and dated the  Initial  Borrowing  Date,
covering the matters set forth in Exhibit E-2 and such other matters incident to
the transaction contemplated herein as the Agent may reasonably request.

     5.04 Corporate  Documents;  Proceedings;  etc. (a) On the Initial Borrowing
Date, the Agent shall have received a certificate from each Credit Party,  dated
the Initial  Borrowing Date,  signed by the Chairman of the Board, the President
or any Vice President of such Credit Party,  and attested to by the Secretary or
any  Assistant  Secretary  of such Credit  Party,  in the form of Exhibit F with
appropriate insertions, together with copies of the certificate of incorporation
(or equivalent organizational document) and by-laws of such Credit Party and the
resolutions  of such  Credit  Party  referred  to in such  certificate,  and the
foregoing shall be in form and substance reasonably acceptable to the Agent.

                  (b) All corporate and legal  proceedings  and all  instruments
and  agreements  in  connection  with  the  transactions  contemplated  by  this
Agreement and the other Documents  shall be reasonably  satisfactory in form and
substance to the Agent and the Required Banks, and the Agent shall have received
all  information  and copies of all documents and papers,  including  records of
corporate proceedings,  governmental  approvals,  good standing certificates and
bring-down telegrams or facsimiles,  if any, which the Agent reasonably may have
requested in connection  therewith,  such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.

                  (c) On the Initial  Borrowing  Date, the corporate,  ownership
and capital structure (including,  without limitation,  the terms of any capital
stock,  options,  warrants or other securities  issued by Holdings or any of its
Subsidiaries)  of Holdings and its  Subsidiaries  shall be in form and substance
reasonably satisfactory to the Agent and the Required Banks.

     5.05 Plans;  Shareholders'  Agreements;  Management Agreements;  Employment
Agreements;   Non-Compete  Agreements;  Collective  Bargaining  Agreements;  Tax
Sharing Agreements; Existing Indebtedness Agreements. On or prior to the Initial
Borrowing  Date,  there shall have been  delivered to the Agent true and correct
copies of the following documents (if any):

                   (i) all Plans (and for each Plan that is  required to file an
         annual report on Internal Revenue Service Form  5500-series,  a copy of
         the most recent such


                                      -32-


<PAGE>




         report  (including,  to the extent required,  the related financial and
         actuarial  statements  and  opinions and other  supporting  statements,
         certifications, schedules and information), and for each Plan that is a
         "single-employer plan," as defined in Section 4001(a)(15) of ERISA, the
         most  recently  prepared  actuarial  valuation  therefor) and any other
         "employee  benefit plans," as defined in Section 3(3) of ERISA, and any
         other material  agreements with or for the benefit of current or former
         employees of Holdings or any of its Subsidiaries or any ERISA Affiliate
         (provided   that  the  foregoing   shall  apply  in  the  case  of  any
         multiemployer  plan,  as defined in  4001(a)(3)  of ERISA,  only to the
         extent that any  document  described  therein is in the  possession  of
         Holdings  or any  Subsidiary  of  Holdings  or any ERISA  Affiliate  or
         reasonably  available  thereto  from the sponsor or trustee of any such
         plan);

                  (ii) all collective bargaining agreements applying or relating
         to any employee of Holdings or any of its  Subsidiaries  (collectively,
         the "Collective Bargaining Agreements");

                 (iii) all  agreements  entered  into by  Holdings or any of its
         Subsidiaries  governing  the terms and  relative  rights of its capital
         stock and any agreements  entered into by shareholders  relating to any
         such  entity  with  respect to its  capital  stock  (collectively,  the
         "Shareholders' Agreements");

                  (iv) all material  agreements with members of, or with respect
         to, the  management  of  Holdings or any of its  Subsidiaries  to which
         Holdings  or any of its  Subsidiaries  are parties  (collectively,  the
         "Management Agreements");

                   (v)  all  material  employment  agreements  entered  into  by
         Holdings  or any of its  Subsidiaries  (collectively,  the  "Employment
         Agreements");

                  (vi) any non-compete agreement entered into by Holdings or any
         of its Subsidiaries  which restrict or limit the ability of Holdings or
         any of its  Subsidiaries  to  engage  in any  line of  business  in any
         geographic area (collectively, the "Non-Compete Agreements");

                 (vii)  all  tax  sharing,  tax  allocation  and  other  similar
         agreements entered into by Holdings or any of its Subsidiaries
        (collectively, the "Tax Sharing Agreements"); and

                (viii) all agreements  evidencing or relating to Indebtedness of
         (including all existing  Seller Notes issued by) Holdings or any of its
         Subsidiaries  which is to remain outstanding after giving effect to the
         incurrence of Loans on the Initial  Borrowing Date  (collectively,  the
         "Existing Indebtedness Agreements");


                                      -33-


<PAGE>




all of which Plans, Collective Bargaining Agreements,  Shareholders' Agreements,
Management  Agreements,  Employment  Agreements,   Non-Compete  Agreements,  Tax
Sharing  Agreement  and Existing  Indebtedness  Agreements  shall be in form and
substance reasonably  satisfactory to the Agent and the Required Banks and shall
be in full force and effect on the Initial Borrowing Date.

     5.06  Financings;  etc. (a) On or prior to the Initial  Borrowing Date, (i)
Holdings  shall have received gross cash proceeds of at least  $32,500,000  from
the Equity Financing (of which no more than (x) $10,000,000 may be received from
the issuance to JNL and Old Hickory of Qualified Preferred Stock of Holdings and
warrants to purchase  common stock of Holdings and (y)  $2,500,000 may be in the
form of rollover equity by existing management of ATC), (ii) Holdings shall have
contributed  the full amount of the gross cash proceeds  received by it from the
Equity Financing to the capital of the Borrower as a common equity  contribution
in exchange for 100% of the issued and outstanding shares of common stock of the
Borrower and (iii) the Borrower shall have utilized the full amount of such cash
contribution to make payments owing in connection with the Transaction.

                  (b) On or prior to the Initial  Borrowing  Date,  the Borrower
shall have received gross cash proceeds of $100,000,000  from the issuance by it
of a like  principal  amount  of the  Senior  Subordinated  Notes  and  (ii) the
Borrower  shall have utilized the full amount of the net cash proceeds  received
from the issuance of the Senior  Subordinated  Notes to make  payments  owing in
connection with the Transaction.

                  (c) On or prior to the  Initial  Borrowing  Date,  there shall
have been delivered to the Agent true and correct copies of the Equity Financing
Documents  and  the  Senior  Subordinated  Note  Documents  (including  (x)  the
supplemental  indenture to the Senior  Subordinated  Note  Indenture  evidencing
ATC's  assumption  of the  obligations  of  Acquisition  Corp. in respect of the
Senior  Subordinated  Notes and (y) the  guarantees  executed by the  Subsidiary
Guarantors in respect of the Senior  Subordinated  Notes),  and all of the terms
and  conditions of the Equity  Financing  Documents and the Senior  Subordinated
Note  Documents  shall be reasonably  satisfactory  in form and substance to the
Agent and the  Required  Banks.  The Equity  Financing  and the  issuance of the
Senior  Subordinated  Notes  shall  have been  consummated,  in each case in all
material  respects in accordance with the terms and conditions of the applicable
Documents therefor and all applicable laws.

                  (d) On the Initial Borrowing Date (but before giving effect to
the  Merger  and  the  incurrence  of any  Loans  on  such  date)  ATC  and  its
Subsidiaries shall have cash on hand of at least $4,500,000.

     5.07 Tender Offer; Merger; etc. (a) On or prior to the Initial Borrowing
Date, there shall have been delivered to the Agent true and correct copies of
the Tender


                                      -34-


<PAGE>




Offer  Documents,  which Tender Offer  Documents  shall be in form and substance
reasonably satisfactory to the Agent and the Required Banks.

                  (b) On or prior to the  Initial  Borrowing  Date,  the  Tender
Offer shall have been  consummated in all material  respects in accordance  with
the  Tender  Offer  Documents  and  all  applicable  laws.  At the  time  of the
consummation  of the  Tender  Offer,  neither  the fair price  provisions  under
applicable law nor the fair price  provisions of ATC's articles of incorporation
shall  require a higher price be paid for Shares in the Merger than that paid in
the Tender Offer,  which price,  in any event,  shall not exceed that amount set
forth in the Offer to  Purchase  and the  Merger  Agreement  as in effect on the
Effective Date.

                  (c) On or prior to the  Initial  Borrowing  Date,  there shall
have been delivered to the Agent true and correct copies of the Merger Agreement
and the other Merger  Documents,  all of which Merger Documents shall be in form
and substance reasonably satisfactory to the Agent and the Required Banks and in
full force and effect. All material conditions  precedent to the consummation of
the Merger as contained in the Merger  Agreement  shall have been satisfied (and
not waived  without  the  consent  of the Agent and the  Required  Banks  (which
consent shall not be  unreasonably  withheld or delayed)),  and any amendment to
the Merger Documents shall be required to be reasonably satisfactory in form and
substance to the Agent and the Required Banks.

                  (d) On or prior to the  Initial  Borrowing  Date,  the  Merger
shall have been  consummated  in all material  respects in  accordance  with the
Merger   Documents  and  all  applicable   laws.  After  giving  effect  to  the
consummation  of  the  Merger,  Holdings  shall  own  100%  of  the  issued  and
outstanding shares of capital stock of ATC.

                  (e) On or prior to the  Initial  Borrowing  Date,  there shall
have been delivered to the Agent true and correct copies of all Proxy Materials,
if any,  and all  such  Proxy  Materials  shall  be  required  to be in form and
substance reasonably satisfactory to the Agent and the Required Banks.

     5.08 Refinancing.  (a) On the Initial Borrowing Date, the total commitments
in respect of the Indebtedness to be Refinanced shall have been terminated,  and
all  loans  and notes  with  respect  thereto  shall  have been  repaid in full,
together with interest  thereon,  all letters of credit issued  thereunder shall
have been terminated and all other amounts  (including  premiums) owing pursuant
to the  Indebtedness  to be  Refinanced  shall have been  repaid in full and all
documents in respect of the  Indebtedness  to be Refinanced  and all  guarantees
with respect  thereto shall have been terminated  (except as to  indemnification
provisions,  which may  survive to the  extent  provided  therein)  and be of no
further force and effect.


                                      -35-


<PAGE>




                  (b) On the Initial Borrowing Date, the creditors in respect of
the Indebtedness to be Refinanced shall have terminated and released any and all
security  interests  and Liens on the assets owned by ATC and its  Subsidiaries.
The Agent shall have received  such releases of security  interests in and Liens
on the assets owned by ATC and its  Subsidiaries  as may have been  requested by
the Agent, which releases shall be in form and substance reasonably satisfactory
to the Agent.  Without  limiting the foregoing,  there shall have been delivered
(i) proper termination statements (Form UCC-3 or the appropriate equivalent) for
filing  under the UCC of each  jurisdiction  where a financing  statement  (Form
UCC-1 or the appropriate equivalent) was filed with respect to ATC or any of its
Subsidiaries in connection with the security  interests  created with respect to
the Indebtedness to be Refinanced and the  documentation  related thereto,  (ii)
termination  or  reassignment  of any  security  interest  in,  or Lien on,  any
patents,  trademarks,  copyrights,  or  similar  interests  of ATC or any of its
Subsidiaries  on  which  filings  have  been  made,  (iii)  terminations  of all
mortgages,  leasehold  mortgages,  deeds of trust and  leasehold  deeds of trust
created  with  respect to  property of ATC or any of its  Subsidiaries,  in each
case, to secure the obligations in respect of the Indebtedness to be Refinanced,
all of which  shall  be in form and  substance  reasonably  satisfactory  to the
Agent,  and  (iv)  all  collateral  owned  by ATC  and its  Subsidiaries  in the
possession  of  any of the  creditors  in  respect  of  the  Indebtedness  to be
Refinanced  or any  collateral  agent or  trustee  under  any  related  security
document  shall have been returned to ATC or its respective  Subsidiary,  as the
case may be.

                  (c) The  Agent  shall  have  received  evidence,  in form  and
substance  reasonably  satisfactory  to it,  that the  matters set forth in this
Section 5.08 have been satisfied as of the Initial Borrowing Date.

     5.09 ATEC  Subordination  Agreement.  On or prior to the Initial  Borrowing
Date,  the Agent shall have  received a duly  executed  Subordination  Agreement
among ATC, ATEC and Gerald D. Mann (as amended,  modified or  supplemented  from
time to time in  accordance  with  the  terms  hereof  and  thereof,  the  "ATEC
Subordination  Agreement"),  which ATEC Subordination Agreement shall be in form
and substance  reasonably  satisfactory  to the Agent and shall be in full force
and effect on the Initial Borrowing Date.

     5.10 Adverse Change,  etc. (a) Since February 28, 1997,  nothing shall have
occurred  (and  neither the Agent nor the Banks  shall have become  aware of any
facts or  conditions  not  previously  known,  whether  as a result of their due
diligence  investigations  or otherwise)  which the Agent or the Required  Banks
shall reasonably determine (a) has had, or could reasonably be expected to have,
a material  adverse  effect on the rights or remedies of the Banks or the Agent,
or on the  ability  of any  Credit  Party to  perform  its  obligations  to them
hereunder or under any other Credit Document or (b) has had, or could reasonably
be expected to have,  a material  adverse  effect on the  Transaction  or on the
business,  operations,  property, assets,  liabilities,  condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.


                                      -36-


<PAGE>




                  (b) On or prior to the Initial  Borrowing  Date, all necessary
governmental (domestic and foreign) and third party approvals and/or consents in
connection with the Transaction and the other  transactions  contemplated by the
Documents and  otherwise  referred to herein or therein shall have been obtained
and remain in effect (other than certain third party approvals and consents with
respect to the Acquisition  the failure to obtain could not,  individually or in
the aggregate,  reasonably be expected to have a material  adverse effect on the
Acquisition  or on the  business,  operations,  property,  assets,  liabilities,
condition (financial or otherwise) or prospects of Holdings and its Subsidiaries
taken as a whole) and all applicable  waiting periods with respect thereto shall
have expired  without any action being taken by any  competent  authority  which
restrains,   prevents  or  imposes   materially  adverse  conditions  upon,  the
consummation  of the Transaction or the other  transactions  contemplated by the
Documents or otherwise referred to herein or therein. Additionally,  there shall
not exist any judgment,  order, injunction or other restraint issued or filed or
a hearing  seeking  injunctive  relief or other  restraint  pending or  notified
prohibiting  or imposing  materially  adverse  conditions  upon,  or  materially
delaying, or making economically unfeasible, the consummation of the Transaction
or the other transactions contemplated by the Documents or otherwise required to
be consummated herein or therein.

     5.11 Litigation.  On the Initial Borrowing Date, there shall be no actions,
suits or proceedings  pending or threatened (i) with respect to the Transaction,
this Agreement or any other Document  except as disclosed on Schedule XI or (ii)
which  the  Agent  or  the  Required  Banks  shall  reasonably  determine  could
reasonably be expected to have a material  adverse effect on (a) the Transaction
or  on  the  business,  operations,  property,  assets,  liabilities,  condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries  taken as
a whole, (b) the rights or remedies of the Banks or the Agent hereunder or under
any other Credit  Document or (c) the ability of any Credit Party to perform its
respective  obligations  to the Banks or the Agent  hereunder or under any other
Credit Document.

     5.12 Pledge  Agreement.  On the Initial  Borrowing  Date, each Credit Party
shall have duly  authorized,  executed and delivered the Pledge Agreement in the
form of Exhibit G (as amended,  modified or supplemented  from time to time, the
"Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee
thereunder, all of the Pledged Securities, if any, referred to therein and owned
by such Credit  Party,  (x)  endorsed in blank in the case of  promissory  notes
constituting Pledged Securities and (y) together with executed and undated stock
powers in the case of capital stock constituting Pledged Securities.

     5.13 Security  Agreement.  On the Initial Borrowing Date, each Credit Party
shall have duly authorized, executed and delivered the Security Agreement in the
form of Exhibit H (as modified,  supplemented  or amended from time to time, the
"Security


                                      -37-


<PAGE>




Agreement")  covering  all of such Credit  Party's  present and future  Security
Agreement Collateral, together with:

                    (i)  proper   Financing   Statements   (Form  UCC-1  or  the
         equivalent)   fully   executed  for  filing  under  the  UCC  or  other
         appropriate filing offices of each jurisdiction as may be necessary or,
         in the reasonable opinion of the Collateral Agent, desirable to perfect
         the  security  interests  purported  to  be  created  by  the  Security
         Agreement;

                   (ii) certified  copies of Requests for  Information or Copies
         (Form UCC-11), or equivalent  reports,  listing all effective financing
         statements  that name any Credit  Party or any of its  Subsidiaries  as
         debtor and that are filed in the  jurisdictions  referred  to in clause
         (i) above, together with copies of such other financing statements that
         name any Credit  Party or any of its  Subsidiaries  as debtor  (none of
         which  shall  cover  the  Collateral  except to the  extent  evidencing
         Permitted Liens or in respect of which the Collateral  Agent shall have
         received termination statements (Form UCC-3 or the equivalent) as shall
         be required by local law fully executed for filing);

                  (iii) evidence of the  completion of all other  recordings and
         filings  of, or with  respect  to,  the  Security  Agreement  as may be
         necessary  or,  in the  reasonable  opinion  of the  Collateral  Agent,
         desirable to perfect the security  interests  intended to be created by
         the Security Agreement; and

                   (iv)  evidence  that all other  actions  necessary or, in the
         reasonable  opinion of the Collateral  Agent,  desirable to perfect and
         protect the security interests  purported to be created by the Security
         Agreement have been taken.

     5.14 Subsidiaries  Guaranty. On the Initial Borrowing Date, each Subsidiary
Guarantor shall have duly  authorized,  executed and delivered the  Subsidiaries
Guaranty in the form of Exhibit I (as  amended,  modified or  supplemented  from
time to time, the "Subsidiaries Guaranty").

     5.15  Acknowledgment and Joinder Agreement.  On the Initial Borrowing Date,
ATC, as the surviving  corporation  of the Merger,  shall have duly  authorized,
executed and delivered to the Agent the  Acknowledgment and Joinder Agreement in
the form of Exhibit J (the "Acknowledgment and Joinder Agreement").

     5.16 Financial Statements; Pro Forma Financial Statements,  Projections. On
or prior to the Initial  Borrowing  Date, the Agent shall have received true and
correct copies of the historical financial  statements,  the pro forma financial
statements and the  Projections  referred to in Sections  7.05(a) and (d), which
historical financial statements, pro


                                      -38-


<PAGE>




forma  financial  statements  and  Projections  shall be in form  and  substance
reasonably  satisfactory to the Agent and the Required Banks. On or prior to the
Initial  Borrowing  Date,  the Agent shall have received  evidence,  in form and
substance  reasonably  satisfactory  to the Agent and the Required  Banks,  that
ATC's pro forma EBITDA for the twelve  month period ended  February 28, 1997 was
at least $22,491,000 (with such pro forma EBITDA to give pro forma effect to any
acquisitions  consummated  by ATC on and  after  March 1,  1996 and prior to the
Initial  Borrowing  Date,  including  the  Bing  Yen  Acquisition  and  the  EWI
Acquisition).

     5.17 Solvency Opinion;  Insurance Certificates.  On or prior to the Initial
Borrowing Date, the Agent shall have received:

                    (i) a solvency opinion from Houlihan,  Lokey, Howard & Zukin
         Financial  Advisors,  Inc., which solvency opinion shall be in form and
         substance reasonably satisfactory to the Agent; and

                 (ii) certificates of insurance  complying with the requirements
         of Section  8.03 for the business  and  properties  of Holdings and its
         Subsidiaries,  in form and  substance  reasonably  satisfactory  to the
         Agent and naming the Collateral  Agent as an additional  insured and as
         loss payee,  and stating  that such  insurance  shall not be  cancelled
         without at least 30 days  prior  written  notice by the  insurer to the
         Collateral  Agent  (or  such  shorter  period  of time as a  particular
         insurance company generally provides).

     5.18 Fees, etc. On the Initial Borrowing Date, the Borrower shall have paid
to the Agent and each Bank all  costs,  fees and  expenses  (including,  without
limitation,  legal fees and expenses)  payable to the Agent and such Bank to the
extent then due.


                  SECTION 6.  Conditions  Precedent  to All Credit  Events.  The
obligation  of each Bank to make  Loans  (including  Loans  made on the  Initial
Borrowing  Date),  and the  obligation  of the Issuing Bank to issue  Letters of
Credit, is subject, at the time of each such Credit Event (except as hereinafter
indicated), to the satisfaction of the following conditions:

     6.01 No Default;  Representations and Warranties.  At the time of each such
Credit  Event and also after  giving  effect  thereto  (i) there  shall exist no
Default  or  Event  of  Default  and (ii)  all  representations  and  warranties
contained  herein and in the other Credit Documents shall be true and correct in
all material  respects with the same effect as though such  representations  and
warranties  had been made on the date of such Credit Event (it being  understood
and agreed that any representation or warranty which by its terms is made


                                      -39-


<PAGE>




as of a specified  date shall be required to be true and correct in all material
respects only as of such specified date).

     6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making
of each Loan (other than a Swingline  Loan and a Revolving Loan made pursuant to
a  Mandatory  Borrowing),  the Agent shall have  received a Notice of  Borrowing
meeting  the  requirements  of  Section  1.03(a).  Prior to the  making  of each
Swingline Loan, the Swingline Bank shall have received the notice referred to in
Section 1.03(b)(i).

                  (b) Prior to the issuance of each Letter of Credit,  the Agent
and the Issuing Bank shall have received a Letter of Credit Request  meeting the
requirements of Section 2.03.

                  The  acceptance  of the  benefits of each  Credit  Event shall
constitute  a  representation  and  warranty by Holdings and the Borrower to the
Agent and each of the Banks that all the conditions specified in Section 5 (with
respect to Credit  Events on the Initial  Borrowing  Date) and in this Section 6
(with  respect  to Credit  Events on or after the  Initial  Borrowing  Date) and
applicable  to such  Credit  Event  exist  as of that  time.  All of the  Notes,
certificates,  legal  opinions  and other  documents  and papers  referred to in
Section 5 and in this Section 6, unless otherwise specified,  shall be delivered
to the Agent at the  Notice  Office  for the  account  of each of the Banks and,
except for the Notes, in sufficient counterparts or copies for each of the Banks
and shall be in form and substance reasonably  satisfactory to the Agent and the
Required Banks.


                  SECTION 7 Representations, Warranties and Agreements. In order
to induce the Banks to enter  into this  Agreement  and to make the  Loans,  and
issue (or  participate  in) the  Letters of Credit as provided  herein,  each of
Holdings and the Borrower  makes the following  representations,  warranties and
agreements,  in each case after giving effect to the  Transaction,  all of which
shall survive the execution and delivery of this Agreement and the Notes and the
making  of the  Loans  and  issuance  of the  Letters  of  Credit,  and with the
occurrence  of each Credit  Event on or after the Initial  Borrowing  Date being
deemed to constitute a representation and warranty that the matters specified in
this  Section 7 are true and correct in all  material  respects on and as of the
Initial  Borrowing  Date and on the date of each  such  Credit  Event  (it being
understood and agreed that any  representation or warranty which by its terms is
made as of a  specified  date shall be  required  to be true and  correct in all
material respects only as of such specified date).

     7.01 Corporate  Status.  Each Credit Party and each of its Subsidiaries (i)
is a duly organized and validly existing  corporation in good standing under the
laws of the jurisdiction of its  organization,  (ii) has the corporate power and
authority  to own its  property and assets and to transact the business in which
it is engaged and presently proposes


                                      -40-


<PAGE>




to engage and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where the ownership,  leasing or operation of
its property or the conduct of its business requires such qualifications  except
for failures to be so qualified which,  individually or in the aggregate,  could
not  reasonably be expected to have a material  adverse  effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

     7.02  Corporate  and Other Power and  Authority.  Each Credit Party has the
corporate  power and  authority  to  execute,  deliver and perform the terms and
provisions  of each of the  Documents  to which it is party  and has  taken  all
necessary corporate action to authorize the execution,  delivery and performance
by it of each of such  Documents.  Each  Credit  Party  has  duly  executed  and
delivered each of the Documents to which it is party, and each of such Documents
constitutes its legal,  valid and binding  obligation  enforceable in accordance
with its terms,  except to the extent  that the  enforceability  thereof  may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
other  similar  laws  generally  affecting  creditors'  rights and by  equitable
principles (regardless of whether enforcement is sought in equity or at law).

     7.03 No Violation.  Neither the  execution,  delivery or performance by any
Credit Party of the Documents to which it is a party,  nor compliance by it with
the terms and provisions thereof,  (i) will contravene any provision of any law,
statute,  rule or  regulation  or any order,  writ,  injunction or decree of any
court or governmental instrumentality,  (ii) will conflict with or result in any
breach  of any  of  the  terms,  covenants,  conditions  or  provisions  of,  or
constitute a default  under,  or result in the creation or imposition of (or the
obligation  to create or  impose)  any Lien  (except  pursuant  to the  Security
Documents)  upon  any  of the  property  or  assets  of  Holdings  or any of its
Subsidiaries  pursuant to the terms of any indenture,  mortgage,  deed of trust,
credit agreement or loan agreement, or any other material agreement, contract or
instrument,  to which Holdings or any of its Subsidiaries is a party or by which
it or any of its  property  or  assets  is bound  or to which it may be  subject
(including,  without  limitation,  any Seller Note), except for the violation of
certain lease and other agreements as a result of Acquisition,  which violations
could not,  individually  or in the aggregate,  reasonably be expected to have a
material  adverse  effect on the  Acquisition  or on the  business,  operations,
property, assets,  liabilities,  condition (financial or otherwise) or prospects
of Holdings  and its  Subsidiaries  taken as a whole,  or (iii) will violate any
provision  of  the  certificate  of  incorporation  or  by-laws  (or  equivalent
organizational documents) of Holdings or any of its Subsidiaries.

     7.04 Approvals.  No order,  consent,  approval,  license,  authorization or
validation of, or filing,  recording or registration  with (except for (x) those
that have otherwise  been obtained or made on or prior to the Initial  Borrowing
Date and which  remain in full force and effect on the Initial  Borrowing  Date,
(y) those  required to register the Senior  Subordinated  Notes with the SEC and
(z) the filing of continuation statements


                                      -41-


<PAGE>




in connection  with the Liens granted  pursuant to the Security  Agreement),  or
exemption by, any  governmental or public body or authority,  or any subdivision
thereof,  is required to authorize,  or is required in connection  with, (i) the
execution,  delivery  and  performance  of any  Document  or (ii) the  legality,
validity, binding effect or enforceability of any such Document.

     7.05 Financial Statements;  Financial Condition;  Undisclosed  Liabilities;
Projections; etc. (a) The consolidated balance sheets of ATC for the fiscal year
and nine  month  period  ended on  February  28,  1997 and  November  30,  1997,
respectively,  and the related consolidated statements of income, cash flows and
shareholders'  equity of ATC for the fiscal  year or nine month  period,  as the
case may be,  ended on such dates,  copies of which have been  furnished  to the
Banks  prior to the  Initial  Borrowing  Date,  present  fairly in all  material
respects the consolidated financial position of ATC at the dates of such balance
sheets and the  consolidated  results of the  operations  of ATC for the periods
covered thereby.  The consolidated balance sheet of each of Bing Yen and EWI for
the fiscal years ended on December 31, 1996 and June 30, 1997, respectively, and
the related  consolidated  statements  of income,  cash flows and  shareholders'
equity of each of Bing Yen and EWI for the respective fiscal years ended on such
dates,  copies of which have been  furnished  to the Banks  prior to the Initial
Borrowing  Date,  present  fairly  in all  material  respects  the  consolidated
financial  position  of each of Bing Yen and EWI at the  dates  of such  balance
sheets and the  consolidated  results of  operations of each of Bing Yen and EWI
for the periods  covered  thereby.  All of the  foregoing  historical  financial
statements have been prepared in accordance with generally  accepted  accounting
principles consistently applied. The pro forma consolidated financial statements
of Holdings and its  Subsidiaries  as of November  30, 1997,  in each case after
giving effect to the  Transaction  and the financing  therefor,  copies of which
have been furnished to the Banks prior to the Initial  Borrowing  Date,  present
fairly in all material respects the pro forma consolidated financial position of
Holdings  and its  Subsidiaries  as of  November  30,  1997  and  the pro  forma
consolidated  results of  operations  of Holdings and its  Subsidiaries  for the
twelve month and nine month periods covered  thereby,  as the case may be. After
giving  effect  to the  Transaction  (but for  this  purpose  assuming  that the
Transaction,  the Bing Yen  Acquisition,  the EWI  Acquisition  and the  related
financing  had occurred  prior to February 28, 1997),  since  February 28, 1997,
there has been no material adverse change in the business, operations, property,
assets, liabilities, condition (financial or otherwise) or prospects of Holdings
and its Subsidiaries taken as a whole.

                  (b) On and as of the Initial  Borrowing  Date and after giving
effect to the  Transaction and to all  Indebtedness  (including the Loans) being
incurred  or  assumed  and Liens  created by the  Credit  Parties in  connection
therewith  (a)  the  sum of the  assets,  at a fair  valuation,  of  each of the
Borrower on a stand-alone basis and of Holdings and its Subsidiaries  taken as a
whole will exceed its debts; (b) each of the Borrower on a stand-alone basis and
Holdings and its Subsidiaries taken as a whole has not incurred and does


                                      -42-


<PAGE>




not intend to incur,  and does not believe that it will incur,  debts beyond its
ability to pay such debts as such debts mature;  and (c) each of the Borrower on
a stand alone basis and Holdings and its Subsidiaries taken as a whole will have
sufficient  capital  with which to conduct its  business.  For  purposes of this
Section  7.05(b),  "debt" means any liability on a claim,  and "claim" means (i)
right  to  payment,  whether  or not  such  a  right  is  reduced  to  judgment,
liquidated,  unliquidated,  fixed,  contingent,  matured,  unmatured,  disputed,
undisputed,  legal,  equitable,  secured,  or  unsecured  or  (ii)  right  to an
equitable  remedy  for  breach of  performance  if such  breach  gives rise to a
payment,  whether  or not such  right  to an  equitable  remedy  is  reduced  to
judgment, fixed, contingent,  matured, unmatured,  disputed, undisputed, secured
or unsecured. The amount of contingent liabilities at any time shall be computed
as the amount that, in the light of all the facts and circumstances  existing at
such time,  represents  the amount that can  reasonably be expected to become an
actual or matured liability.

                  (c) Except as disclosed in the financial  statements delivered
pursuant to Section 7.05(a)  (including in the notes thereto) or as set forth on
Schedule XII,  there were as of the Initial  Borrowing  Date no  liabilities  or
obligations  with respect to Holdings or any of its  Subsidiaries  of any nature
whatsoever  (whether absolute,  accrued,  contingent or otherwise and whether or
not due)  which,  either  individually  or in  aggregate,  could  reasonably  be
expected to be material to Holdings and its Subsidiaries taken as a whole. As of
the Initial Borrowing Date, neither Holdings nor the Borrower knows of any basis
for the  assertion  against it or any of its  Subsidiaries  of any  liability or
obligation  of any nature  whatsoever  that is not  disclosed  in the  financial
statements  delivered  pursuant  to Section  7.05(a) or on  Schedule  XII which,
either  individually  or in the  aggregate,  could  reasonably be expected to be
material to Holdings and its Subsidiaries taken as a whole.

                  (d) On and as of the Initial  Borrowing  Date, the Projections
delivered  to the Agent and the Banks prior to the Initial  Borrowing  Date have
been prepared in good faith and are based on reasonable  assumptions,  and there
are no  statements or  conclusions  in the  Projections  which are based upon or
include  information  known to Holdings or the Borrower to be  misleading in any
material respect or which fail to take into account material  information  known
to Holdings or the  Borrower  regarding  the matters  reported  therein.  On the
Initial  Borrowing Date,  Holdings and the Borrower believe that the Projections
are reasonable and attainable,  it being recognized by the Banks,  however, that
projections as to future events are not to be viewed as facts and are subject to
various  contingencies (many of which may be outside the Borrower's control) and
that the actual results during the period or periods  covered by the Projections
may differ from the projected results and that the differences may be material.

     7.06 Litigation.  There are no actions, suits or proceedings pending or, to
the best knowledge of Holdings and the Borrower,  threatened (i) with respect to
the  Transaction  or any Document  except as disclosed on Schedule XI, (ii) with
respect to any


                                      -43-


<PAGE>




material  Indebtedness of Holdings or any of its  Subsidiaries or (iii) that are
reasonably  likely to materially and adversely affect the business,  operations,
property, assets,  liabilities,  condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.

     7.07 True and  Complete  Disclosure.  All factual  information  (taken as a
whole)  furnished by or on behalf of any Credit Party in writing to the Agent or
any Bank  (including,  without  limitation,  all  information  contained  in the
Documents)  for  purposes of or in  connection  with this  Agreement,  the other
Credit Documents or any transaction  contemplated  herein or therein is, and all
other such factual  information (taken as a whole) hereafter  furnished by or on
behalf of any Credit Party in writing to the Agent or any Bank will be, true and
accurate in all material  respects on the date as of which such  information was
or is dated or  certified  and not  incomplete  by  omitting  to state  any fact
necessary  to make such  information  (taken as a whole) not  misleading  in any
material  respect at such time in light of the  circumstances  under  which such
information was provided.

     7.08 Use of  Proceeds;  Margin  Regulations.  (a) All  proceeds of the Term
Loans will be used by the Borrower (i) to effect the Refinancing and (ii) to pay
fees and expenses related to this Agreement.

                  (b)  All  proceeds  of  the  Working  Capital  Loans  and  the
Swingline  Loans  shall be used for the working  capital  and general  corporate
purposes of the Borrower and its  Subsidiaries  (it being  understood and agreed
that such  purposes  shall  include  payments to effect the repayment of working
capital  indebtedness of entities that become  Subsidiaries of the Borrower that
is outstanding at the time of the  acquisition  thereof  pursuant to a Permitted
Acquisition),  provided that up to  $9,000,000  of Working  Capital Loans in the
aggregate  may  be  incurred  on  the  Initial  Borrowing  Date  to  effect  the
Refinancing and to pay fees and expenses in connection with this Agreement.  The
proceeds  of  all  Acquisition   Loans  shall  be  utilized  to  make  Permitted
Acquisitions.

                  (c) No part of any Credit Event (or the proceeds thereof) will
be used to purchase or carry any Margin  Stock  (including  any Shares  tendered
pursuant to the Tender Offer or to pay the merger consideration  pursuant to the
Merger) or to extend credit for the purpose of purchasing or carrying any Margin
Stock.  Neither the making of any Loan nor the use of the  proceeds  thereof nor
the  occurrence of any other Credit Event will violate or be  inconsistent  with
the  provisions  of  Regulation  G, T, U or X of the Board of  Governors  of the
Federal Reserve System.

     7.09 Tax Returns and Payments.  Except as set forth on Schedule XIII,  each
of Holdings and each of its  Subsidiaries has filed all federal and state income
tax returns and all other material tax returns,  domestic and foreign,  required
to be filed by it and has paid all taxes  and  assessments  payable  by it which
have become due, except for


                                      -44-


<PAGE>




those contested in good faith and adequately disclosed and fully provided for on
the financial  statements of Holdings and its  Subsidiaries  in accordance  with
generally accepted accounting principles.  Holdings and each of its Subsidiaries
have at all times paid,  or have provided  adequate  reserves (in the good faith
judgment of the  management of Holdings) for the payment of, all federal,  state
and other  material  income taxes  applicable for all prior fiscal years and for
the current fiscal year to date. There is no material action, suit,  proceeding,
investigation,  audit or claim now pending or, to the best knowledge of Holdings
and the Borrower  threatened,  by any authority  regarding any taxes relating to
Holdings or any of its Subsidiaries.  As of the Initial Borrowing Date,  neither
Holdings nor any of its  Subsidiaries has entered into an agreement or waiver or
been  requested to enter into an agreement  or waiver  extending  any statute of
limitations relating to the payment or collection of taxes of Holdings or any of
its Subsidiaries,  or is aware of any circumstances that would cause the taxable
years or other taxable periods of Holdings or any of its  Subsidiaries not to be
subject to the normally applicable statute of limitations.

     7.10 Compliance  with ERISA.  (a) Schedule IV sets forth, as of the Initial
Borrowing  Date,  each Plan;  except as set forth on Schedule IV, each Plan (and
each related trust,  insurance  contract or fund) is in  substantial  compliance
with its terms and with all  applicable  laws,  including,  without  limitation,
ERISA and the Code; each Plan (and each related trust, if any) which is intended
to be qualified  under Section  401(a) of the Code has received a  determination
letter  from the  Internal  Revenue  Service  to the  effect  that it meets  the
requirements of Sections 401(a) and 501(a) of the Code; no Reportable  Event has
occurred;  no  Plan  which  is a  multiemployer  plan  (as  defined  in  Section
4001(a)(3) of ERISA) is insolvent or in reorganization;  no Plan has an Unfunded
Current  Liability;  no Plan  which is  subject  to  Section  412 of the Code or
Section 302 of ERISA has an accumulated funding  deficiency,  within the meaning
of such  sections of the Code or ERISA,  or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization period,
within the  meaning of Section  412 of the Code or Section  303 or 304 of ERISA;
all  contributions  required to be made with  respect to a Plan have been timely
made;  neither  Holdings nor any Subsidiary of Holdings nor any ERISA  Affiliate
has incurred any material  liability  (including  any  indirect,  contingent  or
secondary liability) to or on account of a Plan pursuant to Section 409, 502(i),
502(l),  515, 4062,  4063,  4064,  4069,  4201, 4204 or 4212 of ERISA or Section
401(a)(29),  4971 or 4975 of the  Code or  expects  to incur  any such  material
liability  under any of the  foregoing  sections  with  respect to any Plan;  no
condition exists which presents a material risk to Holdings or any Subsidiary of
Holdings  or any ERISA  Affiliate  of  incurring a material  liability  to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted to terminate or appoint a trustee to administer
any Plan  which is subject to Title IV of ERISA;  no action,  suit,  proceeding,
hearing, audit or investigation with respect to the administration, operation or
the investment of assets of any Plan (other than routine claims for benefits) is
pending,  expected or threatened;  using  actuarial  assumptions and computation
methods consistent with Part 1 of subtitle E of Title


                                      -45-


<PAGE>




IV of ERISA, the aggregate  liabilities of Holdings and its Subsidiaries and its
ERISA  Affiliates  to all Plans  which are  multiemployer  plans (as  defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as
of the close of the most recent fiscal year of each such Plan ended prior to the
date of the most recent  Credit  Event,  would not exceed  $500,000;  each group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) which covers or has covered employees or former employees of Holdings, any
Subsidiary of Holdings or any ERISA  Affiliate has at all times been operated in
material  compliance  with the  provisions of Part 6 of subtitle B of Title I of
ERISA and Section  4980B of the Code; no lien imposed under the Code or ERISA on
the assets of Holdings  or any  Subsidiary  of  Holdings or any ERISA  Affiliate
exists or is likely  to arise on  account  of any  Plan;  and  Holdings  and its
Subsidiaries  may cease  contributions to or terminate any employee benefit plan
maintained by any of them without incurring any material liability.

                  (b) Each Foreign  Pension Plan has been maintained in material
compliance  with its terms and with the  requirements  of any and all applicable
laws,  statutes,  rules,  regulations and orders and has been maintained,  where
required,  in  good  standing  with  applicable  regulatory   authorities.   All
contributions  required to be made with  respect to a Foreign  Pension Plan have
been timely made.  Neither Holdings nor any of its Subsidiaries has incurred any
material obligation in connection with the termination of or withdrawal from any
Foreign  Pension  Plan.  The present  value of the accrued  benefit  liabilities
(whether or not vested) under each Foreign  Pension  Plan,  determined as of the
end of  Holdings  most  recently  ended  fiscal  year on the basis of  actuarial
assumptions,  each of which is  reasonable,  did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.

     7.11 The Security  Documents.  (a) The provisions of the Security Agreement
are effective to create in favor of the Collateral  Agent for the benefit of the
Secured Creditors a legal, valid and enforceable security interest in all right,
title and interest of the Credit  Parties in the Security  Agreement  Collateral
described  therein,  and the  Collateral  Agent,  for the benefit of the Secured
Creditors,  has a fully perfected  first lien on, and security  interest in, all
right, title and interest of the Credit Parties in all of the Security Agreement
Collateral  described therein, in each case subject to no other Liens other than
Permitted  Liens.  The  recordation  of the Grant of  Security  Interest in U.S.
Patents and  Trademarks  in the form  attached to the Security  Agreement in the
United States Patent and Trademark  Office,  together with filings on Form UCC-1
made  pursuant to the Security  Agreement,  will create,  as may be perfected by
such filing and recordation,  a perfected security interest in the United States
trademarks and patents covered by the Security Agreement. The recordation of the
Grant of  Security  Interest  in U.S.  Copyrights  in the form  attached  to the
Security  Agreement  with the United  States  Copyright  Office,  together  with
filings on Form UCC-1 made pursuant to the Security Agreement, will create,


                                      -46-


<PAGE>




as may be  perfected  by such  filing  and  recordation,  a  perfected  security
interest in the United States copyrights covered by the Security Agreement.

                  (b) The security  interests created in favor of the Collateral
Agent, as pledgee,  for the benefit of the Secured  Creditors,  under the Pledge
Agreement  constitute first priority perfected security interests in the Pledged
Securities  described in the Pledge Agreement,  subject to no security interests
of any other Person.  So long as the Collateral Agent has control (as defined in
Section  9-115 of the New York UCC) of the  Pledged  Securities,  no  filings or
recordings  are required to perfect (or maintain the  perfection or priority of)
the  security  interests  created  in the  Pledged  Securities  under the Pledge
Agreement.

                  (c)  After the  execution  and  deliver  thereof  pursuant  to
Section 811, the Mortgages create,  for the obligations  purported to be secured
thereby,  a valid and enforceable  perfected  security  interest in and mortgage
lien on all of the  Mortgaged  Properties in favor of the  Collateral  Agent (or
such  other  trustee as may be  required  or  desired  under  local law) for the
benefit of the  Secured  Creditors,  superior  to and prior to the rights of all
third  persons  (except that the security  interest and mortgage lien created in
the Mortgaged  Properties may be subject to the Permitted  Encumbrances  related
thereto) and subject to no other Liens (other than Liens permitted under Section
9.01).  Schedule III  contains a true and  complete  list of each parcel of Real
Property  owned or  leased  by  Holdings  and its  Subsidiaries  on the  Initial
Borrowing  Date,  and the type of  interest  therein  held by  Holdings  or such
Subsidiary. Holdings and each of its Subsidiaries have good and marketable title
to all fee-owned Real Property and valid leasehold  title to all Leaseholds,  in
each  case  free and  clear of all Liens  except  those  described  in the first
sentence of this subsection (c).

     7.12  Representations and Warranties in the Documents.  All representations
and  warranties  set forth in the other  Documents  were true and correct in all
material  respects at the time as of which such  representations  and warranties
were  made (or  deemed  made)  and  shall be true and  correct  in all  material
respects  as of the  Initial  Borrowing  Date  as if  such  representations  and
warranties  were  made on and as of such  date,  unless  stated  to  relate to a
specific earlier date, in which case such  representations  and warranties shall
be true and correct in all material respects as of such earlier date.

     7.13 Properties.  Holdings and each of its Subsidiaries  have good title to
all material  properties owned by them,  including all property reflected in the
balance  sheets  referred  to in Section  7.05(a)  (except as sold or  otherwise
disposed  of since  the date of such  balance  sheet in the  ordinary  course of
business or as permitted by the terms of this Agreement),  free and clear of all
Liens, other than Permitted Liens.

     7.14 Capitalization. (a) On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized


                                      -47-


<PAGE>




capital  stock of  Holdings  shall  consist of (i)  15,000,000  shares of common
stock,  $.01 par value per share,  and (ii) 2,000,000 shares of preferred stock,
$.01 par value per share,  of which 100,000  shares of series A Preferred  Stock
shall be issued and  outstanding.  All  outstanding  shares of capital  stock of
Holdings   have  been  duly  and   validly   issued   and  are  fully  paid  and
non-assessable.  Holdings does not have  outstanding any securities  convertible
into or  exchangeable  for its  capital  stock  or  outstanding  any  rights  to
subscribe  for or to  purchase,  or any  options  for the  purchase  of,  or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character  relating to, its capital  stock,  except
(i) for options to purchase shares of Holdings' common stock which may be issued
from time to time to directors, officers and employees of Holdings or any of its
Subsidiaries,  (ii) warrants to purchase shares of Holdings' common stock issued
to JNL  and  Old  Hickory  as  part of the  Equity  Financing,  (iii)  Qualified
Preferred Stock of Holdings which may be convertible into shares of common stock
of  Holdings,  and  (iv) as may be set  forth  in the  Shareholders'  Agreements
delivered pursuant to Section 5.05(iii).

                  (b) On the Initial  Borrowing  Date and after giving effect to
the Transaction and the other transactions  contemplated  hereby, the authorized
capital stock of the Borrower shall consist of one share of common stock,  $0.01
par value per share, which shall be owned by Holdings. All outstanding shares of
capital stock of the Borrower have been duly and validly issued,  are fully paid
and  nonassessable.  The  Borrower  does not  have  outstanding  any  securities
convertible into or exchangeable for its capital stock or outstanding any rights
to  subscribe  for or to  purchase,  or any options for the  purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.

     7.15  Subsidiaries.  As of the  Initial  Borrowing  Date,  Holdings  has no
Subsidiaries  other than the Borrower and its  Subsidiaries and the Borrower has
no Subsidiaries other than those  Subsidiaries  listed on Schedule V. Schedule V
correctly sets forth, as of the Initial Borrowing Date, the percentage ownership
(direct or indirect) of Holdings in each class of capital  stock or other equity
of each of its Subsidiaries and also identifies the direct owner thereof.

     7.16  Compliance  with  Statutes,  etc.  Each of  Holdings  and each of its
Subsidiaries  is in compliance  with all applicable  statutes,  regulations  and
orders of, and all applicable  restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of  its  property  (including  applicable  statutes,   regulations,  orders  and
restrictions  relating to  environmental  standards and  controls),  except such
noncompliances  as could not,  individually  or in the aggregate,  reasonably be
expected  to  have  a  material  adverse  effect  on the  business,  operations,
property, assets,  liabilities,  condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.


                                      -48-


<PAGE>




     7.17 Investment  Company Act.  Neither Holdings nor any of its Subsidiaries
is an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.

     7.18 Public Utility  Holding Company Act.  Neither  Holdings nor any of its
Subsidiaries  is a "holding  company," or a  "subsidiary  company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary  company"
of a "holding  company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

     7.19 Environmental  Matters. (a) Holdings and each of its Subsidiaries have
complied with, and on the date of each Credit Event are in compliance  with, all
applicable  Environmental  Laws and the requirements of any permits issued under
such  Environmental  Laws.  There are no pending  or, to the best  knowledge  of
Holdings and the Borrower,  threatened  Environmental Claims against Holdings or
any of its Subsidiaries  (including any such claim arising out of the ownership,
lease or operation by Holdings or any of its  Subsidiaries  of any Real Property
no longer owned,  leased or operated by Holdings or any of its  Subsidiaries) or
any  Real  Property  owned,  leased  or  operated  by  Holdings  or  any  of its
Subsidiaries. There are no facts, circumstances,  conditions or occurrences with
respect to the business or operations of Holdings or any of its Subsidiaries, or
any  Real  Property  owned,  leased  or  operated  by  Holdings  or  any  of its
Subsidiaries  (including any Real Property formerly owned, leased or operated by
Holdings or any of its Subsidiaries  but no longer owned,  leased or operated by
Holdings or any of its  Subsidiaries)  or, to the  knowledge  of Holdings or the
Borrower,  any property  adjoining or adjacent to any such Real  Property,  that
could  reasonably  be expected (i) to form the basis of an  Environmental  Claim
against Holdings or any of its  Subsidiaries or any Real Property owned,  leased
or operated by  Holdings  or any of its  Subsidiaries  or (ii) to cause any Real
Property owned,  leased or operated by Holdings or any of its Subsidiaries to be
subject to any restrictions on the ownership,  occupancy or  transferability  of
such Real Property by Holdings or any of its  Subsidiaries  under any applicable
Environmental Law.

                  (b) Hazardous  Materials have not at any time been  generated,
used,  treated or stored on, or transported to or from, any Real Property owned,
leased or operated by Holdings or any of its Subsidiaries where such generation,
use,  treatment  or storage has  violated or has given rise to an  Environmental
Claim  under,  or could  reasonably  be  expected  to violate or give rise to an
Environmental Claim under, any applicable Environmental Law. Hazardous Materials
have not at any time been  Released or disposed of on or from any Real  Property
owned,  leased or operated by  Holdings  or any of its  Subsidiaries  where such
Release or disposal has violated or given rise to an Environmental  Claim under,
or could  reasonably  be  expected  to violate or give rise to an  Environmental
Claim under, any applicable Environmental Law.


                                      -49-


<PAGE>

                  (c)  Notwithstanding  anything to the contrary in this Section
7.19, the  representations and warranties made in this Section 7.19 shall not be
untrue  unless  the  effect  of  any or all  violations,  claims,  restrictions,
failures and  noncompliances  of the types  described above in this Section 7.19
could reasonably be expected to, either individually or in the aggregate, have a
material  adverse  effect  on  the  business,   operations,   property,  assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.

     7.20 Labor  Relations.  Neither  Holdings  nor any of its  Subsidiaries  is
engaged in any unfair labor practice that could reasonably be expected to have a
material adverse effect on Holdings and its Subsidiaries taken as a whole. There
is (i) no unfair labor practice complaint pending against Holdings or any of its
Subsidiaries  or, to the best knowledge of Holdings or the Borrower,  threatened
against any of them, before the National Labor Relations Board, and no grievance
or  arbitration  proceeding  arising out of or under any  collective  bargaining
agreement is so pending against  Holdings or any of its  Subsidiaries or, to the
best  knowledge of Holdings and the  Borrower,  threatened  against any of them,
(ii) no strike, labor dispute,  slowdown or stoppage pending against Holdings or
any of its  Subsidiaries or, to the best knowledge of Holdings and the Borrower,
threatened  against  Holdings  or any of its  Subsidiaries  and  (iii)  no union
representation  question exists with respect to the employees of Holdings or any
of its Subsidiaries, except (with respect to any matter specified in clause (i),
(ii) or (iii) above,  either individually or in the aggregate) such as could not
reasonably  be  expected  to have a  material  adverse  effect on the  business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

     7.21 Patents, Licenses,  Franchises and Formulas. Each of Holdings and each
of its  Subsidiaries  owns or has the right to use all the patents,  trademarks,
permits,   service  marks,  trade  names,  copyrights,   licenses,   franchises,
proprietary  information  (including  but not  limited  to  rights  in  computer
programs and databases)  and formulas,  or rights with respect to the foregoing,
and has obtained  assignments of all leases and other rights of whatever nature,
necessary for the present  conduct of its business,  without any known  conflict
with the rights of others which, or the failure to obtain which, as the case may
be, could  reasonably be expected to result in a material  adverse effect on the
business,  operations,  property, assets,  liabilities,  condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.

     7.22  Indebtedness.  Schedule VI sets forth a true and complete list of all
Indebtedness (including Contingent Obligations and Seller Notes) of Holdings and
its  Subsidiaries  as of the  Initial  Borrowing  Date and  which  is to  remain
outstanding  after giving effect to the  Transaction  (excluding the Loans,  the
Letters  of  Credit   and  the  Senior   Subordinated   Notes,   the   "Existing
Indebtedness"), in each case showing the aggregate


                                      -50-


<PAGE>




principal amount thereof and the name of the respective  borrower and any Credit
Party or any of its  Subsidiaries  which directly or indirectly  guarantees such
debt.

     7.23 Tender Offer.  At the time of consummation  thereof,  the Tender Offer
shall have been  consummated  in all material  respects in  accordance  with the
terms of the Tender Offer  Documents  and all  applicable  laws.  At the time of
consummation of the Tender Offer, all third party approvals and all consents and
approvals  of, and  filings and  registrations  with,  and all other  actions in
respect of, all governmental agencies, authorities or instrumentalities required
in order to make or consummate the Tender Offer (or otherwise referred to in the
Offer to Purchase)  will have been  obtained,  given,  filed or taken and are or
will be in full force and effect (or  effective  judicial  relief  with  respect
thereto  has  been  obtained).  All  actions  taken  by  Holdings  or any of its
Subsidiaries  pursuant to or in  furtherance of the Tender Offer have been taken
in all material  respects in compliance  with the Tender Offer Documents and all
applicable laws.

     7.24 Merger.  At the time of  consummation  thereof,  the Merger shall have
been  consummated in all material  respects in accordance  with the terms of the
Merger  Documents and all applicable  laws. At the time of  consummation  of the
Merger,  all third party  approvals  and all consents  (other than certain third
party  approvals  and consents  with respect to the  Acquisition  the failure to
obtain could not,  individually  or in the aggregate,  reasonably be expected to
have  a  material  adverse  effect  on  the  Acquisition  or  on  the  business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its  Subsidiaries  taken as a whole) and approvals of,
and filings and  registrations  with,  and all other  actions in respect of, all
governmental  agencies,  authorities or  instrumentalities  required in order to
make or consummate the Merger will have been obtained, given, filed or taken and
are or will be in full force and  effect  (or  effective  judicial  relief  with
respect thereto has been obtained).  All applicable waiting periods with respect
thereto have or, prior to the time when required, will have, expired without, in
all such  cases,  any  action  being  taken  by any  competent  authority  which
restrains,  prevents,  or imposes material  adverse  conditions upon the Merger.
Additionally, there does not exist any judgment, order or injunction prohibiting
the Merger or the  performance by Holdings or any of its  Subsidiaries  of their
respective  obligations under the Merger Documents.  As of the Initial Borrowing
Date, all actions taken by Holdings or any of its Subsidiaries pursuant to or in
furtherance of the Merger have been taken in all material respects in compliance
with the Merger Documents and all applicable laws.

     7.25 Issuance of the Senior Subordinated Notes. At the time of the issuance
thereof,  the Senior  Subordinated  Notes shall have been issued in all material
respects in accordance with the terms of the Senior  Subordinated Note Documents
and all  applicable  laws.  At the time of the issuance  thereof,  all consents,
approvals of and permits for, and filings and registrations  with, and all other
actions   in   respect   of,   all   governmental   agencies,   authorities   or
instrumentalities required in order to issue the Senior Subordinated


                                      -51-


<PAGE>




Notes have been (or will, within the time frame required,  be) obtained,  given,
filed  or  taken  and are or will be in full  force  and  effect  (or  effective
judicial  relief with respect thereto has been  obtained).  Additionally,  there
does not  exist  any  judgment,  order or  injunction  prohibiting  or  imposing
material adverse  conditions upon the issuance of the Senior  Subordinated Notes
or the  performance by  Acquisition  Corp. or any of its  Subsidiaries  of their
obligations under the Senior  Subordinated Note Documents.  All actions taken by
the Borrower or any of its  Subsidiaries  pursuant to or in  furtherance  of the
issuance of Senior  Subordinated  Notes have been taken in all material respects
in compliance  with the Senior  Subordinated  Note  Documents and all applicable
laws.

     7.26  Special Purpose Corporations. (a) Holdings and Acquisition Corp. were
formed to effect the Transaction.  Prior to the consummation of the Tender
Offer, (i) Holdings had no significant assets (other than the capital stock of
Acquisition Corp.) or liabilities (other than those liabilities under the
Documents) and (ii) Acquisition Corp. had no significant assets or liabilities
(other than those liabilities under the Documents).

                  (b) After the consummation of the Transaction, Holdings has no
significant  assets (other than the capital stock of the  Borrower)) or material
liabilities  (other than those  liabilities  under this  Agreement and the other
Documents to which it is a party).

                  (c) Prior to the consummation of the Merger, Acquisition Corp.
has no significant  assets (other than the Shares of ATC tendered to it pursuant
to the Tender Offer) or material liabilities (other than those liabilities under
this Agreement and the other Documents to which it is party).

     7.27 Insurance.  Schedule VII sets forth a true and complete listing of all
insurance  maintained  by  Holdings  and  its  Subsidiaries  as of  the  Initial
Borrowing  Date, and with the amounts  insured (and any  deductibles)  set forth
therein.

     7.28 Senior Subordinated Notes. The subordination  provisions  contained in
the  Senior  Subordinated  Notes  and  in the  other  Senior  Subordinated  Note
Documents are  enforceable  against the respective  Credit Parties party thereto
and the  holders of the  Senior  Subordinated  Notes,  and all  Obligations  and
Guaranteed  Obligations (as defined in the Subsidiaries Guaranty) are within the
definition of "Senior Indebtedness" or "Guarantor Senior  Indebtedness",  as the
case may be, included in such subordination provisions.


                  SECTION 8.  Affirmative  Covenants.  Each of Holdings  and the
Borrower  hereby  covenants and agrees that on and after the Effective  Date and
until the Total  Commitment  and all Letters of Credit have  terminated  and the
Loans,  Notes and Unpaid  Drawings,  together with interest,  Fees and all other
Obligations (other than indemnities


                                      -52-


<PAGE>




described  in  Section  13.13  which  are not  then  due and  payable)  incurred
hereunder and thereunder, are paid in full:

     8.01 Information Covenants. Holdings will furnish to each Bank:

               (a) Monthly Reports.  Within 50 days after the end of each fiscal
         month of Holdings (commencing with its fiscal month ending on March 31,
         1998), the consolidated  balance sheet of Holdings and its Subsidiaries
         as at the  end of  such  fiscal  month  and  the  related  consolidated
         statements of income and retained  earnings and statement of cash flows
         for such fiscal  month and for the  elapsed  portion of the fiscal year
         ended  with the last day of such  fiscal  month,  in each case  setting
         forth  comparative  figures for the  corresponding  fiscal month in the
         prior  fiscal  year and  comparable  budgeted  figures  for such fiscal
         month.

               (b) QuarterlyFinancial Statements. Within 50 days after the close
         of the first three quarterly  accounting periods in each fiscal year of
         Holdings (commencing with its quarterly accounting period ending on May
         31,  1998),  the  consolidated   balance  sheet  of  Holdings  and  its
         Subsidiaries as at the end of such quarterly  accounting period and the
         related  consolidated  statements  of income and retained  earnings and
         statement of cash flows for such  quarterly  accounting  period and for
         the elapsed  portion of the fiscal year ended with the last day of such
         quarterly  accounting  period,  in each case setting forth  comparative
         figures for the related  periods in the prior fiscal year, all of which
         shall be certified by the Chief Financial Officer of Holdings,  subject
         to normal year-end audit adjustments and the absence of footnotes.

               (c) Annual Financial  Statements.  Within 95 days after the close
         of each fiscal year of Holdings,  (i) the consolidated balance sheet of
         Holdings and its Subsidiaries as at the end of such fiscal year and the
         related  consolidated  statements  of income and retained  earnings and
         statement of cash flows for such fiscal year setting forth  comparative
         figures  for the  preceding  fiscal  year and  certified  by Deloitte &
         Touche LLP or such other  independent  certified public  accountants of
         recognized  national  standing  reasonably  acceptable  to  the  Agent,
         together  with a report of such  accounting  firm  stating  that in the
         course of its regular audit of the financial statements of Holdings and
         its  Subsidiaries,   which  audit  was  conducted  in  accordance  with
         generally accepted auditing standards, such accounting firm obtained no
         knowledge of any Default or an Event of Default  relating to accounting
         matters which has occurred and is  continuing  or, if in the opinion of
         such  accounting  firm such a Default or Event of Default has  occurred
         and is  continuing,  a  statement  as to the  nature  thereof  and (ii)
         management's  discussion and analysis of the material  operational  and
         financial developments during such fiscal year.


                                      -53-


<PAGE>




               (d) Management  Letters.  Promptly after  Holdings' or any of its
         Subsidiaries'  receipt  thereof,  a  copy  of any  "management  letter"
         received  from  its  certified  public   accountants  and  management's
         response thereto.

               (e) Budgets and Projections.  No later than 30 days following the
         first day of each fiscal year of Holdings  (commencing  with its fiscal
         year  ending   February  28,  1999),   a  budget  in  form   reasonably
         satisfactory to the Agent (including  budgeted statements of income and
         sources and uses of cash and balance  sheets)  prepared by Holdings (i)
         for each of the twelve  months of such fiscal  year  prepared in detail
         and (ii) for each of the  immediately  three  succeeding  fiscal  years
         prepared in summary form, in each case setting forth,  with appropriate
         discussion,  the  principal  assumptions  upon which such  budgets  are
         based.

               (f)  Officer's  Certificates.  At the time of the delivery of the
         financial  statements  provided  for in  Sections  8.01(b)  and (c),  a
         certificate  of the Chief  Financial  Officer of Holdings to the effect
         that, to the best of such officer's  knowledge,  no Default or Event of
         Default has occurred and is  continuing  or, if any Default or Event of
         Default  has  occurred  and is  continuing,  specifying  the nature and
         extent  thereof,  which  certificate  shall (x) set forth in reasonable
         detail the calculations  required to establish (A) whether Holdings and
         its  Subsidiaries  were in compliance  with the  provisions of Sections
         4.02(e),  4.02(g), 9.04 and 9.07 through 9.09, inclusive, at the end of
         such fiscal quarter or year, as the case may be, and (B) the Applicable
         Eurodollar  Rate  Margin and the  Applicable  Base Rate  Margin for the
         Applicable  Margin Period  commencing  with the date of the delivery of
         such  financial  statements,  and (y) if delivered  with the  financial
         statements required by Section 8.01(c),  set forth in reasonable detail
         the amount of (and the  calculations  required to establish  the amount
         of) Excess Cash Flow for the respective Excess Cash Payment Period.

               (g) Notice of Default or  Litigation.  Promptly  upon, and in any
         event within three Business Days after, any officer of any Credit Party
         obtains  knowledge  thereof,  notice of (i) the occurrence of any event
         which  constitutes  a  Default  or an  Event  of  Default  and (ii) any
         litigation or  governmental  investigation  or  proceeding  pending (x)
         against Holdings or any of its  Subsidiaries  which could reasonably be
         expected to materially and adversely  affect the business,  operations,
         property,  assets,  liabilities,  condition (financial or otherwise) or
         prospects of Holdings and its  Subsidiaries  taken as a whole, (y) with
         respect  to  any  material  Indebtedness  of  Holdings  or  any  of its
         Subsidiaries or (z) with respect to the Transaction or any Document.

               (h) Other  Reports  and  Filings.  Promptly  after the  filing or
         delivery thereof, copies of all financial information,  proxy materials
         and reports, if any, which


                                      -54-


<PAGE>




         Holdings  or any of its  Subsidiaries  shall  publicly  file  with  the
         Securities and Exchange Commission or any successor thereto (the "SEC")
         or  deliver to holders of its  material  Indebtedness  pursuant  to the
         terms of the documentation governing such Indebtedness (or any trustee,
         agent or other representative therefor).

               (i)  Environmental  Matters.  Promptly  after any  officer of any
         Credit Party obtains  knowledge  thereof,  notice of one or more of the
         following  environmental  matters,  unless such  environmental  matters
         could  not,  individually  or  when  aggregated  with  all  other  such
         environmental   matters,  be  reasonably  expected  to  materially  and
         adversely   affect  the   business,   operations,   property,   assets,
         liabilities,   condition  (financial  or  otherwise)  or  prospects  of
         Holdings and its Subsidiaries taken as a whole:

                            (i) any pending or  threatened  Environmental  Claim
                   against  Holdings  or  any of its  Subsidiaries  or any  Real
                   Property owned,  leased or operated by Holdings or any of its
                   Subsidiaries;

                           (ii) any  condition or  occurrence on or arising from
                   any Real  Property  owned,  leased or operated by Holdings or
                   any of its Subsidiaries  that (a) results in noncompliance by
                   Holdings  or any  of its  Subsidiaries  with  any  applicable
                   Environmental  Law or (b) could be expected to form the basis
                   of an  Environmental  Claim  against  Holdings  or any of its
                   Subsidiaries or any such Real Property;

                          (iii) any condition or occurrence on any Real Property
                   owned,   leased  or  operated  by  Holdings  or  any  of  its
                   Subsidiaries  that  could  be  expected  to cause  such  Real
                   Property to be subject to any  restrictions on the ownership,
                   occupancy,  use or  transferability by Holdings or any of its
                   Subsidiaries  of such Real Property  under any  Environmental
                   Law; and

                           (iv) the taking of any removal or remedial  action in
                   response to the actual or alleged  presence of any  Hazardous
                   Material on any Real  Property  owned,  leased or operated by
                   Holdings  or any  of  its  Subsidiaries  as  required  by any
                   Environmental Law or any governmental or other administrative
                   agency; provided, that in any event Holdings shall deliver to
                   each Bank all  notices  received  by  Holdings  or any of its
                   Subsidiaries  from  any  government  or  governmental  agency
                   under, or pursuant to, CERCLA which identify  Holdings or any
                   of its  Subsidiaries as potentially  responsible  parties for
                   remediation  costs or which otherwise  notify Holdings or any
                   of its Subsidiaries of potential liability under CERCLA.


                                      -55-


<PAGE>




All such notices shall  describe in  reasonable  detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and Holdings'
or such Subsidiary's response thereto.

               (j) Other Information.  From time to time, such other information
or documents  (financial  or  otherwise)  with respect to Holdings or any of its
Subsidiaries as the Agent or any Bank may reasonably request.

     8.02 Books,  Records,  Inspections and Annual Meetings.  (a) Holdings will,
and will cause each of its  Subsidiaries  to,  keep  proper  books of record and
accounts in which full,  true and correct  entries in conformity  with generally
accepted accounting  principles and all requirements of law shall be made of all
dealings and  transactions in relation to its business and activities.  Holdings
will, and will cause each of its Subsidiaries to, permit officers and designated
representatives of the Agent or any Bank to visit and inspect, under guidance of
officers of Holdings or such  Subsidiary,  any of the  properties of Holdings or
such  Subsidiary,  and to  examine  the books of  account  of  Holdings  or such
Subsidiary  and discuss the  affairs,  finances and accounts of Holdings or such
Subsidiary  with,  and be advised as to the same by, its and their  officers and
independent accountants, all upon reasonable prior notice and at such reasonable
times and intervals and to such reasonable  extent as the Agent or such Bank may
reasonably request.

                  (b) At a date to be mutually agreed upon between the Agent and
Holdings  occurring  on or prior to the 120th day after the close of each fiscal
year of Holdings,  Holdings shall,  at the request of the Agent,  hold a meeting
with all of the Banks at which meeting  shall be reviewed the financial  results
of Holdings and its  Subsidiaries  for the previous  fiscal year and the budgets
presented for the current fiscal year of Holdings.

     8.03 Maintenance of Property;  Insurance. (a) Holdings will, and will cause
each of its Subsidiaries to, (i) keep all property  necessary to the business of
Holdings and its  Subsidiaries  in reasonably  good working order and condition,
ordinary wear and tear excepted, (ii) maintain insurance on all such property in
at least such  amounts and against at least such risks as is  consistent  and in
accordance  with  industry  practice for  companies  similarly  situated  owning
similar  properties  in the same general  areas in which  Holdings or any of its
Subsidiaries  operates,  and (iii) furnish to the Agent,  upon written  request,
full information as to the insurance  carried.  At any time that insurance at or
above the levels  described on Schedule VII is not being  maintained by Holdings
or  any  Subsidiary  of  Holdings,  Holdings  will,  or  will  cause  one of its
Subsidiaries  to,  promptly  notify  the Agent in  writing  and,  if  thereafter
reasonably  requested by the Agent or the Required  Banks to do so,  Holdings or
any such  Subsidiary,  as the case may be, shall  obtain such  insurance at such
levels and coverage  which are at least as great as to the extent such insurance
is reasonably available at a reasonable expense.


                                      -56-


<PAGE>




                  (b) Holdings will, and will cause each of its Subsidiaries to,
at all times keep its property insured in favor of the Collateral Agent, and all
policies  (including  Mortgage  Policies) or certificates  (or certified  copies
thereof) with respect to such insurance (and any other  insurance  maintained by
Holdings  and/or such  Subsidiaries)  (i) shall be  endorsed  to the  Collateral
Agent's satisfaction for the benefit of the Collateral Agent (including, without
limitation,  by naming  the  Collateral  Agent as loss payee  and/or  additional
insured),  (ii) shall state that such insurance  policies shall not be cancelled
without at least 30 days' prior written notice thereof by the respective insurer
to the  Collateral  Agent  (or  such  shorter  period  of time  as a  particular
insurance  company  policy  generally  provides),  (iii) shall  provide that the
respective  insurers  irrevocably  waive any and all rights of subrogation  with
respect to the Collateral  Agent and the Secured  Creditors,  (iv) shall contain
the  standard  non-contributing  mortgage  clause  endorsement  in  favor of the
Collateral Agent with respect to hazard liability  insurance,  (v) shall, except
in the case of public  liability  insurance,  provide  that any losses  shall be
payable  notwithstanding  (A)  any  act or  neglect  of  Holdings  or any of its
Subsidiaries,  (B) the  occupation  or use of the  properties  for purposes more
hazardous  than those  permitted by the terms of the  respective  policy if such
coverage is obtainable at commercially  reasonable rates and is of the kind from
time to time  customarily  insured  against by Persons  owning or using  similar
property  and in such amounts as are  customary,  (C) any  foreclosure  or other
proceeding  relating to the insured properties or (D) any change in the title to
or ownership or possession of the insured properties and (vi) shall be deposited
with the Collateral Agent.

                  (c) If  Holdings  or any of its  Subsidiaries  shall  fail  to
insure its property in accordance  with this Section 8.03, or if Holdings or any
of its  Subsidiaries  shall fail to so  endorse  and  deposit  all  policies  or
certificates  with respect  thereto,  the Collateral  Agent shall have the right
(but shall be under no  obligation)  to procure such  insurance and Holdings and
the Borrower  agree to reimburse the Collateral  Agent for all reasonable  costs
and expenses of procuring such insurance.

     8.04  Corporate  Franchises.  Holdings  will,  and will  cause  each of its
Subsidiaries  to, do or cause to be done,  all things  necessary to preserve and
keep in full force and effect its existence and its material rights, franchises,
licenses and patents; provided, however, that nothing in this Section 8.04 shall
prevent  (i) sales of assets and other  transactions  by  Holdings or any of its
Subsidiaries  in accordance with Section 9.02 or (ii) the withdrawal by Holdings
or any of its Subsidiaries of its qualification as a foreign  corporation in any
jurisdiction where such withdrawal could not,  individually or in the aggregate,
reasonably  be  expected  to have a  material  adverse  effect on the  business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

     8.05 Compliance with Statutes,  etc.  Holdings will, and will cause each of
its Subsidiaries to, comply with all applicable statutes, regulations and orders
of, and all


                                      -57-


<PAGE>




applicable  restrictions  imposed  by,  all  governmental  bodies,  domestic  or
foreign,  in respect of the conduct of its  business  and the  ownership  of its
property (including  applicable statutes,  regulations,  orders and restrictions
relating to environmental standards and controls), except such noncompliances as
could not,  individually  or in the aggregate,  reasonably be expected to have a
material  adverse  effect  on  the  business,   operations,   property,  assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.

     8.06 Compliance with Environmental Laws. (a) Holdings will comply, and will
cause each of its  Subsidiaries  to comply,  in all material  respects  with all
Environmental  Laws  applicable to the ownership or use of its Real Property now
or hereafter owned,  leased or operated by Holdings or any of its  Subsidiaries,
will  promptly  pay or cause to be paid  all  costs  and  expenses  incurred  in
connection with such compliance, and will keep or cause to be kept all such Real
Property  free and clear of any Liens  imposed  pursuant  to such  Environmental
Laws.  Neither Holdings nor any of its Subsidiaries  will generate,  use, treat,
store, Release or dispose of, or permit the generation, use, treatment, storage,
Release or disposal of Hazardous Materials on any Real Property now or hereafter
owned,  leased or operated by Holdings or any of its Subsidiaries,  or transport
or permit the  transportation  of  Hazardous  Materials to or from any such Real
Property,  except for Hazardous  Materials  generated,  used,  treated,  stored,
Released  or  disposed  of at any such  Real  Properties  in  compliance  in all
material respects with all applicable Environmental Laws and reasonably required
in  connection  with the  operation,  use and  maintenance  of the  business  or
operations of Holdings or any of its Subsidiaries.

                  (b) At the  reasonable  written  request  of the  Agent or the
Required  Banks,  which request  shall  specify in  reasonable  detail the basis
therefor,  at any time and from time to time,  Holdings  and the  Borrower  will
provide, at the sole expense of Holdings and the Borrower, an environmental site
assessment  report  concerning  any Real Property  owned,  leased or operated by
Holdings or any of its  Subsidiaries,  prepared by an  environmental  consulting
firm  reasonably  approved by the Agent,  indicating  the presence or absence of
Hazardous  Materials and the potential cost of any removal or remedial action in
connection  with such Hazardous  Materials on such Real Property,  provided that
(i) unless the Banks or the Agent has received any notice of the type  described
in Section 8.01(i) or (ii) the Banks have exercised any of the remedies pursuant
to the last paragraph of Section 10, such request may not be made more than once
every two years in respect of any parcel of Real  Property.  If  Holdings or the
Borrower  fails to provide the same within 90 days after such  request was made,
the Agent may order the same,  the cost of which shall be borne by Holdings  and
the Borrower,  and Holdings and the Borrower shall grant and hereby grant to the
Agent  and the  Banks  and  their  agents  access  to  such  Real  Property  and
specifically  grants  the  Agent  and the  Banks  an  irrevocable  non-exclusive
license,  subject to the rights of tenants,  to undertake  such an assessment at
any reasonable time upon rea-


                                      -58-


<PAGE>




sonable notice to Holdings, all at the sole and reasonable expense of Holdings
and the Borrower.

     8.07  ERISA.  As soon as possible  and, in any event,  within ten (10) days
after  Holdings,  any Subsidiary of Holdings or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following,  Holdings will deliver
to each of the Banks a certificate  of the Chief  Financial  Officer of Holdings
setting  forth the full details as to such  occurrence  and the action,  if any,
that Holdings,  such  Subsidiary or such ERISA Affiliate is required or proposes
to take,  together with any notices required or proposed to be given to or filed
with or by  Holdings,  any  Subsidiary,  any ERISA  Affiliate,  the PBGC, a Plan
participant or the Plan  administrator  with respect thereto:  that a Reportable
Event has occurred (except to the extent that Holdings has previously  delivered
to the Banks a certificate  and notices (if any)  concerning such event pursuant
to the next clause hereof);  that a contributing  sponsor (as defined in Section
4001(a)(13)  of ERISA) of a Plan  subject to Title IV of ERISA is subject to the
advance reporting requirement of PBGC Regulation Section 4043.61 (without regard
to subparagraph (b)(1) thereof),  and an event described in subsection .62, .63,
 .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur  with  respect  to such Plan  within  the  following  30 days;  that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA,  has been incurred or an application is reasonably  likely
to be or has been  made for a waiver  or  modification  of the  minimum  funding
standard  (including any required  installment  payments) or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA
with respect to a Plan; that any  contribution  required to be made with respect
to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been
or may be terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that a Plan has an Unfunded Current Liability in excess of $150,000
or all Plans in the aggregate  have an Unfunded  Current  Liability in excess of
$500,000;  that proceedings are reasonably  likely to be or have been instituted
to terminate or appoint a trustee to administer a Plan which is subject to Title
IV of ERISA;  that a proceeding has been  instituted  pursuant to Section 515 of
ERISA to  collect  a  delinquent  contribution  to a Plan;  that  Holdings,  any
Subsidiary  of Holdings or any ERISA  Affiliate  will or may incur any  material
liability (including any indirect,  contingent, or secondary liability) to or on
account of the  termination  of or  withdrawal  from a Plan under  Section 4062,
4063,  4064,  4069,  4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section  401(a)(29),  4971,  4975 or 4980 of the Code or Section 409,  502(i) or
502(l) of ERISA or with  respect to a group  health  plan (as defined in Section
607(1) of ERISA or Section  4980B(g)(2)  of the Code) under Section 4980B of the
Code;  or that  Holdings or any  Subsidiary  of Holdings  may incur any material
liability  pursuant to any employee  welfare benefit plan (as defined in Section
3(1) of ERISA) that  provides  benefits  to retired  employees  or other  former
employees  (other  than as  required by Section 601 of ERISA) or any Plan or any
Foreign Pension Plan.  Holdings will deliver to each of the Banks (i) a complete
copy of the annual report (on Internal Revenue Service Form 5500-series) of each


                                      -59-


<PAGE>




Plan  (including,  to the extent required,  the related  financial and actuarial
statements  and  opinions  and  other  supporting  statements,   certifications,
schedules  and  information)  required  to be filed  with the  Internal  Revenue
Service and (ii) copies of any records, documents or other information that must
be furnished  to the PBGC with  respect to any Plan  pursuant to Section 4010 of
ERISA.  In  addition  to any  certificates  or  notices  delivered  to the Banks
pursuant to the first sentence hereof, copies of annual reports and any records,
documents or other  information  required to be  furnished to the PBGC,  and any
material notices  received by Holdings,  any Subsidiary of Holdings or any ERISA
Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered to
the Banks no later than ten (10) days after the date such annual report has been
filed with the  Internal  Revenue  Service  or such  records,  documents  and/or
information  has been  furnished to the PBGC or such notice has been received by
Holdings, any Subsidiary or any ERISA Affiliate, as applicable.

     8.08 End of Fiscal Years; Fiscal Quarters.  Holdings will cause (i) each of
its,  and  each of its  Subsidiaries',  fiscal  years to end on  February  28 or
February  29,  as the  case  may be,  and  (ii)  each of  its,  and  each of its
Subsidiaries',  fiscal  quarters to end on February 28 (or  February  29, as the
case may be), May 31, August 31 and November 30.

     8.09 Performance of Obligations.  Holdings will, and will cause each of its
Subsidiaries  to,  perform  all of its  obligations  under  the  terms  of  each
mortgage,  indenture, security agreement, loan agreement or credit agreement and
each other  material  agreement,  contract or  instrument  by which it is bound,
except such  non-performances  as could not,  individually  or in the aggregate,
reasonably  be  expected  to have a  material  adverse  effect on the  business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

     8.10 Payment of Taxes. Holdings will pay and discharge, and will cause each
of  its  Subsidiaries  to  pay  and  discharge,   all  taxes,   assessments  and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto,  and all lawful claims for sums that have become due and payable which,
if unpaid,  might become a Lien not otherwise  permitted under Section  9.01(i);
provided, that neither Holdings nor any of its Subsidiaries shall be required to
pay any such tax, assessment,  charge, levy or claim which is being contested in
good faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with generally accepted accounting principles.

     8.11 Additional Security;  Further Assurances.  (a) Holdings will, and will
cause  each of its  Subsidiaries  to,  grant to the  Collateral  Agent  security
interests  and  Mortgages  in such assets and  properties  of  Holdings  and its
Subsidiaries as are not covered by the original Security  Documents,  and as may
be  reasonably  requested  from time to time by the Agent or the Required  Banks
(collectively, the "Additional Security Documents"). All such security interests
and Mortgages shall be granted pursuant to documentation reasonably


                                      -60-


<PAGE>




satisfactory in form and substance to the Agent and shall  constitute  valid and
enforceable  perfected security interests and Mortgages superior to and prior to
the  rights of all third  Persons  and  subject  to no other  Liens  except  for
Permitted  Liens.  The  Additional  Security  Documents or  instruments  related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish,  perfect, preserve and protect the Liens in
favor of the Collateral  Agent required to be granted pursuant to the Additional
Security  Documents and all taxes,  fees and other charges payable in connection
therewith shall have been paid in full.

                  (b) Holdings will, and will cause each of its Subsidiaries to,
at  the  expense  of  Holdings  and  the  Borrower,   make,  execute,   endorse,
acknowledge,  file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments,  conveyances, financing
statements,  transfer  endorsements,  powers  of  attorney,  certificates,  real
property  surveys on new Mortgaged  Properties,  reports and other assurances or
instruments  and take such further steps relating to the  Collateral  covered by
any of the Security  Documents as the Collateral  Agent may reasonably  require.
Furthermore,  Holdings  and the  Borrower  will  cause  to be  delivered  to the
Collateral  Agent such  opinions of counsel,  title  insurance and other related
documents as may be reasonably requested by the Agent to assure itself that this
Section 8.11 has been complied with.

                  (c) If the Agent or the Required  Banks  reasonably  determine
that they are  required  by law or  regulation  to have  appraisals  prepared in
respect of the  Mortgaged  Properties,  the Borrower  will  provide,  at its own
expense,  to the Agent appraisals  which satisfy the applicable  requirements of
the Real Estate Appraisal Reform Amendments of the Financial Institution Reform,
Recovery and Enforcement  Act of 1989, as amended,  and which otherwise shall be
in form and substance reasonably satisfactory to the Agent.

                  (d) Holdings and the Borrower agree that each action  required
above by this Section  8.11 shall be  completed  as soon as possible,  but in no
event  later than 90 days after such action is either  requested  to be taken by
the Agent or the Required  Banks or required to be taken by Holdings  and/or its
Subsidiaries  pursuant to the terms of this Section 8.11;  provided  that, in no
event will Holdings or any of its  Subsidiaries  be required to take any action,
other than using its reasonable  efforts,  to obtain consents from third parties
with respect to its compliance with this Section 8.11.

     8.12   Contributions.   Holdings   will   contribute  as  a  common  equity
contribution to the capital of the Borrower upon its receipt  thereof,  any cash
proceeds  received by Holdings after the Effective Date from any asset sale, any
incurrence  of  Indebtedness,  any Recovery  Event,  any sale or issuance of its
equity or any cash capital contributions received by Holdings.


                                      -61-


<PAGE>




               SECTION 9. Negative Covenants.  Each of Holdings and the Borrower
hereby  covenants and agrees that on and after the Effective  Date and until the
Total Commitment and all Letters of Credit have terminated and the Loans,  Notes
and Unpaid  Drawings,  together with  interest,  Fees and all other  Obligations
(other than any  indemnities  described in Section  13.13 which are not then due
and payable) incurred hereunder and thereunder, are paid in full:

     9.01 Liens.  Holdings will not, and will not permit any of its Subsidiaries
to,  create,  incur,  assume or suffer to exist any Lien upon or with respect to
any property or assets (real or personal, tangible or intangible) of Holdings or
any of its Subsidiaries,  whether now owned or hereafter  acquired,  or sell any
such property or assets subject to an understanding or agreement,  contingent or
otherwise,  to repurchase such property or assets  (including  sales of accounts
receivable with recourse to Holdings or any of its Subsidiaries),  or assign any
right to receive  income or permit the filing of any financing  statement  under
the UCC or any other  similar  notice of Lien  under any  similar  recording  or
notice  statute;  provided  that the  provisions  of this Section 9.01 shall not
prevent the  creation,  incurrence,  assumption  or existence  of the  following
(Liens described below are herein referred to as "Permitted Liens"):

                    (i) inchoate Liens for taxes,  assessments  or  governmental
         charges  or  levies  not yet due or Liens  for  taxes,  assessments  or
         governmental  charges or levies  being  contested  in good faith and by
         appropriate   proceedings   for  which  adequate   reserves  have  been
         established   in  accordance   with   generally   accepted   accounting
         principles;

                   (ii) Liens in respect of property  or assets of the  Borrower
         or any of its  Subsidiaries  imposed by law, which were incurred in the
         ordinary course of business and do not secure Indebtedness for borrowed
         money, such as carriers', warehousemen's,  materialmen's and mechanics'
         liens and other similar Liens (including any right of set-off by a bank
         in  connection  with any deposit  accounts  maintained  with such bank)
         arising in the ordinary course of business, and (x) which do not in the
         aggregate  materially  detract from the value of the Borrower's or such
         Subsidiary's property or assets or materially impair the use thereof in
         the operation of the business of the Borrower or such Subsidiary or (y)
         which are being  contested  in good faith by  appropriate  proceedings,
         which  proceedings  have the effect of removing such Lien or preventing
         the  forfeiture  or sale of the property or assets  subject to any such
         Lien;

                  (iii) Liens in existence on the Initial  Borrowing  Date which
         are listed,  and the property  subject thereto  described,  in Schedule
         VIII,  but  only to the  respective  date,  if any,  set  forth in such
         Schedule VIII for the removal,  replacement and termination of any such
         Liens, plus renewals, replacements and extensions of such


                                      -62-


<PAGE>




         Liens to the extent set forth on Schedule  VIII,  provided that (x) the
         aggregate principal amount of the Indebtedness, if any, secured by such
         Liens does not increase from that amount outstanding at the time of any
         such  renewal,  replacement  or  extension  and (y) any  such  renewal,
         replacement  or extension  does not encumber any  additional  assets or
         properties of Holdings or any of its Subsidiaries;

                   (iv)    Permitted Encumbrances;

                    (v)    Liens created pursuant to the Security Documents;

                   (vi)  leases  or  subleases  granted  to  other  Persons  not
         materially  interfering with the conduct of the business of Holdings or
         any of its Subsidiaries;

                  (vii)  Liens  upon  assets  of  the  Borrower  or  any  of its
         Subsidiaries  subject to  Capitalized  Lease  Obligations to the extent
         such Capitalized  Lease  Obligations are permitted by Section 9.04(iv),
         provided  that (x) such  Liens  only  serve to secure  the  payment  of
         Indebtedness  arising under such  Capitalized  Lease Obligation and (y)
         the Lien  encumbering  the asset giving rise to the  Capitalized  Lease
         Obligation  does not  encumber  any other asset of the  Borrower or any
         Subsidiary of the Borrower;

                 (viii) Liens placed upon Real Property,  fixtures, equipment or
         machinery  acquired  after the Effective  Date and used in the ordinary
         course of business of the  Borrower or any of its  Subsidiaries  at the
         time of the acquisition  thereof by the Borrower or any such Subsidiary
         or within 90 days thereafter to secure Indebtedness incurred to pay all
         or a portion of the purchase  price  thereof or to secure  Indebtedness
         incurred  solely for the purpose of financing  the  acquisition  of any
         such Real  Property,  fixtures,  equipment or machinery or  extensions,
         renewals  or  replacements  of any of the  foregoing  for the same or a
         lesser amount,  provided that (x) the aggregate  outstanding  principal
         amount of all  Indebtedness  secured by Liens  permitted by this clause
         (viii) shall not at any time exceed  $1,000,000  and (y) in all events,
         the  Lien  encumbering  the  Real  Property,   fixtures,  equipment  or
         machinery so acquired does not encumber any other asset of the Borrower
         or such Subsidiary;

                   (ix) easements,  rights-of-way,  restrictions,  encroachments
         and  other   similar   charges  or   encumbrances,   and  minor   title
         deficiencies, in each case not securing Indebtedness and not materially
         interfering  with the conduct of the business of Holdings or any of its
         Subsidiaries;

                    (x) Liens arising from precautionary UCC financing statement
         filings regarding operating leases;


                                      -63-


<PAGE>




                   (xi) Liens  arising  out of the  existence  of  judgments  or
         awards in respect of which Holdings or any of its Subsidiaries shall in
         good  faith be  prosecuting  an appeal  or  proceedings  for  review in
         respect of which there  shall have been  secured a  subsisting  stay of
         execution  pending  such  appeal  or  proceedings,  provided  that  the
         aggregate  amount of any cash and the fair market value of any property
         subject to such Liens do not exceed $1,000,000 at any time outstanding;

                  (xii)  statutory and common law landlords'  liens under leases
         to which Holdings or any of its Subsidiaries is a party;

                 (xiii) Liens (other than Liens imposed under ERISA) incurred in
         the ordinary course of business in connection with workers compensation
         claims,  unemployment  insurance and social security benefits and Liens
         securing the performance of bids, tenders,  leases and contracts in the
         ordinary  course of  business,  statutory  obligations,  surety  bonds,
         performance  bonds and other  obligations of a like nature  incurred in
         the ordinary course of business (exclusive of obligations in respect of
         the payment for borrowed money);

                  (xiv)  Liens on  property  or assets  acquired  pursuant  to a
         Permitted Acquisition,  or on property or assets of a Subsidiary of the
         Borrower in existence at the time such Subsidiary is acquired  pursuant
         to a Permitted Acquisition,  provided that (x) any Indebtedness that is
         secured by such Liens is permitted to exist under  Section  9.04(viii),
         and  (y)  such  Liens  are  not  incurred  in  connection  with,  or in
         contemplation or anticipation of, such Permitted Acquisition and do not
         attach to any other asset of the Borrower or any of its Subsidiaries;

                   (xv)  Liens  securing  the  Indebtedness  to  be  Refinanced,
         provided that such Liens shall only be permitted to remain  outstanding
         until the consummation of the Merger; and

                  (xvi) Liens on the proceeds (plus investment earnings thereon)
         from the issuance of the Senior  Subordinated Notes (to the extent such
         proceeds were not used to pay for the Shares  tendered  pursuant to the
         Tender Offer) in favor of the holders thereof to be held by the trustee
         for  such  holders  to pay the  merger  consideration  pursuant  to the
         Merger,  provided  that such Liens only  shall be  permitted  to remain
         outstanding through the consummation of the Merger.

In connection  with the granting of Liens of the type described in clauses (vii)
and (viii) of this Section 9.01 by the Borrower or any of its Subsidiaries,  the
Agent and the  Collateral  Agent shall be authorized to take any actions  deemed
appropriate by it in connection  therewith  (including,  without limitation,  by
executing appropriate lien releases or lien subordination agreements in favor of
the holder or holders of such Liens, in either case solely with


                                      -64-


<PAGE>




respect  to the item or items of  equipment  or  other  assets  (including  Real
Property) subject to such Liens).

     9.02 Consolidation,  Merger, Purchase or Sale of Assets, etc. Holdings will
not,  and will not permit any of its  Subsidiaries  to,  wind up,  liquidate  or
dissolve its affairs or enter into any  transaction of merger or  consolidation,
or convey,  sell, lease or otherwise  dispose of all or any part of its property
or  assets,  or enter  into any  sale-leaseback  transactions,  or  purchase  or
otherwise  acquire (in one or a series of related  transactions) any part of the
property or assets  (other than  purchases or other  acquisitions  of inventory,
materials  and  equipment in the ordinary  course of business) of any Person (or
agree to do any of the foregoing at any future time), except that:

                   (i) Capital Expenditures by the Borrower and its Subsidiaries
         shall be permitted to the extent not in violation of Section 9.08;

                  (ii) each of the Borrower and its  Subsidiaries may make sales
         of inventory in the ordinary course of business;

                 (iii)  each of the  Borrower  and  its  Subsidiaries  may  sell
         obsolete, uneconomic or worn-out equipment or materials in the ordinary
         course of business or other  equipment  or  materials  in the  ordinary
         course of business  which are no longer  useful in the  business of the
         Borrower or such Subsidiary,  provided that the aggregate amount of the
         proceeds  received  from all assets sold  pursuant to this clause (iii)
         shall not exceed $250,000 in any fiscal year of the Borrower;

                  (iv) each of the Borrower and its Subsidiaries may sell assets
         (other than the capital stock of any Subsidiary Guarantor),  so long as
         (u) no  Default  or Event  of  Default  then  exists  or  would  result
         therefrom, (w) each such sale is in an arm's-length transaction and the
         Borrower  or the  respective  Subsidiary  receives at least fair market
         value (as determined in good faith by the Borrower or such  Subsidiary,
         as the  case may  be),  (x) the  total  consideration  received  by the
         Borrower  or such  Subsidiary  is at least  90% cash and is paid at the
         time of the closing of such sale,  (y) the Net Sale Proceeds  therefrom
         are  applied  and/or  reinvested  as (and to the  extent)  required  by
         Section 4.02(e) and (z) the aggregate  amount of the proceeds  received
         from all assets  sold  pursuant  to this  clause  (iv) shall not exceed
         $1,500,000 in any fiscal year of the Borrower;

                   (v)  Investments  may be  made  to the  extent  permitted  by
         Section 9.05;

                  (vi) each of the Borrower and its  Subsidiaries  may lease (as
         lessee)  real or personal  property (so long as any such lease does not
         create a Capitalized Lease Obligation except to the extent permitted by
         Section 9.04(iv));


                                      -65-


<PAGE>




                 (vii) each of the  Borrower  and its  Subsidiaries  may sell or
         discount,  in each case without  recourse and in the ordinary course of
         business,  accounts  receivable  arising  in  the  ordinary  course  of
         business,  but only in  connection  with the  compromise  or collection
         thereof;

                (viii)     the Acquisition shall be permitted;

                  (ix)  each of the  Borrower  and its  Subsidiaries  may  grant
         leases or subleases to other Persons not  materially  interfering  with
         the conduct of the business of the Borrower or any of its Subsidiaries;

                   (x)  any  Subsidiary  of the  Borrower  (x)  may  be  merged,
         consolidated  or  liquidated  with or into the  Borrower so long as the
         Borrower is the surviving corporation of such merger,  consolidation or
         liquidation  and (y) may  transfer  all or any portion of its assets to
         the Borrower;

                  (xi)  any  Subsidiary  of the  Borrower  (x)  may  be  merged,
         consolidated  or  liquidated  with or into any other  Subsidiary of the
         Borrower so long as (i) in the case of any such  merger,  consolidation
         or  liquidation  involving  a  Subsidiary  Guarantor,   the  Subsidiary
         Guarantor is the surviving corporation of such merger, consolidation or
         liquidation  and (ii) in  addition  to the  requirements  or  preceding
         clause  (i),  in  the  case  of  any  such  merger,   consolidation  or
         liquidation  involving a Wholly-Owned  Subsidiary of the Borrower,  the
         Wholly-Owned  Subsidiary is the surviving  corporation  of such merger,
         consolidation  or  liquidation,  (y) may transfer all or any portion of
         its assets to any  Subsidiary  Guarantor  and (z) may,  so long as such
         Subsidiary is not a Subsidiary Guarantor,  (i) be merged,  consolidated
         or liquidated with or into any other Subsidiary of the Borrower that is
         not a Subsidiary  Guarantor and (ii) transfer all or any portion of its
         assets to any other Subsidiary of the Borrower that is not a Subsidiary
         Guarantor; and

                 (xii)  after  the  consummation  of  the  Merger,  each  of the
         Borrower and the Subsidiary Guarantors may acquire all or substantially
         all of the  assets of any Person  (or all or  substantially  all of the
         assets of a product line or division of any Person) or 100% (or, to the
         extent  permitted  below,  at least  90%) of the  capital  stock of any
         Person  (including by the merger or  consolidation  of such Person with
         and into  the  Borrower  or such  Subsidiary  Guarantor  so long as the
         Borrower or such Subsidiary  Guarantor is the surviving  corporation of
         such  merger  or  consolidation)  (any  such  acquisition,   merger  or
         consolidation   permitted   by  this   clause   (xii),   a   "Permitted
         Acquisition"),  so long as (i) no  Default  or  Event of  Default  then
         exists or would result therefrom,  (ii) each of the representations and
         warranties  contained  in  Section 7 shall be true and  correct  in all
         material respects both before and after giving effect to such Permitted
         Acquisition (provided that any


                                      -66-


<PAGE>




          representation  or warranty which is made as of specified shall solely
          be required to be true and correct in all material respects as of such
          date),  (iii) any Liens or Indebtedness  assumed or issued  (including
          any Seller Notes) in connection  with such  acquisition  are otherwise
          permitted  under  Section  9.01 or 9.04,  as the case may be, (iv) the
          only consideration paid by the Borrower or any Subsidiary Guarantor in
          connection  with any Permitted  Acquisition  consists  solely of cash,
          Seller  Notes,  common stock of Holdings  and/or  Qualified  Preferred
          Stock  of  Holdings,  (v) at  least  10  Business  Days  prior  to the
          consummation  of any Permitted  Acquisition,  the Borrower  shall have
          delivered  to the  Agent  and  each  of the  Banks  a  certificate  of
          Holdings'  Chief  Financial   Officer   certifying  (and  showing  the
          calculations  therefor in  reasonable  detail)  that (x) the assets or
          Person acquired  pursuant to such Permitted  Acquisition will have pro
          forma positive  earnings (before interest expense and taxes and adding
          back  any  amortization  of  intangibles  and  depreciation)  and  (y)
          Holding's and its Subsidiaries  would have been in compliance with the
          financial  covenants  set forth in Sections 9.08 and 9.09 for the Test
          Period then most recently ended prior to the date of the  consummation
          of such  Permitted  Acquisition,  in each case with such  earnings and
          financial  covenants to be  determined on a pro forma basis as if such
          Permitted  Acquisition  had been  consummated on the first day of such
          Test Period (and assuming that any  Indebtedness  incurred,  issued or
          assumed in connection  therewith had been incurred,  issued or assumed
          on the first day of, and had  remained  outstanding  throughout,  such
          Test Period), it being understood,  however,  (A) that with respect to
          any  Permitted  Acquisition  consummated  prior to May 31,  1998,  the
          Borrower shall be in pro forma  compliance  with the financial  ratios
          set forth in  Sections  9.08 and 9.09 in  respect  of the Test  Period
          ending May 31, 1998 but utilizing the Borrower's  Consolidated  EBITDA
          for its fourth  quarter  ended  February 28, 1998 (and  annualized  in
          connection with  determining  compliance  with Section 9.09),  and (B)
          that with respect to any Permitted Acquisition consummated on or prior
          to January 29, 2000,  the  Borrower's pro forma Leverage Ratio for the
          respective  Test  period  shall  be at least  .25  below  the  maximum
          permitted  Leverage Ratio for such Test Period as set forth in Section
          9.09  (provided  that this clause (B) shall not apply to any Permitted
          Acquisition  in  which  the  aggregate  consideration  (determined  as
          provided  below in this Section  9.02(xii))  is  $1,000,000 or less so
          long as no more than one such $1,000,000 or less Permitted Acquisition
          is  consummated   in  any  six  month  period),   (vi)  the  aggregate
          consideration  paid in connection  with any Permitted  Acquisition  or
          group  of   related   Permitted   Acquisitions   (including,   without
          limitation,   any  earn-out,   non-compete  or  deferred  compensation
          arrangements,  the  aggregate  principal  amount  of any  Indebtedness
          issued  and/or  assumed in  connection  therewith  and the fair market
          value of any capital stock of Holdings issued in connection  therewith
          (as  determined  in good faith by the Board of Directors of Holdings))
          does not exceed  $10,000,000,  (vii) the aggregate cash  consideration
          paid in connection with all Permitted  Acquisitions in which less than
          100% of the capital stock of the acquired Person is


                                      -67-


<PAGE>




          purchased (including, without limitation, any earn-out, non-compete or
          deferred compensation arrangements,  the aggregate principal amount of
          any Indebtedness issued and/or assumed in connection therewith and the
          fair  market  value  of  any  capital  stock  of  Holdings  issued  in
          connection therewith) does not exceed $5,000,000 and (viii) the assets
          acquired pursuant to each such Permitted  Acquisition are engaged in a
          business permitted by Section 9.13 and are employed principally in the
          United States and Canada.

To the extent the Required  Banks waive the provisions of this Section 9.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted by
this  Section  9.02  (other  than to Holdings  or a  Subsidiary  thereof),  such
Collateral  shall be sold free and clear of the Liens  created  by the  Security
Documents,  and the Agent and the  Collateral  Agent shall be authorized to take
any actions deemed appropriate in order to effect the foregoing.

     9.03  Dividends.  Holdings  will  not,  and  will  not  permit  any  of its
Subsidiaries  to,  authorize,  declare  or pay any  Dividends  with  respect  to
Holdings or any of its Subsidiaries, except that:

                    (i)  (x)  any  Subsidiary  of  the  Borrower  may  pay  cash
         Dividends  to the  Borrower or to any  Wholly-Owned  Subsidiary  of the
         Borrower,  provided that, prior to the consummation of the Merger,  ATC
         may not pay cash  Dividends and (y) so long as no Default under Section
         10.01 or 10.05 then  exists or would  result  therefrom  or no Event of
         Default then exists or would  result  therefrom,  any  non-Wholly-Owned
         Subsidiary of the Borrower may pay cash  Dividends to its  shareholders
         generally so long as the Borrower or its  respective  Subsidiary  which
         owns the equity  interest or  interests in the  Subsidiary  paying such
         Dividends receives at least its proportionate share thereof (based upon
         its relative holdings of equity interests in the Subsidiary paying such
         Dividends and taking into account the relative preferences,  if any, of
         the various classes of equity interests in such Subsidiary);

                   (ii) so long as no Default or Event of Default then exists or
         would result therefrom,  after the consummation of the Merger, Holdings
         may  repurchase  outstanding  shares of its common stock (or options to
         purchase such common stock) following the death,  disability,  hardship
         or  termination  of  employment of officers or employees of Holdings or
         any  of  its  Subsidiaries,  provided  that  the  aggregate  amount  of
         Dividends  paid by  Holdings  pursuant  to this  clause  (ii) shall not
         exceed $500,000 in any fiscal year of Holdings;

                  (iii) so long as no Default or Event of Default then exists or
         would  result  therefrom,  after the  consummation  of the Merger,  the
         Borrower may pay cash


                                      -68-


<PAGE>




         Dividends to Holdings so long as Holdings  promptly  uses such proceeds
         for the purposes described in clause (ii) of this Section 9.03;

                   (iv) after the  consummation of the Merger,  the Borrower may
         pay cash  Dividends  to  Holdings so long as the  proceeds  thereof are
         promptly  used by Holdings to pay  operating  expenses in the  ordinary
         course of  business  (including,  without  limitation,  director  fees,
         professional  fees and expenses) and other similar  corporate  overhead
         costs  and  expenses,  provided  that  the  aggregate  amount  of  cash
         Dividends  paid  pursuant to this clause (iv) during any fiscal year of
         the Borrower shall not exceed $250,000;

                    (v) after the  consummation of the Merger,  the Borrower may
         pay cash  Dividends  to Holdings in the amounts and at the times of any
         payment by Holdings in respect of taxes,  provided  that (x) the amount
         of cash Dividends  paid pursuant to this clause (v) to enable  Holdings
         to pay federal and state  income taxes at any time shall not exceed the
         amount  of such  federal  and  state  income  taxes  actually  owing by
         Holdings  at such time for the  respective  period and (y) any  refunds
         received  by  Holdings  shall  promptly  be returned by Holdings to the
         Borrower;

                   (vi) Holdings may pay  Dividends on its  Qualified  Preferred
         Stock  solely  through the issuance of  additional  shares of Qualified
         Preferred Stock of Holdings; and

                  (vii) the merger  consideration may be paid in connection with
         the consummation of the Merger.

     9.04  Indebtedness.  Holdings  will  not,  and will not  permit  any of its
Subsidiaries  to,  contract,  create,  incur,  assume  or  suffer  to exist  any
Indebtedness, except:

                    (i) Indebtedness incurred pursuant to this Agreement and
         the other Credit Documents;

                   (ii)  Existing   Indebtedness   outstanding  on  the  Initial
         Borrowing  Date and listed on Schedule VI, without giving effect to any
         subsequent  extension,  renewal or  refinancing  thereof  except to the
         extent set forth on Schedule VI, provided that the aggregate  principal
         amount of the Indebtedness to be extended,  renewed or refinanced shall
         not  increase  from  that  amount  outstanding  at the time of any such
         extension, renewal or refinancing;

                  (iii) Indebtedness  under Interest Rate Protection  Agreements
         entered into with respect to other  Indebtedness  permitted  under this
         Section 9.04;


                                      -69-


<PAGE>




                   (iv)  Indebtedness  of  the  Borrower  and  its  Subsidiaries
         evidenced by  Capitalized  Lease  Obligations  to the extent  permitted
         pursuant to Section 9.08, provided that in no event shall the aggregate
         principal  amount of Capitalized  Lease  Obligations  permitted by this
         clause (iv) exceed $1,000,000 at any time outstanding;

                    (v)  Indebtedness  subject to Liens permitted under Sections
         9.01(viii);

                   (vi)  intercompany  Indebtedness  among the  Borrower and its
         Subsidiaries to the extent permitted by Section 9.05(ix);

                  (vii)   Indebtedness   of  the  Borrower  and  the  Subsidiary
         Guarantors  under the Senior  Subordinated  Notes and the other  Senior
         Subordinated  Note  Documents in an aggregate  principal  amount not to
         exceed   $100,000,000  (as  reduced  by  any  repayments  of  principal
         thereof),  provided that, prior to the consummation of the Merger,  ATC
         and its  Subsidiaries  may not have any  obligations  in respect of the
         Senior Subordinated Notes;

                 (viii)  Indebtedness  of a  Subsidiary  acquired  pursuant to a
         Permitted  Acquisition  (or  Indebtedness  assumed  at  the  time  of a
         Permitted Acquisition of an asset securing such Indebtedness), provided
         that (x) such  Indebtedness  was not incurred in connection with, or in
         anticipation or contemplation of, such Permitted Acquisition,  (y) such
         Indebtedness  does not  constitute  debt for borrowed money (other than
         debt for borrowed money incurred in connection with industrial  revenue
         or industrial  development  bond  financings),  it being understood and
         agreed  that   Capitalized   Lease   Obligations   and  purchase  money
         Indebtedness  shall not constitute debt for borrowed money for purposes
         of  this  clause  (viii),  and  (z)  at  the  time  of  such  Permitted
         Acquisition such Indebtedness does not exceed 10% of the total value of
         the assets of the Subsidiary so acquired,  or of the asset so acquired,
         as the case may be;

                   (ix)  Indebtedness of ATC and its  Subsidiaries in respect of
         the  Indebtedness  to be  Refinanced,  provided that such  Indebtedness
         shall only be permitted to remain outstanding until the consummation of
         the Merger;

                    (x) guaranties by the Borrower and its  Subsidiaries of each
         other's Indebtedness otherwise permitted under this Section 9.04;

                   (xi)   unsecured   Indebtedness   of  the  Borrower  and  its
         Subsidiaries  in  connection  with their  financing of their  insurance
         premiums in the ordinary  course of business and  consistent  with past
         practices so long as no more than  $2,000,000 of such  Indebtedness  is
         outstanding at any time and the Borrower or such Subsidiary


                                      -70-


<PAGE>




         is permitted to incur such Indebtedness under the Senior Subordinated
         Note Indenture; and

                  (xii) unsecured  Indebtedness incurred by the Borrower and its
         Subsidiaries  in the form of  Seller  Notes in an  aggregate  principal
         amount not to exceed $10,000,000 at any one time outstanding.

     9.05  Advances,  Investments  and Loans.  Holdings  will not,  and will not
permit any of its Subsidiaries to, directly or indirectly,  lend money or credit
or make advances to any Person, or purchase or acquire any stock, obligations or
securities  of, or any other interest in, or make any capital  contribution  to,
any other  Person,  or purchase or own a futures  contract or  otherwise  become
liable for the  purchase or sale of currency  or other  commodities  at a future
date in the nature of a futures  contract,  or hold any cash or Cash Equivalents
(each of the foregoing an "Investment" and, collectively, "Investments"), except
that the following shall be permitted:

                    (i) the Borrower and its  Subsidiaries  may acquire and hold
         accounts  receivables  owing to any of them,  if created or acquired in
         the  ordinary  course of  business  and  payable  or  dischargeable  in
         accordance   with  customary  trade  terms  of  the  Borrower  or  such
         Subsidiary;

                   (ii) the Borrower and its  Subsidiaries  may acquire and hold
         cash and Cash Equivalents, provided that during any time that Revolving
         Loans or Swingline Loans are  outstanding the aggregate  amount of cash
         and  Cash  Equivalents  permitted  to be held by the  Borrower  and its
         Subsidiaries  shall  not  exceed  $1,000,000  for  any  period  of five
         consecutive Business Days;

                  (iii) Holdings and its  Subsidiaries  may hold the Investments
         held by them on the Initial  Borrowing  Date and  described on Schedule
         IX, provided that any additional  Investments made with respect thereto
         shall be  permitted  only if  independently  justified  under the other
         provisions of this Section 9.05;

                   (iv) the  Borrower and its  Subsidiaries  may acquire and own
         investments  (including debt  obligations)  received in connection with
         the bankruptcy or reorganization of suppliers and customers and in good
         faith settlement of delinquent obligations of, and other disputes with,
         customers and suppliers arising in the ordinary course of business;

                    (v) the  Borrower  and its  Subsidiaries  may make loans and
         advances  in the  ordinary  course  of  business  to  their  respective
         officers  and  employees  so long  as the  aggregate  principal  amount
         thereof at any time outstanding (determined


                                      -71-


<PAGE>




         without regard to any write-downs or write-offs of such loans and
         advances) shall not exceed $500,000;

                   (vi) Holdings may acquire and hold obligations of one or more
         officers or other  employees of Holdings or any of its  Subsidiaries in
         connection  with such officers' or employees'  acquisition of shares of
         common stock of Holdings (or options to purchase  such common stock) so
         long as no cash is paid by Holdings or any of its  Subsidiaries to such
         officers or employees in connection  with the  acquisition  of any such
         obligations;

                  (vii)  the  Borrower  may  enter  into   Interest   Protection
         Agreements to the extent permitted by Section 9.04(iii);

                 (viii) (x) Holdings may make cash common  equity  contributions
         to the  capital  of the  Borrower,  (y) until the  consummation  of the
         Merger,  Acquisition Corp. may make cash common equity contributions to
         the capital of ATC, and (z) the Borrower and the Subsidiary  Guarantors
         may make cash  common  equity  contributions  to the  capital  of their
         respective Subsidiaries which are Subsidiary Guarantors;

                   (ix) the  Borrower  and the  Subsidiary  Guarantors  may make
         intercompany   loans  and   advances   between  or  among  one  another
         (collectively, "Intercompany Loans"), so long as each Intercompany Loan
         shall  not  be  evidenced  by  a  promissory  note  other  than  by  an
         Intercompany  Note that is pledged to the Collateral  Agent pursuant to
         the Pledge Agreement;

                    (x) guaranties by the Borrower and its  Subsidiaries of each
         other's Indebtedness otherwise permitted under this Section 9.04;

                   (xi) Permitted  Acquisitions shall be permitted in accordance
         with Section 9.02(xii); and

                  (xii) the Borrower and its  Subsidiaries  may acquire and hold
         non-cash  consideration issued by the purchaser of assets in connection
         with a sale of such assets to the extent permitted by Section 9.02(iv).

     9.06 Transactions  with Affiliates.  Holdings will not, and will not permit
any of its  Subsidiaries  to,  enter into any  transaction  or series of related
transactions,  whether  or not in the  ordinary  course  of  business,  with any
Affiliate  of Holdings or any of its  Subsidiaries,  other than in the  ordinary
course of business  and on terms and  conditions  substantially  as favorable to
Holdings or such Subsidiary as would reasonably be obtained


                                      -72-


<PAGE>




by  Holdings  or such  Subsidiary  at that  time  in a  comparable  arm's-length
transaction with a Person other than an Affiliate,  except that the following in
any event shall be permitted:

                    (i) Dividends may be paid to the extent provided in Section
         9.03;

                   (ii) loans may be made and other  transactions may be entered
         into by  Holdings  and its  Subsidiaries  to the  extent  permitted  by
         Sections 9.02, 9.04 and 9.05;

                  (iii)  customary fees may be paid to non-officer  directors of
         Holdings and its Subsidiaries;

                   (iv) the Borrower and its  Subsidiaries  may pay ordinary and
         reasonable   compensation  to  their  respective   officers  (including
         compensation  in the form of options to purchase shares of common stock
         of Holdings,  insurance and other employee benefits) and may enter into
         employment  agreements  with  such  officers  in  connection  therewith
         (including  those  employment  agreements  described  in  the  Offering
         Memorandum relating to the Senior Subordinated Notes); and

                    (v)  Holdings  and its  Subsidiaries  may enter and  perform
         their  obligations  under any Tax Sharing  Agreement entered into among
         themselves in accordance with the terms of this Agreement.

     9.07 Capital  Expenditures.  (a) Holdings will not, and will not permit any
of its  Subsidiaries to, make any Capital  Expenditures,  except that (i) during
the period from the Effective Date through and including  February 28, 1999, the
Borrower  and its  Subsidiaries  may make Capital  Expenditures  in an aggregate
amount not to exceed  $3,400,000 and (ii) during any fiscal year of Holdings set
forth below (taken as one accounting period),  the Borrower and its Subsidiaries
may  make  Capital  Expenditures  so long as the  aggregate  amount  of all such
Capital  Expenditures  does not exceed in any fiscal year of Holdings  set forth
below the amount set forth opposite such fiscal year below:


                  Fiscal Year Ending                                  Amount
                  ------------------                                  ------

                  February 29, 2000                                 $3,500,000
                  February 28, 2001                                 $5,200,000
                  February 28, 2002                                 $4,500,000
                  February 28, 2003                                 $5,000,000


                                      -73-


<PAGE>




                  (b) In addition to the foregoing, in the event that the amount
of  Capital  Expenditures   permitted  to  be  made  by  the  Borrower  and  its
Subsidiaries  pursuant  to clause (a) above in any fiscal  year of the  Borrower
(before  giving  effect to any increase in such  permitted  Capital  Expenditure
amount  pursuant  to this  clause  (b)) is  greater  than the  amount of Capital
Expenditures  actually  made by the  Borrower and its  Subsidiaries  during such
fiscal  year,  the  lesser  of (x)  such  excess  and (y) 25% of the  applicable
permitted  scheduled Capital  Expenditure amount as set forth in such clause (a)
above may be carried  forward and utilized to make Capital  Expenditures  in the
immediately  succeeding  fiscal  year,  provided  that no amounts  once  carried
forward  pursuant to this Section  9.07(b) may be carried  forward to any fiscal
year thereafter and such amounts may only be utilized after the Borrower and its
Subsidiaries have utilized in full the permitted Capital  Expenditure amount for
such fiscal year as set forth in the table in clause (a) above  (without  giving
effect to any increase in such amount by operation of this clause (b)).

                  (c)  In  addition  to  the  foregoing,  the  Borrower  and  it
Subsidiaries may make Capital  Expenditures with the amount of Net Sale Proceeds
received by the Borrower or any of its Subsidiaries  from any Asset Sale so long
as such Net Sale Proceeds are reinvested in  replacement  assets within 300 days
following  the date of such Asset Sale to the extent such Net Sale  Proceeds are
not otherwise  required to be applied to repay outstanding Term Loans (or reduce
the Total Term Loan Commitment,  as the case may be) pursuant to Section 4.02(e)
or reduce the Total Revolving Loan Commitment  pursuant to Section  3.03(d),  as
the case may be.

                  (d) In  addition  to  the  foregoing,  the  Borrower  and  its
Subsidiaries  may make  Capital  Expenditures  with the amount of Net  Insurance
Proceeds  received by the Borrower or any of its Subsidiaries  from any Recovery
Event so long as such Net Insurance  Proceeds are used to replace or restore any
properties or assets in respect of which such Net  Insurance  Proceeds were paid
within 300 days  following  the date of receipt of such Net  Insurance  Proceeds
from such  Recovery  Event to the extent  such Net  Insurance  Proceeds  are not
otherwise  required to be applied to repay outstanding Term Loans (or reduce the
Total Term Loan  Commitment,  as the case may be) pursuant to Section 4.02(g) or
reduce the Total Revolving Loan Commitment  pursuant to Section 3.03(d),  as the
case may be.

                  (e) In  addition  to  the  foregoing,  the  Borrower  and  the
Subsidiary  Guarantors  may make Capital  Expenditures  consisting  of Permitted
Acquisitions to the extent permitted by Section 9.02(xii).

     9.08  Consolidated  Interest  Coverage Ratio.  Holdings will not permit the
Consolidated  Interest Coverage Ratio for any Test Period ending on the last day
of a fiscal quarter set forth below to be less than the ratio set forth opposite
such fiscal quarter below:


                                      -74-


<PAGE>




                  Fiscal Quarter Ending                          Ratio
                  ---------------------                          -----
                  May 31, 1998                                 1.60:1.00
                  August 31, 1998                              1.70:1.00
                  November 30, 1998                            1.70:1.00
                  February 28, 1999                            1.70:1.00
                  May 31, 1999                                 1.80:1.00
                  August 31, 1999                              1.80:1.00
                  November 30, 1999                            1.80:1.00
                  February 29, 2000                            1.80:1.00
                  May 31, 2000                                 2.00:1.00
                  August 31, 2000                              2.00:1.00
                  November 30, 2000                            2.00:1.00
                  February 28, 2001                            2.00:1.00
                  May 31, 2001                                 2.10:1.00
                  August 31, 2001                              2.10:1.00
                  November 30, 2001                            2.10:1.00
                  February 28, 2002                            2.10:1.00
                  May 31, 2002                                 2.20:1.00
                  August 31, 2002                              2.20:1.00
                  November 30, 2002                            2.20:1.00

     9.09 Maximum Leverage Ratio. Holdings will not permit the Leverage Ratio at
any time during a period set forth below to be greater  than the ratio set forth
opposite such period below:

                  Period                                         Ratio
                  ------                                         -----
         Initial Borrowing Date through and including
         May 31, 1998                                          5.60:100

         June 1, 1998 through and including August
         31, 1998                                              5.50:1.00


                                      -75-


<PAGE>




         September 1, 1998 through and including
         February 28, 1999                                     5.30:1.00

         March 1, 1999 through and including February
         29, 2000                                              5.00:1.00

         March 1, 2000 through and including February
         29, 2001                                              4.50:1.00

         March 1, 2001 through and including February
         28, 2002                                              4.00:1.00

         Thereafter                                            3.50:1.00


     9.10  Limitation  on  Payments  of Certain  Indebtedness,;Modifications  of
Certain 0.1 Limitation on Payments of Certain  Indebtedness,;  Modifications  of
Certain Indebtedness;  ents; etc. Modifications of Certificate of Incorporation,
By-Laws and Certain  Other  Agreements;  etc.  Holdings  will not,  and will not
permit any of its  Subsidiaries  to, (i) make (or give any notice in respect of)
any voluntary or optional  payment or prepayment on or redemption or acquisition
for value of, or any  prepayment  or  redemption  as a result of any asset sale,
change  of  control  or  similar  event  of  (including  in each  case,  without
limitation,  by way of depositing  with the trustee with respect  thereto or any
other Person money or securities  before due for the purpose of paying when due)
the Senior  Subordinated Notes, (ii) amend or modify, or permit the amendment or
modification of, any provision of the Senior Subordinated Note Documents,  (iii)
make (or give any notice in respect of) any  voluntary  or  optional  payment or
prepayment on or redemption or  acquisition  for value of, or any  prepayment or
redemption as a result of any asset sale, change of control or similar event of,
any Seller Note, provided that the Borrower and its Subsidiaries may voluntarily
prepay certain of the ATEC  Obligations in an amount not to exceed $75,000 on or
prior to the Initial  Borrowing Date and may voluntarily  prepay any Seller Note
(including  the ATEC  Obligations)  after March 1, 1999 so long as no Default or
Event of Default then exists or would result therefrom, (iv) after the execution
and delivery thereof,  amend,  modify or change any provision of any Seller Note
(including  the  ATEC  Obligations)  to the  extent  that  any  such  amendment,
modification  or change could be more  restrictive on the Borrower or any of its
Subsidiaries  or could be adverse to the  interests of the Banks in any material
respect,   (v)  amend,   modify  or  change  its  certificate  of  incorporation
(including, without limitation, by the filing or modification of any certificate
of designation) or by-laws (or the equivalent  organizational  documents) or any
agreement  entered into by it with respect to its capital stock  (including  any
Shareholders'  Agreement),  or enter into any new agreement  with respect to its
capital  stock,  unless such  amendment,  modification,  change or other  action
contemplated by this clause (v) would not violate or be inconsistent with any of
the terms or provisions of this Agreement or could not reasonably be expected to
be adverse to the  interests of the Banks in any material  respect,  (vi) amend,
modify or change any provision of (x) any Management Agreement


                                      -76-


<PAGE>




or enter into any new  management  agreement,  financial  advisory  agreement or
similar  agreement with any Affiliate of Holdings or any of its  Subsidiaries or
(y) any Tax Sharing Agreement or enter into any new tax sharing  agreement,  tax
allocation  agreement or similar agreements without the prior written consent of
the Agent in the case of this  clause (y) or (vii)  amend,  modify or change any
provision of the ATEC Subordination Agreement.

     9.11 Limitation on Certain Restrictions on Subsidiaries. Holdings will not,
and will not permit any of its Subsidiaries  to, directly or indirectly,  create
or otherwise  cause or suffer to exist or become  effective any  encumbrance  or
restriction  on the ability of any such  Subsidiary to (a) pay dividends or make
any  other  distributions  on  its  capital  stock  or  any  other  interest  or
participation  in its profits owned by Holdings or any Subsidiary  Holdings,  or
pay any  Indebtedness  owed to Holdings or any Subsidiary of Holdings,  (b) make
loans or advances to Holdings or any  Subsidiary of Holdings or (c) transfer any
of its  properties or assets to Holdings or any  Subsidiary of Holdings,  except
for  such  encumbrances  or  restrictions  existing  under or by  reason  of (i)
applicable  law, (ii) this Agreement and the other Credit  Documents,  (iii) the
Senior  Subordinated  Note  Documents,  (iv)  customary  provisions  restricting
subletting or assignment of any lease governing a leasehold interest of Holdings
or any Subsidiary of Holdings,  (v) customary provisions  restricting assignment
of any  licensing  agreement or other  contract  entered into by Holdings or any
Subsidiary of Holdings in the ordinary course of business and (vi)  restrictions
on the transfer of any asset subject to a Lien permitted by Sections  9.01(vii),
(viii), (xiv) and (xv).

     9.13  Limitation on Issuance of Capital  Stock.  (a) Holdings will not, and
will not permit any of its  Subsidiaries to, issue (i) any preferred stock other
than Qualified  Preferred Stock of Holdings or (ii) any redeemable  common stock
(other than common  stock that is  redeemable  at the sole option of Holdings or
such Subsidiary).

                  (b) Holdings will not permit any of its  Subsidiaries to issue
any capital stock  (including by way of sales of treasury  stock) or any options
or warrants to purchase,  or securities  convertible into, capital stock, except
(i) for transfers and replacements of then outstanding  shares of capital stock,
(ii) for stock splits,  stock  dividends and issuances which do not decrease the
percentage  ownership of Holdings or any of its Subsidiaries in any class of the
capital  stock of such  Subsidiary,  (iii) to  qualify  directors  to the extent
required by  applicable  law,  (iv) for  issuances by newly  created or acquired
Subsidiaries  in  accordance  with the  terms of this  Agreement  or (v) for the
common stock to be issued by the Borrower to Holdings as part of the Merger.

     9.13  Business.  (a) Holdings and its  Subsidiaries  will not engage in any
business  other  than  the  businesses  engaged  in  by  the  Borrower  and  its
Subsidiaries as of the Initial Borrowing Date and reasonable  extensions thereof
and businesses  complimentary thereto,  provided that in no event shall Holdings
or any of its Subsidiaries engage in any


                                      -77-


<PAGE>




business  related to insurance  other than as an  insurance  broker in each case
without the incurrence of any underwriting risk.

                  (b)  Notwithstanding  the  foregoing or anything  else in this
Agreement,  Holdings  will  not  engage  in any  business  and  will not own any
significant assets or have any material  liabilities other than its ownership of
the capital  stock of the  Borrower  and having  those  liabilities  which it is
responsible  for under this  Agreement and the other  Documents to which it is a
party, provided that Holdings may engage in those activities that are incidental
to (x) the maintenance of its corporate  existence in compliance with applicable
law,  (y)  legal,  tax and  accounting  matters  in  connection  with any of the
foregoing  activities and (z) the entering into, and performing its  obligations
under, this Agreement and the other Documents to which it is a party.

                  (c)  Notwithstanding  the  foregoing or anything  else in this
Agreement,  Acquisition  Corp. will not engage in any business and will not have
any significant  assets or material  liabilities other than its ownership of the
capital stock of ATC and having those  liabilities  which it is responsible  for
under this  Agreement and the other  Documents to which it is a party;  provided
that Acquisition Corp. may engage in those activities that are incidental to (i)
the  maintenance of its corporate  existence in compliance  with applicable law,
(ii)  legal,  tax and  accounting  matters  in  connection  with  the  foregoing
activities  and (iii) the entering  into,  and  performance  of its  obligations
under, this Agreement and the other Documents to which it is a party.

     9.14 Limitation on Creation of  Subsidiaries.  Notwithstanding  anything to
the contrary contained in this Agreement, Holdings will not, and will not permit
any of its  Subsidiaries  to,  establish,  create or acquire after the Effective
Date any Subsidiary,  provided that, after the  consummation of the Merger,  the
Borrower and its  Wholly-Owned  Subsidiaries  shall be  permitted to  establish,
create or, to the  extent  permitted  by this  Agreement,  acquire  Wholly-Owned
Subsidiaries (or, to the extent permitted by clause (vii) of Section  9.02(xii),
non-Wholly-Owned  Subsidiaries) so long as (i) the capital stock or other equity
interests of each such new Subsidiary is pledged  pursuant to, and to the extent
required by, the Pledge Agreement and the certificates  representing  such stock
or other equity interests,  together with stock or other powers duly executed in
blank,  are  delivered  to the  Collateral  Agent for the benefit of the Secured
Creditors,  (ii) each such new  Subsidiary  executes and delivers to the Agent a
counterpart of the Subsidiaries  Guaranty, the Pledge Agreement and the Security
Agreement,  and (iii) each such new Subsidiary,  to the extent  requested by the
Agent or the  Required  Banks,  takes all actions  required  pursuant to Section
8.11. In addition, each new Subsidiary shall execute and deliver, or cause to be
executed and  delivered,  to the Agent all other relevant  documentation  of the
type described in Section 5 as such new Subsidiary  would have had to deliver if
such new Subsidiary were a Credit Party on the Initial Borrowing Date.


                                      -78-


<PAGE>




     9.15  Senior   Subordinated   Notes.   Neither  Holdings  nor  any  of  its
Subsidiaries  shall designate any Indebtedness,  other than the Obligations,  as
"Designated  Senior Debt" for purposes of the Senior  Subordinated Notes and the
other Senior Subordinated Note Documents.


               SECTION 10.  Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):

     10.01  Payments.  The Borrower shall (i) default in the payment when due of
any  principal of any Loan or any Note or (ii)  default,  and such default shall
continue  unremedied for three or more Business Days, in the payment when due of
any  interest on any Loan or Note,  any Unpaid  Drawing or any Fees or any other
amounts owing hereunder or thereunder; or

     10.02 Representations, etc. Any representation,  warranty or statement made
(or deemed made) by any Credit  Party herein or in any other Credit  Document or
in any certificate delivered to the Agent or any Bank pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or

     10.03 Covenants.  Any Credit Party shall (i) default in the due performance
or  observance  by it of any term,  covenant or  agreement  contained in Section
8.01(g)(i),  8.08,  8.12 or Section 9 or (ii) default in the due  performance or
observance  by it of any other term,  covenant or  agreement  contained  in this
Agreement or any other Credit  Document  (other than those set forth in Sections
10.01 and 10.02) and such default shall  continue  unremedied for a period of 30
days after written notice  thereof to the  defaulting  party by the Agent or the
Required Banks; or

     10.04  Default  Under  Other  Agreements.   (i)  Holdings  or  any  of  its
Subsidiaries  shall (x) default in any payment of any  Indebtedness  (other than
the Obligations)  beyond the period of grace, if any, provided in the instrument
or  agreement  under which such  Indebtedness  was created or (y) default in the
observance  or  performance  of  any  agreement  or  condition  relating  to any
Indebtedness  (other than the  Obligations)  or contained in any  instrument  or
agreement  evidencing,  securing or relating  thereto,  or any other event shall
occur or  condition  exist,  the  effect  of  which  default  or other  event or
condition is to cause,  or to permit the holder or holders of such  Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without  regard to whether any notice is  required),  any such  Indebtedness  to
become due prior to its stated maturity,  or (ii) any  Indebtedness  (other than
the Obligations) of Holdings or any of its Subsidiaries  shall be declared to be
(or shall  become) due and  payable,  or required to be prepaid  other than by a
regularly scheduled required  prepayment,  prior to the stated maturity thereof,
provided  that it shall  not be a  Default  or an Event of  Default  under  this
Section 10.04 unless the


                                      -79-


<PAGE>




aggregate principal amount of all Indebtedness as described in preceding
clauses (i) and (ii) is at least $2,000,000; or

     10.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall commence a
voluntary  case  concerning  itself  under  Title 11 of the United  States  Code
entitled  "Bankruptcy," as now or hereafter in effect,  or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against Holdings or
any of its Subsidiaries, and the petition is not controverted within 10 days, or
is not dismissed within 60 days, after  commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially  all of the  property of Holdings or any of its  Subsidiaries,  or
Holdings or any of its  Subsidiaries  commences any other  proceeding  under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency  or  liquidation  or similar law of any  jurisdiction  whether now or
hereafter in effect relating to Holdings or any of its Subsidiaries, or there is
commenced  against Holdings or any of its Subsidiaries any such proceeding which
remains  undismissed  for a  period  of 60  days,  or  Holdings  or  any  of its
Subsidiaries  is  adjudicated  insolvent or bankrupt;  or any order of relief or
other order approving any such case or proceeding is entered; or Holdings or any
of its Subsidiaries  suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 60 days;  or  Holdings  or any of its  Subsidiaries  makes a general
assignment  for the benefit of creditors;  or any  corporate  action is taken by
Holdings  or any of its  Subsidiaries  for the purpose of  effecting  any of the
foregoing; or

     10.06  ERISA.  (a) Any Plan  shall  fail to  satisfy  the  minimum  funding
standard  required  for any plan year or part thereof  under  Section 412 of the
Code or Section 302 of ERISA or a waiver of such  standard or  extension  of any
amortization  period is  sought  or  granted  under  Section  412 of the Code or
Section  303 or 304  of  ERISA,  a  Reportable  Event  shall  have  occurred,  a
contributing  sponsor  (as  defined in Section  4001(a)(13)  of ERISA) of a Plan
subject  to  Title  IV of  ERISA  shall  be  subject  to the  advance  reporting
requirement of PBGC Regulation  Section 4043.61  (without regard to subparagraph
(b)(1)  thereof) and an event  described in subsection  .62, .63, .64, .65, .66,
 .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with  respect  to such Plan  within  the  following  30 days,  any Plan which is
subject  to Title IV of ERISA  shall  have had or is  likely  to have a  trustee
appointed  to  administer  such  Plan,  any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be  terminated or to be the subject of
termination  proceedings  under ERISA,  any Plan shall have an Unfunded  Current
Liability,  a  contribution  required  to be made  with  respect  to a Plan or a
Foreign  Pension Plan has not been timely made,  Holdings or any  Subsidiary  of
Holdings or any ERISA Affiliate has incurred or is likely to incur any liability
to or on account of a Plan under Section 409, 502(i),  502(l),  515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section  401(a)(29),  4971 or 4975 of
the Code or on account of a group  health plan (as defined in Section  607(1) of
ERISA or Section 4980B(g)(2) of the Code) under


                                      -80-


<PAGE>




Section  4980B of the Code,  or  Holdings  or any  Subsidiary  of  Holdings  has
incurred  or is likely to incur  liabilities  pursuant  to one or more  employee
welfare  benefit  plans (as  defined  in  Section  3(1) of ERISA)  that  provide
benefits to retired  employees or other former employees (other than as required
by Section  601 of ERISA) or Plans or Foreign  Pension  Plans;  (b) there  shall
result from any such event or events the imposition of a lien, the granting of a
security  interest,  or a liability or a material risk of incurring a liability;
and (c) such lien, security interest or liability,  individually,  and/or in the
aggregate,  in the reasonable  opinion of the Required Banks,  has had, or could
reasonably  be  expected to have,  a material  adverse  effect on the  business,
operations,  properties, assets, liabilities, condition (financial or otherwise)
or prospects of Holdings and its Subsidiaries taken as a whole; or

     10.07  Security  Documents.  At any time after the  execution  and delivery
thereof,  any of the  Security  Documents  shall  cease to be in full  force and
effect,  or shall  cease to give the  Collateral  Agent for the  benefit  of the
Secured  Creditors  the Liens,  rights,  powers and  privileges  purported to be
created thereby (including,  without  limitation,  a perfected security interest
in, and Lien on, all of the Collateral (other than an immaterial  portion of the
Security Agreement  Collateral),  in favor of the Collateral Agent,  superior to
and prior to the rights of all third  Persons  (except as  permitted  by Section
9.01), and subject to no other Liens (except as permitted by Section 9.01); or

     10.08 Guaranties. At any time after the execution and delivery thereof, any
Guaranty or any  provision  thereof shall cease to be in full force or effect as
to any Guarantor,  or any Guarantor or any Person acting by or on behalf of such
Guarantor  shall  deny or  disaffirm  such  Guarantor's  obligations  under  its
Guaranty or any Guarantor  shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to its Guaranty; or

     10.09 Judgments.  One or more judgments or decrees shall be entered against
Holdings or any  Subsidiary of Holdings  involving in the aggregate for Holdings
and its  Subsidiaries  a liability (not paid or fully covered by a reputable and
solvent insurance  company) and such judgments and decrees either shall be final
and  non-appealable  or shall  not be  vacated,  discharged  or stayed or bonded
pending appeal for any period of 30 consecutive  days, and the aggregate  amount
of all such judgments equals or exceeds $2,000,000; or

     10.10 Change of Control. A Change of Control shall occur; or

     10.11 ATEC Subordination  Agreement.  The ATEC  Subordination  Agreement or
material any provision  thereof  shall cease to be in full force and effect,  or
any party to the ATEC  Subordination  Agreement shall default in the performance
or observance of any term,  covenant or agreement on its part to be performed or
observed pursuant thereto;


                                      -81-


<PAGE>




then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing,  the Agent,  upon the written  request of the Required
Banks, shall by written notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of any Agent, any Bank or the holder of
any Note to enforce its claims against any Credit Party  (provided,  that, if an
Event of Default  specified  in Section  10.05 shall  occur with  respect to the
Borrower,  the result which would occur upon the giving of written notice by the
Agent as  specified  in clauses  (i) and (ii) below  shall  occur  automatically
without  the  giving of any such  notice):  (i)  declare  the  Total  Commitment
terminated,  whereupon all  Commitments of each Bank shall  forthwith  terminate
immediately and any Commitment Commission shall forthwith become due and payable
without any other  notice of any kind;  (ii)  declare the  principal  of and any
accrued interest in respect of all Loans and the Notes and all Obligations owing
hereunder and thereunder to be,  whereupon the same shall become,  forthwith due
and payable without  presentment,  demand,  protest or other notice of any kind,
all of which are hereby waived by each Credit Party;  (iii) terminate any Letter
of Credit which may be terminated in accordance with its terms;  (iv) direct the
Borrower to pay (and the Borrower  agrees that upon  receipt of such notice,  or
upon the  occurrence  of an Event of Default  specified  in  Section  10.05 with
respect to the  Borrower,  it will pay) to the  Collateral  Agent at the Payment
Office  such  additional  amount  of  cash or  Cash  Equivalents,  to be held as
security by the Collateral  Agent, as is equal to the aggregate Stated Amount of
all  Letters  of  Credit  issued  for  the  account  of the  Borrower  and  then
outstanding;  (v) enforce,  as Collateral  Agent,  all of the Liens and security
interests  created pursuant to the Security  Documents;  and (vi) apply any cash
collateral  held by the Agent  pursuant to Section 4.02 to the  repayment of the
Obligations.


               SECTION 11.  Definitions and Accounting Terms.ions and
Accounting Terms

     11.01 Defined Terms. As used in this  Agreement,  the following terms shall
have the following  meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

                  "Acknowledgment and Joinder Agreement" shall have the meaning
provided in Section 5.15.

                  "Acquired  Entity or Business" shall have the meaning provided
in the definition of Consolidated Net Income.

                  "Acquisition" shall mean, collectively, (x) the purchase by
Acquisition Corp. for cash of the outstanding Shares pursuant to the Offer to
Purchase and (y) the Merger.

                  "Acquisition  Corp."  shall have the  meaning  provided in the
first paragraph of this Agreement.


                                      -82-


<PAGE>




                  "Acquisition  Documents"  shall  mean and  include  the Tender
Offer Documents and the Merger Documents.

                  "Acquisition  Loan" shall mean any Revolving  Loan incurred by
the Borrower to finance the consideration  paid to, or on behalf of, a Seller in
connection with a Permitted Acquisition.

                  "Additional Security Documents" shall have the meaning
provided in Section 8.11.

                  "Acquisition   Sub-Limit"   shall   mean,   at  any  time  (x)
$23,000,000  less (y)(i) except as otherwise  provided in clause (ii) below, 77%
of the aggregate  reductions to the Total Revolving Loan Commitment  theretofore
effected  or (ii) with  respect  to  reductions  effected  pursuant  to  Section
3.02(a),  such other amount as may be specified by the Borrower pursuant to such
Section.

                  "Adjusted Consolidated Net Income" shall mean, for any period,
Consolidated Net Income for such period plus,  without  duplication,  the sum of
the  amount  of  all  net  non-cash  charges  (including,   without  limitation,
depreciation,  amortization, deferred tax expense and non-cash interest expense)
and net non-cash  losses  which were  included in arriving at  Consolidated  Net
Income for such period,  less the amount of all net non-cash gains (exclusive of
items reflected in Adjusted Consolidated Working Capital) which were included in
arriving at Consolidated Net Income for such period.

                  "Adjusted  Consolidated  Working  Capital"  shall mean, at any
time,  Consolidated  Current Assets (but  excluding  therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities at such time.

                  "Affiliate" shall mean, with respect to any Person,  any other
Person directly or indirectly  controlling  (including,  but not limited to, all
directors  and  officers  of such  Person),  controlled  by, or under  direct or
indirect common control with,  such Person.  A Person shall be deemed to control
another Person if such Person possesses,  directly or indirectly,  the power (i)
to vote 10% or more of the  securities  having  ordinary  voting  power  for the
election  of  directors  of such  corporation  or (ii) to  direct  or cause  the
direction of the management and policies of such other Person,  whether  through
the ownership of voting securities, by contract or otherwise.

                  "Agent"  shall mean  BTCo,  in its  capacity  as Agent for the
Banks hereunder, and shall include any successor to the Agent appointed pursuant
to Section 12.09.


                                      -83-


<PAGE>




                  "Agreement"  shall mean this Credit  Agreement,  as  modified,
supplemented,   amended,  restated  (including  any  amendment  and  restatement
hereof), extended, renewed, refinanced or replaced from time to time.

                  "Applicable  Base Rate  Margin"  shall mean (i) for the period
from the Initial  Borrowing  Date through but not including the first Start Date
after the Initial  Borrowing Date,  1.25% and (ii) from and after any Start Date
to and including the corresponding End Date, the respective percentage per annum
set forth in clause  (A),  (B) or (C) below if, but only if, as of the Test Date
for such Start Date the applicable condition set forth in clause (A), (B) or (C)
below, as the case may be, is met:

                  (A) 1.25% if,  but only if, as of the Test Date for such Start
         Date the  Leverage  Ratio for the Test  Period  ended on such Test Date
         shall be greater than or equal to 3.50:1:00;

                  (B) 1.00% if,  but only if, as of the Test Date for such Start
         Date the  Leverage  Ratio for the Test  Period  ended on such Test Date
         shall be less than  3.50:1.00  and greater than or equal to  3.00:1.00;
         and

                  (C) 0.75% if,  but only if, as of the Test Date for such Start
         Date the  Leverage  Ratio for the Test  Period  ended on such Test Date
         shall be less than 3.00:1.00.

Notwithstanding  anything  to  the  contrary  above  in  this  definition,   the
Applicable  Base Rate  Margin  shall be 1.25% at all times  when a Default or an
Event of Default shall exist.

                  "Applicable Commitment Commission Percentage" shall mean
 .500%.

                  "Applicable  Eurodollar  Rate  Margin"  shall mean (i) for the
period from the Initial Borrowing Date through but not including the first Start
Date after the Initial  Borrowing Date, 2.25%, and (ii) from and after any Start
Date to and including the corresponding End Date, the respective  percentage per
annum set forth in clause (A),  (B) or (C) below if, but only if, as of the Test
Date for such Start Date the  applicable  condition set forth in clause (A), (B)
or (C) below, as the case may be, is met:

                  (A) 2.25% if,  but only if, as of the Test Date for such Start
         Date the  Leverage  Ratio for the Test  period  ended on such Test Date
         shall be greater than or equal to 3.50:1:00;

                  (B) 2.00% if,  but only if, as of the Test Date for such Start
         Date the  Leverage  Ratio for the Test  Period  ended on such Test Date
         shall be less than  3.50:1.00  and greater than or equal to  3.00:1.00;
         and


                                      -84-


<PAGE>




                  (C) 1.75% if,  but only if, as of the Test Date for such Start
         Date the  Leverage  Ratio for the Test  Period  ended on such Test Date
         shall be less than 3.00:1.00.

Notwithstanding  anything  to  the  contrary  above  in  this  definition,   the
Applicable  Eurodollar Rate Margin shall be 2.25% at all times when a Default or
an Event of Default shall exist.

                  "Applicable  Excess  Cash Flow  Percentage"  shall mean (i) in
respect of the Excess Cash Payment Period ending on February 28, 1999,  75%, and
(ii) in respect of each Excess Cash Payment Period thereafter, 50%.

                  "Applicable  Margin Period" shall mean each period which shall
commence on a date on which the financial  statements are delivered  pursuant to
Section  8.01(b) or (c),  as the case may be, and which shall end on the earlier
of (i) the date of the actual delivery of the next financial statements pursuant
to Section 8.01(b) or (c), as the case may be, and (ii) the latest date on which
the next financial  statements are required to be delivered  pursuant to Section
8.01(b) or (c), as the case may be,  provided that the first  Applicable  Margin
Period shall  commence with the delivery of Holdings'  financial  statements for
the Test Period ending on February 28, 1999.

                  "Asset   Sale"   shall  mean  any  sale,   transfer  or  other
disposition  by Holdings  or any of its  Subsidiaries  to any Person  (including
by-way-of  redemption by such Person)  other than to Holdings or a  Wholly-Owned
Subsidiary of Holdings of any asset (including,  without limitation, any capital
stock or other securities of, or equity interests in, another Person) other than
sales of assets pursuant to Sections 9.02 (ii), (iii), (vii) and (ix).

                  "Assignment and Assumption Agreement" shall mean an Assignment
and Assumption  Agreement  substantially in the form of Exhibit K (appropriately
completed).

                  "ATC" shall mean ATC Group Services Inc., a Delaware
corporation.

                  "ATEC" shall mean American Testing and Engineering
Corporation, an Indiana corporation.

                  "ATEC Obligation"  shall mean the obligations  currently owing
by the  Borrower to American  Testing and  Engineering  Corporation,  an Indiana
corporation,   which  obligations  were  originally  incurred  as  part  of  the
acquisition  by  the  Borrower  of  certain  assets  of  American   Testing  and
Engineering Corporation.

                  "ATEC Subordination Agreement" shall have the meaning
provided in Section 5.09.


                                      -85-


<PAGE>




                  "Bank"  shall  mean  each  financial   institution  listed  on
Schedule I, as well as any Person which becomes a "Bank"  hereunder  pursuant to
Section 1.13 or 13.04(b).

                  "Bank  Default" shall mean (i) the refusal (which has not been
retracted)  or the  failure  of a Bank  to make  available  its  portion  of any
Borrowing  (including  any  Mandatory  Borrowing)  or to fund its portion of any
unreimbursed  payment  under Section  2.04(c) or (ii) a Bank having  notified in
writing the  Borrower  and/or the Agent that such Bank does not intend to comply
with its obligations under Section 1.01(a),  1.01(b),  1.01(d) or 2, in the case
of either clause (i) or (ii) as a result of any takeover or control  (including,
without  limitation,  as a result  of the  occurrence  of any  event of the type
described  in  Section  10.05  with  respect  to such  Bank) of such Bank by any
regulatory authority or agency.

                  "Bankruptcy Code" shall have the meaning provided in Section
10.05.

                  "Base  Rate" shall  mean,  at any time,  the higher of (i) the
Prime Lending Rate and (ii) 1/2 of 1% in excess of the Federal Funds Rate.

                  "Base Rate Loan" shall mean (i) each  Swingline  Loan and (ii)
each other Loan  designated or deemed  designated as such by the Borrower at the
time of the incurrence thereof or conversion thereto.

                  "Bing Yen" shall mean Bing Yen & Associates, Inc., a
California corporation.

                  "Bing Yen  Acquisition"  shall mean the  acquisition by ATC of
all of the  outstanding  shares of capital stock of Bing Yen pursuant to, and in
accordance with the terms set forth in, the Bing Yen Acquisition Agreement.

                  "Bing Yen Acquisition Agreement" shall mean the Stock Purchase
Agreement dated as of November 26, 1997 by and among Bing Yen Associates, Inc.,
Bing Yen, Glenn Tofani and ATC.

                  "Borrower"  shall  mean (i) prior to the  consummation  of the
Merger,  Acquisition  Corp.,  and (ii) from and after  the  consummation  of the
Merger, ATC as the surviving corporation of the Merger.

                  "Borrowing"  shall mean the borrowing of one Type of Loan of a
single Tranche from all the Banks having  Commitments of the respective  Tranche
(or from the Swingline Bank in the case of Swingline  Loans) on a given date (or
resulting  from a conversion or  conversions on such date) having in the case of
Eurodollar Loans the same


                                      -86-


<PAGE>




Interest  Period,  provided  that Base Rate Loans  incurred  pursuant to Section
1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans.

                  "BTCo" shall mean Bankers  Trust  Company,  in its  individual
capacity,  and any successor  corporation  thereto by merger,  consolidation  or
otherwise.

                  "Business  Day" shall mean (i) for all purposes  other than as
covered by clause (ii) below, any day except Saturday,  Sunday and any day which
shall be in New York City,  New York, a legal  holiday or a day on which banking
institutions  are  authorized or required by law or other  government  action to
close and (ii) with  respect to all notices  and  determinations  in  connection
with, and payments of principal and interest on, Eurodollar Loans, any day which
is a  Business  Day  described  in clause  (i) above and which is also a day for
trading by and between banks in the New York interbank Eurodollar market.

                  "Capital Expenditures" shall mean, with respect to any Person,
all  expenditures  by such Person which should be capitalized in accordance with
generally accepted accounting principles and, without duplication, the amount of
Capitalized Lease Obligations incurred by such Person.

                  "Capitalized  Lease  Obligations"  shall mean, with respect to
any  Person,  all rental  obligations  of such  Person  which,  under  generally
accepted accounting principles, are or will be required to be capitalized on the
books of such Person,  in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.

                  "Cash   Equivalents"   shall  mean,  as  to  any  Person,  (i)
securities  issued or  directly  and fully  guaranteed  or insured by the United
States or any agency or  instrumentality  thereof  (provided that the full faith
and credit of the United States is pledged in support thereof) having maturities
of not more than six months from the date of acquisition, (ii) marketable direct
obligations  issued  by  any  state  of  the  United  States  or  any  political
subdivision  or  public  instrumentality  of such  state,  in each  case  having
maturities of not more than six months from the date of acquisition  and, at the
time of acquisition  thereof,  having one of the two highest ratings  obtainable
from either  Standard & Poor's Ratings  Services or Moody's  Investors  Service,
Inc., (iii) Dollar  denominated time deposits and certificates of deposit of any
commercial bank having, or which is the principal  banking  subsidiary of a bank
holding company having, a long-term unsecured debt rating of at least "A" or the
equivalent  thereof  from  Standard  & Poor's  Ratings  Services  or "A2" or the
equivalent thereof from Moody's Investors  Service,  Inc. with maturities of not
more  than  six  months  from  the  date of  acquisition  by such  Person,  (iv)
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 (iii) above, (v) commercial paper
issued by any Person incorporated in the United States rated


                                      -87-


<PAGE>




at least A-1 or the equivalent  thereof by Standard & Poor's Ratings Services or
at least P-1 or the equivalent thereof by Moody's Investors Service, Inc. and in
each case  maturing  not more than six months after the date of  acquisition  by
such Person and (vi)  investments  in money  market funds  substantially  all of
whose assets are comprised of  securities of the types  described in clauses (i)
through (v) above.

                  "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. ss. 9601 et seq.

                  "Change  of  Control"  shall  mean (i) WPG and its  Affiliates
shall cease to own on a fully diluted basis in the aggregate at least 51% of the
economic and voting  interest in Holdings'  capital  stock,  (ii) Holdings shall
cease to own 100% of the economic and voting interest in the Borrower's  capital
stock or (iii) a "change of control" or similar event shall occur under,  and as
defined in, the Senior Subordinated Note Documents.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
amended from time to time, and the  regulations  promulgated  and rulings issued
thereunder.  Section references to the Code are to the Code, as in effect at the
date of this  Agreement and any  subsequent  provisions of the Code,  amendatory
thereof, supplemental thereto or substituted therefor.

                  "Collateral"   shall  mean  all  property   (whether  real  or
personal)  with  respect to which any security  interests  have been granted (or
purported to be granted) pursuant to any Security Document,  including,  without
limitation,  all Pledge Agreement Collateral, all Security Agreement Collateral,
the  Mortgaged  Properties  and all  cash  and  Cash  Equivalents  delivered  as
collateral pursuant to Section 4.02 or 10.

                  "Collateral  Agent" shall mean the Agent acting as  collateral
agent for the Secured Creditors pursuant to the Security Documents.

                  "Collective Bargaining Agreements" shall have the meaning
provided in Section 5.05.

                  "Commitment"  shall mean any of the  commitments  of any Bank,
i.e., whether the Term Loan Commitment or the Revolving Loan Commitment.

                  "Commitment Commission" shall mean the Revolving Loan
Commitment Commission and the Term Loan Commitment Commission.

                  "Consolidated  Current  Assets" shall mean,  at any time,  the
consolidated current assets of Holdings and its Subsidiaries at such time.


                                      -88-


<PAGE>




                  "Consolidated  Current  Liabilities"  shall mean, at any time,
the  consolidated  current  liabilities of Holdings and its Subsidiaries at such
time, but excluding the current portion of any Indebtedness under this Agreement
and  the  current  portion  of any  other  long-term  Indebtedness  which  would
otherwise be included therein.

                  "Consolidated  EBIT" shall mean, for any period,  Consolidated
Net Income for such period before  Consolidated  Interest  Expense and provision
for taxes for such period and  without  giving  effect (x) to any  extraordinary
gains or losses and (y) to any gains or losses  from sales of assets  other than
from sales of inventory sold in the ordinary course of business.

                  "Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT  for  such  period,  adjusted  by  adding  thereto  (i) the  amount  of all
amortization of intangibles and  depreciation  that were deducted in arriving at
Consolidated  EBIT for such  period and (ii) the amount of all  amortization  of
non-compete and consulting payments made to George Rubin and Morry F. Rubin that
were  deducted in arriving at  Consolidated  EBIT for such period,  which amount
shall not exceed  $346,500 in the aggregate in any fiscal quarter of Holdings or
$4,714,000  in the  aggregate  during the term of this  Agreement  and with such
amortization  and any cash payments made in connection with such non-compete and
consulting arrangements to be consistent with that set forth in the Projections.

                  "Consolidated  Indebtedness"  shall  mean,  at any  time,  the
principal  amount of all  Indebtedness of Holdings and its  Subsidiaries at such
time as  determined  on a  consolidated  basis  (excluding,  for  this  purpose,
Indebtedness permitted by Section 9.04(x)).

                  "Consolidated  Interest  Coverage  Ratio" shall mean,  for any
period,  the ratio of Consolidated  EBITDA to Consolidated  Interest Expense for
such period.

                  "Consolidated  Interest  Expense"  shall mean, for any period,
the total  consolidated  interest  expense of Holdings and its  Subsidiaries for
such  period  (calculated  without  regard  to any  limitations  on the  payment
thereof)  plus,   without   duplication,   that  portion  of  Capitalized  Lease
Obligations of Holdings and its  Subsidiaries  representing  the interest factor
for such period, provided that the amortization of deferred financing, legal and
accounting  costs  with  respect  to the  Transaction  shall  be  excluded  from
Consolidated  Interest  Expense to the extent  same  would  otherwise  have been
included therein.

                  "Consolidated Net Income" shall mean, for any period,  the net
income (or loss) of Holdings and its Subsidiaries for such period, determined on
a consolidated basis (after any deduction for minority interests), provided that
in determining  Consolidated Net Income,  (i) the net income of any other Person
which is not a  Subsidiary  of Holdings or is  accounted  for by Holdings by the
equity method of accounting  shall be included only to the extent of the payment
of cash dividends or distributions by such other Person to


                                      -89-


<PAGE>




Holdings or a Subsidiary  thereof  during such  period,  (ii) the net income (or
loss) of any other Person  acquired by such specified  Person or a Subsidiary of
such Person in a pooling of  interests  transaction  for any period prior to the
date of such  acquisition  shall be  excluded  and (iii)  the net  income of any
Subsidiary of the Borrower shall be excluded to the extent that the  declaration
or payment of  dividends  or similar  distributions  by that  Subsidiary  of its
income is not at the time  permitted by operation of the terms of its charter or
any agreement,  instrument or law applicable to such  Subsidiary;  provided that
for purposes of Section 9.09 and the  definitions of Applicable Base Rate Margin
and Applicable  Eurodollar  Rate Margin,  there shall be included (to the extent
not already included) in determining  Consolidated Net Income for any period the
net income (or loss) of any Person, business,  property or asset acquired during
such period  pursuant to a Permitted  Acquisition and not  subsequently  sold or
otherwise  disposed of by the  Borrower or one of its  Subsidiaries  during such
period  (each  such  Person,  business,  property  or  asset  acquired  and  not
subsequently  disposed of during such period, an "Acquired Entity or Business"),
in each case based on the actual net income (or loss) of such Acquired Entity or
Business for the entire period (including the portion thereof occurring prior to
such acquisition).

                  "Contingent  Obligation"  shall mean,  as to any  Person,  any
obligation of such Person as a result of such Person being a general  partner of
the  other  Person,   unless  the   underlying   obligation  is  expressly  made
non-recourse  as to such  general  partner,  and any  obligation  of such Person
guaranteeing  or intended to guarantee any  Indebtedness,  leases,  dividends or
other  obligations  ("primary  obligations")  of any other Person (the  "primary
obligor") in any manner,  whether  directly or  indirectly,  including,  without
limitation,  any obligation of such Person,  whether or not  contingent,  (i) to
purchase any such primary  obligation  or any  property  constituting  direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary  obligation or (y) to maintain working capital or
equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency  of the primary  obligor,  (iii) to purchase  property,  securities  or
services  primarily  for the purpose of assuring  the owner of any such  primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  or (iv)  otherwise  to assure or hold  harmless  the  holder of such
primary obligation against loss in respect thereof; provided,  however, that the
term  Contingent  Obligation  shall not include  endorsements of instruments for
deposit or  collection  in the ordinary  course of  business.  The amount of any
Contingent  Obligation  shall be deemed to be an amount  equal to the  stated or
determinable  amount  of  the  primary  obligation  in  respect  of  which  such
Contingent  Obligation  is made or, if not stated or  determinable,  the maximum
reasonably  anticipated  liability in respect  thereof  (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

                  "Credit  Documents"  shall mean this  Agreement and, after the
execution and delivery  thereof  pursuant to the terms of this  Agreement,  each
Note, the Acknowledgment and Joinder  Agreement,  the Subsidiaries  Guaranty and
each Security Document.


                                      -90-


<PAGE>




                  "Credit Event" shall mean the making of any Loan or the
issuance of any Letter of Credit.

                  "Credit Party" shall mean Holdings, the Borrower and each
Subsidiary Guarantor.

                  "Default"  shall mean any event,  act or condition  which with
notice or lapse of time, or both, would constitute an Event of Default.

                  "Defaulting  Bank" shall mean any Bank with respect to which a
Bank Default is in effect.

                  "Dividend"  shall mean, with respect to any Person,  that such
Person has  declared or paid a dividend or  returned  any equity  capital to its
stockholders or partners or authorized or made any other  distribution,  payment
or delivery of property  (other than common stock of such Person) or cash to its
stockholders or partners as such, or redeemed,  retired,  purchased or otherwise
acquired, directly or indirectly, for a consideration any shares of any class of
its  capital  stock or any  partnership  interests  outstanding  on or after the
Effective Date (or any options or warrants issued by such Person with respect to
its capital stock), or set aside any funds for any of the foregoing purposes, or
shall have permitted any of its  Subsidiaries  to purchase or otherwise  acquire
for a  consideration  any  shares  of any  class  of the  capital  stock  or any
partnership  interests of such Person outstanding on or after the Effective Date
(or any  options or warrants  issued by such Person with  respect to its capital
stock).  Without limiting the foregoing,  "Dividends" with respect to any Person
shall also include all payments  made or required to be made by such Person with
respect to any stock appreciation rights, plans, equity incentive or achievement
plans or any  similar  plans or  setting  aside of any funds  for the  foregoing
purposes.

                  "Documents"  shall mean and include (i) the Credit  Documents,
(ii) the Tender  Offer  Documents,  (iii) the  Refinancing  Documents,  (iv) the
Equity  Financing  Documents,  (v) the  Merger  Documents  and (vi)  the  Senior
Subordinated Note Documents.

                  "Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.

                  "Drawing" shall have the meaning provided in Section 2.05(b).

                  "Effective Date" shall have the meaning provided in Section
13.10.

                  "Eligible  Transferee"  shall  mean and  include a  commercial
bank,  financial  institution,  any fund  that  invests  in  loans or any  other
"accredited investor" (as defined in Regulation D of the Securities Act).


                                      -91-


<PAGE>




                  "Employment Agreements" shall have the meaning provided in
Section 5.05.

                  "End Date" shall mean, for any Applicable  Margin Period,  the
last day of such Applicable Margin Period.

                  "Environmental  Claims" shall mean any and all administrative,
regulatory or judicial  actions,  suits,  demands,  demand letters,  directives,
claims,  liens,  notices  of  noncompliance  or  violation,   investigations  or
proceedings  relating in any way to any  Environmental Law or any permit issued,
or any approval given, under any such  Environmental Law (hereafter,  "Claims"),
including,  without  limitation,  (a) any  and all  Claims  by  governmental  or
regulatory authorities for enforcement,  cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable  Environmental  Law, and (b)
any  and  all  Claims  by  any  third  party  seeking   damages,   contribution,
indemnification,  cost recovery, compensation or injunctive relief in connection
with alleged injury or threat of injury to health, safety or the environment due
to the presence of Hazardous Materials.

                  "Environmental Law" shall mean any Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, written policy
and rule of common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.
2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of
1986, 42 U.S.C. ss. 11001 et seq.; the Hazardous Material Transportation Act, 49
U.S.C. ss. 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C.
ss. 651 et seq.; and any state and local or foreign counterparts or equivalents,
in each case as amended from time to time.

                  "Equity  Financing" shall mean the issuance by Holdings of (x)
shares of its common stock (or options to purchase  shares of its common  stock)
to WPG Corporate  Development,  JNL, Old Hickory and existing  management of ATC
and (y) shares of its Qualified  Preferred Stock and warrants to purchase shares
of its common stock to JNL and Old Hickory,  in each case pursuant to the Equity
Financing Documents.

                  "Equity Financing  Documents" shall mean each of the documents
and agreements  entered into in connection  with the  consummation of the Equity
Financing.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974,


                                      -92-


<PAGE>




as amended from time to time, and the regulations promulgated and rulings issued
thereunder.  Section  references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent  provisions of ERISA,  amendatory  thereof,
supplemental thereto or substituted therefor.

                  "ERISA  Affiliate"  shall  mean each  person  (as  defined  in
Section 3(9) of ERISA) which  together with Holdings or a Subsidiary of Holdings
would be deemed to be a "single  employer"  (i)  within  the  meaning of Section
414(b),  (c),  (m) or (o) of the  Code or  (ii) as a  result  of  Holdings  or a
Subsidiary of Holdings being or having been a general partner of such person.

                  "Eurodollar Loan" shall mean each Loan (other than a Swingline
Loan)  designated as such by the Borrower at the time of the incurrence  thereof
or conversion thereto.

                  "Eurodollar  Rate"  shall mean (a) the  offered  quotation  to
first-class banks in the New York interbank Eurodollar market by BTCo for Dollar
deposits of amounts in immediately available funds comparable to the outstanding
principal  amount of the Eurodollar Loan of BTCo with  maturities  comparable to
the Interest  Period  applicable to such Eurodollar Loan commencing two Business
Days  thereafter  as of 11:00  A.M.  (New  York  time) on the date  which is two
Business Days prior to the  commencement of such Interest  Period,  divided (and
rounded  upward to the  nearest  1/16 of 1%) by (b) a  percentage  equal to 100%
minus the then  stated  maximum  rate of all  reserve  requirements  (including,
without  limitation,  any marginal,  emergency,  supplemental,  special or other
reserves  required  by  applicable  law)  applicable  to any member  bank of the
Federal  Reserve  System in respect of  Eurocurrency  funding or  liabilities as
defined  in  Regulation  D (or  any  successor  category  of  liabilities  under
Regulation D).

                  "Event of Default" shall have the meaning provided in Section
10.

                  "Excess Cash Flow" shall mean,  for any period,  the remainder
of (a) the sum of (i) Adjusted  Consolidated Net Income for such period and (ii)
the decrease,  if any, in Adjusted  Consolidated  Working Capital from the first
day to the last day of such  period,  minus (b) the sum of (i) the amount of all
Capital  Expenditures  made by Holdings and its Subsidiaries  during such period
pursuant to Sections  9.07(a) and (b) (other than  Capital  Expenditures  to the
extent financed with equity proceeds or Indebtedness  (other than with Revolving
Loans or Swingline Loans)),  (ii) the amount of all Permitted  Acquisitions made
by the Borrower and its  Subsidiaries  during such period (other than  Permitted
Acquisitions to the extent financed through the issuance of capital stock,  with
equity  proceeds or  Indebtedness  (other than with Revolving Loans or Swingline
Loans),   (iii)  the  aggregate  amount  of  permanent   principal  payments  of
Indebtedness  for borrowed  money of Holdings and its  Subsidiaries  during such
period (other than repayments of Loans, provided that


                                      -93-


<PAGE>




repayments  of Loans shall be deducted in  determining  Excess Cash Flow if such
repayments were (x) required as a result of a Scheduled  Repayment under Section
4.02(b) or (y) made as a voluntary  prepayment with  internally  generated funds
(but in the case of a  voluntary  prepayment  of  Revolving  Loans or  Swingline
Loans,  only to the extent  accompanied  by a voluntary  reduction  to the Total
Revolving  Loan  Commitment))  and  (iv)  the  increase,  if  any,  in  Adjusted
Consolidated Working Capital from the first day to the last day of such period.

                  "Excess  Cash Payment  Date" shall mean the date  occurring 95
days after the last day of each  fiscal  year of  Holdings  (beginning  with its
fiscal year ending on February 28, 1999).

                  "Excess Cash Payment  Period" shall mean,  with respect to the
repayment  required on each Excess Cash Payment Date, the immediately  preceding
fiscal year of the Borrower.

                  "Existing Indebtedness" shall have the meaning provided in
Section 7.22.

                  "Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.05.

                  "EWI" shall mean Environmental Warranty Inc., a Connecticut
corporation.

                  "EWI  Acquisition"  shall mean the acquisition by ATC of 90.1%
of the outstanding shares of capital stock of EWI pursuant to, and in accordance
with the terms set forth in, the EWI Acquisition Agreement.

                  "EWI  Acquisition  Agreement"  shall  mean the Stock  Purchase
Agreement dated as of November 4, 1997, by and among Conning  Insurance  Capital
Limited  Partnership II, Conning  Insurance Capital  International  Partners II,
Cullinane and Donnelly  Venture  Partners,  Limited  Partnership,  Lawyers Title
Environmental Insurance Services Agency, Inc., Charles L. Perry, Jr. and ATC.

                  "Facing Fee" shall have the meaning provided in Section
3.01(d).

                  "Federal Funds Rate" shall mean, for any period, a fluctuating
interest  rate equal for each day during such period to the weighted  average of
the rates on overnight  Federal Funds  transactions  with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next  preceding  Business Day) by the
Federal  Reserve Bank of New York,  or, if such rate is not so published for any
day which is a Business Day, the average of the quota-


                                      -94-


<PAGE>




tions for such day on such transactions received by the Agent from three Federal
Funds brokers of recognized standing selected by the Agent.

                  "Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.

                  "Foreign  Pension Plan" shall mean any plan, fund  (including,
without   limitation,   any  superannuation   fund)  or  other  similar  program
established  or  maintained  outside the United States of America by Holdings or
any one or more of its  Subsidiaries  primarily  for the benefit of employees of
Holdings or such  Subsidiaries  residing  outside the United  States of America,
which plan, fund or other similar program  provides,  or results in,  retirement
income,  a deferral of income in  contemplation  of retirement or payments to be
made upon  termination of employment,  and which plan is not subject to ERISA or
the Code.

                  "Guaranteed  Creditors"  shall  mean and  include  each of the
Agent,  the Collateral  Agent, the Issuing Bank, the Banks and each party (other
than any Credit Party) party to an Interest Rate  Protection  Agreement or Other
Hedging  Agreement to the extent such party constitutes a Secured Creditor under
the Security Documents.

                  "Guaranteed  Obligations"  shall  mean (i) the full and prompt
payment when due (whether at the stated maturity,  by acceleration or otherwise)
of the  principal  and  interest  on each Note issued by, and Loans made to, the
Borrower  under this  Agreement  and all  reimbursement  obligations  and Unpaid
Drawings  with  respect  to  Letters  of  Credit,  together  with all the  other
obligations  (including  obligations  which,  but for the  automatic  stay under
Section  362(a)  of the  Bankruptcy  Code,  would  become  due) and  liabilities
(including,  without limitation,  indemnities, fees and interest thereon) of the
Borrower to the Banks,  the Agent, the Issuing Bank and the Collateral Agent now
existing or hereafter incurred under,  arising out of or in connection with this
Agreement or any other Credit Document and the due performance and compliance by
the Borrower  with all the terms,  conditions  and  agreements  contained in the
Credit  Documents and (ii) the full and prompt  payment when due (whether at the
stated  maturity,  by acceleration  or otherwise) of all obligations  (including
obligations  which,  but for the  automatic  stay  under  Section  362(a) of the
Bankruptcy Code, would become due) of the Borrower owing under any Interest Rate
Protection  Agreement or Other  Hedging  Agreement  entered into by the Borrower
with any Bank or any affiliate thereof (even if such Bank subsequently ceases to
be a Bank under this Agreement for any reason) so long as such Bank or affiliate
participates  in such  Interest  Rate  Protection  Agreement  or  Other  Hedging
Agreement,  and their  subsequent  assigns,  if any, whether now in existence or
hereafter  arising,  and the due  performance  and  compliance  with all  terms,
conditions and agreements contained therein.

                  "Guarantor" shall mean Holdings and each Subsidiary Guarantor.


                                      -95-


<PAGE>




                  "Guaranty" shall mean and include the Parent Guaranty and the
Subsidiaries Guaranty.

                  "Hazardous   Materials"   shall  mean  (a)  any  petroleum  or
petroleum products, radioactive materials, asbestos in any form that is friable,
urea formaldehyde foam insulation,  transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated  biphenyls, and radon gas;
(b) any  chemicals,  materials  or  substances  defined  as or  included  in the
definition of "hazardous  substances," "hazardous waste," "hazardous materials,"
"extremely   hazardous   substances,"   "restricted   hazardous  waste,"  "toxic
substances,"  "toxic  pollutants,"  "contaminants," or "pollutants," or words of
similar  import,  under  any  applicable  Environmental  Law;  and (c) any other
chemical, material or substance, the Release of which is prohibited,  limited or
regulated by any governmental authority.

                  "Holdings" shall have the meaning provided in the first
paragraph of this Agreement.

                  "Indebtedness"   shall  mean,   as  to  any  Person,   without
duplication,  (i) all  indebtedness  (including  principal,  interest,  fees and
charges) of such Person for borrowed money or for the deferred purchase price of
property or services,  (ii) the maximum  amount  available to be drawn under all
letters of credit issued for the account of such Person and all unpaid  drawings
in  respect  of such  letters of  credit,  (iii) all  Indebtedness  of the types
described  in clause (i),  (ii),  (iv),  (v),  (vi) or (vii) of this  definition
secured by any Lien on any property  owned by such  Person,  whether or not such
Indebtedness has been assumed by such Person (provided,  that, if the Person has
not assumed or otherwise  become  liable in respect of such  Indebtedness,  such
Indebtedness  shall be deemed to be in an amount  equal to the fair market value
of the property to which such Lien relates as  determined  in good faith by such
Person), (iv) the aggregate amount required to be capitalized under leases under
which such Person is the  lessee,  (v) all  obligations  of such Person to pay a
specified  purchase  price for goods or  services,  whether or not  delivered or
accepted,  i.e.,  take-or-pay  and  similar  obligations,  (vi)  all  Contingent
Obligations  of such Person and (vii) all  obligations  under any Interest  Rate
Protection  Agreement,  any Other Hedging Agreement or under any similar type of
agreement.  Notwithstanding the foregoing,  Indebtedness shall not include trade
payables  and  accrued  expenses  incurred  by any  Person  in  accordance  with
customary practices and in the ordinary course of business of such Person.

                  "Indebtedness  to be Refinanced"  shall mean all  Indebtedness
set forth on Schedule X which is to be repaid in full on the  Initial  Borrowing
Date.

                  "Initial  Borrowing  Date" shall mean the date occurring on or
after the Effective Date on which the initial Borrowing of Loans occurs.


                                      -96-


<PAGE>




                  "Intercompany Loan" shall have the meaning provided in
Section 9.05(ix).

                  "Intercompany  Note" shall mean a promissory note, in the form
of Exhibit L, evidencing Intercompany Loans.

                  "Interest  Determination Date" shall mean, with respect to any
Eurodollar  Loan,  the  second  Business  Day prior to the  commencement  of any
Interest Period relating to such Eurodollar Loan.

                  "Interest Period" shall have the meaning provided in Section
1.09.

                  "Interest Rate Protection  Agreement"  shall mean any interest
rate swap agreement,  interest rate cap agreement,  interest  collar  agreement,
interest rate hedging agreement or other similar agreement or arrangement.

                  "Investments" shall have the meaning provided in Section 9.05.

                  "Issuing Bank" shall mean BTCo.

                  "JNL" shall mean Jackson National Life Insurance Company.

                  "L/C  Supportable  Obligations"  shall mean (i) obligations of
the Borrower or any of its  Subsidiaries  with respect to workers  compensation,
surety  bonds and  other  similar  statutory  obligations  and (ii)  such  other
obligations  of  the  Borrower  or any of  its  Subsidiaries  as are  reasonably
acceptable to the Issuing Bank and otherwise  permitted to exist pursuant to the
terms of this Agreement.

                  "Leaseholds" of any Person shall mean all the right, title and
interest  of such  Person  as  lessee or  licensee  in,  to and under  leases or
licenses of land, improvements and/or fixtures.

                  "Letter of Credit" shall have the meaning provided in Section
2.01(a).

                  "Letter of Credit Fee" shall have the meaning provided in
Section 3.01(c).

                  "Letter of Credit  Outstandings"  shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding  Letters of Credit and
(ii) the amount of all Unpaid Drawings.

                  "Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).


                                      -97-


<PAGE>




                  "Leverage  Ratio"  shall  mean,  at any  time,  the  ratio  of
Consolidated  Indebtedness  at such  time to  Consolidated  EBITDA  for the Test
Period then most  recently  ended,  provided  that,  (x) in the case of the Test
Period ending on May 31, 1998, Consolidated EBITDA for such Test Period shall be
the actual  Consolidated EBITDA for such Test Period multiplied by 4, (y) in the
case of the Test Period ending on August 31, 1998,  Consolidated EBITDA for such
Test  Period  shall be the  actual  Consolidated  EBITDA  for such  Test  Period
multiplied  by 2, and (z) in the case of the Test  Period  ending  November  30,
1998,  Consolidated EBITDA for such Test Period shall be the actual Consolidated
EBITDA for such Test Period multiplied by a fraction the numerator of which is 4
and the denominator of which is 3.

                  "Lien"  shall  mean  any  mortgage,   pledge,   hypothecation,
assignment,  deposit  arrangement,   encumbrance,  lien  (statutory  or  other),
preference,  priority  or  other  security  agreement  of  any  kind  or  nature
whatsoever (including,  without limitation,  any conditional sale or other title
retention  agreement,  any financing or similar  statement or notice filed under
the UCC or any other similar  recording or notice statute,  and any lease having
substantially the same effect as any of the foregoing).

                  "Loan" shall mean each Term Loan, each Revolving Loan and
each Swingline Loan.

                  "Management Agreements" shall have the meaning provided in
Section 5.05.

                  "Mandatory Borrowing" shall have the meaning provided in
Section 1.01(d).

                  "Margin Stock" shall have the meaning provided in
Regulation U.

                  "Maturity Date" shall mean, with respect to any Tranche of
Loans, the Term Loan Maturity Date, the Revolving Loan Maturity Date or the
Swingline Expiry Date, as the case may be.

                  "Maximum Swingline Amount" shall mean $2,000,000.

                  "Merger" shall mean the merger of Acquisition Corp. with and
into ATC, with ATC being the surviving corporation of such merger.

                  "Merger  Agreement"  shall  mean  the  Agreement  and  Plan of
Merger, dated as of November 26, 1997, among Holdings, Acquisition Corp.
and ATC.

                  "Merger  Documents"  shall  mean  the  Merger  Agreement,  the
certificate of merger  attached  thereto as an exhibit and all other  agreements
and documents related to the Merger.


                                      -98-


<PAGE>




                  "Minimum  Borrowing  Amount"  shall  mean (i) for Term  Loans,
$5,000,000,  (ii) for Revolving  Loans,  $500,000 and (iii) for Swingline Loans,
$100,000.

                  "Mortgage"  shall mean each  mortgage,  deed to secure debt or
deed of trust  pursuant  to which any Credit  Party  shall  have  granted to the
Collateral Agent a mortgage lien on such Credit Party's Mortgaged Property.

                  "Mortgaged  Property"  shall mean each parcel of Real Property
owned or leased by any Credit Party which is encumbered by a Mortgage.

                  "Net Debt Proceeds" shall mean, with respect to any incurrence
of  Indebtedness  for borrowed  money,  the cash proceeds  (net of  underwriting
discounts and commissions and other costs associated  therewith) received by the
respective  Person  from the  respective  incurrence  of such  Indebtedness  for
borrowed money.

                  "Net  Equity  Proceeds"  shall  mean,  with  respect  to  each
issuance or sale of any equity by any Person or any capital contribution to such
Person,  the cash proceeds (net of  underwriting  discounts and  commissions and
other costs  associated  therewith)  received by such Person from the respective
sale or issuance of its equity or from the respective capital contribution.

                  "Net  Insurance  Proceeds"  shall  mean,  with  respect to any
Recovery Event, the cash proceeds (net of costs,  expenses and taxes incurred in
connection  with such  Recovery  Event)  received  by the  respective  Person in
connection with the respective Recovery Event.

                  "Net Sale Proceeds"  shall mean, for any Asset Sale, the gross
cash proceeds  (including any cash received by way of deferred  payment pursuant
to a promissory  note,  receivable or otherwise,  but only as and when received)
received  from such sale of  assets,  net of the  costs,  expenses  of such sale
(including fees and commissions,  payments of unassumed  liabilities relating to
the  assets  sold  and  required  payments  of  any  Indebtedness   (other  than
Indebtedness secured pursuant to the Security Documents) which is secured by the
respective assets which were sold), and the incremental taxes paid or payable as
a result of such Asset Sale.

                  "Non-Compete Agreements" shall have the meaning provided in
Section 5.05.

                  "Non-Defaulting  Bank" shall mean and include  each Bank other
than a Defaulting Bank.


                                      -99-


<PAGE>




                  "Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.

                  "Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).

                  "Notice of Conversion" shall have the meaning provided in
Section 1.06.

                  "Notice  Office" shall mean the office of the Agent located at
One  Bankers  Trust  Plaza,  130  Liberty  Street,  New  York,  New York  10006,
Attention:  Greg Perry or such other office as the Agent may hereafter designate
in writing as such to the other parties hereto.

                  "Obligations"  shall mean all amounts owing to the Agent,  the
Collateral  Agent,  the Issuing  Bank or any Bank  pursuant to the terms of this
Agreement or any other Credit Document.

                  "Offer to Purchase" shall mean the Offer to Purchase, dated
December 4, 1997, issued by Acquisition Corp. in connection with the Tender
Offer.

                  "Old Hickory" shall mean Old Hickory Fund I, L.L.C.

                  "Other  Hedging  Agreement"  shall mean any  foreign  exchange
contracts,  currency  swap  agreements,  commodity  agreements  or other similar
agreements  or  arrangements  designed to protect  against the  fluctuations  in
currency values.

                  "Parent Guaranty" shall mean the guaranty of Holdings
pursuant to Section 14.

                  "Participant" shall have the meaning provided in Section
2.04(a).

                  "Payment Office" shall mean the office of the Agent located at
One Bankers Trust Plaza,  130 Liberty Street,  New York, New York 10006, or such
other  office as the Agent may  hereafter  designate  in  writing as such to the
other parties hereto.

                  "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.

                  "Permitted Acquisition" shall have the meaning provided in
Section 9.02(xii).

                  "Permitted  Encumbrance"  shall  mean,  with  respect  to  any
Mortgaged  Property,  such  exceptions to title as are set forth in the Mortgage
Policy delivered with


                                     -100-


<PAGE>




respect thereto,  all of which  exceptions must be reasonably  acceptable to the
Agent in its reasonable discretion.

                  "Permitted Liens" shall have the meaning provided in Section
9.01.

                  "Person"  shall  mean  any  individual,   partnership,   joint
venture,  firm,  corporation,  association,  limited liability company, trust or
other  enterprise  or any  government  or political  subdivision  or any agency,
department or instrumentality thereof.

                  "Plan"  shall mean any pension plan as defined in Section 3(2)
of ERISA,  which is  maintained  or  contributed  to by (or to which there is an
obligation  to  contribute  of) Holdings or a Subsidiary of Holdings or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest  date on which the  Holdings,  or a  Subsidiary  of  Holdings or an ERISA
Affiliate maintained,  contributed to or had an obligation to contribute to such
plan.

                  "Pledge Agreement" shall have the meaning provided in Section
5.12.

                  "Pledge Agreement Collateral" shall mean all "Collateral"
as defined in the Pledge Agreement.

                  "Pledged Securities" shall mean all "Pledged Securities" as
defined in the Pledge Agreement.

                  "Prime  Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime  lending  rate,  the Prime Lending Rate to change
when and as such  prime  lending  rate  changes.  The  Prime  Lending  Rate is a
reference  rate and does not  necessarily  represent  the  lowest  or best  rate
actually charged to any customer.  BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.

                  "Projections" shall mean the projections prepared by Holdings,
dated January 28, 1998 and furnished to the Banks prior to the Initial Borrowing
Date.

                  "Proxy  Materials" shall mean all proxy materials sent by
Acquisition Corp. and ATC to the shareholders of ATC in connection with the
Acquisition.

                  "Qualified  Preferred Stock" shall mean the preferred stock of
Holdings  issued to JNL as part of the Equity  Financing (as  constituted on the
Effective  Date) and any other  preferred stock of Holdings so long as the terms
of any such preferred  stock (i) do not contain any mandatory  put,  redemption,
repayment, sinking fund or other similar provision occurring before December 31,
2005,  (ii) do not require the cash payment of  dividends,  (iii) do not contain
any covenants other than those covenants of the type (but no


                                     -101-


<PAGE>




more  restrictive  than those) set forth in the preferred stock issued to JNL as
part of the Equity Financing (as constituted on the Effective Date), (iv) do not
grant the  holders  thereof  any voting  rights  except  for (x)  voting  rights
required  to be granted to such  holders  under  applicable  law and (y) limited
customary voting rights on fundamental matters such as mergers,  consolidations,
sales  of all or  substantially  all of the  assets  of  Holdings,  liquidations
involving  Holdings or the creation of any class of equity on a parity with,  or
prior to, such  Qualified  Preferred  Stock,  and (v) are  otherwise  reasonably
satisfactory to the Agent.

                  "Quarterly  Payment Date" shall mean each February 28, May 31,
August 31 and November 30 occurring after the Initial Borrowing Date.

                  "RCRA" shall mean the Resource Conservation and Recovery
Act, as the same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.

                  "Real Property" of any Person shall mean all the right,  title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds.

                  "Recovery  Event" shall mean the receipt by Holdings or any of
its Subsidiaries of any cash insurance  proceeds or condemnation  awards payable
by reason of theft,  loss,  physical  destruction,  damage,  taking or any other
similar  event with  respect to any property or assets of Holdings or any of its
Subsidiaries.

                  "Refinancing" shall mean the repayment in full by the
Borrower of the Indebtedness to be Refinanced.

                  "Refinancing Documents" shall mean all agreements and
documents related to the Refinancing.

                  "Register" shall have the meaning provided in Section 13.15.

                  "Regulation  D"  shall  mean  Regulation  D of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.

                  "Regulation  G"  shall  mean  Regulation  G of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.

                  "Regulation  T"  shall  mean  Regulation  T of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.


                                     -102-


<PAGE>




                  "Regulation  U"  shall  mean  Regulation  U of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.

                  "Regulation  X"  shall  mean  Regulation  X of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.

                  "Release"  shall mean the disposing,  discharging,  injecting,
spilling,  pumping, leaking, leaching,  dumping, emitting,  escaping,  emptying,
pouring  or  migrating,  into or upon any land or  water  or air,  or  otherwise
entering into the environment.

                  "Replaced Bank" shall have the meaning provided in Section
1.13.

                  "Replacement Bank" shall have the meaning provided in Section
1.13.

                  "Reportable  Event"  shall mean an event  described in Section
4043(c)  of ERISA  with  respect  to a Plan that is subject to Title IV of ERISA
other than those  events as to which the 30-day  notice  period is waived  under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

                  "Required  Banks" shall mean  Non-Defaulting  Banks the sum of
whose  outstanding Term Loans (or, if prior to the Initial  Borrowing Date, Term
Loan  Commitments)  and Revolving  Loan  Commitments  (or after the  termination
thereof, outstanding Revolving Loans and RL Percentages of outstanding Swingline
Loans and Letter of Credit Outstandings) represent an amount greater than 50% of
the sum of all outstanding Term Loans of  Non-Defaulting  Banks (or, if prior to
the Initial  Borrowing  Date, the Total Term Loan  Commitment less the Term Loan
Commitments of all  Defaulting  Banks) and the Total  Revolving Loan  Commitment
less the  Revolving  Loan  Commitments  of all  Defaulting  Banks  (or after the
termination  thereof,  the sum of the then total outstanding  Revolving Loans of
Non-Defaulting  Banks and the  aggregate RL  Percentages  of all  Non-Defaulting
Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings
Swingline Loans at such time).

                  "Revolving Loan" shall have the meaning provided in Section
1.01(b)(A).

                  "Revolving  Loan  Commitment"  shall mean,  for each Bank, the
amount set forth  opposite  such Bank's  name in  Schedule I directly  below the
column  entitled  "Revolving  Loan  Commitment," as same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03 and/or 10 or (y) adjusted from time
to time as a result of assignments to or from such Bank pursuant to Section 1.13
or 13.04(b).


                                     -103-


<PAGE>




                  "Revolving Loan Commitment  Commission" shall have the meaning
provided in Section 3.01(b).

                  "Revolving Loan Maturity Date" shall mean January 29, 2003.

                  "Revolving Note" shall have the meaning provided in Section
1.05(a).

                  "RL  Percentage" of any Bank at any time shall mean a fraction
(expressed  as a  percentage)  the  numerator  of  which is the  Revolving  Loan
Commitment of such Bank at such time and the  denominator  of which is the Total
Revolving  Loan  Commitment at such time,  provided that if the RL Percentage of
any Bank is to be determined  after the Total Revolving Loan Commitment has been
terminated, then the RL Percentages of the Banks shall be determined immediately
prior (and without giving effect) to such termination.

                  "Scheduled Repayments" shall have the meaning provided in
Section 4.02(b).

                  "SEC" shall have the meaning provided in Section 8.01(h).

                  "Section 4.04(b)(ii) Certificate" shall have the meaning
provided  in  Section 4.04(b)(ii).

                  "Secured  Creditors" shall have the meaning assigned that term
in the respective Security Documents.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended, and the rules and regulations promulgated thereunder.

                  "Securities  Exchange Act" shall mean the Securities  Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.

                  "Security Agreement" shall have the meaning provided in
Section 5.13.

                  "Security Agreement Collateral" shall mean all "Collateral"
as defined in the Security Agreement.

                  "Security  Document"  shall  mean  and  include  each  of  the
Security Agreement, the Pledge Agreement, each Mortgage and, after the execution
and delivery thereof, each Additional Security Document.


                                     -104-


<PAGE>




                  "Seller  Notes"  shall mean and  include (i) each of the notes
issued (and other  deferred  consideration  owing) by the Borrower or any of its
Subsidiaries as partial consideration for acquisitions  consummated prior to the
Initial Borrowing Date and designated as such on Schedule VI (including the ATEC
Obligations)  and (ii) each of the unsecured notes that may be issued (and other
deferred  consideration  owing) by the Borrower or any of its Subsidiaries  from
time to time after the  Initial  Borrowing  Date in  connection  with  Permitted
Acquisitions  to the extent such notes are  permitted to be issued in accordance
with the terms of Sections 9.02(xii) and 9.04.

                  "Senior   Subordinated   Documents"   shall  mean  the  Senior
Subordinated  Note  Indenture,  the  Senior  Subordinated  Notes and each  other
document or agreement relating to the issuance of the Senior Subordinated Notes.

                  "Senior Subordinated Note Indenture" shall mean the Indenture,
dated as of January 29,  1998,  between the  Borrower  and State Street Bank and
Trust Company, as Trustee.

                  "Senior  Subordinated  Notes"  shall mean the  Borrower's  12%
Senior Subordinated Notes due 2008 (which term shall include the Series A Senior
Subordinated Notes and the Series B Senior Subordinated Notes issued in exchange
therefor pursuant to the Senior Subordinated Note Documents).

                  "Shareholders' Agreements" shall have the meaning provided in
Section 5.05.

                  "Shares" shall mean all outstanding shares of common stock of
ATC.

                  "Start Date" shall mean, with respect to any Applicable Margin
Period, the first day of such Applicable Margin Period.

                  "Stated  Amount" of each Letter of Credit  shall mean,  at any
time,  the  maximum  amount  available  to be drawn  thereunder  (in  each  case
determined  without  regard to whether any  conditions  to drawing could then be
met).

                  "Sub-Limit"  shall mean and  include  each of the  Acquisition
Sub-Limit and the Working Capital Sub-Limit.

                  "Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary  voting power to elect a majority of the directors of such  corporation
(irrespective  of  whether  or not at the time  stock of any class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any contingency) is at the time owned by such


                                     -105-


<PAGE>




Person and/or one or more  Subsidiaries of such Person and (ii) any partnership,
limited liability company,  association,  joint venture or other entity in which
such Person and/or one or more  Subsidiaries  of such Person has more than a 50%
equity interest at the time.

                  "Subsidiary Guarantor" shall mean each Subsidiary of the
Borrower.

                  "Subsidiaries Guaranty" shall have the meaning provided in
Section 5.14.

                  "Supermajority  Banks" shall mean those  Non-Defaulting  Banks
which  would  constitute  the  Required  Banks  under,  and as defined  in, this
Agreement if (x) all  outstanding  Obligations  in respect of the Revolving Loan
Commitment  were  repaid in full and the Total  Revolving  Loan  Commitment  was
terminated  and (y) the  percentage  "50%"  contained  therein  were  changed to
"66-2/3%."

                  "Swingline Bank" shall mean BTCo.

                  "Swingline  Expiry  Date"  shall  mean that date which is five
Business Days prior to the Revolving Loan Maturity Date.

                  "Swingline Loan" shall have the meaning provided in Section
1.01(c).

                  "Swingline Note" shall have the meaning provided in Section
1.05(a).

                  "Syndication  Date"  shall mean that date upon which the Agent
determines  (and  notifies  the  Borrower)  that the  primary  syndication  (and
resultant  addition of Persons as Banks  pursuant to Section  13.04(b)) has been
completed.

                  "Tax Sharing Agreements" shall have the meaning provided in
Section 5.05.

                  "Taxes" shall have the meaning provided in Section 4.04(a).

                  "Tender Offer" shall mean the tender offer commenced by
Acquisition Corp. pursuant to the Offer to Purchase.

                  "Tender Offer Documents" shall mean the Offer to Purchase, the
Schedule  14D-1 filed by  Acquisition  Corp.  and all  amendments  and  exhibits
thereto  and  related  documents  filed  with  the  SEC  or  distributed  to the
shareholders of the Borrower in connection with the Tender Offer.

                  "Term Loan" shall have the meaning provided in Section
1.01(a).


                                     -106-


<PAGE>




                  "Term Loan  Commitment"  shall mean, for each Bank, the amount
set forth  opposite  such Bank's  name in  Schedule I directly  below the column
entitled  "Term Loan  Commitment,"  as same may be (x) reduced from time to time
pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b).

                  "Term  Loan  Commitment  Commission"  shall  have the  meaning
provided in Section 3.01(a).

                  "Term Loan Maturity Date" shall mean January 29, 2003.

                  "Test Date" shall mean,  with  respect to any Start Date,  the
last day of the most recent fiscal quarter of Holdings ended  immediately  prior
to such Start Date.

                  "Test Period" shall mean (i) for any determination  made on or
prior to November 30, 1998, the period from March 1, 1998 to the last day of the
fiscal quarter of Holdings then last ended (in each case taken as one accounting
period), provided that the first Test Period shall end on May 31, 1998, and (ii)
for any determination  made thereafter,  each period of four consecutive  fiscal
quarters  of  Holdings  then last  ended (in each case  taken as one  accounting
period).

                  "Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.

                  "Total Revolving Loan Commitment" shall mean, at any time, the
sum of the Revolving Loan Commitments of each of the Banks.

                  "Total Term Loan Commitment"  shall mean, at any time, the sum
of the Term Loan Commitments of each of the Banks.

                  "Total  Unutilized  Revolving Loan Commitment"  shall mean, at
any time,  an amount  equal to the  remainder  of (x) the Total  Revolving  Loan
Commitment then in effect less (y) the sum of the aggregate  principal amount of
all Revolving Loans and Swingline Loans then outstanding plus the then aggregate
amount of all Letter of Credit Outstandings.

                  "Tranche"  shall mean the respective  facility and commitments
utilized in making Loans  hereunder,  with there being three separate  Tranches,
i.e., Term Loans, Revolving Loans and Swingline Loans.

                  "Transaction" shall mean,  collectively,  (i) the consummation
of the Tender Offer, (ii) the issuance of the Senior  Subordinated  Notes, (iii)
the consummation of the


                                     -107-


<PAGE>




Equity  Financing,  (iv) the consummation of the  Refinancing,  (v) the entering
into of the Credit  Documents  and the  incurrence  of all Loans on the  Initial
Borrowing  Date,  (vi) the  consummation  of the Merger and (vii) the payment of
fees and expenses in connection with the foregoing.

                  "Type" shall mean the type of Loan  determined  with regard to
the interest  option  applicable  thereto,  i.e.,  whether a Base Rate Loan or a
Eurodollar Loan.

                  "UCC" shall mean the Uniform  Commercial  Code as from time to
time in effect in the relevant jurisdiction.

                  "Unfunded  Current  Liability"  of any  Plan  shall  mean  the
amount,  if any, by which the actuarial  present value of the  accumulated  plan
benefits under the Plan as of the close of its most recent plan year, determined
in accordance with actuarial  assumptions at such time consistent with Statement
of Financial Accounting Standards No. 87, exceeds the market value of the assets
allocable thereto.

                  "United States" and "U.S." shall each mean the United States
of America.

                  "Unpaid Drawing" shall have the meaning provided for in
Section 2.05(a).

                  "Unutilized  Acquisition  Sub-Limit"  shall mean, at any time,
(i) the  Acquisition  Sub-Limit at such time less (ii) the sum of the  aggregate
outstanding principal amount of all Acquisition Loans at such time.

                  "Unutilized   Revolving  Loan  Commitment"  shall  mean,  with
respect to any Bank at any time,  such Bank's  Revolving Loan Commitment at such
time  less the sum of (i) the  aggregate  outstanding  principal  amount  of all
Revolving  Loans  made by such  Bank  at such  time  and  (ii)  such  Bank's  RL
Percentage of the Letter of Credit Outstandings at such time.

                  "Unutilized  Working  Capital  Sub-Limit"  shall mean,  at any
time,  (i) the Working  Capital  Sub-Limit at such time less (ii) the sum of the
aggregate principal amount of all Working Capital Loans at such time.

                  "Wholly-Owned  Subsidiary"  shall mean, as to any Person,  (i)
any corporation  100% of whose capital stock (other than  director's  qualifying
shares) is at the time  owned by such  Person  and/or  one or more  Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, limited liability company,
association,  joint  venture or other entity in which such Person  and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.


                                     -108-


<PAGE>




                  "Working Capital Loan" shall mean each Revolving Loan incurred
by the Borrower which does not constitute an Acquisition Loan.

                  "Working  Capital  Sub-Limit"  shall  mean,  at any time,  (x)
$15,000,000  less (y)(i) except as otherwise  provided in clause (ii) below, 23%
of the aggregate  reduction to the Total Revolving Loan  Commitment  theretofore
effected or (ii) with  respect to the  reductions  effected  pursuant to Section
3.02(a),  such other amount as may be specified by the Borrower pursuant to such
Section,  it being understood and agreed that in no event may the Borrower elect
a reduction of the Working Capital  Sub-Limit  pursuant to Section 3.02(a) to an
amount less than $10,000,000.

                  "WPG"  shall  mean  Weiss,  Peck & Greer,  L.L.C.,  a Delaware
limited liability company.


               SECTION 12.  The Agent.

     12.01  Appointment.  The Banks hereby  irrevocably  designate BTCo as Agent
(for  purposes of this Section 12, the term  "Agent" also shall  include BTCo in
its capacity as Collateral  Agent pursuant to the Security  Documents) to act as
specified herein and in the other Credit Documents. Each Bank hereby irrevocably
authorizes,  and each holder of any Note by the acceptance of such Note shall be
deemed  irrevocably to authorize,  the Agent to take such action on their behalf
under the provisions of this Agreement, the other Credit Documents and any other
instruments  and  agreements  referred to herein or therein and to exercise such
powers and to perform such duties  hereunder and thereunder as are  specifically
delegated  to or required of the Agent by the terms  hereof and thereof and such
other powers as are reasonably  incidental thereto. The Agent may perform any of
its duties hereunder by or through its officers, directors, agents, employees or
affiliates.

     12.02   Nature  of  Duties.   The  Agent  shall  not  have  any  duties  or
responsibilities  except those  expressly set forth in this Agreement and in the
other Credit  Documents.  Neither the Agent nor any of its officers,  directors,
agents,  employees or affiliates shall be liable for any action taken or omitted
by them hereunder or under any other Credit  Document or in connection  herewith
or  therewith,  unless  caused  by its or  their  gross  negligence  or  willful
misconduct.  The duties of the Agent shall be mechanical and  administrative  in
nature; the Agent shall not have by reason of this Agreement or any other Credit
Document a  fiduciary  relationship  in respect of any Bank or the holder of any
Note; and nothing in this Agreement or any other Credit  Document,  expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any other Credit  Document except as
expressly set forth herein or therein.


                                     -109-


<PAGE>




     12.03 Lack of Reliance  on the Agent.  Independently  and without  reliance
upon the Agent,  each Bank and the  holder of each Note,  to the extent it deems
appropriate,  has  made  and  shall  continue  to make  (i) its own  independent
investigation  of the  financial  condition  and  affairs  of  Holdings  and its
Subsidiaries  in connection with the making and the continuance of the Loans and
the taking or not taking of any action in  connection  herewith and (ii) its own
appraisal of the  creditworthiness  of Holdings and its Subsidiaries and, except
as expressly  provided in this  Agreement,  the Agent shall not have any duty or
responsibility,  either initially or on a continuing  basis, to provide any Bank
or the  holder of any Note with any  credit or other  information  with  respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter.  The Agent shall not be responsible to any Bank or
the   holder   of  any  Note   for  any   recitals,   statements,   information,
representations  or warranties  herein or in any document,  certificate or other
writing  delivered in connection  herewith or for the execution,  effectiveness,
genuineness, validity, enforceability,  perfection, collectability,  priority or
sufficiency  of this  Agreement  or any other Credit  Document or the  financial
condition  of  Holdings  or any of its  Subsidiaries  or be required to make any
inquiry  concerning  either the  performance  or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document,  or the
financial  condition of Holdings or any of its  Subsidiaries or the existence or
possible existence of any Default or Event of Default.

     12.04 Certain Rights of the Agent. If the Agent shall request  instructions
from the Required Banks with respect to any act or action (including  failure to
act) in connection with this Agreement or any other Credit  Document,  the Agent
shall be  entitled to refrain  from such act or taking  such  action  unless and
until the Agent shall have received  instructions  from the Required Banks;  and
the  Agent  shall not incur  liability  to any Bank by reason of so  refraining.
Without limiting the foregoing, no Bank or the holder of any Note shall have any
right of action whatsoever  against the Agent as a result of the Agent acting or
refraining  from  acting  hereunder  or  under  any  other  Credit  Document  in
accordance with the instructions of the Required Banks.

     12.05  Reliance.  The Agent shall be  entitled to rely,  and shall be fully
protected in relying,  upon any note, writing,  resolution,  notice,  statement,
certificate,  telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone  message signed,  sent or made by any Person that
the Agent  believed  to be the proper  Person,  and,  with  respect to all legal
matters  pertaining  to this  Agreement  and any other  Credit  Document and its
duties hereunder and thereunder, upon advice of counsel selected by the Agent.

     12.06  Indemnification.  To the  extent  the  Agent is not  reimbursed  and
indemnified  by the Credit  Parties,  the Banks will reimburse and indemnify the
Agent in proportion to their respective  "percentage" as used in determining the
Required Banks (determined as if there were no Defaulting Banks) for and against
any and all liabilities,


                                     -110-


<PAGE>




obligations,  losses, damages,  penalties,  claims, actions,  judgments,  costs,
expenses or  disbursements of whatsoever kind or nature which may be imposed on,
asserted  against or incurred by the Agent in performing its duties hereunder or
under any other Credit Document or in any way relating to or arising out of this
Agreement or any other Credit  Document;  provided  that no Bank shall be liable
for any portion of such liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits,  costs,  expenses  or  disbursements  to the extent
resulting  from the Agent's gross  negligence or willful  misconduct (as finally
determined by a court of competent jurisdiction).

     12.07 The Agent in its Individual Capacity.  With respect to its obligation
to make  Loans,  or issue or  participate  in  Letters  of  Credit,  under  this
Agreement,  the Agent  shall have the rights and powers  specified  herein for a
"Bank"  and may  exercise  the same  rights  and  powers  as  though it were not
performing the duties specified herein;  and the term "Banks," "Required Banks,"
"Supermajority Banks," "holders of Notes" or any similar terms shall, unless the
context  clearly  otherwise  indicates,  include  the  Agent  in its  respective
individual  capacities.  The Agent and its affiliates may accept  deposits from,
lend money to, and generally engage in any kind of banking,  investment banking,
trust or other business with, or provide debt financing, equity capital or other
services  (including  financial  advisory  services) to, any Credit Party or any
Affiliate of any Credit Party (or any Person engaged in a similar  business with
any Credit Party or any Affiliate  thereof) as if they were not  performing  the
duties specified herein,  and may accept fees and other  consideration  from any
Credit Party or any  Affiliate  of any Credit  Party for services in  connection
with this Agreement and otherwise  without having to account for the same to the
Banks.

     12.08  Holders.  The  Agent may deem and treat the payee of any Note as the
owner thereof for all purposes  hereof unless and until a written  notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent.  Any  request,  authority or consent of any Person who, at
the time of making such  request or giving  such  authority  or consent,  is the
holder of any Note shall be  conclusive  and binding on any  subsequent  holder,
transferee,  assignee  or  indorsee,  as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.

     12.09  Resignation  by the  Agent.  (a)  The  Agent  may  resign  from  the
performance of all its respective  functions and duties  hereunder  and/or under
the other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Banks.  Such resignation shall take effect upon the appointment of
a successor Agent pursuant to clauses (b) and (c) below or as otherwise provided
below.

                  (b) Upon any such  notice of  resignation  by the  Agent,  the
Required Banks shall appoint a successor Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the Borrower.


                                      -111-


<PAGE>




                  (c) If a  successor  Agent  shall not have  been so  appointed
within such 15 Business  Day period,  the Agent with the consent of the Borrower
(which  consent  shall not be  unreasonably  withheld  or  delayed),  shall then
appoint a successor Agent who shall serve as Agent hereunder or thereunder until
such time, if any, as the Required  Banks appoint a successor  Agent as provided
above.

                  (d) If no  successor  Agent  has been  appointed  pursuant  to
clause (b) or (c) above by the 20th  Business  Day after the date such notice of
resignation  was  given by the  Agent,  the  Agent's  resignation  shall  become
effective and the Required Banks shall thereafter  perform all the duties of the
Agent hereunder  and/or under any other Credit Document until such time, if any,
as the Required Banks appoint a successor Agent as provided above.


               SECTION 13.  Miscellaneous.

     13.01 Payment of Expenses,  etc. The Borrower shall: (i) whether or not the
transactions   herein   contemplated   are   consummated,   pay  all  reasonable
out-of-pocket  costs and expenses of the Agent (including,  without  limitation,
the  reasonable  fees and  disbursements  of White & Case LLP and of the Agent's
local counsel and consultants) in connection with the preparation, execution and
delivery of this Agreement and the other Credit  Documents and the documents and
instruments referred to herein and therein and any amendment,  waiver or consent
relating  hereto or thereto,  of the Agent in  connection  with its  syndication
efforts  with  respect  to  this  Agreement  and of the  Agent  and,  after  the
occurrence and during the continuance of an Event of Default,  each of the Banks
in  connection  with the  enforcement  of this  Agreement  and the other  Credit
Documents and the documents and instruments referred to herein and therein or in
connection  with any  refinancing or  restructuring  of the credit  arrangements
provided  under this  Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy  proceedings  (including,  without limitation,  in each
case the reasonable fees and  disbursements  of counsel for the Agent and, after
the occurrence of an Event of Default, for each of the Banks); (ii) pay and hold
each of the Banks  harmless  from and  against  any and all  present  and future
stamp,  excise and other similar documentary taxes with respect to the foregoing
matters  and  save  each of the  Banks  harmless  from and  against  any and all
liabilities  with respect to or resulting from any delay or omission (other than
to the extent  attributable to such Bank) to pay such taxes; and (iii) indemnify
the Agent  and each  Bank,  and each of their  respective  officers,  directors,
employees,  representatives  and  agents  from  and hold  each of them  harmless
against  any and all  liabilities,  obligations  (including  removal or remedial
actions), losses, damages, penalties,  claims, actions, judgments, suits, costs,
expenses and  disbursements  (including  reasonable  attorneys' and consultants'
fees and disbursements)  incurred by, imposed on or assessed against any of them
as a result of, or arising  out of, or in any way  related  to, or by reason of,
(a) any investigation, litigation or other proceeding (whether or not the Agent


                                     -112-


<PAGE>




or any Bank is a party thereto and whether or not such investigation, litigation
or other  proceeding is brought by or on behalf of any Credit Party)  related to
the  entering  into and/or  performance  of this  Agreement  or any other Credit
Document  or the use of any  Letter  of  Credit  or the  proceeds  of any  Loans
hereunder  or the  consummation  of the  Transaction  or any other  transactions
contemplated  herein or in any other  Credit  Document or the exercise of any of
their rights or remedies  provided herein or in the other Credit  Documents,  or
(b) the actual or alleged  presence of Hazardous  Materials in the air,  surface
water or  groundwater or on the surface or subsurface of any Real Property owned
or at any time operated by Holdings or any of its Subsidiaries,  the generation,
storage, transportation, handling or disposal of Hazardous Materials by Holdings
or any of its Subsidiaries at any location,  whether or not owned or operated by
Holdings or any of its  Subsidiaries,  the  non-compliance  of any Real Property
with any Environmental Law (including applicable permits thereunder)  applicable
to any Real Property, or any Environmental Claim asserted against Holdings,  any
of its  Subsidiaries  or any Real  Property  owned or at any  time  operated  by
Holdings  or  any  of  its  Subsidiaries,   including,  in  each  case,  without
limitation,   the  reasonable  fees  and  disbursements  of  counsel  and  other
consultants  incurred in connection with any such  investigation,  litigation or
other proceeding (but excluding, in each case any losses,  liabilities,  claims,
damages or expenses to the extent incurred by reason of the gross  negligence or
willful  misconduct of the Person to be indemnified (as finally  determined by a
court  of  competent  jurisdiction)).  To the  extent  that the  undertaking  to
indemnify, pay or hold harmless the Agent or any Bank set forth in the preceding
sentence  may be  unenforceable  because  it is  violative  of any law or public
policy,  the  Borrower  shall make the maximum  contribution  to the payment and
satisfaction of each of the indemnified  liabilities  which is permissible under
applicable law.

     13.02  Right of Setoff.  (a) In  addition  to any  rights now or  hereafter
granted under  applicable law or otherwise,  and not by way of limitation of any
such  rights,  upon the  occurrence  and during the  continuance  of an Event of
Default,  each  Bank is  hereby  authorized  at any  time or from  time to time,
without presentment,  demand,  protest or other notice of any kind to any Credit
Party or to any other Person,  any such notice being hereby expressly waived, to
set off and to appropriate  and apply any and all deposits  (general or special)
and any other  Indebtedness  at any time held or owing by such Bank  (including,
without  limitation,  by branches and agencies of such Bank wherever located) to
or for the credit or the account of any Credit  Party  against and on account of
the  Obligations  and  liabilities of the Credit Parties to such Bank under this
Agreement  or  under  any of the  other  Credit  Documents,  including,  without
limitation,  all  interests in  Obligations  purchased by such Bank  pursuant to
Section 13.06(b),  and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit  Document,  irrespective
of whether or not such Bank shall have made any demand  hereunder  and  although
said Obligations,  liabilities or claims, or any of them, shall be contingent or
unmatured.


                                     -113-


<PAGE>




                  (b) NOTWITHSTANDING THE FOREGOING  SUBSECTION (a), AT ANY TIME
THAT THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED
IN  CALIFORNIA,  NO BANK  SHALL  EXERCISE A RIGHT OF  SETOFF,  BANKER'S  LIEN OR
COUNTERCLAIM  OR TAKE ANY  COURT  OR  ADMINISTRATIVE  ACTION  OR  INSTITUTE  ANY
PROCEEDING  TO ENFORCE ANY  PROVISION OF THIS  AGREEMENT OR ANY NOTE THAT IS NOT
TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH
SETOFF OR ACTION OR PROCEEDING  WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b,
580d AND 726 OF THE  CALIFORNIA  CODE OF CIVIL  PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA  CIVIL  CODE,  IF  APPLICABLE,  OR  OTHERWISE)  AFFECT OR IMPAIR  THE
VALIDITY,  PRIORITY OR  ENFORCEABILITY  OF THE LIENS  GRANTED TO THE  COLLATERAL
AGENT PURSUANT TO THE SECURITY  DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND
OTHER OBLIGATIONS HEREUNDER,  AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH
RIGHT  WITHOUT  OBTAINING  SUCH CONSENT OF THE REQUIRED  BANKS SHALL BE NULL AND
VOID.  THIS  SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS
HEREUNDER AND MAY BE AMENDED,  MODIFIED OR WAIVED IN ANY RESPECT BY THE REQUIRED
BANKS WITHOUT THE  REQUIREMENT OF PRIOR NOTICE TO OR CONSENT BY ANY CREDIT PARTY
AND DOES NOT  CONSTITUTE  A WAIVER OF ANY RIGHTS  AGAINST  ANY  CREDIT  PARTY OR
AGAINST ANY COLLATERAL.

     13.03 Notices.  Except as otherwise  expressly provided herein, all notices
and other  communications  provided for hereunder shall be in writing (including
telegraphic,  telex, telecopier or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to any Credit Party, at the address
specified  opposite  its  signature  below  or  in  the  other  relevant  Credit
Documents;  if to the Bank,  at its address  specified on Schedule II; and if to
the Agent,  at the Notice  Office;  or, as to any Credit Party or the Agent,  at
such other address as shall be  designated by such party in a written  notice to
the other parties hereto and, as to each Bank, at such other address as shall be
designated by such Bank in a written  notice to the Borrower and the Agent.  All
such  notices and  communications  shall,  when  mailed,  telegraphed,  telexed,
telecopied,  or cabled or sent by overnight courier, be effective when deposited
in the mails,  delivered to the  telegraph  company,  cable company or overnight
courier, as the case may be, or sent by telex or telecopier, except that notices
and  communications  to the Agent and the Borrower shall not be effective  until
received by the Agent or the Borrower, as the case may be.

     13.04 Benefit of Agreement; Assignments; Participations. (a) This Agreement
shall be  binding  upon and inure to the  benefit of and be  enforceable  by the
respective successors and assigns of the parties hereto; provided,  however, the
Borrower may not assign or transfer any of its rights,  obligations  or interest
hereunder without the


                                     -114-


<PAGE>




prior written consent of the Banks and,  provided  further,  that,  although any
Bank may transfer,  assign or grant participations in its rights hereunder, such
Bank shall remain a "Bank" for all purposes  hereunder  (and may not transfer or
assign all or any  portion of its  Commitments  hereunder  except as provided in
Sections 1.13 and 13.04(b)) and the transferee,  assignee or participant, as the
case may be, shall not constitute a "Bank" hereunder and, provided further, that
no Bank shall transfer or grant any  participation  under which the  participant
shall have rights to approve any amendment to or waiver of this Agreement or any
other Credit  Document  except to the extent such  amendment or waiver would (i)
extend  the  final  scheduled  maturity  of any  Loan,  Note or Letter of Credit
(unless such Letter of Credit is not extended beyond the Revolving Loan Maturity
Date) in which such participant is  participating,  or reduce the rate or extend
the time of payment of interest or Fees  thereon  (except in  connection  with a
waiver of  applicability  of any  post-default  increase in  interest  rates) or
reduce the principal amount thereof, or increase the amount of the participant's
participation over the amount thereof then in effect (it being understood that a
waiver of any  Default or Event of Default or of a  mandatory  reduction  in the
Total  Commitment,   shall  not  constitute  a  change  in  the  terms  of  such
participation, and that an increase in any Commitment or Loan shall be permitted
without the consent of any participant if the participant's participation is not
increased as a result  thereof),  (ii) consent to the  assignment or transfer by
the Borrower of any of its rights and obligations  under this Agreement or (iii)
release all or  substantially  all of the  Collateral  under all of the Security
Documents (except as expressly provided in the Credit Documents)  supporting the
Loans hereunder in which such participant is  participating.  In the case of any
such  participation,  the  participant  shall  not have any  rights  under  this
Agreement or any of the other Credit Documents (the participant's rights against
such  Bank in  respect  of such  participation  to be  those  set  forth  in the
agreement  executed by such Bank in favor of the participant  relating  thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.

                  (b)  Notwithstanding  the  foregoing,  any  Bank  (or any Bank
together  with one or more  other  Banks) may (x) assign all or a portion of its
Commitments and related  outstanding  Obligations  (or, if the Commitments  with
respect  to the  relevant  Tranche  have  terminated,  outstanding  Obligations)
hereunder to (i) its parent  company  and/or any affiliate of such Bank which is
at least 50% owned by such Bank or its parent company or to one or more Banks or
(ii) in the case of any Bank that is a fund  that  invests  in loans,  any other
fund that  invests in loans and is  managed  or  advised by the same  investment
advisor of such Bank or by an Affiliate of such investment advisor or (y) assign
all,  or if less  than  all,  a  portion  equal  to at least  $2,500,000  in the
aggregate for the assigning Bank or assigning  Banks,  of such  Commitments  and
related  outstanding  Obligations  (or, if the  Commitments  with respect to the
relevant Tranche have terminated,  outstanding  Obligations) hereunder to one or
more Eligible Transferees (treating any fund that invests in loans and any other
fund that  invests in loans and is  managed  or  advised by the same  investment
advisor of such fund or by an Affiliate of such  investment  advisor as a single
Eligible Transferee), each of


                                     -115-


<PAGE>




which assignees shall become a party to this Agreement as a Bank by execution of
an Assignment and Assumption Agreement, provided that, (i) at such time Schedule
I shall be deemed modified to reflect the Commitments  and/or outstanding Loans,
as the case may be, of such new Bank and of the  existing  Banks,  (ii) upon the
surrender of the relevant  Notes by the assigning  Bank (or, upon such assigning
Bank's  indemnifying  the  Borrower  for any lost Note  pursuant  to a customary
indemnification  agreement) new Notes will be issued, at the Borrower's expense,
to such new Bank and to the assigning  Bank upon the request of such new Bank or
assigning  Bank,  such new Notes to be in conformity  with the  requirements  of
Section 1.05 (with  appropriate  modifications)  to the extent needed to reflect
the revised  Commitments and/or outstanding Loans, as the case may be, (iii) the
consent of the Agent and,  so long as no Default  under  Section  10.01 or 10.05
then exists or no Event of Default  then  exists,  the consent of the  Borrower,
shall be required in connection  with any  assignment to an Eligible  Transferee
pursuant to clause (y) above (each of which consents  shall not be  unreasonably
withheld  or  delayed),  (iv) the Agent  shall  receive at the time of each such
assignment, from the assigning or assignee Bank, the payment of a non-refundable
assignment  fee of  $3,500  and  (v) no  such  transfer  or  assignment  will be
effective until recorded by the Agent on the Register pursuant to Section 13.15.
To the extent of any assignment pursuant to this Section 13.04(b), the assigning
Bank shall be relieved of its obligations hereunder with respect to its assigned
Commitments  and outstanding  Loans. At the time of each assignment  pursuant to
this  Section  13.04(b) to a Person  which is not already a Bank  hereunder  and
which  is not a United  States  person  (as  such  term is  defined  in  Section
7701(a)(30)  of the  Code) for  Federal  income  tax  purposes,  the  respective
assignee Bank shall,  to the extent  legally  entitled to do so,  provide to the
Borrower the appropriate  Internal Revenue Service Forms (and, if applicable,  a
Section  4.04(b)(ii)  Certificate)  described in Section 4.04(b).  To the extent
that an  assignment  of all or any portion of a Bank's  Commitments  and related
outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would,
at the time of such  assignment,  result in increased  costs under Section 1.10,
2.06 or 4.04 from those being charged by the respective  assigning Bank prior to
such assignment,  then the Borrower shall not be obligated to pay such increased
costs  (although  the  Borrower,  in  accordance  with and pursuant to the other
provisions  of this  Agreement,  shall be obligated  to pay any other  increased
costs of the type described  above  resulting from changes after the date of the
respective assignment).

                  (c) Nothing in this  Agreement  shall  prevent or prohibit any
Bank from  pledging its Loans and Notes  hereunder to a Federal  Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and, with
the consent of the Agent, any Bank which is a fund may pledge all or any portion
of its Loans and Notes to its  trustee  in  support  of its  obligations  to its
trustee. No pledge pursuant to this clause (c) shall release the transferor Bank
from any of its obligations hereunder.

     13.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Agent, the Collateral Agent, the Issuing Bank or any Bank in exercising any
right,


                                     -116-


<PAGE>




power or privilege hereunder or under any other Credit Document and no course of
dealing  between  the  Borrower  or any other  Credit  Party and the Agent,  the
Collateral  Agent,  the  Issuing  Bank or any  Bank  shall  operate  as a waiver
thereof;  nor shall any  single  or  partial  exercise  of any  right,  power or
privilege  hereunder  or under any other Credit  Document  preclude any other or
further exercise thereof or the exercise of any other right,  power or privilege
hereunder or thereunder.  The rights, powers and remedies herein or in any other
Credit  Document  expressly  provided are  cumulative  and not  exclusive of any
rights,  powers or remedies which the Agent,  the Collateral  Agent, the Issuing
Bank or any Bank  would  otherwise  have.  No notice to or demand on any  Credit
Party in any case shall entitle any Credit Party to any other or further  notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Agent, the Collateral Agent, the Issuing Bank or any Bank to any other or
further action in any circumstances without notice or demand.

     13.06  Payments  Pro  Rata.  (a)  Except  as  otherwise  provided  in  this
Agreement, the Agent agrees that promptly after its receipt of each payment from
or on behalf of the Borrower in respect of any Obligations  hereunder,  it shall
distribute  such payment to the Banks (other than any Bank that has consented in
writing  to waive its pro rata  share of any such  payment)  pro rata based upon
their respective  shares,  if any, of the Obligations with respect to which such
payment was received.

                  (b) Each of the Banks  agrees that,  if it should  receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by  counterclaim  or cross
action,  by  the  enforcement  of any  right  under  the  Credit  Documents,  or
otherwise),  which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings,  Commitment Commission or Letter of Credit Fees,
of a sum which with  respect to the related sum or sums  received by other Banks
is in a greater  proportion  than the total of such Obligation then owed and due
to such Bank bears to the total of such  Obligation  then owed and due to all of
the Banks  immediately  prior to such  receipt,  then such Bank  receiving  such
excess  payment  shall  purchase for cash without  recourse or warranty from the
other Banks an interest in the  Obligations  of the  respective  Credit Party to
such Banks in such amount as shall result in a proportional participation by all
the Banks in such  amount;  provided  that if all or any  portion of such excess
amount is thereafter  recovered from such Bank, such purchase shall be rescinded
and the  purchase  price  restored to the extent of such  recovery,  but without
interest.

                  (c) Notwithstanding anything to the contrary contained herein,
the  provisions of the preceding  Sections  13.06(a) and (b) shall be subject to
the express  provisions of this Agreement  which require,  or permit,  differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.


                                     -117-


<PAGE>




     13.07  Calculations;  Computations;  Accounting  Terms.  (a) The  financial
statements  to be  furnished  to the  Banks  pursuant  hereto  shall be made and
prepared in accordance  with  generally  accepted  accounting  principles in the
United States  consistently  applied  throughout the periods involved (except as
set forth in the notes  thereto  or as  otherwise  disclosed  in  writing by the
Borrower to the Banks); provided that, except as otherwise specifically provided
herein,  all  computations  of Excess Cash Flow, the Applicable Base Rate Margin
and  the  Applicable  Eurodollar  Rate  Margin,  and  all  computations  and all
definitions  used in  determining  compliance  with  Sections 9.07 through 9.09,
inclusive,  shall utilize accounting  principles and policies in conformity with
those used to prepare the historical  financial statements of ATC referred to in
Section 7.05(a).

                  (b) All  computations  of  interest  (other than in respect of
Base Rate Loans),  Commitment  Commission and other Fees hereunder shall be made
on the basis of a year of 360 days for the actual number of days  (including the
first  day but  excluding  the last  day;  except  that in the case of Letter of
Credit Fees,  the last day shall be included)  occurring in the period for which
such interest,  Commitment  Commission or Fees are payable.  All computations of
interest  on Base Rate Loans  hereunder  shall be made on the basis of a year of
365/366  days  for the  actual  number  of days  (including  the  first  day but
excluding  the last day)  occurring  in the period for which  such  interest  is
payable.

     13.08  GOVERNING LAW;  SUBMISSION TO  JURISDICTION;  VENUE;  WAIVER OF JURY
TRIAL.  (a) THIS  AGREEMENT  AND THE OTHER CREDIT  DOCUMENTS  AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER  SHALL,  EXCEPT AS OTHERWISE
PROVIDED IN THE  MORTGAGES,  BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER CREDIT  DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS  AGREEMENT OR ANY OTHER CREDIT  DOCUMENT,
EACH OF HOLDINGS AND THE BORROWER HEREBY  IRREVOCABLY  ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,  THE JURISDICTION OF THE
AFORESAID COURTS.  EACH OF HOLDINGS AND THE BORROWER HEREBY FURTHER  IRREVOCABLY
WAIVES ANY CLAIM  THAT ANY SUCH  COURTS  LACK  PERSONAL  JURISDICTION  OVER SUCH
CREDIT PARTY,  AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION  PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT  DOCUMENTS  BROUGHT IN ANY OF
THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH
CREDIT PARTY. EACH OF HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY  CONSENTS TO
THE SERVICE OF


                                     -118-


<PAGE>




PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE  MAILING OF COPIES  THEREOF BY  REGISTERED  OR  CERTIFIED  MAIL,  POSTAGE
PREPAID,  TO SUCH CREDIT PARTY AT ITS ADDRESS SET FORTH  OPPOSITE ITS  SIGNATURE
BELOW,  SUCH  SERVICE TO BECOME  EFFECTIVE 30 DAYS AFTER SUCH  MAILING.  EACH OF
HOLDINGS  AND THE  BORROWER  HEREBY  IRREVOCABLY  WAIVES ANY  OBJECTION  TO SUCH
SERVICE OF PROCESS  AND  FURTHER  IRREVOCABLY  WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY ACTION OR PROCEEDING  COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT
DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.  NOTHING
HEREIN SHALL  AFFECT THE RIGHT OF THE AGENT,  ANY BANK OR THE HOLDER OF ANY NOTE
TO SERVE  PROCESS IN ANY OTHER  MANNER  PERMITTED  BY LAW OR TO  COMMENCE  LEGAL
PROCEEDINGS OR OTHERWISE  PROCEED AGAINST  HOLDINGS OR THE BORROWER IN ANY OTHER
JURISDICTION.

                  (b)  EACH OF  HOLDINGS  AND THE  BORROWER  HEREBY  IRREVOCABLY
WAIVES ANY OBJECTION  WHICH IT MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID  ACTIONS OR PROCEEDINGS  ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT  BROUGHT IN THE COURTS REFERRED
TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER  IRREVOCABLY,  TO THE EXTENT PERMITTED
BY  APPLICABLE  LAW,  WAIVES  AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.

                  (c) EACH OF THE PARTIES TO THIS AGREEMENT  HEREBY  IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,  PROCEEDING  OR  COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT,  THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

     13.09  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed by all the parties  hereto  shall be lodged with the  Borrower  and the
Agent.

     13.10 Effectiveness.  This Agreement shall become effective on the date the
"Effective  Date") on which  Holdings,  the Borrower,  the Agent and each of the
Banks shall have signed a  counterpart  hereof  (whether  the same or  different
counterparts) and shall


                                     -119-


<PAGE>




have delivered the same to the Agent at the Notice Office or, in the case of the
Banks, shall have given to the Agent telephonic (confirmed in writing),  written
or telex notice (actually received) at such office that the same has been signed
and mailed to it.  The Agent  will give  Holdings,  the  Borrower  and each Bank
prompt written notice of the occurrence of the Effective Date.

     13.11  Headings  Descriptive.  The  headings  of the several  sections  and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

     13.12  Amendment or Waiver;  etc. (a) Neither this  Agreement nor any other
Credit  Document  nor any  terms  hereof  or  thereof  may be  changed,  waived,
discharged or terminated unless such change, waiver, discharge or termination is
in  writing  signed by the  respective  Credit  Parties  party  thereto  and the
Required Banks, provided that no such change,  waiver,  discharge or termination
shall,  without the consent of each Bank  (other than a  Defaulting  Bank) (with
Obligations  being directly  affected in the case of following  clause (i)), (i)
extend  the final  scheduled  maturity  of any Loan or Note or extend the stated
expiration date of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal  amount  thereof  (except to the extent repaid in cash) (it
being understood that any amendment or modification to the financial definitions
in this Agreement or to Section 13.07(a) shall not constitute a reduction in the
rate of interest or Fees for the purposes of this clause (i)),  (ii) release all
or  substantially  all of the  Collateral  (except as expressly  provided in the
Credit Documents) under all the Security Documents, (iii) amend, modify or waive
any provision of this Section 13.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being  understood that, with the consent of the
Required Banks,  additional  extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loan  Commitments and Revolving Loan Commitments
are included on the Effective Date) or (v) consent to the assignment or transfer
by the  Borrower  of any of its rights  and  obligations  under this  Agreement;
provided further,  that no such change,  waiver,  discharge or termination shall
(u) increase the  Commitments of any Bank over the amount thereof then in effect
without  the  consent  of  such  Bank  (it  being  understood  that  waivers  or
modifications of conditions precedent,  covenants, Defaults or Events of Default
or of a mandatory  reduction in the Total  Commitment  shall not  constitute  an
increase of the  Commitment  of any Bank,  and that an increase in the available
portion of any  Commitment  of any Bank shall not  constitute an increase of the
Commitment of such Bank),  (v) without the consent of the Issuing  Bank,  amend,
modify or waive any  provision  of Section 2 or alter its rights or  obligations
with  respect to Letters of Credit,  (w) without  the  consent of the  Swingline
Bank, alter the Swingline Bank's rights or obligations with respect to Swingline
Loans,  (x)  without  the  consent  of the  Agent,  amend,  modify  or waive any
provision of Section 12 or any other  provision as same relates to the rights or
obligations


                                     -120-


<PAGE>




of the Agent, (y) without the consent of the Collateral Agent,  amend, modify or
waive any  provision  relating to the rights or  obligations  of the  Collateral
Agent, or (z) without the consent of the Supermajority  Banks, reduce the amount
of, or extend the date of, any Scheduled  Repayment,  or amend the definition of
Supermajority  Banks (it being understood that, with the consent of the Required
Banks,  additional  extensions  of  credit  pursuant  to this  Agreement  may be
included in the  determination of the  Supermajority  Banks on substantially the
same  basis as the  extensions  of Term  Loan  Commitments  and  Revolving  Loan
Commitments are included on the Effective Date).

                  (b) If,  in  connection  with  any  proposed  change,  waiver,
discharge  or  termination  to  any of  the  provisions  of  this  Agreement  as
contemplated  by clauses (i) through  (v),  inclusive,  of the first  proviso to
Section 13.12(a),  the consent of the Required Banks is obtained but the consent
of one or more of such other  Banks whose  consent is required is not  obtained,
then the  Borrower  shall have the right,  so long as all  non-consenting  Banks
whose individual  consent is required are treated as described in either clauses
(A) or (B) below, to either (A) replace each such  non-consenting  Bank or Banks
with one or more  Replacement  Banks  pursuant to Section 1.13 so long as at the
time of such  replacement,  each such  Replacement Bank consents to the proposed
change,  waiver,  discharge or termination or (B) terminate such  non-consenting
Bank's  Commitments  and/or repay each Tranche of outstanding Loans of such Bank
in accordance with Sections  3.02(b) and/or 4.01(b),  provided that,  unless the
Commitments that are terminated,  and Loans repaid, pursuant to preceding clause
(B) are  immediately  replaced in full at such time  through the addition of new
Banks or the increase of the Commitments  and/or  outstanding  Loans of existing
Banks (who in each case must specifically consent thereto),  then in the case of
any action pursuant to preceding clause (B) the Required Banks (determined after
giving  effect to the  proposed  action)  shall  specifically  consent  thereto,
provided  further,  that in any event the  Borrower  shall not have the right to
replace a Bank,  terminate its Commitments or repay its Loans solely as a result
of the  exercise of such  Bank's  rights (and the  withholding  of any  required
consent by such Bank) pursuant to the second proviso to Section 13.12(a).

     13.13  Survival.  All  indemnities  set  forth  herein  including,  without
limitation,  in Sections 1.10,  1.11,  2.06, 4.04, 12.06 and 13.01 shall survive
the execution,  delivery and termination of this Agreement and the Notes and the
making and repayment of the Obligations.

     13.14 Domicile of Loans.  Each Bank may transfer and carry its Loans at, to
or for the  account  of any  office,  Subsidiary  or  Affiliate  of  such  Bank.
Notwithstanding  anything to the contrary contained herein, to the extent that a
transfer of Loans  pursuant to this  Section  13.14  would,  at the time of such
transfer,  result in increased costs under Section 1.10, 2.06 or 4.04 from those
being charged by the respective  Bank prior to such transfer,  then the Borrower
shall not be obligated to pay such increased costs (although the


                                     -121-


<PAGE>




Borrower  shall  be  obligated  to pay any  other  increased  costs  of the type
described  above  resulting  from  changes  after  the  date  of the  respective
transfer).

     13.15 Register.  The Borrower  hereby  designates the Agent to serve as the
Borrower's  agent,  solely for  purposes of this  Section  13.15,  to maintain a
register (the  "Register") on which it will record the Commitments  from time to
time of each of the  Banks,  the  Loans  made  by  each of the  Banks  and  each
repayment in respect of the principal amount of the Loans of each Bank.  Failure
to make any such recordation,  or any error in such recordation shall not affect
the Borrower's  obligations in respect of such Loans.  With respect to any Bank,
the transfer of the Commitments of such Bank and the rights to the principal of,
and  interest  on,  any Loan  made  pursuant  to such  Commitments  shall not be
effective  until such  transfer is recorded on the  Register  maintained  by the
Agent with respect to ownership of such  Commitments and Loans and prior to such
recordation all amounts owing to the transferor with respect to such Commitments
and Loans shall remain owing to the transferor.  The  registration of assignment
or transfer of all or part of any Commitments and Loans shall be recorded by the
Agent on the  Register  only  upon the  acceptance  by the  Agent of a  properly
executed and delivered  Assignment and Assumption  Agreement pursuant to Section
13.04(b).  Coincident  with the delivery of such an  Assignment  and  Assumption
Agreement to the Agent for acceptance and registration of assignment or transfer
of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate  principal amount shall be issued to the
assigning  or  transferor  Bank  and/or  the new Bank.  The  Borrower  agrees to
indemnify  the Agent from and against any and all  losses,  claims,  damages and
liabilities of whatsoever  nature which may be imposed on,  asserted  against or
incurred by the Agent in performing its duties under this Section 13.15.

     13.16 Confidentiality.  (a) Subject to the provisions of clause (b) of this
Section  13.16,  each Bank  agrees that it will not  disclose  without the prior
consent of the  Borrower  (other than to its  employees,  auditors,  advisors or
counsel or to another Bank if the Bank or such Bank's  holding or parent company
in its reasonable  discretion  determines that any such party should have access
to such information, provided such Persons shall be subject to the provisions of
this Section 13.16 to the same extent as such Bank) any information with respect
to Holdings or any of its  Subsidiaries  which is now or in the future furnished
pursuant to this Agreement or any other Credit  Document and which is designated
by the Borrower to the Banks in writing as confidential,  provided that any Bank
may disclose any such information (i) as has become  generally  available to the
public  other  than by  virtue  of a  breach  of this  Section  13.16(a)  by the
respective Bank, (ii) as may be required or appropriate in any report, statement
or testimony submitted to any municipal, state or Federal regulatory body having
or claiming to have jurisdiction over such Bank or to the Federal Reserve Board,
the Federal Deposit Insurance  Corporation or the NAIC or similar  organizations
(whether in the United States or elsewhere) or their successors, (iii)


                                     -122-


<PAGE>




as may be  required or  appropriate  in respect to any summons or subpoena or in
connection  with any  litigation,  (iv) in order to comply with any law,  order,
regulation or ruling applicable to such Bank, (v) to the Agent or the Collateral
Agent  and (vi) to any  prospective  or  actual  transferee  or  participant  in
connection with any  contemplated  transfer or participation of any of the Notes
or  Commitments  or any  interest  therein  by such  Bank,  provided  that  such
prospective  transferee  agrees  to be bound by the  confidentiality  provisions
contained in this Section 13.16.

                  (b) Each of Holdings and the Borrower hereby  acknowledges and
agrees  that each  Bank may share  with any of its  affiliates  any  information
related to Holdings or any of its Subsidiaries  (including,  without limitation,
any nonpublic customer  information  regarding the  creditworthiness of Holdings
and its Subsidiaries),  provided such Persons shall be subject to the provisions
of this Section 13.16 to the same extent as such Bank).


               SECTION 14. Parent Guaranty.

     14.01 Guaranty.  In order to induce the Agent,  the Collateral  Agent,  the
Issuing  Bank and the Banks to enter into this  Agreement  and to extend  credit
hereunder,  and to induce the other Guaranteed  Creditors to enter into Interest
Rate Protection  Agreements or Other Hedging  Agreements,  and in recognition of
the direct  benefits to be received by Holdings  from the proceeds of the Loans,
the  issuance of the Letters of Credit and the  entering  into of such  Interest
Rate Protection  Agreements or Other Hedging Agreements,  Holdings hereby agrees
with the Guaranteed Creditors as follows: hereby unconditionally and irrevocably
guarantees  as  primary  obligor  and not  merely as surety  the full and prompt
payment when due, whether upon maturity,  acceleration or otherwise,  of any and
all of the Guaranteed  Obligations of the Borrower to the Guaranteed  Creditors.
If any or all of the  Guaranteed  Obligations  of the Borrower to the Guaranteed
Creditors  becomes  due and  payable  hereunder,  Holdings  unconditionally  and
irrevocably  promises  to pay such  indebtedness  to the Agent  and/or the other
Guaranteed  Creditors,  or order, on demand,  together with any and all expenses
which  may be  incurred  by the  Agent  or the  other  Guaranteed  Creditors  in
collecting  any of the  Guaranteed  Obligations.  If claim is ever made upon any
Guaranteed  Creditor for repayment or recovery of any amount or amounts received
in payment or on account  of any of the  Guaranteed  Obligations  and any of the
aforesaid  payees  repays  all or part  of  said  amount  by  reason  of (i) any
judgment,   decree  or  order  of  any  court  or  administrative   body  having
jurisdiction  over such payee or any of its property or (ii) any  settlement  or
compromise  of any such claim  effected  by such  payee  with any such  claimant
(including the Borrower),  then and in such event Holdings  agrees that any such
judgment,  decree,  order,  settlement  or  compromise  shall  be  binding  upon
Holdings,  notwithstanding  any revocation of this Guaranty or other  instrument
evidencing  any  liability of the  Borrower,  and  Holdings  shall be and remain
liable to the afore-


                                     -123-


<PAGE>




said payees  hereunder  for the amount so repaid or recovered to the same extent
as if such amount had never originally been received by any such payee.

     14.02 Bankruptcy.  Additionally,  Holdings  unconditionally and irrevocably
guarantees  the  payment  of any and all of the  Guaranteed  Obligations  of the
Borrower  to the  Guaranteed  Creditors  whether  or not due or  payable  by the
Borrower upon the  occurrence of any of the events  specified in Section  10.05,
and irrevocably and unconditionally,  and jointly and severally, promises to pay
such  indebtedness to the Guaranteed  Creditors,  or order, on demand, in lawful
money of the United States.

     14.03 Nature of Liability. The liability of Holdings hereunder is exclusive
and  independent  of  any  security  for or  other  guaranty  of the  Guaranteed
Obligations of the Borrower whether executed by Holdings, any other guarantor or
by any  other  party,  and the  liability  of  Holdings  hereunder  shall not be
affected or impaired by any  circumstance or occurrence  whatsoever  (other than
the  indefeasible  payment  in  full in  cash  of the  Guaranteed  Obligations),
including, without limitation, (a) any direction as to application of payment by
the Borrower or by any other party,  (b) any other continuing or other guaranty,
undertaking or maximum  liability of a guarantor or of any other party as to the
Guaranteed  Obligations  of the Borrower,  (c) any payment on or in reduction of
any such other  guaranty or  undertaking,  (d) any  dissolution,  termination or
increase,  decrease or change in personnel by the Borrower, (e) any payment made
to any  Guaranteed  Creditor  on  the  Guaranteed  Obligations  which  any  such
Guaranteed  Creditor  repays  to the  Borrower  pursuant  to court  order in any
bankruptcy,  reorganization,  arrangement,  moratorium  or other  debtor  relief
proceeding, and Holdings waives any right to the deferral or modification of its
obligations  hereunder  by  reason  of any such  proceeding,  (f) any  action or
inaction by the Guaranteed Creditors as contemplated in Section 14.05 or (g) any
invalidity,  irregularity  or  unenforceability  of  all  or  any  part  of  the
Guaranteed Obligations or any security therefor.

     14.04  Independent  Obligation.  The obligations of Holdings  hereunder are
independent of the  obligations of any other  guarantor,  any other party or the
Borrower, and a separate action or actions may be brought and prosecuted against
Holdings whether or not action is brought against any other guarantor, any other
party or the Borrower and whether or not any other guarantor, any other party or
the Borrower be joined in any such action or actions.  Holdings  waives,  to the
fullest  extent  permitted  by law,  the benefit of any  statute of  limitations
affecting its liability hereunder or the enforcement thereof. Any payment by the
Borrower or other circumstance which operates to toll any statute of limitations
as to the  Borrower  shall  operate  to toll the  statute of  limitations  as to
Holdings.

     14.05  Authorization.  Holdings authorizes the Guaranteed Creditors without
notice or demand  (except as shall be required by applicable  statute and cannot
be waived),  and without  affecting or impairing its liability  hereunder,  from
time to time to:


                                     -124-


<PAGE>




                  (a) change the manner,  place or terms of payment  of,  and/or
         change or extend the time of payment of, renew, increase, accelerate or
         alter,  any of the  Guaranteed  Obligations  (including any increase or
         decrease  in the  rate of  interest  or  fees  thereon),  any  security
         therefor,  or any liability  incurred directly or indirectly in respect
         thereof,  and the  Guaranty  herein made shall apply to the  Guaranteed
         Obligations as so changed, extended, renewed or altered;

                  (b) take and hold  security for the payment of the  Guaranteed
         Obligations and sell, exchange,  release,  impair,  surrender,  realize
         upon or otherwise deal with in any manner and in any order any property
         by whomsoever at any time pledged or mortgaged to secure,  or howsoever
         securing,  the Guaranteed Obligations or any liabilities (including any
         of those hereunder)  incurred directly or indirectly in respect thereof
         or hereof, and/or any offset thereagainst;

                  (c) exercise or refrain from exercising any rights against the
         Borrower,  any other Credit Party or others or otherwise act or refrain
         from acting;

                  (d)  release  or  substitute   any  one  or  more   endorsers,
         guarantors, the Borrower, other Credit Parties or other obligors;

                  (e) settle or compromise  any of the  Guaranteed  Obligations,
         any  security  therefor  or  any  liability  (including  any  of  those
         hereunder)  incurred  directly  or  indirectly  in  respect  thereof or
         hereof,  and may  subordinate the payment of all or any part thereof to
         the payment of any  liability  (whether  due or not) of the Borrower to
         its creditors other than the Guaranteed Creditors;

                  (f) apply any sums by whomsoever paid or howsoever realized to
         any  liability  or  liabilities  of  the  Borrower  to  the  Guaranteed
         Creditors  regardless of what  liability or liabilities of the Borrower
         remain unpaid;

                  (g) consent to or waive any breach of, or any act, omission or
         default under, this Agreement,  any other Credit Document or any of the
         instruments or agreements  referred to herein or therein,  or otherwise
         amend,  modify or supplement this Agreement,  any other Credit Document
         or any of such other instruments or agreements;

                  (h)  act  or  fail  to act in any  manner  which  may  deprive
         Holdings of its right to  subrogation  against the  Borrower to recover
         full indemnity for any payments made pursuant to this Guaranty; and/or


                                     -125-


<PAGE>




                  (i)  take  any  other  action  which  would,  under  otherwise
applicable principles of common law, give rise to a legal or equitable discharge
of Holdings from its liabilities under this Guaranty.

     14.06 Reliance.  It is not necessary for any Guaranteed Creditor to inquire
into the  capacity  or  powers of  Holdings  or any of its  Subsidiaries  or the
officers,  directors,  partners or agents  acting or  purporting to act on their
behalf,  and any  Guaranteed  Obligations  made or created in reliance  upon the
professed exercise of such powers shall be guaranteed hereunder.

     14.07  Subordination.  Any  indebtedness  of the  Borrower now or hereafter
owing to Holdings is hereby  subordinated  to the Guaranteed  Obligations of the
Borrower  owing to the Guaranteed  Creditors;  and if the Agent so requests at a
time when an Event of Default exists,  all such  indebtedness of the Borrower to
Holdings  shall be collected,  enforced and received by Holdings for the benefit
of the  Guaranteed  Creditors  and be paid  over to the  Agent on  behalf of the
Guaranteed Creditors on account of the Guaranteed Obligations of the Borrower to
the Guaranteed  Creditors,  but without affecting or impairing in any manner the
liability of Holdings under the other provisions of this Guaranty.  Prior to the
transfer by Holdings of any note or negotiable  instrument  evidencing  any such
indebtedness  of the  Borrower  to  Holdings,  Holdings  shall mark such note or
negotiable   instrument  with  a  legend  that  the  same  is  subject  to  this
subordination. Without limiting the generality of the foregoing, Holdings hereby
agrees with the  Guaranteed  Creditors  that it will not  exercise  any right of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether  contractual,  under Section 509 of the  Bankruptcy  Code or otherwise)
until all Guaranteed Obligations have been irrevocably paid in full in cash.

     14.08 Waiver. (a) Holdings waives any right (except as shall be required by
applicable  statute and cannot be waived) to require any Guaranteed  Creditor to
(i) proceed against the Borrower,  any other guarantor or any other party,  (ii)
proceed  against or  exhaust  any  security  held from the  Borrower,  any other
guarantor or any other party or (iii) pursue any other remedy in any  Guaranteed
Creditor's power whatsoever. Holdings waives any defense based on or arising out
of any defense of the Borrower,  any other  guarantor or any other party,  other
than payment in full of the Guaranteed  Obligations,  based on or arising out of
the disability of the Borrower,  any other  guarantor or any other party, or the
validity, legality or unenforceability of the Guaranteed Obligations or any part
thereof from any cause,  or the cessation from any cause of the liability of the
Borrower  other  than  payment  in  full  of  the  Guaranteed  Obligations.  The
Guaranteed  Creditors may, at their election,  foreclose on any security held by
the Agent, the Collateral Agent or any other Guaranteed  Creditor by one or more
judicial or nonjudicial  sales,  whether or not every aspect of any such sale is
commercially  reasonable  (to the extent such sale is  permitted  by  applicable
law),  or exercise any other right or remedy the  Guaranteed  Creditors may have
against the Borrower or any other party, or any security,  without  affecting or
impairing in


                                     -126-


<PAGE>




any way the liability of Holdings  hereunder except to the extent the Guaranteed
Obligations have been paid.  Holdings waives any defense arising out of any such
election by the  Guaranteed  Creditors,  even though such  election  operates to
impair or extinguish any right of reimbursement or subrogation or other right or
remedy of Holdings against the Borrower or any other party or any security.

                  (b) Holdings waives all presentments, demands for performance,
protests and notices,  including without  limitation  notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and  notices  of the  existence,  creation  or  incurring  of new or  additional
Guaranteed  Obligations.  Holdings  assumes  all  responsibility  for  being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other  circumstances  bearing upon the risk of nonpayment of the  Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Agent and the Banks shall have no duty
to advise Holdings of information known to them regarding such  circumstances or
risks.

                  (c)  Holdings   hereby   acknowledges   and  affirms  that  it
understands  that to the extent the Guaranteed  Obligations  are secured by Real
Property located in California,  Holdings shall be liable for the full amount of
the liability hereunder notwithstanding the foreclosure on such Real Property by
trustee  sale  or  any  other  reason  impairing  Holdings'  or  any  Guaranteed
Creditor's  right to proceed  against the Borrower or any other guarantor of the
Guaranteed Obligations.  In accordance with Section 2856 of the California Civil
Code, Holdings hereby waives:

                    (i)    all    rights    of    subrogation,    reimbursement,
         indemnification,  and  contribution  and any other  rights and defenses
         that are or may become available to Holdings by reason of Sections 2787
         to 2855, inclusive, 2899 and 3433 of the California Civil Code;

                   (ii) all rights and defenses  that  Holdings may have because
         the  Guaranteed  Obligations  are secured by Real  Property  located in
         California.   This  means,  among  other  things:  (A)  the  Guaranteed
         Creditors may collect from Holdings  without first  foreclosing  on any
         real or personal  property  collateral  pledged by the  Borrower or any
         other Credit Party;  and (B) if the Guaranteed  Creditors  foreclose on
         any Real  Property  collateral  pledged  by the  Borrower  or any other
         Credit  Party,  (1) the  amount of the  Guaranteed  Obligations  may be
         reduced  only by the  price for which  that  collateral  is sold at the
         foreclosure  sale,  even if the  collateral is worth more than the sale
         price, and (2) the Guaranteed  Creditors may collect from Holdings even
         if the  Guaranteed  Creditors,  by  foreclosing  on the  Real  Property
         collateral,  have destroyed any right Holdings may have to collect from
         the Borrower.  This is an unconditional  and irrevocable  waiver of any
         rights  and  defenses   Holdings   may  have  because  the   Guaranteed
         Obligations are secured by


                                     -127-


<PAGE>




         Real Property. These rights and defenses include, but are not limited
         to, any rights or defenses based upon Section 580a, 580b, 580d or 726
         of the California Code of Civil Procedure; and

                  (iii) all rights and  defenses  arising  out of an election of
         remedies by the  Guaranteed  Creditors,  even  though that  election of
         remedies,  such as a nonjudicial  foreclosure  with respect to security
         for the  Guaranteed  Obligations,  has  destroyed  Holdings'  rights of
         subrogation and reimbursement  against the Borrower by the operation of
         Section 580d of the Code of Civil Procedure or otherwise.

Holdings  warrants  and agrees  that each of the waivers set forth above is made
with full knowledge of its significance and consequences and that if any of such
waivers are  determined to be contrary to any  applicable  law or public policy,
such waivers shall be effective only to the maximum extent permitted by law.

     14.09 Nature of Liability.  It is the desire and intent of Holdings and the
Guaranteed  Creditors that this Guaranty shall be enforced  against  Holdings to
the fullest extent  permissible  under the laws and public  policies  applied in
each jurisdiction in which enforcement is sought. If, however, and to the extent
that, the obligations of Holdings under this Guaranty shall be adjudicated to be
invalid or unenforceable for any reason (including,  without limitation, because
of any  applicable  state or federal law relating to fraudulent  conveyances  or
transfers), then the amount of Holdings obligations under this Guaranty shall be
deemed to be reduced and Holdings shall pay the maximum amount of the Guaranteed
Obligations which would be permissible under applicable law.

                                      * * *


                                     -128-


<PAGE>




               IN WITNESS  WHEREOF,  the parties  hereto have caused  their duly
authorized  officers to execute and deliver this  Agreement as of the date first
above written.


Address:

c/o Weiss, Peck and Greer                           ACQUISITION HOLDINGS, INC.
  Private Equity Group
One New York Plaza
New York, New York  10004-1950                       By /s/ Wesley Lang
Attention:  President                                  --------------------
Telephone No.:  (212) 908-9890                       Title: President
Telecopier No.:  (212) 908-0112


104 East 25th Street                                 ACQUISITION CORP.
10th Floor
New York, New York  10010
Attention:  President                                By /s/ Wesley Lang
Telephone No.:  (212) 353-8280                         ---------------------
Telecopier No.:  (212) 598-4283                      Title: President


                                                     BANKERS TRUST COMPANY,
                                                       Individually and as Agent


                                                     By /s/ Patricia Hogan
                                                       ---------------------
                                                     Title: Principal


<PAGE>




                                                                   EXHIBIT 10.20

                                 FIRST AMENDMENT


                  FIRST  AMENDMENT (this  "Amendment"),  dated as of February 5,
1998, among Acquisition  Holdings,  Inc.  ("Holdings"),  ATC Group Services Inc.
(the  "Borrower"),  the lenders party to the Credit Agreement  referred to below
(the  "Banks"),   and  Bankers  Trust  Company,  as  Agent  (the  "Agent").  All
capitalized  terms used herein and not otherwise  defined  herein shall have the
respective meanings provided such terms in the Credit Agreement.


                              W I T N E S S E T H:

                  WHEREAS,  Holdings,  the Borrower (as  successor-by-merger  to
Acquisition  Corp.),  the Banks and the Agent are parties to a Credit Agreement,
dated as of January 29, 1998 (the "Credit Agreement");

                  WHEREAS, the Borrower has requested certain amendments to the
Credit Agreement; and

                  WHEREAS,  subject to the terms and conditions of this
Amendment, the Banks are willing to grant such amendments;


                  NOW, THEREFORE, it is agreed:

         I.    Amendments

                  1. On and after the First Amendment Effective Date (as defined
in Section  II(1)  below),  Section  9.07(a) of the  Credit  Agreement  shall be
amended by deleting the table  appearing  therein in its entirety and  inserting
the following new table in lieu thereof:

                 "Fiscal Year Ending          Amount
                  ------------------          ------

                  February 29, 2000         $3,500,000
                  February 28, 2001         $4,000,000
                  February 28, 2002         $5,200,000
                  February 28, 2003         $5,000,000".

                  2. Section 9.02(xii) of the Credit Agreement is hereby amended
by inserting  the following  language  after the words ", in each case with such
earnings and financial covenants to be determined on a pro forma basis":


<PAGE>




                  "consistent  with  Regulation S-X under the Securities Act (as
                  in  effect  on the  Effective  Date)  (except  that pro  forma
                  adjustments  of the type described on Schedule XIV need not be
                  done on a basis consistent with Regulation S-X) and".

                  3. On and  after  the  First  Amendment  Effective  Date,  the
definition of "Consolidated Net Income" appearing in Section 11.01 of the Credit
Agreement  shall be amended  by  inserting  the  following  language  at the end
thereof:
                  "but adjusted for the factually  supportable and  identifiable
                  pro forma  adjustments  of the type  described on Schedule XIV
                  for  such  period  that  are  directly   attributable  to  the
                  acquisition of such Acquired Entity or Business  pursuant to a
                  Permitted Acquisition (which pro forma adjustments need not be
                  done on a basis  consistent  with  Regulation  S-X  under  the
                  Securities Act)".

                  4. On and after the First Amendment Effective Date, the Credit
Agreement  shall be further  amended by adding a new Schedule XIV thereto in the
form of Schedule XIV attached hereto.


         II.   Miscellaneous Provisions

                  1. This  Amendment  shall  become  effective  on the date (the
"First Amendment  Effective Date") when Holdings,  the Borrower and the Required
Banks shall have signed a  counterpart  hereof  (whether  the same or  different
counterparts)   and  shall  have  delivered   (including  by  way  of  facsimile
transmission) the same to the Agent at the Notice Office.

                  2. In order to induce the Banks to enter into this  Amendment,
each of Holdings and the Borrower hereby represents and warrants that:
                  (a) no  Default  or  Event  of  Default  exists  on the  First
               Amendment  Effective Date, both before and after giving effect to
               this Amendment;and

                  (b) on the First  Amendment  Effective  Date,  both before and
               after giving effect to this Amendment,  all  representations  and
               warranties  contained  in the Credit  Agreement  and in the other
               Credit Documents are true and correct in all


                                       -2-


<PAGE>




               material respects as though such  representations  and warranties
               were made on the First Amendment Effective Date.

                  3.  This   Amendment   may  be   executed  in  any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which counterparts when executed and delivered shall be an original,  but all
of which shall together  constitute one and the same instrument.  A complete set
of counterparts shall be delivered to Holdings, the Borrower and the Agent.

                  4.     THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                  5.  From and after the First  Amendment  Effective  Date,  all
references in the Credit Agreement and each of the other Credit Documents to the
Credit  Agreement  shall be deemed to be references  to the Credit  Agreement as
modified hereby.

                  6.  This  Amendment  is  limited  as  specified  and shall not
constitute a  modification,  acceptance or waiver of any other  provision of the
Credit Agreement or any other Credit Document.

                                      * * *


                                       -3-


<PAGE>




               IN  WITNESS  WHEREOF,  each of the  parties  hereto  has caused a
counterpart  of this  Amendment to be duly executed and delivered as of the date
first above written.



                                            ACQUISITION HOLDINGS, INC.


                                            By   /s/ Wesley Lang
                                              ------------------------
                                              Title: President



                                            ATC GROUP SERVICES INC.


                                            By   /s/ Nicholas Malino
                                              ------------------------
                                              Title: President



                                            BANKERS TRUST COMPANY,
                                              Individually and as Agent


                                            By   /s/ Patricia Hogan
                                              ------------------------
                                              Title: Principal


<PAGE>




                                                                    SCHEDULE XIV

                              PRO FORMA ADJUSTMENTS

           (a)    Adjustments to revenues to reflect customers not likely
                  to be retained;

           (b)    adjustments to labor and other direct costs to reflect
                  application of the Borrower's utilization rate (the billable
                  hours of the Borrower's employees divided by such employees'
                  available hours) to the Acquired Entity or Business 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 Acquired Entity or
                  Business;

           (c)    adjustments  to reflect home office  functions of the Acquired
                  Entity or Business such as accounting,  payroll and legal that
                  will be provided by the Borrower, including any adjustments to
                  eliminate outside professional  services if such functions are
                  to be assumed by then existing Borrower personnel;

           (d)    adjustments  with  respect to savings that will be realized by
                  including the Acquired Entity or Business under the Borrower's
                  insurance  coverage and  adjustments to reflect costs, if any,
                  of transferring or termination duplicate insurance policies of
                  the Acquired Entity or Business;

           (e)    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.);

           (f)    adjustments   to  employee   benefit   costs  to  reflect  the
                  Borrower's  actual  employee  benefit cost  structure,  to the
                  extent the Acquired Entity or Business' employee benefits will
                  be replaced with the Borrower's employee benefits;

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


<PAGE>




           (h)    adjustments to replace the Acquired
                  Entity or Business'  then-current  goodwill  depreciation  and
                  amortization  with  such  amounts  as  are  derived  from  the
                  application  to the  Acquired  Entity or  Business of purchase
                  accounting, if applicable, under generally accepted accounting
                  principles; and

           (i)    interest  expense   adjustments  to  reflect   refinancing  of
                  existing  debt or  increase in  borrowings  used to effect the
                  subject Permitted Acquisition.

                  The pro forma adjustments described above also may be used, to
the extent  factually  supportable and  identifiable,  to determine  whether the
Acquired  Entity or Business had pro forma positive  earnings  (before  interest
expense  and  taxes  and  adding  back  any   amortization  of  intangibles  and
depreciation) as required by Section 9.02(xii) of the Credit Agreement.

                  In  addition,  to  the  extent  that  any  of  the  pro  forma
adjustments  described  above are utilized for any  Permitted  Acquisition,  the
Borrower also shall have  delivered to the Banks a statement of its  independent
accountants  confirming  that  such pro  forma  adjustments  are made on a basis
consistent with this Schedule XIV.

                  Further,  as  required  by  Section  9.02(xii)  of the  Credit
Agreement,  all pro forma calculations shall be made as if the subject Permitted
Acquisition had been  consummated on the first day of the respective Test Period
(and assuming that any  Indebtedness  incurred,  issued or assumed in connection
therewith  had been  incurred,  issued or  assumed  on the first day of, and had
remained outstanding throughout, such Test Period).


<PAGE>




                                                                   EXHIBIT 10.21

                                SECOND AMENDMENT


                  SECOND AMENDMENT (this "Amendment"),  dated as of February 27,
1998, among ACQUISITION HOLDINGS, INC., a Delaware corporation ("Holdings"), ATC
GROUP SERVICES, INC., a Delaware corporation (the "Borrower"), the bank party to
the Credit Agreement referred to below on the date hereof and immediately before
giving effect to this Amendment (the "Existing Bank"), BANKERS TRUST COMPANY, as
Agent (the "Agent") for the Banks,  and each of the lenders listed on Schedule A
hereto (each, a "New Bank" and, collectively,  the "New Banks"). All capitalized
terms used herein and not  otherwise  defined  herein shall have the  respective
meanings provided such terms in the Credit Agreement referred to below.

                              W I T N E S S E T H :

                  WHEREAS,  Holdings,  the Borrower  (as  successor by merger to
Acquisition  Corp.),  the  Existing  Bank and the Agent are  parties to a Credit
Agreement,  dated as of January 29, 1998 (as in effect on the date  hereof,  the
"Credit Agreement"); and

                  WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided;

                  NOW, THEREFORE, it is agreed:

                  1. The Existing Bank hereby sells and assigns to each New Bank
without recourse and without representation or warranty (other than as expressly
provided  herein),  and each New Bank  hereby  purchases  and  assumes  from the
Existing  Bank,  that  interest  in  and  to  the  Existing  Bank's  rights  and
obligations  under the Credit  Agreement as of the date hereof which  represents
such New Bank's pro rata share (for each such New Bank, its "Pro Rata Share") as
set forth on, and in respect of the credit  facilities listed on, Annex A hereto
(calculated  after  giving  affect to this  Amendment),  and such Pro Rata Share
represents  all of the  outstanding  rights  and  obligations  under the  Credit
Agreement  that are being sold and  assigned  to each such New Bank  pursuant to
this Amendment.

                  2. In accordance with the  requirements of Section 13.04(b) of
the Credit  Agreement,  (i) on the Second  Amendment  Effective Date (as defined
below),  the Credit Agreement shall be amended by deleting Schedule I thereto in
its  entirety  and by  inserting in lieu thereof a new Schedule I in the form of
Annex B hereto and (ii) the


<PAGE>




Borrower agrees that it will,  promptly following the Second Amendment Effective
Date, issue  appropriate  Notes to each Bank in conformity with the requirements
of Section 1.05 of the Credit Agreement.

                  3. On and after  the  Second  Amendment  Effective  Date,  the
Credit Agreement shall be further amended by deleting Schedule II thereto in its
entirety and  inserting in lieu thereof a new Schedule II in the form of Annex C
hereto.

                  4. The Existing  Bank (i)  represents  and warrants that it is
the legal and  beneficial  owner of the interest  being assigned by it hereunder
and that such  interest  is free and clear of any adverse  claim;  (ii) makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in  connection  with the
Credit  Agreement or the other  Credit  Documents  or the  execution,  legality,
validity,  enforceability,  genuineness,  sufficiency  or  value  of the  Credit
Agreement or the other  Credit  Documents  or any other  instrument  or document
furnished  pursuant  thereto;  and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Holdings or
any of its  Subsidiaries  or the performance or observance by Holdings or any of
its  Subsidiaries  of any of  their  respective  obligations  under  the  Credit
Agreement or the other  Credit  Documents to which they are a party or any other
instrument or document furnished pursuant thereto.

                  5. Each New Bank (i)  confirms  that it has received a copy of
the Credit Agreement and the other Credit Documents, together with copies of the
financial   statements   referred  to  therein  and  such  other  documents  and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into this Amendment;  (ii) agrees that it will,  independently
and  without  reliance  upon the  Agent  or any  other  Bank  and  based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  decisions  in taking or not taking  action under the Credit
Agreement;  (iii)  confirms  that it is an  Eligible  Transferee  under  Section
13.04(b) of the Credit Agreement; (iv) appoints and authorizes the Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers  under  the  Credit  Agreement  and the  other  Credit  Documents  as are
delegated to the Agent and the Collateral  Agent by the terms thereof,  together
with such powers as are reasonably  incidental thereto;  (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit  Agreement are required to be performed by it as a Bank;  and (vi)
to the extent relevant,  agrees to promptly submit to the Borrower and the Agent
the appropriate  Internal Revenue Service Forms described in Section 13.04(b) of
the Credit Agreement.

                  6. The Existing Bank, the New Banks and the Agent hereby agree
that (x) all  amounts  accrued  with  respect  to the  outstanding  Term  Loans,
outstanding Revolving


                                       2


<PAGE>




Loans and the Total Revolving Loan Commitment  prior to the delivery by such New
Bank of the amount  referred to in clause  (ii) of Section 12 of this  Amendment
shall be for the account of the Existing  Bank and (y) all such amounts  accrued
on and after the  delivery  of the  amount  referred  to in clause  (ii) of such
Section 12 shall be for the account of such New Bank based upon its relevant Pro
Rata Share.

                  7.  In  accordance   with  Section   13.04(b)  of  the  Credit
Agreement,  on and as of the date upon which each New Bank  delivers  the amount
referred to in clause (ii) of Section 12 of this Amendment,  such New Bank shall
become a "Bank"  under,  and for all purposes of, the Credit  Agreement  and the
other Credit Documents and,  notwithstanding anything to the contrary in Section
13.15 of the Credit Agreement, the Agent shall record the transfers contemplated
hereby in the Register.

                  8. In order to induce the Banks to enter into this  Amendment,
each of Holdings and the Borrower hereby represents and warrants that:

                  (a) no  Default  or Event of  Default  exists as of the Second
Amendment Effective Date, both before and after giving effect to this Amendment;
and

                  (b) all of the representations and warranties contained in the
Credit  Agreement  and the other  Credit  Documents  are true and correct in all
material  respects as of the Second  Amendment  Effective  Date, both before and
after  giving  effect to this  Amendment,  with the same  effect as though  such
representations  and warranties had been made on and as of the Second  Amendment
Effective Date (it being understood that any representations or warranty made as
of a specific date shall be true and correct in all material respects as of such
specific date).

                  9.  This  Amendment  is  limited  as  specified  and shall not
constitute a  modification,  acceptance or waiver of any other  provision of the
Credit Agreement or any other Credit Document.

                  10.  This   Amendment   may  be  executed  in  any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which counterparts when executed and delivered shall be an original,  but all
of which shall together  constitute one and the same instrument.  A complete set
of counterparts shall be lodged with Holdings, the Borrower and the Agent.

                  11.  THIS  AMENDMENT  AND THE  RIGHTS AND  OBLIGATIONS  OF THE
PARTIES  HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.


                                       3


<PAGE>




                  12.  Subject to Section 13 of this  Amendment,  this Amendment
shall become effective on the date (the "Second Amendment  Effective Date") when
(i) Holdings, the Borrower, the Agent, the Existing Bank and each New Bank shall
have signed a counterpart  hereof  (whether the same or different  counterparts)
and shall have delivered  (including by way of facsimile  transmission) the same
to the Agent at the Notice Office and (ii) each New Bank shall have delivered to
the Agent for the  account of the  Existing  Bank,  an amount  equal to such New
Bank's relevant Pro Rata Share of the principal amount of the outstanding Loans.

                  13..  Notwithstanding Section 12 of this Amendment, if for any
reason any New Bank shall not have (i) signed a counterpart hereof and delivered
the same to the Agent at the Notice  Office and (ii)  delivered  to the Agent an
amount  equal to such New Bank's Pro Rata Share of the  principal  amount of the
outstanding  Loans, in each case on or prior to February 27, 1998,  then, if the
Existing Bank agrees, this Amendment shall become effective notwithstanding such
failure, provided that (x) Annexes A, B and C hereto shall be modified to delete
any such New Bank and such New Bank's Pro Rata Share  shall be  retained  by the
Existing  Bank and (y) the  signature  pages of this  Amendment  shall be deemed
revised to delete such New Bank's name therefrom.

                  14. From and after the Second  Amendment  Effective  Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit  Agreement  shall be deemed to be references  to the Credit  Agreement as
amended hereby.

                                      * * *


                                        4


<PAGE>




                  IN WITNESS  WHEREOF,  each of the parties  hereto has caused a
counterpart  of this  Amendment to be duly executed and delivered as of the date
first above written.

                                                    ACQUISITION HOLDINGS, INC.

                                                  By  /s/  Wesley W. Lang, Jr.
                                                    ---------------------------
                                                    Name:  Wesley W. Lang, Jr.
                                                    Title: President


                                                    ATC GROUP SERVICES, INC.

                                                  By  /s/  Nicholas J. Malino
                                                    ---------------------------
                                                    Name:  Nicholas J. Malino
                                                    Title: President


                                                    BANKERS TRUST COMPANY,
                                                      Individually and as Agent

                                                  By  /s/  Patricia Hogan
                                                    ---------------------------
                                                    Name:  Patricia Hogan
                                                    Title: Principal


                                                    BANKBOSTON, N.A.

                                                  By  /s/  Gregory R. D. Clark
                                                    ---------------------------
                                                    Name:  Gregory R. D. Clark
                                                    Title: Managing Director


                                                    CREDITANSTALT CORPORATE
                                                    FINANCE, INC.

                                                  By  /s/  Ridgley Cromwell
                                                    ---------------------------
                                                    Name:  Ridgley Cromwell
                                                    Title: Associate

                                                  By  /s/  Clifford L. Wells
                                                    ---------------------------
                                                    Name:  Clifford L. Wells
                                                    Title: Vice President




                                       5


<PAGE>




                                                    FLEET CAPITAL CORPORATION

                                                  By  /s/  Timothy J. Broderick
                                                    ---------------------------
                                                    Name:  Timothy J. Broderick
                                                    Title: Senior Vice President


                                                    LASALLE NATIONAL BANK

                                                  By  /s/  Henry J. M.
                                                    ---------------------------
                                                    Name:  Henry J. M
                                                    Title: Commercial Lending
                                                           Officer


                                                    BANK POLSKAKASOPIEKISA
                                                    PEKAO SA GROUP

                                                  By  /s/  Harvey Winter
                                                    ---------------------------
                                                    Name:  Harvey Winter
                                                    Title: Vice President




                                       6


<PAGE>




                                                                      ANNEX A TO
                                                            SECOND AMENDMENT

NEW BANKS                                                    PERCENTAGES (1)


BankBoston, N.A.                                             18.00000000%

Creditanstalt Corporate Finance, Inc.                        18.00000000%

Fleet Capital Corporation                                    18.00000000%

LaSalle National Bank                                        18.00000000%

Bank Polskakasaopiekisa Pekao SA Group                        8.00000000%













----------------------------------------------------------------------
(1)  Represents  the  percentage  interest in each of the aggregate  outstanding
     Term Loans and the Total Revolving Loan Commitment.


<PAGE>




                                                                      ANNEX B TO
                                                                SECOND AMENDMENT

                                   COMMITMENTS

                                           Term Loans            Revolving Loan
BANK                                       Commitment              Commitment
----                                       ----------              ----------
Bankers Trust Company                      $4,000,000              $6,000,000
BankBoston, N.A.                           $3,600,000              $5,400,000
Creditanstalt Corporate Finance, Inc.      $3,600,000              $5,400,000
Fleet Capital Corporation                  $3,600,000              $5,400,000
LaSalle National Bank                      $3,600,000              $5,400,000
Bank Polskakasaopiekisa Pekao SA Group     $1,600,000              $2,400,000
                                          ------------            ------------
         TOTAL:                           $20,000,000             $30,000,000


<PAGE>




                                                                      ANNEX C TO
                                                                SECOND AMENDMENT

                                 BANK ADDRESSES

Bank                                              Addresses

Bankers Trust Company                         130 Liberty Street
                                              New York, NY 10006
                                              Attention: Patricia Hogan
                                              Tel No.:  (212) 250-5175
                                              Fax No.:  (212) 250-7218

Bank Polskakasaopiekisa                       470 Park Avenue South
Pekao Sa Group                                15th Floor
                                              New York, New York 10016
                                              Attn: Harry Winter
                                              Tel. No.: (212) 251-1222
                                              Fax No.: (212) 679-5910

BankBoston, N.A.                              100 Federal Street
                                              MS 01-08-05
                                              Boston, Massachusetts  02110-2016
                                              Attn: Tim Barns
                                              Tel. No.: (617) 434-7976
                                              Fax No.: (617) 434-4929

Creditanstalt Corporate Finance, Inc.         2 Greenwich Plaza
                                              4th Floor
                                              Greenwich, Connecticut 06830
                                              Attn: David Yewer
                                              Tel. No.: (203) 861-1499
                                              Fax No.: (203) 861-6581

Fleet Capital Corporation                     200 Glastonbury Blvd.
                                              Glastonbury, Connecticut 06033
                                              Attn: Tim Broderick
                                              Tel. No.:  (860) 657-7774
                                              Fax No.:  (860) 657-7759

LaSalle National Bank                         135 S. LaSalle Street
                                              Chicago, Illinois 60603
                                              Attn: Henry Munez
                                              Tel. No.: (312) 904-7295
                                              Fax No.: (312) 904-6242


<PAGE>



                                                                   EXHIBIT 10.22

               SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT

                  THIS SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT (this
"Agreement"),  dated as of February 5, 1998 is by and between ATC Group Services
Inc. with its principal  office at 104 East 25th Street,  10th Floor,  New York,
New York 10010 (the  "Company") and George Rubin,  #30A, 200 Central Park South,
New York, New York ("Employee").

                                    RECITALS

                  WHEREAS, Employee is employed by the Company as Secretary;

                  WHEREAS,  Employee  is  currently  compensated  at the rate of
$300,000 per year with a bonus equal to 2.5% of the  Company's  pre-tax  profits
(in the aggregate, the "Compensation");

                  WHEREAS,  the Employee  desires to resign his employment  with
the Company as of the effective date of the proposed merger between  Acquisition
Holdings, Inc. or an affiliate thereof and the Company (the "Effective Date");

                  WHEREAS,  the  parties  desire to set forth  their  respective
rights  and  obligations  in respect of  Employee's  resignation  from the above
positions; and

                  WHEREAS,  the  Company  and  Employee  desire to enter  into a
consulting agreement as set forth herein.

                  NOW,   THEREFORE,   in  consideration  of  the  covenants  and
conditions set forth herein,  the parties,  intending to be legally bound, agree
as follows:

                                    AGREEMENT

                  1.  Resignation.  Employee  hereby resigns from his employment
with the Company with effect on and as of the  Effective  Date.  It is agreed by
the parties that, on and as of the Effective Date, all rights and obligations of
Employee and the Company with respect to such employment shall terminate.

                  2. Consulting Services.  For a period of three (3) years after
the  Effective  Date,  Employee  agrees to make himself  available at reasonable
times  and  locations   (taking   necessary   account  of  Employee's   business
commitments)  to perform  consulting  services as  reasonably  requested  by the
Company  provided,  (i) the  Employee  shall be  given  at least 48 hours  prior
written  notice of the requested  services,  (ii) all such  consulting  services
shall be rendered in The City of New


<PAGE>




York and (iii)  Employee  shall not be required to devote more than 10 hours per
month to the business of the Company.  All consulting  services  rendered to the
Company  by  Employee  shall be  performed  as an  independent  contractor,  and
Employee shall not for any purpose be deemed to be an employee of the Company.

                  3. Benefits.

                  (a) Payment. In consideration of the agreements of Employee in
Sections  1 and 2 hereof,  and  without  diminution  because  of the  ability or
inability of Employee to perform any  consulting  services that may be requested
by the  Company,  the Company  agrees to pay Employee (or his assigns or, in the
event of his death,  his executor),  on the Effective Date, the aggregate sum of
$860,290,  less applicable  withholdings for federal,  state and local taxes, as
follows:  $260,290 as a pro rata bonus for the fiscal year ending  February  28,
1998 and $600,000 as a severance payment. Any tax liability incurred by Employee
in respect of consideration received hereunder shall be borne by him.

                  (b) Health Insurance. For the three (3) year period commencing
on the Effective Date, Employee and the members of his immediate family shall be
entitled to participate in and receive benefits under: (i) ATC Management Inc.'s
health  coverage  plan with Unicare or any health  insurance  plan  subsequently
adopted by the Company in its place;  and (ii) the Executive  Supplement Plan to
ATC Management  Inc.'s health  coverage plan with Unicare as long as the Company
is able to obtain coverage for Employee under the supplemental  plan;  provided,
that,  the  Company  shall  use  commercially  reasonable  efforts  to  maintain
substantially  similar  coverage during the term of this Agreement.  During such
period,  Employee shall pay all premiums,  deductibles and other charges arising
out of or  associated  with the  coverage of Employee and his  immediate  family
under the insurance  plans  described in clauses (i) and (ii) hereof;  provided,
that,   such   premiums,   deductibles   and  other   charges  do  not  increase
disproportionately  for Employee as compared with other senior executives of the
Company.

                  (c) Car Lease.  On or about February 18, 1998,  Employee shall
return to the Company the Range Rover vehicle  leased by the Company and used by
the Employee.
                  4. Expenses.  All reasonable  expenses incurred by Employee in
connection  with the  provision  of  consulting  services  requested  hereunder,
including  for  airfare,  hotel  accommodations,  meals and the  like,  shall be
reimbursed by the Company within seven (7) days after  presentation  by Employee
of receipts and other supporting  documentation,  provided that such expense had
been approved in advance by the Company.


                                       2


<PAGE>




                  5. No  Solicitation of Employees.  Employee hereby  represents
and warrants  that he has not  solicited  for  employment  or induced any person
employed by the Company to  terminate  employment  during the  sixty-day  period
preceding the date hereof.

                  6. Covenant Not to Compete.

                  (a) Employee  hereby  covenants and agrees that Employee shall
not,  alone or in  conjunction  with any other  person or  entity,  whether as a
principal,   agent,   stockholder,    director,   officer,   manager,   trustee,
representative,  employee, executive or consultant or in any other capacity, for
whatever  reason,  directly  or  indirectly:  (i) for a period of four (4) years
after the  Effective  Date,  compete or assist any person or entity in competing
with the Company in all aspects of the  business as  conducted by the Company on
the Effective  Date in any manner in the United  States,  except as permitted in
clauses (iii) and (iv) below; provided, that, upon written notice by the Company
of  Employee's  breach of this  Section  6(a)(i),  Employee  shall have 10 (ten)
business days from the date of notice to cure any such breach; (ii) for a period
of four (4) years after the Effective Date, request or cause any person employed
by the Company on or after the date hereof to terminate  employment,  subject to
clauses  (iii)  and (iv)  below;  (iii) for a period  three (3) years  after the
Effective  Date,  compete or assist any person or entity in  competing  with ATC
InSys Technology Inc. ("InSys") or 3D Information Services Inc. ("3D") or assist
any person or entity in  competing  with InSys or 3D  anywhere  within the legal
boundaries  of the  State of New  Jersey;  or (iv) for a period  three (3) years
after the  Effective  Date,  solicit on behalf of himself or any other person or
entity,  within The City of New York,  any of the following  customers of InSys:
(A) J.P. Morgan & Co. Incorporated, (B) Merrill, Lynch & Co. (C) The Long Island
Rail Road Co. and (D) The Chase  Manhattan  Bank;  provided,  however,  that the
immediately  preceding clause (iv) shall apply only to products or services that
are  competitive  with  those of  InSys.  This  Section 6 shall not be deemed to
prohibit the Employee from owning up to 5% of the outstanding  voting securities
of any issuer whose  securities  are listed or traded on a U.S.  national  stock
exchange,  the Nasdaq National Market System or a comparable foreign exchange or
system.

                  (b)  If  the  scope  of  any  restriction  contained  in  this
Agreement is too broad to permit  enforcement of such restriction to its fullest
extent,  then such restriction shall be enforced to the maximum extent permitted
by law,  and  Employee  hereby  consents  and  agrees  that  such  scope  may be
judicially  modified  accordingly  in any  proceeding  brought to  enforce  such
restriction.  Employee  acknowledges  and agrees  that the  covenants  contained
herein are necessary for the  protection  of the Company's  legitimate  business
interests and are reasonable in scope and content. Employee further acknowledges
and  understands  that the remedy at law for any breach by him of this Section 6
will be  inadequate,  and that the  damages  flowing  from such  breach  are not
readily


                                       3


<PAGE>




susceptible to being measured in monetary terms. Accordingly, it is acknowledged
that upon  Employee's  violation of any provision of this Section 6, the Company
shall be  entitled  to  immediate  injunctive  relief and may obtain a temporary
order  restraining any threatened or further  breach.  Nothing in this Section 6
shall be deemed  to limit the  Company's  remedies  at law or in equity  for any
breach by Employee of any of the provisions of Section 6 which may be pursued or
availed of by the Company.

                  (c) The Company is  concurrently  entering  into a  Severance,
Consulting and Non-Competition Agreement with Morry F. Rubin containing covenant
not to compete arrangements  substantially  identical with those of this Section
6, except that the applicable period is four years (the "Other  Agreement").  It
is of material  significance  to the Company that these  arrangements  are being
entered into with both the Employee and Morry F. Rubin  simultaneously  and that
they will be enforced on a joint basis.  Accordingly,  it is understood that the
obligations of the Company and the Employee pursuant to this Section 6 and those
of the Company and Morry F. Rubin  pursuant to Section 6 of the Other  Agreement
are to be  construed  jointly,  such that any breach by the Employee or Morry F.
Rubin of their respective  non-compete agreements will be considered a breach by
both, and any default by the Company under either agreement will be considered a
default by the Company under both this Agreement and the Other Agreement.

                  (d) The  Company  has  agreed  to pay an  aggregate  total  of
$4,700,000  in  consideration  of the  joint  covenants  not to  compete  of the
Employee and Morry F. Rubin,  of which it will pay to the Employee the aggregate
sum of $940,000, as follows:  $156,667 shall be paid on each January 1, April 1,
July 1, and October 1, commencing on the first such day that occurs at least one
month  following the Effective Date and ending with the sixth such payment.  Any
tax liability  incurred by Employee in respect of the payment hereunder shall be
borne by him.

                  7. Release.  The Company hereby  releases the Employee and the
Employee  hereby  releases  the  Company  and its  affiliates  and its and their
present  and  former  stockholders,   directors,  officers,  employees,  agents,
attorneys,  successors and assigns (together,  the "Company Released  Parties"),
from any and all  claims  that  each of the  Employee  or the  Company  Released
Parties has or may have arising in any way out of Employee's employment with the
Company  and  service as Director  and  Chairman of the Board and the  cessation
thereof,  including, but not limited to, any and all claims each of the Employee
or  the  Company  had,  has or  may  have  with  respect  to  the  Compensation.
Notwithstanding  the above, this provision is not intended to release any claims
that may arise after the date Employee executes this Agreement, including claims
to enforce this Agreement.


                                       4


<PAGE>




                  8. Retained Property. Employee represents that he has returned
all  property of the  Company in his  possession,  including  but not limited to
credit cards,  security key cards,  telephone cards, car service cards, computer
software or hardware,  company  identification cards, Company records and copies
of  records,  correspondence  and copies of  correspondence  and other  books or
manuals issued by the Company. Employee also warrants that he has no debts to or
loans from the Company.  Notwithstanding the foregoing,  Employee shall have the
right to retain (i)  duplicate  photocopies  of books and records of the Company
that do not fall within the category of  "Confidential  Information" (as defined
below) and (ii) all personal property of the Employee located on the premises of
the Company.

                  9. Confidentiality.  Employee acknowledges that he has had and
may in the performance of consulting  services hereunder continue to have access
to Confidential  Information (as hereinafter  defined) of the Company.  Employee
agrees not to  disclose,  communicate  or  divulge  to, or use for the direct or
indirect benefit of, any person (including Employee), firm, association or other
entity (other than the Company or its affiliates) any Confidential  Information.
"Confidential  Information"  includes,  but is not limited to, business methods,
business policies, procedures,  techniques,  research or development projects or
results, trade secrets (which Employee agrees include the Company's customer and
prospective  customer  lists),   pricing  policies,   business  plans,  computer
software,  intellectual  property,  and other  such  information  not  otherwise
available to the general public, unless the information is disclosed to Employee
without confidential or proprietary  restriction by the Company or a third party
who rightfully  possesses the information  (without  confidential or proprietary
restriction) and did not learn of it, directly or indirectly,  from the Company.
If any person  (including  any government  employee)  requests the disclosure or
release of  Confidential  Information,  Employee  shall (i) promptly  notify the
Company of such request so that the Company may pursue any available remedies to
prevent the  disclosure  or release of such  Confidential  Information  and (ii)
furnish the Company a copy of all written  materials  pertaining to such request
for Confidential Information as the Company shall deem appropriate.

                  10. No Claims.  Employee  represents  and warrants that he has
not filed any  charges,  claims  or  complaints  against  the  Company  Released
Parties, and he represents and warrants that he will not initiate or voluntarily
participate  or assist in any charge,  claim,  or complaint  against the Company
Released  Parties,  it being  understood  that this  provision  does not  affect
Employee's  right to enforce this  Agreement,  or legal  obligation,  if any, to
appear as a witness if subpoenaed for examination before trial or subpoenaed for
trial or hearing or, if required, to provide information to


                                       5


<PAGE>




the Equal Employment  Opportunity  Commission or to an equivalent state or local
administrative agency in response to a demand for information.

                  11. Benefits Terminated.  Employee acknowledges that he is not
entitled to receive benefits from the Company other than as set forth in Section
3 of this  Agreement,  except  for any  vested  benefits  to which  Employee  is
entitled in the Company's 401(k) Plan and except for any other benefits afforded
Employee by applicable law.

                  12. No Inducements. Employee warrants that he is entering into
this Agreement voluntarily, and that, except as set forth herein, no promises or
inducements  for this  Agreement  have been made,  and he is entering  into this
Agreement  without reliance upon any statement or  representation  by any of the
Company  Released  Parties or any other  person,  concerning  any fact  material
hereto.

                  13.  Integration.   This  Agreement   constitutes  the  entire
agreement  between the parties with respect to the subject  matter  hereof,  and
supersedes any and all prior  agreements or  understandings  between the parties
arising  out of or  relating  to the  Employee's  employment  and the  cessation
thereof. This Agreement may only be changed by written agreement executed by the
parties.
                  14.  Governing  Law. This  Agreement  shall be governed by the
laws of the State of New York,  without  giving  effect to the  conflicts of law
principles thereof.

                  15.  Counterparts.  This  Agreement  may be executed in two or
more counterparts,  all of which shall be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.


                                       6


<PAGE>




                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the day and year first above written.


                                                     ATC GROUP SERVICES INC.

                                                       /s/ Nicholas J. Malino
                                                    --------------------------
                                                    By:    Nicholas J. Malino
                                                    Title: President


                                                     EMPLOYEE

                                                       /s/ George Rubin
                                                    --------------------------
                                                           George Rubin








                                       7


<PAGE>




                                                                   EXHIBIT 10.23

               SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT

                  THIS SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT (this
"Agreement"),  dated as of February 5, 1998 is by and between ATC Group Services
Inc. with its principal  office at 104 East 25th Street,  10th Floor,  New York,
New York 10010 (the  "Company") and Morry F. Rubin,  #22H,  1965  Broadway,  New
York, New York ("Employee").

                                    RECITALS

                  WHEREAS, Employee is employed by the Company as President and
Chief Executive Officer;

                  WHEREAS,  Employee  is  currently  compensated  at the rate of
$300,000 per year with a bonus equal to 2.5% of the  Company's  pre-tax  profits
(in the aggregate, the "Compensation");

                  WHEREAS,  the Employee  desires to resign his employment  with
the Company as of the effective date of the proposed merger between  Acquisition
Holdings, Inc. or an affiliate thereof and the Company (the "Effective Date");

                  WHEREAS,  the  parties  desire to set forth  their  respective
rights  and  obligations  in respect of  Employee's  resignation  from the above
positions; and

                  WHEREAS,  the  Company  and  Employee  desire to enter  into a
consulting agreement as set forth herein.

                  NOW,   THEREFORE,   in  consideration  of  the  covenants  and
conditions set forth herein,  the parties,  intending to be legally bound, agree
as follows:

                                    AGREEMENT

                  1.  Resignation.  Employee  hereby resigns from his employment
with the Company with effect on and as of the  Effective  Date.  It is agreed by
the parties that, on and as of the Effective Date, all rights and obligations of
Employee and the Company with respect to such employment shall terminate.

                  2. Consulting Services.  For a period of three (3) years after
the  Effective  Date,  Employee  agrees to make himself  available at reasonable
times  and  locations   (taking   necessary   account  of  Employee's   business
commitments)  to perform  consulting  services as  reasonably  requested  by the
Company  provided,  (i) the  Employee  shall be  given  at least 48 hours  prior
written  notice of the requested  services,  (ii) all such  consulting  services
shall be rendered in The City of New


<PAGE>




York and (iii)  Employee  shall not be required to devote more than 10 hours per
month to the business of the Company.  All consulting  services  rendered to the
Company  by  Employee  shall be  performed  as an  independent  contractor,  and
Employee shall not for any purpose be deemed to be an employee of the Company.

                  3. Benefits.

                  (a) Payment. In consideration of the agreements of Employee in
Sections  1 and 2 hereof,  and  without  diminution  because  of the  ability or
inability of Employee to perform any  consulting  services that may be requested
by the  Company,  the Company  agrees to pay Employee (or his assigns or, in the
event of his death,  his executor),  on the Effective Date, the aggregate sum of
$860,290,  less applicable  withholdings for federal,  state and local taxes, as
follows:  $260,290 as a pro rata bonus for the fiscal year ending  February  28,
1998 and $600,000 as a severance payment. Any tax liability incurred by Employee
in respect of consideration received hereunder shall be borne by him.

                  (b) Health Insurance. For the three (3) year period commencing
on the Effective Date, Employee and the members of his immediate family shall be
entitled to participate in and receive benefits under: (i) ATC Management Inc.'s
health  coverage  plan with Unicare or any health  insurance  plan  subsequently
adopted by the Company in its place;  and (ii) the Executive  Supplement Plan to
ATC Management  Inc.'s health  coverage plan with Unicare as long as the Company
is able to obtain coverage for Employee under the supplemental  plan;  provided,
that,  the  Company  shall  use  commercially  reasonable  efforts  to  maintain
substantially  similar  coverage during the term of this Agreement.  During such
period,  Employee shall pay all premiums,  deductibles and other charges arising
out of or  associated  with the  coverage of Employee and his  immediate  family
under the insurance  plans  described in clauses (i) and (ii) hereof;  provided,
that,   such   premiums,   deductibles   and  other   charges  do  not  increase
disproportionately  for Employee as compared with other senior executives of the
Company.

                  (c) Car Lease.  On or about February 18, 1998,  Employee shall
return to the Company the BMW  automobile  leased by the Company and used by the
Employee.

                  4. Expenses.  All reasonable  expenses incurred by Employee in
connection  with the  provision  of  consulting  services  requested  hereunder,
including  for  airfare,  hotel  accommodations,  meals and the  like,  shall be
reimbursed by the Company within seven (7) days after  presentation  by Employee
of receipts and other supporting  documentation,  provided that such expense had
been approved in advance by the Company.


                                       2


<PAGE>




                  5. No  Solicitation of Employees.  Employee hereby  represents
and warrants  that he has not  solicited  for  employment  or induced any person
employed by the Company to  terminate  employment  during the  sixty-day  period
preceding the date hereof.

                  6. Covenant Not to Compete.

                  (a) Employee  hereby  covenants and agrees that Employee shall
not,  for a period of three (3) years  after  the  Effective  Date,  alone or in
conjunction  with any other  person or entity,  whether as a  principal,  agent,
stockholder,  director,  officer,  manager, trustee,  representative,  employee,
executive or consultant or in any other capacity, for whatever reason,  directly
or indirectly:  (i) compete or assist any person or entity in competing with the
Company in all  aspects  of the  business  as  conducted  by the  Company on the
Effective  Date in any  manner in the  United  States,  except as  permitted  in
clauses (iii) and (iv) below; provided, that, upon written notice by the Company
of  Employee's  breach of this  Section  6(a)(i),  Employee  shall have 10 (ten)
business  days from the date of notice to cure any such breach;  (ii) request or
cause  any  person  employed  by the  Company  on or after  the date  hereof  to
terminate employment;  (iii) compete or assist any person or entity in competing
with ATC InSys Technology Inc. ("InSys") or 3D Information  Services Inc. ("3D")
or assist any person or entity in competing with InSys or 3D anywhere within the
legal  boundaries  of the  State of New  Jersey;  or (iv)  solicit  on behalf of
himself or any other person or entity,  within The City of New York,  any of the
following customers of InSys: (A) J.P. Morgan & Co.  Incorporated,  (B) Merrill,
Lynch & Co. (C) The Long Island Rail Road Co. and (D) The Chase  Manhattan Bank;
provided,  however,  that the immediately preceding clause (iv) shall apply only
to products or services that are competitive with those of InSys. This Section 6
shall  not be  deemed  to  prohibit  the  Employee  from  owning up to 5% of the
outstanding  voting  securities  of any issuer  whose  securities  are listed or
traded on a U.S. national stock exchange, the Nasdaq National Market System or a
comparable foreign exchange or system.

                  (b)  If  the  scope  of  any  restriction  contained  in  this
Agreement is too broad to permit  enforcement of such restriction to its fullest
extent,  then such restriction shall be enforced to the maximum extent permitted
by law,  and  Employee  hereby  consents  and  agrees  that  such  scope  may be
judicially  modified  accordingly  in any  proceeding  brought to  enforce  such
restriction.  Employee  acknowledges  and agrees  that the  covenants  contained
herein are necessary for the  protection  of the Company's  legitimate  business
interests and are reasonable in scope and content. Employee further acknowledges
and  understands  that the remedy at law for any breach by him of this Section 6
will be  inadequate,  and that the  damages  flowing  from such  breach  are not
readily


                                       3


<PAGE>




susceptible to being measured in monetary terms. Accordingly, it is acknowledged
that upon  Employee's  violation of any provision of this Section 6, the Company
shall be  entitled  to  immediate  injunctive  relief and may obtain a temporary
order  restraining any threatened or further  breach.  Nothing in this Section 6
shall be deemed  to limit the  Company's  remedies  at law or in equity  for any
breach by Employee of any of the provisions of Section 6 which may be pursued or
availed of by the Company.

                  (c) The Company is  concurrently  entering  into a  Severance,
Consulting and  Non-Competition  Agreement with George Rubin containing covenant
not to compete arrangements  substantially  identical with those of this Section
6, except that the applicable period is four years (the "Other  Agreement").  It
is of material  significance  to the Company that these  arrangements  are being
entered into with both the Employee  and George  Rubin  simultaneously  and that
they will be enforced on a joint basis.  Accordingly,  it is understood that the
obligations of the Company and the Employee pursuant to this Section 6 and those
of the Company and George Rubin pursuant to Section 6 of the Other Agreement are
to be construed jointly, such that any breach by the Employee or George Rubin of
their respective non-compete agreements will be considered a breach by both, and
any default by the Company under either  agreement  will be considered a default
by the Company under both this Agreement and the Other Agreement.

                  (d) The  Company  has  agreed  to pay an  aggregate  total  of
$4,700,000  in  consideration  of the  joint  covenants  not to  compete  of the
Employee and George  Rubin,  of which it will pay to the Employee the  aggregate
sum of $3,760,000,  as follows:  (i)  $1,379,422  shall be paid on the Effective
Date;  and (ii)  $396,763  shall be paid on each January 1, April 1, July 1, and
October  1,  commencing  on the  first  such day that  occurs at least one month
following  the Effective  Date and ending with the sixth such  payment.  Any tax
liability  incurred by Employee  in respect of the  payment  hereunder  shall be
borne by him.

                  7. Release.  The Company hereby  releases the Employee and the
Employee  hereby  releases  the  Company  and its  affiliates  and its and their
present  and  former  stockholders,   directors,  officers,  employees,  agents,
attorneys,  successors and assigns (together,  the "Company Released  Parties"),
from any and all  claims  that  each of the  Employee  or the  Company  Released
Parties has or may have arising in any way out of Employee's employment with the
Company and service as Director and the cessation  thereof,  including,  but not
limited to, any and all claims each of the  Employee or the Company  had, has or
may have with  respect to the  Compensation.  Notwithstanding  the  above,  this
provision  is not  intended  to release any claims that may arise after the date
Employee executes this Agreement, including claims to enforce this Agreement.


                                       4


<PAGE>




                  8. Retained Property. Employee represents that he has returned
all  property of the  Company in his  possession,  including  but not limited to
credit cards,  security key cards,  telephone cards, car service cards, computer
software or hardware,  company  identification cards, Company records and copies
of  records,  correspondence  and copies of  correspondence  and other  books or
manuals issued by the Company. Employee also warrants that he has no debts to or
loans from the Company.  Notwithstanding the foregoing,  Employee shall have the
right to retain (i)  duplicate  photocopies  of books and records of the Company
that do not fall within the category of  "Confidential  Information" (as defined
below) and (ii) all personal property of the Employee located on the premises of
the Company.

                  9. Confidentiality.  Employee acknowledges that he has had and
may in the performance of consulting  services hereunder continue to have access
to Confidential  Information (as hereinafter  defined) of the Company.  Employee
agrees not to  disclose,  communicate  or  divulge  to, or use for the direct or
indirect benefit of, any person (including Employee), firm, association or other
entity (other than the Company or its affiliates) any Confidential  Information.
"Confidential  Information"  includes,  but is not limited to, business methods,
business policies, procedures,  techniques,  research or development projects or
results, trade secrets (which Employee agrees include the Company's customer and
prospective  customer  lists),   pricing  policies,   business  plans,  computer
software,  intellectual  property,  and other  such  information  not  otherwise
available to the general public, unless the information is disclosed to Employee
without confidential or proprietary  restriction by the Company or a third party
who rightfully  possesses the information  (without  confidential or proprietary
restriction) and did not learn of it, directly or indirectly,  from the Company.
If any person  (including  any government  employee)  requests the disclosure or
release of  Confidential  Information,  Employee  shall (i) promptly  notify the
Company of such request so that the Company may pursue any available remedies to
prevent the  disclosure  or release of such  Confidential  Information  and (ii)
furnish the Company a copy of all written  materials  pertaining to such request
for Confidential Information as the Company shall deem appropriate.

                  10. No Claims.  Employee  represents  and warrants that he has
not filed any  charges,  claims  or  complaints  against  the  Company  Released
Parties, and he represents and warrants that he will not initiate or voluntarily
participate  or assist in any charge,  claim,  or complaint  against the Company
Released  Parties,  it being  understood  that this  provision  does not  affect
Employee's  right to enforce this  Agreement,  or legal  obligation,  if any, to
appear as a witness if subpoenaed for examination before trial or subpoenaed for
trial or hearing or, if required, to provide information to


                                       5


<PAGE>




the Equal Employment  Opportunity  Commission or to an equivalent state or local
administrative agency in response to a demand for information.

                  11. Benefits Terminated.  Employee acknowledges that he is not
entitled to receive benefits from the Company other than as set forth in Section
3 of this  Agreement,  except  for any  vested  benefits  to which  Employee  is
entitled in the Company's 401(k) Plan and except for any other benefits afforded
Employee by applicable law.

                  12. No Inducements. Employee warrants that he is entering into
this Agreement voluntarily, and that, except as set forth herein, no promises or
inducements  for this  Agreement  have been made,  and he is entering  into this
Agreement  without reliance upon any statement or  representation  by any of the
Company  Released  Parties or any other  person,  concerning  any fact  material
hereto.

                  13.  Integration.   This  Agreement   constitutes  the  entire
agreement  between the parties with respect to the subject  matter  hereof,  and
supersedes any and all prior  agreements or  understandings  between the parties
arising  out of or  relating  to the  Employee's  employment  and the  cessation
thereof. This Agreement may only be changed by written agreement executed by the
parties.

                  14.  Governing  Law. This  Agreement  shall be governed by the
laws of the State of New York,  without  giving  effect to the  conflicts of law
principles thereof.

                  15.  Counterparts.  This  Agreement  may be executed in two or
more counterparts,  all of which shall be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.


                                       6


<PAGE>




                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the day and year first above written.

                                                     ATC GROUP SERVICES INC.


                                                         /s/ Nicholas J. Malino
                                                     --------------------------
                                                     By:     Nicholas J. Malino
                                                     Title:  President


                                                     EMPLOYEE

                                                         /s/ Morry F. Rubin
                                                     --------------------------
                                                                  Morry F. Rubin







                                       7


<PAGE>



                                                                   EXHIBIT 10.24

                                    AGREEMENT
                              FOR SALE AND PURCHASE
                               OF BUSINESS ASSETS


                  This  AGREEMENT  (the  "Agreement"),  dated  the  18th  day of
August,  1997, is entered into by and among ATC GROUP  SERVICES INC., a Delaware
corporation  with its principal  office at 104 East 25th Street,  New York,  New
York  10010  (the  "Purchaser");   SMITH  TECHNOLOGY  CORPORATION,   a  Delaware
corporation  with its principal office at 3501 Jamboree Road, Suite 304, Newport
Beach, CA 92660 ("Smith");  BCM ENGINEERS INC., a Delaware  corporation with its
principal office at One Plymouth Meeting,  Plymouth Meeting,  PA 19462 ("BCMD");
BCM ENGINEERS INC., a Pennsylvania  corporation with its principal office at One
Plymouth Meeting,  Plymouth Meeting,  PA 19462 ("BCMP");  BCM ENGINEERS INC., an
Alabama  corporation with its principal  office at 63 South Royal Street,  Suite
200,  Mobile,  AL  36633  ("BCMA");  and BCM  ENGINEERS  INC.,  a West  Virginia
corporation with its principal office at One Plymouth Meeting, Plymouth Meeting,
PA 19462 ("BCMWV") (Smith, BCMD, BCMP, BCMA, and BCMWV are collectively referred
to as the "Sellers").

                  The Purchaser  desires to purchase  certain business assets of
Sellers in exchange for cash and other  consideration  as hereinafter  provided,
and Sellers desire to effect such asset purchase through sale in accordance with
the covenants and terms of this Agreement.


                         I. SALE AND PURCHASE OF ASSETS

                  1.01 Basic Terms of Sale and Purchase of Assets

                  On the basis of the representations, warranties, covenants and
agreements  in this  Agreement  and subject to the terms and  conditions of this
Agreement:

                  (a) At Closing, Sellers agree to sell, convey, assign, deliver
and transfer to Purchaser,  and Purchaser agrees to acquire, accept and purchase
from  Sellers,  all of the  properties  and  assets  of  Sellers,  tangible  and
intangible,  personal,  real and mixed, known or unknown,  vested or contingent,
which constitute  Sellers'  Engineering  Division (the "Engineering  Division"),
which  includes  all  of the  assets  of  Sellers  based  in or out of  Sellers'
Burlington, New Jersey, Dallas, Texas, Fairhope,  Alabama, Fort Walton, Florida,
Gulfport,  Mississippi,  Jackson, Mississippi,  Meridian,  Mississippi,  Mobile,
Alabama, Modesto, California,  Norristown,  Pennsylvania,  Panama City, Florida,
Pascagoula, Mississippi, Pittsburgh, Pennsylvania, Pleasanton, California,


                                   -1 of 49 -


<PAGE>




Pocono Summit,  Pennsylvania,  Sandia Laboratories,  New Mexico, and Washington,
D.C., offices and Sellers' assets used primarily by or associated primarily with
the Engineering  Division at Sellers' Plymouth Meeting,  Pennsylvania,  Livonia,
Michigan, and Mt. Prospect,  Illinois offices. The Engineering Division consists
of the  operations  of Sellers  engaged in the  functions of (i)  testing,  (ii)
consulting,  (iii)  engineering,  (iv) design,  (v) project  management and (vi)
training.  For purposes of defining  what assets are to be conveyed as assets of
the Engineering  Division under this 1.01(a),  the Engineering Division does not
include the operations and assets,  regardless of function or service fields, of
Sellers' Denver, Colorado and Porter, Indiana offices. The assets to be sold and
purchased under this Agreement are all of the Engineering Division assets of all
of the Sellers  (the  Engineering  Division  assets to be purchased by Purchaser
from Sellers, whether or not itemized below, are collectively referred to as the
"Purchased Assets"). The Purchased Assets do not include those assets of Sellers
excluded by 1.01(d).  The  Purchased  Assets  include,  but are not  necessarily
limited to:

                  (1)  All  of  the  Engineering  Division's  supply  inventory,
         including  but not  limited  to field  supplies,  laboratory  supplies,
         office supplies,  processing supplies,  labeling supplies,  packing and
         shipping materials and selling and promotional materials.

                  (2) All of Seller's right, title and interest in the telephone
         and fax numbers set forth on Schedule 1.01(a)(2).  Purchaser shall have
         the  exclusive  right to apply for changes in such  numbers or in their
         location.

                  (3) All of the Engineering Division's fixed assets,  including
         all  furniture,   fixtures,  vehicles,  office,  field  and  production
         equipment,   including  computer  equipment,  and  inventory  (Schedule
         1.01(a)(3) sets forth a substantially complete list of all fixed assets
         of the Engineering Division).

                  (4) All of Sellers' interest in real property leases which are
         assumed as Assumed  Liabilities (as defined in 1.02) ("Assumed Premises
         Leases")  and  all  rights  to  pre-payments,  deposits  and  leasehold
         improvements  pertaining to the Assumed  Premises  Leases.  The Assumed
         Premises  Leases are listed on Scheduled  1.02.  Sellers' real property
         leases  other  than  Assumed   Premises   Leases  are  referred  to  as
         "Non-Assumed Premises Leases."

                  (5)  All  right,  title  and  interest  in  and  to all of the
         Engineering  Division's  customer  contracts  and  agreements,  whether
         written  or  oral   ("Customer   Contracts")   and  customer   business
         arrangements and relationships.  At Closing,  Sellers shall deliver all
         of the Customer Contracts by surrendering


                                   - 2 of 49 -


<PAGE>




         possession of them to Purchaser at closing at their then current
         location.

                  (6) All right,  title and interest in (i) all  subcontracts of
         the Engineering Division (the  "Subcontracts");  and (ii) all contracts
         of  the   Engineering   Division  other  than  Customer   Contracts  or
         Subcontracts  which are assumed by Purchaser as Assumed  Liabilities by
         inclusion on Schedule 1.02 ("Assumed Contracts").

                  (7) All of Sellers'  right,  title,  and interest in the names
         "BCM  Engineers  Inc.,"  "BCM," and any other names or any  customarily
         utilized   portion  or  abbreviation   thereof,   either  alone  or  in
         conjunction  with other  words,  utilized as business  names by Sellers
         primarily in connection with the Engineering Division's operations; and
         all right, title and interest in any trademarks,  logos, service marks,
         the  goodwill   associated   therewith   and  all   registrations   and
         applications   in  connection  with  such  names.  As  set  forth  with
         particularity  in 4.09(d),  Smith also grants  Purchaser a one (1) year
         limited  license  to use  the  names  "Smith  Technology  Corporation,"
         "Reidel  Environmental   Services  Inc.,"  and  "Canonie  Environmental
         Services  Corp." on a  transitional  basis to enable  Purchaser to use,
         obtain the benefits from,  including  payment,  and effect the transfer
         of, the Purchased Assets.  Purchaser agrees to indemnify Smith pursuant
         to 1.03 for Third Party Claims against Sellers arising from Purchaser's
         use of such names or for any breach by Purchaser of the  limitations on
         use contained in 4.09(d).

                  (8) At Sellers'  election,  either  originals or copies of the
         business  records  of the  Engineering  Division,  including  all  such
         business  records of Sellers  pertaining to the Purchased Assets or the
         Assumed Liabilities as Purchaser reasonably determines are necessary to
         enable  Purchaser to obtain  possession  of and title to the  Purchased
         Assets, to realize the value of and benefits from the Purchased Assets,
         to carry out its  obligations  under  the  Assumed  Liabilities  and to
         conduct the business  associated with the Purchased  Assets and Assumed
         Liabilities  ("Records").  The Records include (but are not necessarily
         limited  to)  documents  of  title,   accounting  records,  job  files,
         invoices,  correspondence,  sales records, technical records, customer,
         records and other data and records  relating to sales,  customers,  the
         Purchased Assets and the Assumed  Liabilities,  and include those which
         exist on paper, on film, tape,  videotape or other storage media and on
         any and all electronic media such as computer hard drives, diskettes or
         magnetic tape. The Records do not include any of the financial  records
         of  Sellers  or  records  not  primarily  related  to  the  Engineering
         Division,  but Purchaser  shall have access to such records under 4.06.
         Sellers shall deliver the Records located at premises which are Assumed
         Premises Leases


                                   - 3 of 49 -


<PAGE>




         at Closing (as defined in 6.01) at their then current  location and the
         Records located at Sellers' other offices or premises  promptly as such
         times,  from  time to  time,  after  Closing  and at  Purchaser's  sole
         expense, as records in Sellers' possession are reasonably determined by
         Purchaser  to  constitute  Records  as  defined  in  this  section.  In
         conjunction  with the delivery of the Closing ED Financial  Statements,
         Sellers  shall  deliver to  Purchaser  a copy of the job and  financial
         accounting computer systems back-up tapes for the Engineering  division
         as of the Effective time.

                  (9) All of Sellers'  right,  title,  interest  or  proprietary
         interest  claims  in and  to  any  patents  or  unpatented  proprietary
         technology or processes  primarily used by or sold or licensed to third
         parties by the Engineering Division (listed on Schedule 1.01(a)(9)).

                  (10) All of Sellers'  right,  title,  interest or  proprietary
         interest  claims in and to all copyrights  used primarily by or sold or
         licensed  to third  parties  by the  Engineering  Division  (listed  on
         Schedule  1.01(a)(10)) and all reports,  forms,  archives,  data bases,
         studies, methods, research, technical and other books, manuals, videos,
         scripts, recordings,  training materials,  journals, handbooks, and all
         other  intellectual  property in whatever  form  primarily  used by the
         Engineering  Division,  whether or not  copyrighted  or  proprietary to
         Sellers.

                  (11) All of Sellers'  right,  title,  interest or  proprietary
         interest  claims in and to any and all business or  technical  computer
         software  associated  primarily with,  primarily used by or sold by the
         Engineering  Division and all system manuals and  supporting  materials
         related  to such  software  (each  such  software  system  is listed on
         Schedule  1.01(a)(11));  provided  that any such software for which any
         Seller is obligated to pay royalties, lease payments or license fees or
         which  contains   assignability   restrictions  shall  be  acquired  by
         Purchaser only to the extent assumed as an Assumed Liability.

                  (12) Sellers' complete  Engineering Division customer list(s),
         prospect  contract  list(s)  or log(s),  order  backlog  and  proposals
         outstanding and under  development.  At Closing,  Sellers shall deliver
         their list(s) or data base(s) of all known past (within  previous three
         years) and current  Engineering  Division  customers or clients and the
         Engineering  Division's sales prospect contact list(s), data base(s) or
         log(s), to the extent that such lists, data bases or logs are presently
         stored and  available  on Sellers'  current  data  management  systems,
         whether manual or electronic.  At Closing, Sellers will also provide as
         Schedule 1.01(a)(12) a detail of its order backlog.  This schedule will
         include the customer's


                                   - 4 of 49 -


<PAGE>




         name,  project name,  order  amount,  amount billed to date and backlog
         amount.

                  (13)  Sellers'  vendor  list  applicable  to  the  Engineering
         Division  and all of Sellers'  right,  title and  interest in contracts
         with vendors which are assumed by Purchaser as Assumed Liabilities.

                  (14) All accounts  receivable and all unbilled work in process
         (whether  or not such work in  process  has been  booked as  revenue or
         included on any  schedule)  attributable  to services  performed  by or
         contracts of the Engineering Division, including associated retainages.
         The aging  report of  accounts  receivable  recorded  on the Interim ED
         Balance  Sheet  (see 2.03)  shall be  provided  at Closing as  Schedule
         1.01(a)(14)(i).  An aging report of the work in process recorded on the
         Interim ED  Balance  Sheet  shall be  provided  at Closing as  Schedule
         1.01(a)(14)(ii).  Final aging reports of both accounts  receivable  and
         work in  process,  current  to the  Effective  Time and  including  all
         accounts  receivable  and work in process  recorded  on the  Closing ED
         Balance  Sheet,  shall be delivered in  connection  with the Closing ED
         Financial Statements (see 1.01(b)(4) and 2.03).

                  (15) All deposits, bonds, bond collateral,  proceeds, refunds,
         and prepaid expenses  (including any refunds  thereof)  associated with
         the  Purchased  Assets,   the  Assumed  Premises  Leases,  the  Assumed
         Equipment Leases or the Assumed Liabilities (listed on Schedule
         1.01(a)(15)).

                  (16)  All of  Sellers'  right,  title  and  interest  in those
         specific  personal  property  leases  assumed  as  Assumed  Liabilities
         ("Assumed Equipment Leases").

                  (17)  To  the  extent  assignable,   all  licenses,   permits,
         accreditations,  registrations,  approvals and the like of governmental
         agencies and other licensing or accrediting  entities used  exclusively
         or primarily by the Engineering Division.

                  (18) The real estate set forth on Schedule  1.01(a)(18) to the
         extent that  Purchaser  accepts the  conveyance  thereof  following its
         environmental  due diligence with respect  thereto (the "Purchased Real
         Estate"). Upon Purchaser's request after Closing,  Sellers will deliver
         a recordable  special  warranty deed for each parcel of Purchased  Real
         Estate.

                  (19) All right to the Sellers'  lock box no. 35053  maintained
         with Chase  Manhattan  Bank of New York for  receipt and deposit of the
         Engineering Division's collections, proceeds and other cash receipts.


                                   - 5 of 49 -


<PAGE>




                  (20) The Marion Bank claim.

                  Sellers  agree to use their best  efforts to provide  complete
         information  on the schedules  provided for in this 1.01(a) on the date
         provided.  However,  the  omission  of any item  shall not  operate  to
         exclude the omitted item from the sale, delivery and assignment thereof
         (except in those cases  where the asset is to be  acquired  only to the
         extent a coupled  liability is to be assumed as an Assumed Liability in
         which  case  it will  be  deemed  included  only  if the  liability  is
         specifically assumed as an Assumed Liability),  and the omission of any
         item shall abridge neither  Sellers'  obligation to deliver  possession
         and title thereto nor Purchaser's  obligation to pay the purchase price
         provided Purchaser acquires actual possession and beneficial  ownership
         of the omitted item.

                  (b) As  consideration  for the Purchased  Assets and the other
promises, agreements, warranties, and covenants hereof, the Purchaser shall:

                  (1) Pay to  Smith  at  Closing  the sum of Five  Million  Four
         Hundred   Twenty-Five   Thousand  Five  Hundred   Thirty-Nine   Dollars
         ($5,425,539).   Such  payment   shall  be  paid  by  wire  transfer  of
         immediately available funds to the accounts in the amounts specified by
         Sellers in Schedule 1.01(b)(1).

                  (2) At closing,  deliver to Smith a six (6) month conditional,
         non-negotiable  promissory note in the form of Exhibit  1.01(b)(2) (the
         "Note")  evidencing  Purchaser's  obligation to pay to Smith the sum of
         Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000),  with no
         interest thereon, payable on the date seven (7) days after the date six
         (6) months after the Closing Date (the seven day delay is to enable the
         parties  to  settle  the  accounts   receivable  and  work  in  process
         collection  adjustment  set forth below).  The Note shall be subject to
         the condition  that  Purchaser  shall have available to it the right of
         set-off  against  payments to be made under the Note in accordance with
         the provisions of 1.04, including specifically the right of set-off for
         uncollected accounts receivable and work in process (see 2.06 and 4.01)
         and for any  other  purpose  for  which  the  right of  set-off  may be
         exercised  under 1.04,  but not  including any right of set-off for any
         overstatement  of Adjusted Equity Value on the Interim ED Balance Sheet
         (including any reduction in Adjusted  Equity Value which occurs between
         the Interim ED Balance  Sheet and the Closing ED Balance  Sheet)  which
         shall be adjusted in accordance with 1.01(b)(3), (4) and (5). Purchaser
         acknowledges  that the Note will be assigned to Sellers' senior lender,
         The Chase Manhattan Bank,  pursuant to a collateral  assignment of even
         date herewith, subject to Purchaser's set-off rights in 1.04 hereof.


                                   - 6 of 49 -


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                  (3)  Conditionally  assume at Closing those Closing ED Balance
         Sheet  liabilities of the Sellers related to the Engineering  Division,
         in an  aggregate  amount not to exceed Four Million  Three  Hundred One
         Thousand  Dollars  ($4,301,000),   which  are  set  forth  on  Schedule
         1.012(b)(3)  (the "Assumed Balance Sheet  Liabilities").  The aggregate
         amount of,  and the  specific  liabilities  included  in,  the  Assumed
         Balance Sheet Liabilities shall be adjusted,  and Scheduled  1.01(b)(3)
         shall be revised  accordingly,  to reflect the  difference  between the
         Adjusted  Equity Value of the  Engineering  Division on the Interim and
         Closing ED Balance Sheets in accordance with 1.01(b)(4).

                  (4) Within ten (10) days  following the Closing Date,  Sellers
         shall  provide to  Purchaser  the Closing ED Financial  Statements  (as
         defined in 2.03).  Any  disagreements  between  Purchaser  and  Sellers
         concerning the  Engineering  Division's  final Adjusted Equity Value as
         shown on the Closing ED Balance  Sheet shall be resolved in  accordance
         with 2.03(c) during the twenty (20) day period thereafter. At such time
         as the Closing ED Balance Sheet has been finally determined between the
         parties  within thirty (30) days after Closing,  a final  adjustment to
         the amount of Assumed  Balance  Sheet  Liabilities  to be assumed under
         1.01(b)(3)  shall be made and Schedule  1.01(b)(3)  shall be amended to
         reflect  such  adjustment,  equal to the  amount,  if any, by which the
         Engineering  Division's  Adjusted Equity Value as of the Effective Time
         as set forth on the finally determined Closing ED Balance Sheet exceeds
         or is less than the  warranted  Adjusted  Equity Value set forth on the
         Interim ED  Financial  Statements,  net of any set-off for such purpose
         taken by Purchaser against the Short Term Note under 1.01(b)(5). If the
         Engineering  Division's  Adjusted Equity Value as of the Effective Time
         is less than the Interim ED Balance Sheet value,  the aggregate  amount
         of Assumed  Balance  Sheet  Liabilities  assumed by Purchaser  shall be
         reduced by such  difference less any amount which Purchaser has elected
         to take as a set-off  for such  purpose  against the Short Term Note as
         provided in 1.01(b)(5)(B). If the Adjusted Equity Value is greater than
         the Interim ED Balance  Sheet value,  the  aggregate  amount of Assumed
         Balance Sheet  Liabilities  assumed by Purchaser  shall be increased by
         such difference. Purchaser shall have the right to select which Closing
         ED Balance  Sheet  liabilities  are added to or deleted  from  Schedule
         1.01(b)(3)  to  reflect  the  adjustment  effected  by this  paragraph.
         Purchaser   shall  be  given  credit  for  any  Assumed  Balance  Sheet
         Liabilities  which it  discharges  prior to the  amendment  of Schedule
         1.01(b)(3).

                  (5)  At   Closing,   deliver  to  Smith  a  thirty   (30)  day
         conditional,  non-negotiable  promissory  note in the  form of  Exhibit
         1.01(b)(5) (the "Short Term Note") evidencing Purchaser's obligation to
         pay to Smith the sum of Two Hundred Thousand Dollars  ($200,000),  with
         interest thereon at


                                   - 7 of 49 -


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         the Chase Manhattan Bank prime rate as of the Closing Date,  payable on
         the date thirty (30) days after the Closing  Date.  The Short Term Note
         shall be subject to the condition that  Purchaser  shall have available
         to it the right of set-off against  payments to be made under the Short
         Term Note for:

                         (A)  Any  payment  which  Purchaser  elects  to make on
                  behalf  of  Sellers  of  any  liability  of  the   Engineering
                  Division:  (i) which is not set forth as an account payable of
                  the  Engineering  Division  on Schedule  1.01(b)(5)  (Schedule
                  1.01(b)(5) is the ledger of trade accounts payable included as
                  liabilities  of  the  Engineering  Division  recorded  on  the
                  Interim  ED  Balance  Sheet);  (ii)  which  is not an  Assumed
                  Liability; and (iii) which Sellers do not pay within seven (7)
                  days after being requested by Purchaser in writing to do so in
                  accordance with 4.14; or

                         (B)  The  amount,  if any,  by  which  the  Engineering
                  Division's  Adjusted  Equity Value as of the Effective Time as
                  set forth on the finally  determined  Closing ED Balance Sheet
                  is less than the Interim ED Balance Sheet value, determined in
                  accordance  with  1.01(b)(4),  to the  extent  that  Purchaser
                  elects to take such  adjustment as a set-off against the Short
                  Term Note  instead of a  reduction  in Assumed  Balance  Sheet
                  Liabilities.

                  Purchaser  acknowledges  that  the  Short  Term  Note  will be
         assigned to Sellers' senior lender, The Chase Manhattan Bank,  pursuant
         to  a  collateral   assignment  of  even  date  herewith,   subject  to
         Purchaser's set-off rights in this 1.01(b)(5).

                  (c) The purchase  price shall be  allocated  to the  Purchased
         Assets by  agreement  of the parties as set forth on Schedule  1.01(c),
         with final  adjustments to conform to the Closing ED Balance Sheet made
         by agreement between the parties within 45 days after Closing.

                  (d) The  Purchased  Assets  will  not  include  the  following
         (collectively, the "Excluded Assets"):

                         (1) All  cash  bank  accounts  or cash  equivalents  of
                  Sellers on hand on the  Closing  Date,  except as  provided in
                  1.01(a)(15).

                         (2) All insurance  policies of the Sellers,  in respect
                  of the Purchased Assets or otherwise.

                         (3)  Sellers'   interest  in  that  certain   Technical
                  Services  Agreement  dated May 1, 1993,  between  Schlumberger
                  Technology  Corporation  and  Canonie  Environmental  Services
                  Corp.,   including  the  right  of  any   proceeds,   accounts
                  receivable, claims for payment or other rights arising from or
                  related to such agreement.


                                   - 8 of 49 -


<PAGE>




                         (4) All  rights of Sellers  arising  from or related to
                  the lawsuit filed in the Superior Court of California,  County
                  of Alemeda,  Case No. V-013711-1  against Locus  Technologies,
                  Neno Duplancic and other unidentified defendants.

                         (5)  Any   permits,   licenses,   agreements,   leases,
                  instruments,  contracts  and  contract  rights  which would be
                  Purchased  Assets but for this  1.01(d)(5),  but which require
                  the consent, approval, novation or waiver of a third person if
                  the  transfer  of  such  would  constitute  a  breach  of such
                  contract  or a  violation  of any  law  and if  such  consent,
                  approval,  novation  or  waiver  is  not  obtained,  provided,
                  however,  that  the  benefits  of any such  agreement,  lease,
                  instrument, contract or contract right, including the right to
                  payment  arising  therefrom,   shall  nevertheless  constitute
                  Purchased  Assets  to the  extent  that such  benefits  can be
                  afforded to Purchaser by means of the  covenants  set forth in
                  4.09, 6.02(1) and 7.02 or any other covenant of this Agreement
                  whose  purpose is to assure to  Purchaser  the benefits of the
                  Purchased   Assets   for  which   Purchaser   is  paying   the
                  consideration provided for in this Agreement.

                         (6)  All  of   Seller's   assets  of  every   type  and
                  description  which are not primarily used by or related to the
                  Engineering Division.
                         (7) All real estate  owned or leased by Sellers  except
                  for any: (i) owned real estate expressly  itemized on Schedule
                  1.01(a)(18) as a Purchased  Asset; or (ii) interests in leased
                  real estate which are Assumed Premises Leases.

                         (8) All claims of Sellers,  including  those related to
                  the Engineering Division, arising prior to the Effective Time,
                  except for the Marion Bank claim (the "Retained Claims").

                         (9) All  rights in former  accounts  receivable  of the
                  Engineering  Division  which  were  charged  off  prior to the
                  Effective Time.

                         (10)  Deposits,  pre-payments,   fixtures,  and  tenant
                  improvements associated with Non-Assumed Leases.

                         (11) Records related to Sellers'  pending or threatened
                  litigation, proceedings, investigations or claims.

                         (12) All of Sellers' recorded goodwill.

                         (13) Sellers'  computer network  equipment and licensed
                  network  software,  including  those  components  used  by the
                  Engineering Division prior to Closing.


                                   - 9 of 49-


<PAGE>




                         (14)  All  of  Sellers'   leased   real  and   personal
                  properties  other than those  assumed by  Purchaser as Assumed
                  Premises or Assumed Equipment Leases.

                  1.02  Liabilities of Seller and Purchaser

                  (a)  Purchaser  has not,  and shall not be  construed to have,
assumed,   adopted  or  taken  over  any  obligations,   debts,  liabilities  or
responsibilities  of  Sellers   whatsoever,   including  (but  not  limited  to)
liabilities for local,  state or federal taxes,  except for: (i) the liabilities
itemized on Schedule 1.02; (ii) the Assumed Balance Sheet  Liabilities set forth
on Schedule 1.01(b)(3) as adjusted;  and (iii) such future (i.e.  post-Effective
Time)  performance  as is  obligated  under the terms  and  conditions  of those
Customer   Contracts  or  Subcontracts   which   constitute   Purchased   Assets
(collectively  the  "Assumed  Liabilities").  Purchaser  shall use its  diligent
efforts to secure the assignment to Purchaser or novation of contracts which are
Assumed  Liabilities.   Purchaser  shall  be  free  to  seek  the  amendment  or
renegotiation   of  terms  of  Customer   Contracts,   Subcontracts  or  Assumed
Liabilities  in its sole  discretion  provided that  Purchaser  shall  indemnify
Sellers from any adverse effect on Sellers arising from such actions.  Purchaser
shall  cooperate  with Sellers in attempting to obtain the release and waiver or
settlement of claims of parties under the Customer Contracts in favor of Sellers
for any damages or losses alleged to have been incurred by such parties  arising
from  performance  prior  to the  Effective  Time.  Notwithstanding  Purchaser's
acceptance  of a Customer  Contract and the  obligation  of future  performance,
Sellers, as their interests are defined by such contracts or by law (which shall
not be  altered or  enlarged  with  respect  to third  parties by virtue of this
Agreement),  shall  retain  responsibility  and  liability,  except  as such are
expressly assumed as Assumed Liabilities,  for all obligations,  performance and
liability  due,   occurring  or  accruing   under  all  Customer   Contracts  or
Subcontracts   prior  to  the  Effective  Time,  with  Purchaser   assuming  all
responsibility  and liability for  obligations and performance due and performed
after the Effective Time and all liabilities  arising out of such post-Effective
Time performance.

                  (b) Except for the Assumed Liabilities, Sellers agree, jointly
and  severally,  to retain or  assume  full  liability  and  responsibility  for
satisfaction of all of Sellers' debts or liabilities of any kind,  whether known
or unknown,  fixed or  contingent,  including  any and all  liability  for trade
payables and other accounts payable,  federal, state or local taxes,  employment
taxes, tort or contract claims, and employee compensation, benefits or claims.

                  (c) The  disclosure by Sellers of any liability or any item or
matter that creates a liability in the future on the schedules to this Agreement
or otherwise shall not result in an assumption by, or shifting to,  Purchaser of
liability with respect to such matter


                                  - 10 of 49 -


<PAGE>




except to the extent that  Purchaser has expressly  agreed to the  assumption of
such liability as an Assumed Liability.

                  1.03 Indemnity Against Liabilities, etc.

                  (a) Sellers,  jointly and  severally,  agree to indemnify  and
hold  harmless  the  Purchaser,  its  subsidiaries,  their  employees  and their
successors against and in respect of any and all:

                  (1) Claims, suits, actions,  proceedings (formal or informal),
         governmental   investigations,   judgments,   deficiencies,   set-offs,
         damages,  settlements,  liabilities,  and  reasonable  legal  and other
         expenses  (including  reasonable  attorneys' fees) as and when incurred
         arising  out  of or  based  upon  any  breach  of  any  representation,
         warranty,  covenant,  or  agreement of Sellers or any person other than
         Purchaser contained in this Agreement or any of the Related Agreements;

                  (2)  Debts  or  liabilities  of any kind  and  claims,  liens,
         set-offs,  suits,  actions,  and  proceedings  (formal and informal) of
         persons or  entities  and  related  judgments,  deficiencies,  damages,
         settlements, set-offs, liens, liabilities, and legal and other expenses
         (including reasonable attorneys' fees) as and when incurred arising (i)
         out of the Purchased Assets or the business associated  therewith prior
         to the  Effective  Time  except  to the  extent  expressly  assumed  by
         Purchaser as Assumed Liabilities or (ii) out of or based upon the acts,
         omissions,  contractual  performance  or  conduct  of the  business  of
         Sellers  whether  before or after  the  Effective  Time,  except to the
         extent expressly assumed by purchaser as Assumed Liabilities; and

                  (3) Any loss,  damage or cost for which Sellers or any of them
         have  agreed  to  indemnify  Purchaser  under  any  provision  of  this
         Agreement or any Related Agreement.

                  (b) Purchaser  agrees to indemnify and hold harmless  Sellers,
their affiliated corporations, their employees and their successors, against and
in respect of any and all:

                  (1) Claims, suits, actions,  proceedings (formal or informal),
         governmental   investigations,   judgments,   deficiencies,   set-offs,
         damages,  settlements,  liabilities,  and  reasonable  legal  and other
         expenses  (including  reasonable  attorneys' fees) as and when incurred
         arising  out  of or  based  upon  any  breach  of  any  representation,
         warranty,  covenant,  or  agreement  of  Purchaser  contained  in  this
         Agreement or any of the Related Agreements;

                  (2)  Debts  or  liabilities  of any kind  and  claims,  liens,
         set-offs,  suits,  actions,  and  proceedings  (formal and informal) of
         persons or entities and related judgments, deficiencies,


                                  - 11 of 49 -


<PAGE>




         damages,  settlements,  set-offs,  liens,  liabilities,  and reasonable
         legal and other expenses (including  reasonable attorneys' fees) as and
         when incurred  arising (i) out of the Purchased  Assets or the business
         associated  therewith  after the  Effective  time,  except for Sellers'
         debts or  liabilities  not  expressly  assumed by  Purchaser as Assumed
         Liabilities; (ii) out of or based upon the acts, omission,  contractual
         performance  or conduct of the business of Purchaser  whether before or
         after the Effective Time; or (iii) out of the Assumed Liabilities after
         the Effective Time; and

                  (3) Any loss, damage or cost for which Purchaser has agreed to
         indemnify  Sellers or any of them under any provision of this Agreement
         or any Related Agreement.

                  (c)  If  any   party   to  be   indemnified   hereunder   (the
"indemnitee")  receives  notice  of  the  assertion  of  any  claim  or  of  the
commencement  of any  action or  proceeding  by any entity who is not a party to
this  Agreement or an affiliate  of such party (a "Third Party  Claim")  against
such  indemnitee,  against  which any person or entity  that may be  required to
provide  indemnification  therefor under this Agreement (the "indemnitor"),  the
indemnitee  will give such indemnitor  reasonably  prompt written notice thereof
after receipt of such notice of such Third Party Claim in reasonable detail, and
will indicate the estimated amount, if reasonably practicable,  of the loss that
has been or may be sustained by the  indemnitee.  The  indemnitor  will have the
right to  participate  in or, by written  notice to the indemnitee no later than
thirty (30) calendar days after  receipt of the  above-described  notice of such
Third Party  Claim,  to elect to assume the defense of such Third Party Claim at
such  indemnitor's  own expense and by such  indemnitor's  own counsel,  and the
indemnitee  will  cooperate  in good  faith in such  defense.  If within  the 30
calendar days set forth in this paragraph, an indemnitee receives written notice
from an indemnitor that such indemnitor has elected to assume the defense of any
Third Party  Claim,  the  indemnitor  will not be liable for any legal  expenses
subsequently  incurred by the indemnitee in connection  with the defense thereof
(except as provided  in this  paragraph  or  paragraph  (d) or (f)  below).  The
indemnitee  will,  however,  have the right to participate in the defense of any
Third Party Claim assisted by counsel of its own choosing at its own expense. If
the indemnitee has not received  written notice within such thirty (30) calendar
day period that the  indemnitor  has elected to assume the defense of such Third
Party Claim,  the  indemnitee  may, at its option,  elect to settle,  subject to
paragraphs  (e) and (f), or assume such defense,  assisted by counsel of its own
choosing, the cost of which shall constitute an indemnified loss.

                  (d) An  indemnitor  shall not be entitled to control,  and the
indemnitee  shall  be  entitled  to have  sole  control  over,  the  defense  or
settlement of any claim against such indemnitee to the extent


                                   -12 of 49 -


<PAGE>




that (i) such claim seeks an order, injunction or other equitable relief against
the indemnitee  which if successful,  could reasonably be expected to materially
interfere  with the  business,  operations,  assets or condition  (financial  or
otherwise)  of the  indemnitee  or (ii)  such  claim  arises  out of a  Customer
Contract  and  seeks   recovery   against  both  Sellers  and  Purchaser   under
circumstances  subjecting  the claim to liability  and  indemnity  apportionment
under paragraph (j)(1) of this section, in which event indemnitor and indemnitee
shall have control over their respective defenses.

                  (e) Without the prior written consent of the other, indemnitor
will not enter into any  settlement  of any Third Party Claim or cease to defend
against  such  claim,  if  pursuant  to or as a  result  of such  settlement  or
cessation: (i) injunctive or other equitable relief would be imposed against the
indemnitee;  or (ii) such  settlement  or  cessation  would lead to liability or
create any financial or other obligation on the part of the indemnitee for which
it is not entitled to or is unlikely to receive full  indemnification  hereunder
(exclusive  of the Indemnity  Deductible,  or any portion  thereof).  Indemnitor
shall not consent to the entry of any judgment or enter into any settlement that
does not include as an unconditional  term thereof the giving by the claimant or
plaintiff to each  indemnitee of a release from all liability in respect of such
claim.

                  (f) If a firm offer is made to settle a Third  Party Claim and
either indemnitor or indemnitee  desires to accept and agree to such offer, such
party will given written notice to the other to that effect.  If the other party
fails to consent to such firm offer within 30 calendar days after its receipt of
notice,  the party  desiring to so settle may continue to contest or defend such
Third Party Claim and, in such event: (i) if the party desiring to settle is the
indemnitor, the maximum liability of the indemnitor as to such Third Party claim
will not exceed the amount of such  settlement  offer,  plus costs and  expenses
paid or incurred by the indemnitee  through the end of such 30-day period to the
extent  otherwise  indemnifiable  hereunder;  or (ii) if the party  desiring  to
settle is the indemnitee, the indemnitee is participating in the defense of such
Third Party Claim at its cost and the final  judgment or  settlement is equal to
or greater than the firm offer,  the  indemnitee's  costs and expenses  incurred
after such 30-day period shall constitute an indemnified loss.

                  (g) Any claim by an indemnitee for indemnification  other than
indemnification  against a Third Party Claim (a "Direct Claim") will be asserted
by giving the  indemnitor  reasonably  prompt written  notice  thereof,  and the
indemnitor  will have a period of 15 calendar  days  within  which to respond in
writing to such Direct Claim.  If the indemnitor does not so respond within such
15 calendar day period,  the  indemnitor  will be deemed to have  rejected  such
claim, in which event the indemnitee will be free to pursue


                                  - 13 of 49 -


<PAGE>




such remedies as may be available to the indemnitee under this Agreement.

                  (h) With regard to claims for which indemnification is payable
hereunder,  such  indemnification  shall be paid by the indemnitor promptly upon
(i) the entry of a judgment  against the  indemnitee  and the  expiration of any
applicable  appeal period;  (ii) the entry of an unappealable  judgment of final
appellate decision against the indemnitee; or (iii) a settlement permitted under
1.03. In the event that the indemnitee has taken a provisional  set-off  against
amounts due to the indemnitor for the indemnified  claim pursuant to 1.04(c) and
the amount  finally  determined  to be payable as provided in this  paragraph is
less than the amount so set-off,  the excess  shall  thereupon be payable to the
indemnitor  together  with  interest on such excess at the Chase Bank prime rate
quoted for the date on which the  payment  against  which the  set-off was taken
would have  otherwise  been due. This  provision  shall not apply to Purchaser's
set-off rights against the Note for uncollected  accounts receivable and work in
process and against the Short Term Note for  Purchaser's  payment of unscheduled
accounts   payable  under  1.01(b)(5)  which  shall  be  governed  by  1.04  and
1.01(b)(5), respectively, and shall be finally determined in accordance with the
procedure set forth for resolution of accounting issues in 2.03.

                  (i)  If  the  Purchaser  is  the  indemnitee,  payment  of  an
indemnification  claim  shall first be made by a set-off  against the  principal
amount of the Note  remaining  unpaid,  subject to paragraphs  (j)(3) and (5) of
this section.

                  (j) The parties' respective  indemnity  obligations  hereunder
shall be further subject to the following:

                  (1) In the event any contracting  party of a Customer Contract
         (other  than  Purchaser)  asserts  any claim for  damages,  failure  or
         inadequacy  of  performance,  breach of  warranty or breach of contract
         relating  to the  Customer  Contract  and  such  claim  is  founded  on
         allegations  of breach of contract,  negligence or other legal fault of
         both a Seller and  Purchaser,  then,  and in that event,  Purchaser and
         Sellers  indemnification  obligations contained herein shall apply only
         to the extent of their  respective  actual  comparative  negligence  or
         other legal fault as  determined by the dispute  resolution  procedures
         set forth in this Agreement, by a court or by agreement of the parties.
         A  determination  of liability on the part of Purchaser  based upon the
         assignment or novation to, or undertaking of performance by,  Purchaser
         of any Customer  Contract or based upon successor  liability or similar
         theory shall not constitute legal fault of the Purchaser,  it being the
         intention of this section to apportion liability to the party whose act
         or omission was actually responsible for creating the liability.


                                  - 14 of 49 -


<PAGE>




                  (2) Except with  respect to claims  arising  from  performance
         under  Customer  Contracts  prior to closing or claims of breach of any
         contract  by any Seller  prior to  Closing,  rights to  indemnification
         pursuant to 1.03(a) hereof shall survive Closing for a period of thirty
         (30)  months.  Rights to  indemnification  for claims  arising from any
         Seller's  performance under any Customer Contract or breach of contract
         by any Seller  prior to Closing  shall  survive for a period of six (6)
         years  after  the  date  of  the  making  of  the  contract.  All  such
         non-excepted  claims  for  indemnification  hereunder  shall be forever
         barred  unless made by  notifying  the Sellers in writing of such claim
         within the time period set forth in this paragraph.

                  (3)  The  Sellers'  and   Purchaser's   respective   indemnity
         obligations  hereunder  shall be  limited  to: (i)  individual  losses,
         claims,  etc.  having a value  of  $2,500.00  or more (an  "Indemnified
         Claim"); and (ii) losses, claims, etc. after the first $100,000.00,  in
         the aggregate, of Indemnified Claims (the "Indemnity  Deductible"),  in
         which event only the aggregate amount of Indemnified Claim(s) in excess
         of  the  Indemnity  Deductible  shall  be  subject  to  indemnification
         hereunder.  Sellers shall not be  responsible  for any loss or claim to
         the extent  that a reserve  exists  therefor  on the Closing ED Balance
         Sheet and remains  available.  The  following are not subject to either
         the  Indemnified  Claim  threshold or the Indemnity  Deductible and are
         covered from the first dollar over the reserved amount:  (iii) Sellers'
         warranty that accounts receivable and recorded work in process recorded
         on the Closing ED Balance Sheet, net of reserves,  will be collected as
         specified in 2.06(a); (iv) Sellers' warranty that there are no unearned
         billings or receipts  net of reserves  for such purpose as set forth in
         2.06(a) and 2.07(b);  (v) Sellers'  warranty  that both the Interim and
         Closing  Balance Sheets  correctly  stated  tangible net equity for the
         Engineering  Division as of the Effective Time; (vi) Sellers'  warranty
         that Hazardous  Materials  have been removed from the Assumed  Premises
         Leases and  Purchased  Real  Estate  prior to Closing;  (vii)  Sellers'
         covenants  to  pay  unrecorded  accounts  payable  of  the  Engineering
         Division  under 4.14 and to pay  insurance  premiums  under  4.12;  and
         (viii)  Purchaser's  covenant to make payments required in the ordinary
         course under Assumed  Balance Sheet  Liabilities  or leases  assumed as
         Assumed Liabilities.

                  (4) The terms  "loss" or  "cost"  as used in  1.03(a)  include
         corrective    services   performed   by   Purchaser    (including   its
         subcontractors)  to remedy a deficiency in Sellers'  performance  under
         any contract for the  performance of services by a Seller to the extent
         that Purchaser reasonably determines: (i) that such corrective services
         are in fact  necessary to remedy a defective  performance  by a Seller;
         and (ii) that Purchaser


                                  - 15 of 49 -


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         must  perform  such  corrective  services  in  order  to  preserve  its
         relationship  with (x) any customer under a Customer  Contract or other
         engagement for services having remaining billings of $20,000 or more in
         excess of the cost of such corrective  services,  (y) any  pre-existing
         customer  from  which  Purchaser  accrued  revenue in excess of $30,000
         within the previous year or (z) any customer from which the Engineering
         Division  accrued  more than  $50,000  in  revenue in either of the two
         years prior to Closing.  corrective  services performed by Purchaser at
         the request of Sellers shall not be subject to any threshold.

                  (5)  The  maximum  aggregate  liability  of  the  Sellers  for
         indemnification  under  this  Agreement  and  set-offs  under  1.04 and
         1.01(b)(5),  exclusive  of  liability  covered  by  Sellers'  insurance
         coverage for any indemnified claim, shall be equal to Two Million Seven
         Hundred Fifty Thousand  Dollars  ($2,750,000)  (the "Maximum  Aggregate
         Indemnity   Amount"),   and  the   obligations   of  the   Sellers  for
         indemnification  hereunder will  terminate  when the Maximum  Aggregate
         Liability  Amount has been paid or set-off,  except  that if  Purchaser
         exercises  set-off  rights  against the Note and the Short Term Note in
         excess  of  $1,250,000  in  the  aggregate  for  uncollected   accounts
         receivable and work in process and for payments of unrecorded  accounts
         payable,   the  maximum   aggregate   liability   of  the  Sellers  for
         indemnification  shall  nevertheless  be equal to $1,500,000  for other
         indemnified  matters regardless of the amount set-off for the foregoing
         purposes.

                  (6)  To  the  extent  that  an  indemnitee  actually  receives
         proceeds of  insurance or any other  recovery of amounts  claimed as an
         indemnified loss or cost hereunder,  the indemnification  obligation of
         the  indemnifying  party  shall be  reduced  to the  extent  of the net
         insurance proceeds or other recovery received by the indemnitee. If the
         amount of any  indemnifiable  loss at any time subsequent to the making
         of a payment in respect thereof (an "indemnity  Payment") is reduced by
         recovery,  settlement  or otherwise  under or pursuant to any insurance
         coverage,  or pursuant to any claim,  recovery,  settlement or payment,
         the amount so received will be promptly repaid by the indemnitee to the
         indemnitor,  together  with  interest  thereon from the date of payment
         thereof at a rate equal to the then current prime rate.

                  (7) Upon making any Indemnity Payment, the indemnitor will, to
         the extent of such  Indemnity  Payment,  be subrogated to all rights of
         the indemnitee  against any third party that is not an affiliate of the
         indemnitee  in  respect  of the loss to  which  the  Indemnity  Payment
         relates.  Without  limiting  the  generality  or  effect  of any  other
         provision hereof, each such indemnitee and indemnitor will duly execute
         upon request all


                                  - 16 of 49 -


<PAGE>




         instruments  which  fairly  reflect,  and are  reasonably  necessary to
         evidence and perfect, the above-described rights.

                  (8) Sellers and Purchaser,  or any  indemnitee  claiming under
         them,  shall  each give the other  prompt  notice as  provided  in this
         section  of  any  allegedly  indemnified  item  incurred,  asserted  or
         threatened  on the  basis  of  which  an  indemnitee  intends  to  seek
         indemnification  from  an  indemnitor  as  provided  herein;  provided,
         however,  that the obligation of an indemnitor shall be reduced for the
         failure to give notice at any  particular  time only to the extent that
         the indemnitor has been actually prejudiced thereby.

                  (9) The indemnity agreements contained in this Agreement shall
         inure only to the benefit of Purchaser and Sellers,  respectively  (and
         their respective  subsidiaries,  affiliates employees and successors to
         the extent they are  indemnitees),  and shall not be for the benefit of
         any other person or entity.  These  indemnity  provisions  shall not be
         construed to abrogate  the  corporate  liability  shield as provided by
         law,  to  extend a right of action  to any  third  party not  otherwise
         available,  or to enlarge the underlying liability of any indemnitor or
         indemnitee to any third party.

                  (k)  Notwithstanding  any other  provision  contained  in this
Agreement  to the  contrary,  neither  Sellers  nor  Purchaser  shall  have  any
liability to the other or to any other indemnitee under this Agreement, or under
any  Related  Agreement,  document  or  instrument  delivered  pursuant  to this
Agreement,  or in  connection  with  the  transactions  contemplated  hereby  or
thereby,  for any indirect,  consequential or incidental  damages of any kind or
nature. The following shall not constitute indirect, consequential or incidental
damages: (i) amounts that an indemnitee is required to pay to a Third Party even
if such amounts are for indirect,  incidental or consequential damages sustained
by such Third Party;  or (ii) attorneys' fees and defense costs and expenses for
which a right to indemnification is provided in this 1.03.

                  (l) The  indemnification  obligation of an indemnitor shall be
adjusted so as to give credit to the indemnitor  for any tax benefits  available
to the  indemnitee  by  virtue  of or as a result  of the  matter  for which the
indemnitee  is  being  indemnified  (net  of  tax  detriments  resulting  to the
indemnitee by virtue of such indemnification).

                  (m)  Purchaser  and  Sellers  each  agree  that  the  remedies
provided to each party in this 1.03 shall be the sole and exclusive  remedies of
such  party (or any  person  claiming  by or through  such  party)  for  breach,
misrepresentation  or default by the other party  under or with  respect to this
Agreement or any Related  Agreement  except for the  following:  (i) the parties
shall be  entitled  to  equitable  remedies  with  respect to  matters  where an
equitable remedy is


                                  - 17 of 49 -


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provided in this Agreement or where such relief is available under principles of
equity  generally;  and (ii) the parties shall not be limited as to remedy under
circumstances constituting fraud in the inducement.

                  1.04 Rights of Set-Off

                  (a) Without  limiting  such other rights as it may have at law
or equity or by agreement,  the Purchaser  shall have the right,  subject to the
procedures  of this 1.04,  to set off against,  and withhold  from,  any payment
otherwise  due to  Sellers  under  the  Note:  (i)  the  amount  of any  account
receivable or work in process which is a Purchased Asset and is determined to be
uncollected pursuant to 2.06(a) and 4.01; (ii) any amount for which Purchaser is
entitled  to an  indemnification  payment as  provided  in 1.03  (subject to the
limitations  of 1.03(j)(3) and  1.03(j)(5));  and (iii) as provided in paragraph
(c) below.  In-kind goods or services  provided by Purchaser for which Purchaser
would be  entitled to set off if paid by  Purchaser  in money shall be valued at
Standard Rates (as defined in 4.11).

                  (b) Without limiting such other rights as they may have at law
or  equity  or by  agreement,  Sellers  shall  have the  right,  subject  to the
procedures  of this 1.04,  to set off against,  and withhold  from,  any payment
otherwise due to Purchaser  under this Agreement or under any Related  Agreement
any amount for which  Sellers are entitled to an  indemnification  payment under
1.03 (subject to the  limitations  of 1.03(j)(3) and  1.03(j)(5));  and (iii) as
provided in paragraph (c) below.  In-kind goods or services provided by a Seller
for which Sellers would be entitled to set off if paid by Sellers in money shall
be valued at Standard Rates (as defined in 4.11).

                  (c) Subject to the procedures  set forth below,  but only with
respect to Third  Party  Claims,  it shall not be  necessary  that a Third Party
Claim or a threatened Third Party Claim has resulted in actual damage to a party
having  set-off  rights under this section for the party to exercise its set-off
rights  under  this  section,  but  rather  such  party  shall have the right to
provisionally  withhold  payment to cover the future  effects of any Third Party
Claim or threatened  Third Party Claim pending actual  conclusion of the matter,
provided that the party  asserting  the right of set-off for a threatened  Third
Party  Claim  shall have  produced  sufficient  objective  evidence of facts and
sufficient  supporting legal authority for a competent,  experienced attorney to
conclude that:

                  (1) A written notice of the claim or threatened claim has been
         received by the party seeking to withhold;

                  (2) Either the loss-threatening event has occurred or there is
         a substantial probability that it will occur;


                                  - 18 of 49 -


<PAGE>




                  (3) There is a substantial  probability that the occurrence or
         probable occurrence will cause a loss;

                  (4) An  action  to hold the party  liable  for the loss  could
         withstand a motion to dismiss or a motion for summary judgment;

                  (5)  There  is  a  substantial   probability  that  the  loss,
         including associated  attorneys' fees and costs of defense,  will be as
         great as the amount asserted for set-off;

                  (6)  Either  there is a  substantial  issue as to  whether  an
         available  insurance policy provides coverage for the claim or there is
         a substantial  potential that the insurance coverage available will not
         be  adequate  in amount to pay the  portion of the loss  asserted  as a
         set-off; and

                  (7) If  the  set-off  is not  asserted  at the  present  time,
         insufficient  funds will remain  subject to set-off  following the next
         payment to enable the asserting party to protect its interests.

                  If (i) any of the above findings  becomes no longer true, (ii)
a formal  proceeding  has not been  commenced  with respect to such  Third-Party
Claim  within  one (1) year  after  the  notice  of  intent  to set  off,  (iii)
settlement negotiations are not actively in progress to resolve such Third Party
Claim after one (1) year from the notice of intent to set off, or (iv) such loss
or damage does not in fact occur,  then upon the earlier to occur of such events
such party shall then pay the withheld  amount to the other party  together with
interest on such amount  from the  payment due date at the  Chemical  Bank prime
rate in effect on the due date for such payment.

                  (d)  Purchaser  may not set off any amounts under this section
except to the extent that any reserve  recorded on the Closing Balance Sheet for
such  liability or class of  liabilities  is not  available or is  inadequate to
cover the asserted amount.

                  (e) If the parties  have a dispute  involving  the exercise of
set-off  rights,  including  any issue as to  insurance  coverage  or  liability
exposure,  then within ten (10) days, Sellers and Purchaser shall confer in good
faith in an effort to resolve  the  dispute.  If the parties are unable to agree
within thirty (30) days after the issue is first asserted, then such issue shall
be submitted to non-binding  mediation as provided in 7.15. Pending agreement or
determination  of a charge  against  available  reserves  and/or a set-off,  the
amount  asserted for set-off may be withheld by the asserting  party (subject to
the  provisions  of  paragraph  (c) above) and shall not  constitute a breach or
default under this Agreement,  provided that the withholding is reasonable as to
amount  and is  undertaken  in good  faith  with a  reasonable  belief as to the
entitlement to the set-off.


                                  - 19 of 49 -


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                  II. REPRESENTATIONS AND WARRANTIES OF SELLER

                  As a  material  inducement  to  Purchaser  to enter  into this
Agreement, Sellers represent and warrant to Purchaser as follows:

                  2.01 Organization and Qualification

                  (a) Sellers are each  corporations  which are validly existing
under the laws of their state of incorporation with the full corporate power and
authority to enter into contracts, to sell their assets and to perform the other
agreements and covenants as provided in this  agreement.  Sellers are authorized
to do  business  and are in good  standing  in each  jurisdiction  in which  the
Engineering  Division  maintains an office or is required to be qualified except
where the failure to be so qualified  could not reasonably be expected to have a
material adverse effect on the Engineering Division. Schedule 2.01(a) lists each
such  jurisdiction  in which the  Engineering  Division  maintains an office and
Sellers  are  authorized  to do  business.  Sellers  will not be, as a result of
executing and performing this Agreement and related agreements,  in violation or
breach  of,  or in  default  with  respect  to,  any  term of  their  respective
certificates of incorporation, by-laws or other charter documents.

                  (b) Sellers have no subsidiary or affiliated  corporations  or
entities other than those listed on Schedule 2.01(b).

                  2.02 Capitalization and Shareholder Action

                  Except  as set  forth on  Schedule  2.02,  the stock or equity
interests of Sellers are not  encumbered  or restricted in any way or subject to
any agreement  that will  interfere with this  transaction,  affect  Purchaser's
title to or  beneficial  use of the  Purchased  Assets or subject  Purchaser  to
liability to any stockholder. Stockholder approval of this sale of assets either
has been duly  obtained  prior to  Closing  or is not  required  by law or under
Sellers' respective certificates or articles of incorporation or by-laws.

                  2.03 Financial Condition

                  (a) Sellers  have  delivered  to the  Purchaser  and  attached
hereto as Schedule 2.03 true and correct  copies of the  following:  (i) audited
balance  sheets,  statements  of income,  statements of retained  earnings,  and
statements of cash flow of Smith or its  predecessors  for the fiscal year ended
February 28, 1995, and the seven months ended September 30, 1995; (ii) unaudited
balance sheet, statement of income, statement of retained earnings and statement
of cash flow of Smith for the  fiscal  year  ended  September  30,  1996;  (iii)
unaudited  selected  balance  sheet  accounts and  statements  of income for the
Engineering Division for the twelve


                                  - 20 of 49 -


<PAGE>




(12) months ended  September 30, 1996;  (iv)  unaudited  selected  balance sheet
accounts and statements of income for the Engineering  Division for the ten (10)
months ended July 31, 1997 (the "Interim ED Financial  Statements").  Within ten
(10) days following the Closing Date,  Sellers shall provide (v) final unaudited
selected  balance sheet  accounts  ("Closing  Balance  Sheet") and statements of
income,  retained  earnings  and cash flows of Sellers for the period  beginning
October  1, 1996,  and  ending on the  Effective  Time (the  "Closing  Financial
Statements");  and (vi)  final  unaudited  balance  sheet  ("Closing  ED Balance
Sheet")  and  statements  of  income,  retained  earnings  and cash flows of the
Engineering Division for the period beginning October 1, 1996, and ending on the
Effective Time (the "Closing ED Financial Statements").

                  (b) The Smith  financial  statements  referred to in 2.03 have
been  prepared in  accordance  with  generally  accepted  accounting  principles
("GAAP") consistently applied throughout the periods involved. The balance sheet
and  financial  statements  of  the  Engineering  Division  have  been  prepared
consistent  with the  accounting  principles  used in  preparing  the  financial
statements  of Smith  for  contemporaneous  periods  and are  representative  of
stand-alone  financial  statements  except as follows:  corporate costs were not
allocated;  there  were no  footnote  disclosures;  intercompany  accounts  were
excluded;  common area  maintenance  was excluded;  cash was excluded;  shutdown
expenses for Norristown laboratory facility were excluded;  $542,000 of accounts
payable  was  excluded  in exchange  for the  addition of a $542,000  employment
agreement  liability;  legal expenses were excluded.  Purchaser and Sellers have
agreed to the value for fixed assets on the Interim ED Balance Sheet,  and there
shall be no post-Closing adjustment for fixed assets.

                  (c) Purchaser's in-house and independent  accountants shall be
afforded free and full access to the non-proprietary  working papers and records
used by Sellers' independent accountants and the working papers and records used
by Sellers'  in-house  accountants  in conducting  their audits and in preparing
their audited  financial  statements and unaudited Interim and Closing Financial
Statements. If there is a difference of opinion between the two accounting firms
as to the general  acceptability of any of the accounting principles followed in
connection  with  preparing or  reviewing  the  unaudited  Interim or Closing ED
Financial Statements,  the respective accountants shall immediately confer in an
effort  to  resolve  such  differences.  If the firms  are  unable to  resolve a
difference  involving Closing Financial  Statements delivered after Closing, the
difference  shall be  resolved  by  submitting  the  dispute  to a third firm of
accountants  who shall summarily  decide the issue following a conference  among
the three firms at which the parties' respective  accounting firms shall each be
afforded the  opportunity  to present its  position and the evidence  supporting
such position.

                  2.04 Tax and Other Liabilities


                                  - 21 of 49 -


<PAGE>




                  (a) Sellers have filed all payroll and other  federal,  state,
local and foreign  tax  returns  required to be filed by them and have duly paid
the  trust  portion  of  all  employee-related  taxes  and  have  duly  paid  or
established  adequate  reserves  for the  proper  payment of all taxes and other
governmental  charges  which may in any way result in a Lien on or claim against
the Purchased  Assets or on Purchaser's  other assets or a liability or claim of
liability against Purchaser for such taxes. Except for any specifically  Assumed
Liabilities for taxes,  Purchaser  shall incur no liability,  cost or expense in
connection  with  Sellers'  federal,  state,  local or  employee-related  taxes,
including any cost or expense arising from investigations,  audits,  proceedings
or actions taken by taxing authorities.

                  (b) Sellers have paid or will pay all Sellers' expenses, taxes
(except sales taxes), and other liabilities,  resulting from the preparation of,
or the  transactions  contemplated  by, this Agreement.  These costs will not be
assumed by  Purchaser  except to the extent they are  included on the Closing ED
Balance Sheet and expressly assumed as Assumed Balance Sheet Liabilities.

                  (c) Except for the  Assumed  Liabilities,  Sellers  retain and
Purchaser  will  incur no  liability  as a result  of  environmental  conditions
associated with any acts, omissions, or real property ownership,  leasing or use
by Sellers prior to the Effective Time.

                  2.05 Litigation and Claims

                  (a)  Except as set  forth on  Schedule  2.05:  (i) there is no
material  litigation,  arbitration,  claim,  governmental  or  other  proceeding
(formal or informal),  or investigation pending or, to the knowledge of Sellers,
threatened  (or any  basis  therefor  known  to  Sellers)  which,  if  adversely
determined,  could  reasonably be expected to have a material  adverse effect on
the  Engineering  Division  or the  Purchased  Assets;  (ii) within the last two
years,  the  Engineering  Division has not been subject to any union activity or
organized  labor  dispute;  (iii) Sellers are not in violation of, or in default
with  respect  to,  any law,  rule,  regulation,  order,  judgment,  or  decree,
including  any  environmental  laws or  regulations  which could  reasonably  be
expected to have a material adverse effect on the Engineering  Division taken as
a whole.  Schedule 2.05 shall set forth, among other matters, all past (previous
three  years) and current  material  citations,  violations,  fines,  judgments,
decrees,  orders, consent decrees or orders, and pending proceedings of any type
arising out of the alleged  violation of any federal,  state or local  criminal,
bidding or procurement, environmental, health and safety, licensing or labor law
or regulation or out of alleged deficiencies, negligence, intentionally wrongful
act or breach of contract in the performance of services known to Sellers.


                                  - 23 of 49 -


<PAGE>




                  (b)  Purchaser  will  incur  no  liability,  loss or cost as a
result of claims,  proceedings or litigation  arising from Sellers' alleged acts
or omissions.

                     2.06 Accounts Receivable and Properties

                  (a)  All  accounts  receivable  and  work  in  process  of the
Engineering  Division recorded on the Closing Balance Sheet are set forth on the
agings delivered in connection with the Closing Financial Statements,  will have
arisen from valid  transactions in the ordinary course of Sellers'  business and
will be collected by  Purchaser,  net of reserves  for  uncollectible  accounts,
within six (6) months of the Closing Date  utilizing  reasonable  and  customary
collection  procedures (i.e. measures such as legal action,  referral to outside
collection  agency or  mechanics  lien shall not be  required  of  Purchaser  to
conform to this  standard).  All accounts  receivable and work in process of the
Engineering  Division recorded on the Closing ED Balance Sheet were fully earned
as of the Effective  Time, net of the reserve for billings in excess (no account
receivable or work in process entry represents a prebilling except to the extent
an  allowance  is reserved  for it).  4.01 sets forth  certain  covenants of the
parties with respect to the collection of accounts receivable.

                  (b) Except as disclosed  on Schedule  2.06(b),  each  physical
asset whose  value is recorded on the Closing ED Balance  Sheet will be in fully
operational  condition as of the Effective Time (except for normal wear and tear
which is not such as to affect their operability).

                  (c)  Except  as noted on  Schedule  2.06(c),  no parcel of the
Purchased Real Estate nor any property  covered by any Assumed Premises Lease is
encumbered by any liability arising from the presence of Hazardous  Materials or
pollutants on such  property.  Purchaser  will incur no liability as a result of
environmental  conditions  associated  with any Purchased  Real Estate,  Assumed
Premises Lease, or real property  ownership,  leasing or use by Sellers prior to
the Effective Time.

                  2.07 Contracts and Other Instruments

                  (a) The Customer  Contracts  delivered at Closing  pursuant to
1.01(a)(5)  are  all of the  Customer  Contracts  of the  Engineering  Division.
Schedule  2.07(a) or the other  schedules to this Agreement set forth a true and
correct  listing of all material  contracts,  other than Customer  Contracts and
contracts  with  subcontractors,  to which any  Seller is a party for the use or
benefit of the Engineering Division,  including material leases and licenses and
all  supply,   distribution,   agency,   financing  or  other  arrangements  and
understandings. Any of the foregoing not


                                  - 23 of 49 -


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disclosed  on the other  schedules  to this  Agreement  are  listed on  Schedule
2.07(a).  For  purposes  of  this  2.07(a)  only,  "material  contract"  means a
contract,  including  Customer  Contracts,  which  provides for the provision or
purchase  of goods or  services  in excess  of  $20,000  per  annum or  requires
performance by Seller for a period of more than twelve  months.  With respect to
Customer  Contracts,   "material  arrangement  or  understanding"  includes  any
relationship  between  Seller and any  customer  or group of related  customers,
whether  formalized  by binding  written  contract  or not,  from which  Sellers
derived  more than  $50,000 in the twelve  months  preceding  the Closing  Date.
Neither  Sellers  nor, to Sellers'  knowledge,  any other party to any  material
contract,  agreement,  instrument,  lease,  or license is now or is  expected by
Sellers  as of  Closing  to be in the  future in  violation  or breach of, or in
default with respect to complying with, any material provision  thereof,  and to
Sellers' knowledge, each such material contract,  agreement,  instrument, lease,
or license is in full force and is the legal,  valid, and binding  obligation of
the parties  thereto and is enforceable as to them in accordance with its terms,
except as  disclosed  on Schedule  2.07(a).  Neither any Seller nor, to Sellers'
knowledge,   any  other  party  to  any  material   contract,   arrangement   or
understanding  has given notice of termination or taken any action  inconsistent
with the continuance of such material contract, arrangement or understanding.

                  (b) Except for  situations  disclosed on Schedule  2.07(b) and
for the cost of correction  of which an adequate  reserve is or will be recorded
on the  Closing ED Balance  Sheet as a  liability:  all  services  rendered  and
products  supplied by the Engineering  Division prior to the Effective Time have
been in  conformity  with the scope of  performance  defined by the  contract or
arrangement,  and to the reasonable satisfaction of the customer; no curative or
corrective  work,   replacements  or  payments  are  necessary  to  render  such
performance legally or contractually  sufficient;  and all costs for performance
completed  prior to Closing shall have been duly recorded as  liabilities on the
Closing ED Balance  Sheet.  Billings by Sellers on each Customer  Contract to be
acquired by Purchaser as a Purchased  Asset shall not, as of the Effective Time,
have  constituted a greater  percentage of total  allowable  billings under such
contract than the percentage of work performed prior to the Effective Time shall
have constituted of total work to be performed under such contract.

                  (c) Sellers enjoy peaceful and  undisturbed  possession  under
all Assumed Premises Leases and licenses under which the Engineering Division is
operating.  No  Seller  is a  party  to or  bound  by any  contract,  agreement,
instrument,  lease, license,  arrangement,  or understanding,  or subject to any
charter  or  other  restriction,  which,  to the  knowledge  of  Sellers,  could
reasonably  be expected to have a material and adverse  affect on the  Purchased
Assets or the operations or business of the Engineering  Division.  Sellers have
no contract, agreement, lease, license, arrangement, or


                                  - 24 of 49 -


<PAGE>




understanding  related  to, or which  could  reasonably  be  expected  to have a
material adverse effect upon, the Purchased Assets or Purchaser's  title thereto
or the  operations  of the  Engineering  Division  with,  any  shareholder,  any
director,  officer,  or  employee  of any Seller,  or any other  corporation  or
enterprise in which any Seller, or any shareholder,  any director,  officer,  or
employee of any Seller,  has a five percent (5%) or greater  equity or voting or
other  substantial  interest,  other than such  contracts  and  agreements as so
listed and specified on Schedule 2.07(c).  There exists no contract,  agreement,
right or  understanding  material to the  business of the  Engineering  Division
which is in the name of any  principal,  officer,  director,  shareholder or any
other person or entity other than a Seller except as disclosed and so identified
on Schedule 2.07(c).

                  (d) The backlog schedule  provided as Schedule  1.01(a)(12) is
correct to  Sellers'  knowledge  as of the  Effective  Time,  and,  to  Sellers'
knowledge,  the backlog  items  listed on such  schedule  all  represent  actual
commitments  by customers  for the  performance  of services by the  Engineering
Division  which are either actual  contractual  commitments or actual written or
verbal  communications of commitment  received by a Seller from the customers to
hire a Seller for the  performance of such services in such amounts as are shown
on the schedule.

                     2.08 Employees and Employee Liabilities

                  Except for the  Assumed  Liabilities  and as  provided in 4.04
hereof, Purchaser will not incur any liability to any governmental authority, to
any third person (including employee benefit plans of Sellers or to or on behalf
of Sellers' employees,  any of which arise out of the employees' employment with
Sellers,  out of the employees'  participation  in any employee benefit plans of
Sellers or out of Sellers' acts or omissions (as distinguished  from Purchaser's
acts or omissions, including without limitation its decision to hire or not hire
any  particular  employee  of  Sellers),  including  (but  not  limited  to) any
liability:  under ERISA or the Internal  Revenue Code;  for  obligations  to, or
arrangements with employees for wages, salary, bonuses,  incentive compensation,
vacation pay, severance pay, insurance,  or other benefits; for employee-related
taxes;  for  personal  injury  or  property  damage;   or  for   discrimination,
harassment, or wrongful discharge under federal, state or local laws.

                  2.09 Patents, Trademarks, Copyrights, etc.

                  Sellers  neither own,  nor have pending or are licensed  under
any patent, patent application,  trademark,  trademark application,  trade name,
service mark, copyright,  franchise,  or other intangible property or asset used
by or sold or licensed to others by the Engineering Division and material to the
Engineering  Division's operations  ("Intangibles"),  other than as described in
the


                                  - 25 of 49 -


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Schedules to 1.01(a) or on Schedule  2.09, all of which are in good standing and
uncontested. Except as disclosed on such schedules, no person other than Sellers
owns any interest in any such Intangible.

                  2.10 Questionable Payments and Activities

                  Except  to  the  extent  assumed  as  an  Assumed   Liability,
Purchaser  will not be subject to any action,  proceeding  or  liability  or any
debarment or other  limitation on bidding or contracting  and will not incur any
costs in connection with ethics or contractor integrity  rehabilitation programs
as a result of any  investigation  or proceeding by a governmental  agency based
upon any bribe, ethics violation,  or improper conduct by Sellers or persons for
whose acts or omissions Sellers are responsible.

                  2.11 Authority to Sell

                  Sellers have all  requisite  corporate  power and authority to
execute,   deliver,   and  perform  this  Agreement.   All  necessary  corporate
proceedings of Sellers,  including all shareholder notice and approvals required
by law or the  certificates or articles of  incorporation or by-laws of Sellers,
have been or as of the Closing Date will have been duly taken to  authorize  the
execution,  delivery,  and  performance  of  this  Agreement  by  Sellers.  This
Agreement  has  been  duly  authorized,  executed,  and  delivered  by  Sellers,
constitutes  the  legal,  valid,  and  binding  obligation  of  Sellers,  and is
enforceable as to them in accordance  with its terms,  except as  enforceability
may be limited by applicable equitable principles or by bankruptcy,  insolvency,
reorganization,  moratorium,  or  similar  laws  affecting  the  enforcement  of
creditor's  rights  generally.  No  consent,  authorization,   approval,  order,
license,  certificate,  or permit of or from, or declaration or filing with, any
governmental  authority,  court or other  tribunal  or entity or  individual  is
required  by  Sellers  for  the  execution,  delivery,  or  performance  of this
Agreement by them. The execution,  delivery,  and  performance of this Agreement
will not materially violate or result in a breach of any term of the certificate
of  incorporation,  by-laws or other charter  document of any Seller or violate,
result in a breach  of,  or  conflict  with any law,  rule,  regulation,  order,
judgment,  or decree binding on any Seller or to which any of their  operations,
business, properties, or assets are subject.

                  2.12 Fictitious Names

                  Schedule  2.12 sets forth each  fictitious  name  utilized  by
Sellers within the past two years.

                     2.13 Absence of Undisclosed Liabilities


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                  Except as set forth in the schedules to this  Agreement or the
Closing ED Balance  Sheet,  Sellers have no  obligations  or  liabilities of any
kind,  fixed,  accrued or contingent which would materially  affect the value of
the  Purchased  Assets  or  Purchaser's  title to the  Purchased  Assets  or the
business associated therewith.

                  2.14 Assets Free and Clear of Liens

                  Except as set forth on Schedule 2.14,  Sellers have,  prior to
Closing, good title to all of the Purchased Assets, free and clear of all liens,
mortgages,  security interests,  pledges, charges,  encumbrances,  shareholders'
agreements,   or  claims  (collectively,   "Liens").   Except  for  the  Assumed
Liabilities  or as set forth on Schedule  2.14, at Closing the Purchased  Assets
will be free and  clear  of all  Liens,  and  Sellers  will  have  procured  and
delivered at or prior to the Closing proof of release and  satisfaction  of each
and every Lien which is not assumed as an Assumed  Liability or, but only to the
extent  that  Purchaser  consents  in writing  thereto  at or prior to  Closing,
Sellers will have procured the written  agreement of the holder of any such Lien
to so release its Lien(s) as soon as the  preparation  and filing of the release
can be  completed,  not to exceed  ten (10) days  after  the  Closing.  Upon the
Closing,  Purchaser will have good title to the Purchased Assets, free and clear
of all Liens except those expressly assumed as Assumed Liabilities.

                  2.15 Hazardous Materials - Lab and Field Samples

                  Prior to the Effective Time, Sellers have disposed of or moved
to locations which are not Assumed Premises Leases or Purchased Real Estate: (i)
all hazardous substances, pollutants or contaminants (as those terms are defined
in 42 U.S.C. 9601 or under any similar, applicable state or local law); (ii) all
petroleum  wastes;  (iii) all  asbestos-containing  materials,  except for those
incorporated in building materials in premises; (iv) all obsolete,  discarded or
off-specification laboratory or other commercially packaged chemicals or nuclear
source  materials  (but not  unconsumed  laboratory  chemicals,  nuclear  source
materials  which are  components  of  equipment or other  commercially  packaged
supplies  conveyed as Purchased  Assets and  currently  used in the  Engineering
Division's  business);  and (v) all  laboratory or field samples upon which work
has been completed prior to Closing (collectively  "Hazardous  Materials").  The
foregoing warranty applies to all Hazardous  Materials which, if not so disposed
of or moved  (vi)  would be located  in or on the  Purchased  Real  Estate or in
premises to be assumed by Purchaser  under the Assumed  Premises Leases or (vii)
would be in the possession of the Engineering  Division; or for which (viii) the
Engineering  Division  could  be held  responsible  for  the  care,  custody  or
disposal.


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                III. REPRESENTATIONS AND WARRANTIES OF PURCHASER

                  As a  material  inducement  to  Sellers  to  enter  into  this
Agreement, Purchaser represents and warrants as follows:

                  3.01 Organization and Good Standing

                  Purchaser is a corporation  duly organized,  validly  existing
and in good standing under the laws of the State of Delaware, and duly qualified
to  engage  in  business  in the  state of  Pennsylvania,  with  full  power and
authority to enter into and perform  each of the  transactions  contemplated  by
this Agreement.

                  3.02 Execution and Performance Authorized

                  This   Agreement  and  all  other   documents  and  agreements
contemplated  hereunder  have been duly executed and delivered by the Purchaser,
such  execution  and  delivery  and  the   consummation   by  Purchaser  of  the
transactions  contemplated  hereunder have been duly authorized by all necessary
corporate  action,  and no further  action is  required  by law,  its  corporate
charter,  by-laws or otherwise to authorize  all action to be taken by Purchaser
with  respect  to  this  Agreement  and  the  consummation  of the  transactions
contemplated  hereunder.  The  Agreement  and the other  documents  contemplated
hereunder are binding and are enforceable  against  Purchaser in accordance with
their terms,  except as  enforceability  may be limited by applicable  equitable
principles or by bankruptcy, insolvency, reorganization,  moratorium, or similar
laws affecting the enforcement of creditors' rights generally.

                  3.03 Absence of Litigation

                  Except  as set forth on  Schedule  3.03,  there is no  action,
lawsuit, proceeding or investigation of any kind or nature pending or threatened
against Purchaser before any court,  tribunal or administrative  agency or board
which might,  individually  or in the  aggregate,  materially  and adversely (i)
affect Purchaser's solvency or its ability to perform hereunder,  or (ii) render
any one or more of the transactions contemplated hereunder void or voidable.

                  3.04 No Other Default

                  The execution and delivery of this  Agreement by Purchaser and
the  consummation of the transactions  contemplated  hereunder will not conflict
with or violate or require any  consent  under and will not result in any breach
or  termination  of Purchaser's  corporate  articles,  by-laws or minutes or any
agreement  to which  Purchaser  is a party or by which  any of its  property  is
subject or by which it is bound, except for the agreements set forth on Schedule
3.04 for which  Purchaser  has obtained such waivers or consents as are required
by such agreements.


                                  - 28 of 49 -


<PAGE>




                  3.05 Permits and Filings

                  There is no  requirement  applicable  to Purchaser to make any
filing with, or to obtain any permit, authorization,  consent or approval of any
third party or any governmental or other regulatory  authority as a condition of
the lawful consummation of the transactions contemplated under this Agreement.

                  3.06         Absence of Lien

                  Except  for  the  conditions   specified   elsewhere  in  this
Agreement,  the  monies  to be paid by  Purchaser  under  1.01  shall be paid by
Purchaser  and  received  by  Sellers  free and  clear of any  lien,  charge  or
encumbrance  arising out of any agreement or  instrument  to which  Purchaser is
subject or by which their properties are bound.

                  3.07 Solvency

                  At the  Closing  and after  payment of the  purchase  price as
required  under  1.01,  Purchaser  will be and will  remain  solvent  under  all
applicable federal and state laws and regulations. Purchaser also agrees that it
will not  intentionally  cause its  business  to be  conducted  in a manner that
results in its becoming insolvent;  provided,  however, that consistent with the
foregoing,  this covenant  shall not restrict the future  business  decisions of
Purchaser  which  relate  to the  Purchased  Assets or the  business  associated
therewith.

                  3.08 Corporate Documents

                  Purchaser  has  furnished  to  Sellers  its   certificate   of
incorporation and a certificate of good standing in Delaware and a good standing
certificate  evidencing  Purchaser's  qualification as a foreign  corporation in
good  standing  in  Pennsylvania,  each  dated  within  thirty  (30) days of the
Closing.

                  3.09 Disclosure of Discovered Facts

                  Prior to Closing,  Purchaser  shall have  disclosed to Sellers
the  existence  of any facts  discovered  by  Purchaser in the course of its due
diligence  which would  render any of  Sellers'  representations  or  warranties
materially untrue as of Closing.


                                  IV. COVENANTS

                  In addition to the other covenants of this Agreement,  Sellers
and Purchaser agree as follows:


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<PAGE>




                  4.01 Collection of Accounts Receivable

                  (a) In the  event  that  any  account  receivable  or  work in
process which is a Purchased Asset and subject to 2.06(a) has not been collected
by Purchaser within six (6) months,  Purchaser may deem such account  receivable
or work in process to be uncollectible  and transfer such account  receivable or
work in process to Sellers by written notice within seven (7) days after the end
of such six (6) month  period.  Accounts  or work in process  may also be deemed
uncollectible  by  agreement  of the  parties as  provided  in 4.01(c) and shall
thereupon be transferred to Sellers.  Purchaser may recover from the Sellers the
amount of any such uncollected  accounts and work in process, net of the reserve
for such purpose on the Closing ED Balance  Sheet,  by set-off  against the Note
under 1.04.

                  (b)  Purchaser  shall  provide  Sellers  with a monthly  aging
report of the purchased  accounts  receivable and work in process  together with
contact log summary of problem  accounts.  If at any time  Purchaser  determines
that measures in addition to Purchaser's  customary collection  procedures (e.g.
measures such as mechanics lien, legal action or referral to collection  agency)
should be employed on a specific account to obtain  collection,  Purchaser shall
notify Sellers in writing of the measures proposed to be taken. If Sellers agree
in  writing  that the  proposed  extraordinary  measures  should  be taken or if
Sellers  themselves  deem  such  action  to be  necessary  without  notice  from
Purchaser,  Sellers shall notify Purchaser in writing of their agreement to such
measures.  Sellers' agreement to the taking of extraordinary collection measures
shall  constitute their agreement to having the reasonable cost of such measures
actually incurred,  first charged against the reserve for uncollectible accounts
and the excess, if any, set off under 1.04.

                  (c) At any time the  parties may by mutual  written  agreement
deem an account  uncollectible,  Purchaser  shall  re-assign  it to Sellers  and
charge it off of available  reserves and set off the excess,  if any.  Purchaser
shall  not  unreasonably  deny  such  request.   Such  request  by  Sellers  for
reassignment  shall constitute  Sellers' agreement to a reduction in the reserve
for  uncollectible  accounts by such amount or, to the extent that the remaining
reserve balance is thereby exceeded,  to a set-off in such excess amount,  which
Purchaser shall exercise at the time of its payment on the Note.

                  (d) Purchaser  agrees to use its best efforts to bill all work
in process which is a Purchased  Asset as soon as is possible under the contract
giving rise to the work in process and within the administrative capabilities of
Purchaser  in the  transition  after  Closing.  Within  30 days  after  Closing,
Purchaser  shall  deliver an opening  ledger of work in process  billings  which
documents  amount billed on each account,  amounts charged off as unbillable and
amounts for which  billing is not yet  possible  or has not yet been  completed.
Within 10 days after its receipt of such ledger,  Sellers shall object to any of
Purchaser's determinations that all


                                  - 30 of 49 -


<PAGE>




or a portion of any work in process account is not billable or is not yet able
to be billed.

                  (e) The  parties  agree to confer in good faith to resolve any
disputes  concerning the covenants set forth in 4.01, and if a dispute cannot be
so resolved,  to follow the  procedure  set forth in 2.03(c) for  resolution  of
disputes involving accounting issues to determine the matter.

                  4.02 Public Statements

                  Before  Sellers or  Purchaser  shall  release any  information
concerning  this Agreement or the  transactions  contemplated  by this Agreement
which is intended for or may result in public dissemination  thereof, they shall
cooperate  with the other party hereto and shall furnish drafts of all documents
or  proposed  oral  statements  for  comments,  and shall not  release  any such
information  without the  written  consent of the other  party  hereto.  Nothing
contained  herein shall prevent  Purchaser or Sellers from making any release or
furnishing any  information if required to do so by law or regulation,  but even
in such  case,  the other  party  shall be given  notice of the  release  and an
opportunity to comment on the contents.

                  4.03 Non-Competition

                  (a) In  consideration  of the  payments  to be  made  and  the
Purchaser's  other covenants  hereunder,  Sellers agree to strictly abide by the
following  covenants.  Sellers  agree  that for a period of two (2) years  after
Closing, they will not:

                  (1)   Non-Competition.   Within  the  regulated  zone,  either
         directly or indirectly, perform for hire services in the same fields in
         which the Engineering  Division has been engaged or own, or participate
         in,  be  employed  by,  or serve  as a  consultant  or  other  agent or
         contractor to or for any business or enterprise,  other than Purchaser,
         engaged in such fields of services  in which the  Engineering  Division
         has been engaged, without the express written consent of Purchaser. The
         "regulated  zone" means all area  within one hundred  miles of the city
         limits of an  Engineering  Division  office as listed in 1.01(a) during
         the year  prior to  Closing.  The  "fields  in  which  the  Engineering
         Division has been engaged"  means the service types and functions  with
         respect thereto  performed by the  Engineering  Division within the two
         (2) year period prior to Closing,  including  (but are not  necessarily
         limited to) the  functions  set forth in 1.01(a).  Notwithstanding  the
         foregoing, Sellers shall not be precluded from performing the following
         services in the regulated  zone:  (i) turn-key  remediation  design and
         construction  contracts;  or (ii)  after  giving at least five (5) days
         prior written  notice to Purchaser,  sole source  contracts for clients
         which were, prior


                                  - 31 of 49 -


<PAGE>




         to  Closing,   clients  of  the  Sellers'  operations  other  than  the
         Engineering  Division  and were not  actively  solicited by Sellers for
         such contract in violation of (4) (i.e. the client was the initiator of
         the  request  for  Sellers to perform  such  services  on a sole source
         basis).  Furthermore,  in the  event  of an  acquisition  by any of the
         Sellers  of, the  acquisition  of any of the Sellers by, or a merger of
         any of the Sellers with another entity providing services in the fields
         in  which  the   Engineering   Division  has  been   actively   engaged
         (individually or collectively "M&A Transaction"),  nothing herein shall
         prevent  the Sellers or such entity  from  continuing  to provide  such
         services in the  regulated  zone,  provided that to the extent that the
         acquired or  acquiring  entity does not  maintain an office  within the
         regulated zone as of the closing of such M&A  Transaction,  neither the
         Sellers  nor any such  entity  shall  establish  an office  within  the
         regulated zone within the two (2) year period following Closing.

                  (2)  Non-Disclosure.  Use  for  their  benefit,  or  disclose,
         communicate  or divulge to, or use for the direct or  indirect  benefit
         of, any person,  firm,  association  or company other than Purchaser or
         its  affiliates,   any  information  regarding  the  business  methods,
         business  policies,  procedures,  techniques,  research or  development
         projects or results,  trade secrets,  customers or clients or any other
         confidential  information  relating  to or  dealing  with the  business
         operations of the  Engineering  Division.  The covenants in this clause
         (2) shall not apply to (i)  information  that is generally known in the
         industry, (ii) information that is in the public domain not as a result
         of the  violation of the  Sellers'  undertakings  herein,  or (iii) any
         disclosure or use required by law or court order.

                  (3)   Non-Solicitation   -  Employees.   Either   directly  or
         indirectly,   for  themselves  or  any  person  or  entity  other  than
         Purchaser,  hire,  or induce or attempt to influence  to terminate  his
         employment, any employee or former employee of the Engineering Division
         to which Purchaser extended an offer of employment  conforming to 4.04.
         An "employee"  shall be considered a "former  employee" for a period of
         one (1) year following  termination of employment  with the Engineering
         Division, Purchaser or Purchaser's subsidiaries or affiliates.

                  (4)  Non-Solicitation  - Customers.  Directly or indirectly on
         behalf of themselves  or any third party,  make any sales contact with,
         or  solicit  or accept  business  from,  any  customer  or  prospective
         customer  of the  Engineering  Division  for the  purpose of securing a
         commitment  from such customer or prospect to purchase  services in the
         fields in which the Engineering Division has been engaged,  unless such
         customers were also customers of any entity involved in M&A Transaction
         with Sellers.


                                  - 32 of 49 -


<PAGE>




                  (5) Use of Names.  Except for the benefit of  Purchaser or its
         subsidiaries or affiliates,  use the names included as Purchased Assets
         by 1.01(a)(7).

                  (b)  Except as  otherwise  defined  in this  section or as the
context otherwise  plainly  requires,  terms used in this section shall have the
same meaning as elsewhere in this  Agreement.  Undefined  terms shall have their
ordinary meaning.

                  (1) The term  "participate  in" means "directly or indirectly,
         for their own  benefit or for,  with,  or through  any other  person or
         entity, own, manage, operate, control, loan money to, give money to, or
         participate in the ownership (except as a non-controlling owner of less
         than  5% of the  stock  of a  publicly-held  corporation),  management,
         operation,  or control  of, or be  connected  as a  director,  officer,
         employee,  partner,  consultant,   agent,  independent  contractor,  or
         otherwise with, or acquiesce in the use of their names in."

                  (2) The term "customer" means any entity with whom Sellers had
         entered into a contract or engagement,  either written or oral, for the
         performance  of a  service  by the  Engineering  Division  or from whom
         Sellers recorded revenue for Engineering Division services,  within the
         two (2) year period prior to Closing.

                  (3) The term  "customer  prospect"  means any person or entity
         who  had a  potential  need  for  services  of a type  provided  by the
         Engineering  Division (i) to whom Sellers  submitted a written proposal
         for either  specific  services  by the  Engineering  Division  or for a
         master or general services  arrangement  with the Engineering  Division
         within  the two (2)  years  prior  to  Closing  or (ii)  with  whom the
         Engineering  Division,  within  the two (2)  years  prior  to  Closing,
         developed or maintained a business  relationship  or about whom Sellers
         acquired  knowledge  of its  desire to  purchase  Engineering  Division
         services.

                  (4) The term  "indirectly"  includes,  but is not  limited to,
         means such as acting  through or on behalf  of,  assisting,  arranging,
         encouraging,  making a loan or gift to,  owning or having an  ownership
         interest  in  (except  for  passive   investments  in  publicly  traded
         securities  of less than five percent of the  outstanding  voting stock
         of) or entering into a partnership or similar arrangement with.

                  (5) The term "turn-key"  means a contract where the contractor
         is  required  by the  terms of the  contract  to  undertake  all of the
         services  of  design  and  construction  of a  remediation  system as a
         condition of entering into the contract.


                                  - 33 of 49 -


<PAGE>




                  (6) The term "sole source"  means a contract  which is awarded
         to  Sellers  on the  basis  of a  relationship  which  pre-existed  the
         decision  to award such  contract  to Sellers  and which was offered to
         Sellers alone because of such relationship on a non-competitive basis.

                  (c) Sellers agree that the restrictive  covenants of this 4.03
are  reasonable in scope and duration and are necessary to protect the bona fide
confidential  business  information  purchased by Purchaser  from Sellers and to
protect the value for Purchaser of the Purchased  Assets,  the  associated  good
will, and Purchaser's  employee,  customer and business  relationships.  Sellers
agree that the  Engineering  Division has either had offices or has actively and
substantially  performed  services  throughout the entire United States and that
the  regulated  zone  limiting  the  applicability  of (a) hereof is therefore a
necessary  and  reasonable  coverage  area.  Sellers  expressly  agree  that the
customer list and other customer and business information purchased by Purchaser
as  Purchased  Assets  are  proprietary,  and they agree that a breach of any of
these  provisions  will cause  immediate  and  irreparable  harm for which money
damages  alone  will not be an  adequate  remedy and that  Purchaser  shall have
available to it, in addition to any other remedies  available by law,  equitable
remedies, including the remedies of specific performance, preliminary injunction
and injunction,  to compel performance of and to enjoin the breach or threatened
breach of the  provisions  of this  section,  without the  necessity of proof of
immediate and irreparable harm and of providing any injunction bond.

                  (d) If any restrictive  covenant  contained in this 4.03 shall
be deemed by a court or  arbitrator  to be invalid,  illegal,  or  unenforceable
under  the laws of any  jurisdiction  by  reason  of the  extent,  duration,  or
geographical  scope  thereof or  otherwise,  the balance of this  section  shall
remain in effect in such  jurisdiction  and the entire agreement shall remain in
effect in all  jurisdictions  in which such provision is lawful and enforceable.
If any  such  provision  is  unenforceable  as to  any  circumstance,  it  shall
nevertheless remain applicable to all other circumstances. Sellers and Purchaser
agree that the court or arbitrator  shall be authorized to reform such provision
by reducing  such  extent,  duration,  geographical  scope,  or other  provision
hereof, or otherwise  modifying or limiting such provision to the minimum extent
necessary to render such  provision  enforceable,  and in its reformed form such
restriction shall be enforceable in the manner contemplated hereby.

                  4.04 Hiring of Engineering Division Employees

                  (a)  Effective as of the Closing,  the  Purchaser  shall offer
employment,  on an "at will" basis,  at their then current rates of base pay and
employment  status to all  employees  who are  employed  by the  Sellers  in the
Engineering Division listed on Schedule 4.04


                                  - 34 of 49 -


<PAGE>




("Offerees").  Such Offerees who accept  employment  with the Purchaser shall be
referred to herein as the "Hired  Employees."  Purchaser shall provide the Hired
Employees  the same benefits and benefit  options,  including  health  insurance
coverage, provided to the other employees of Purchaser.  Purchaser's health plan
shall not impose any  limitation or exclusion  with respect to any  pre-existing
condition  that  affects  coverage for the Hired  Employees or their  spouses or
dependents, and Purchaser shall make such coverage available to all of the Hired
Employees,  spouses and  dependents  who were eligible as of the Closing Date to
receive such coverage under Sellers' plan. In addition,  Purchaser shall provide
to  the  Hired  Employees  the  same  benefits  provided  to  Purchaser's  other
employees.  Subject to the preceding two sentences,  Purchaser may modify, alter
or  terminate  any of the  terms  and  conditions  of  employment  of the  Hired
Employees.   Nothing  in  this  Agreement   shall  prevent  the  Purchaser  from
terminating  the  employment of any Hired Employee at any time after the Closing
Date.  Purchaser  represents  to Seller  that it does not intend to  implement a
"plant  closing"  or a "mass  layoff",  as those terms are defined in the Worker
Adjustment  and  Retraining   Notification  Act  ("WARN"),  in  respect  of  the
Engineering  Division within 150 days after the Closing Date.  Purchaser further
agrees to assume  responsibility for giving any and all notices required by WARN
and to assume liability for any alleged failure to give a WARN Notice.

                  (b) The  Sellers  agree  to cause  the  release  of the  Hired
Employees from any contractual provision with the Sellers which would impair the
utility of such employees' services to Purchaser or which would impose upon such
employees any monetary or other  obligation to the Sellers which otherwise would
be occasioned by the termination of such  employees'  employment or relationship
including,   without   limitation,   any   agreements   of   noncompetition   or
confidentiality.

                  (c) At the Closing,  Purchaser shall assume all liabilities of
Sellers to the extent included in the Assumed Balance Sheet Liabilities relating
to the payment of all accrued but unpaid  overtime,  vacation  and holiday  pay,
sick pay and  short-term  disability pay of the Hired  Employees,  regardless of
whether  such  individuals  are actively at work on the Closing Date or are on a
leave of absence.  For  purposes of this  Agreement  the term "leave of absence"
shall include  medical leave of absence,  military leave of absence and workers'
compensation leave of absence. Effective as of the Closing Date, Purchaser shall
assume liability for all post-Closing  claims  (including,  without  limitation,
claims  arising  under the health care  continuation  coverage  requirements  of
Section  4980B of the Code and  Sections  601  through  608 of ERISA)  which are
properly  payable with respect to the Hired  Employees under each of Purchaser's
benefit  plans,  including  without  limitation,  all life  insurance,  medical,
dental, accident and disability plans, programs, policies or arrangements.


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                  (d)  Purchaser  shall offer all Hired  Employees the option to
participate  from  and  after  the  Closing  Date  in  Purchaser's  401(k)  plan
("Purchaser's Plan") on the same terms as Purchaser's other employees. Purchaser
shall  permit  all  Hired   Employees  who  were   participants   in  the  Smith
Environmental Technologies Corporation Profit-sharing and 401(k) Plan ("Sellers'
Plan") as of the day  immediately  preceding the Closing Date to roll over their
shares in Sellers'  Plan into  Purchaser's  Plan.  Purchaser's  Plan shall,  for
purposes of vesting and  eligibility,  recognize all service of Hired  Employees
that  was  recognized  under  Sellers'  401(k)  Plan as of the  day  immediately
preceding the Closing Date.

                  (e) Following  the Closing  Date,  the Sellers shall take such
action as may be necessary to cause the account  balances of all Hired Employees
in the BCM Engineers Inc. Employee Stock Ownership and Profit Sharing Plan to be
distributed pursuant to the terms of such plan, and Purchaser shall permit Hired
Employees to roll over such  distributions  into  Purchaser's Plan to the extent
such rollover is allowable under Purchaser's Plan.

                  4.05 Transaction Costs and Expenses

                  Except as  otherwise  expressly  agreed  herein,  Sellers  and
Purchaser shall each bear and pay all of their respective costs, fees,  expenses
and taxes incurred in connection with bringing about this transaction including,
without  limitation,  all legal,  accounting,  auditing  and  appraisal  fees in
negotiating  and  preparing  the  documents  and in  consummating,  closing  and
carrying out the transactions  contemplated  hereby.  Any costs to be charged to
the Engineering Division shall be included on the Closing ED Balance Sheet.

                  4.06 Information, Books and Records

                  (a) Each party  shall  provide to the other,  with  reasonable
promptness  following  a request  in writing  (not to exceed  ten (10)  business
days),  such  information  and data with  respect  to the  Engineering  Division
business before the Effective Time and/or the Purchased  Assets as may from time
to time be  requested  by the other  party.  In the event  either  Purchaser  or
Sellers are required or desire to prepare audited  statements for any reasonable
purpose  including  the desire to verify any  information  provided to the other
party  relative to this  Agreement or in  connection  with future  financings or
transactions desired by either party, the parties agree to allow the other party
reasonable  access to  documents  and  records,  including  the  non-proprietary
working  papers of the other  party's  accountants,  subject  to  standard  hold
harmless  agreements which may be required by such  accountants,  and to provide
reasonable cooperative assistance in the preparation of reports, documents, etc.
(including  the  signing  of  management  representation  letters  and the like)
without charge except for reimbursement of any actual,  out-of-pocket  expenses,
exclusive of the cost of in-


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house staff time. Notwithstanding the foregoing, in the event that a party is or
anticipates  becoming  a party to  litigation,  neither  this 4.06 nor any other
provision of this Agreement  shall be construed to require such party to provide
information  to the other which could prevent such party from making a bona fide
claim of attorney/client privilege or such other privileges as may be applicable
with respect to such information.

                  (b) Neither  party shall  intentionally  dispose of or destroy
any of the Records in its  possession  except in conformity  with the procedures
set forth in this  section.  If a party  wishes to dispose of or destroy  any of
such Records,  it shall first give thirty (30) days prior written  notice to the
other party of the action it intends to take, and the other party shall have the
right,  at its option and expense,  upon prior  written  notice to the notifying
party within such 30-day  period,  to take  possession of such affected  Records
within 30 days after the date of the notice of intent to take possession.

                  (c) Each party  shall  exercise  reasonable  care in the care,
custody and maintenance of the Records and records of Sellers  pertaining to the
Engineering Division or the Purchased Assets in its possession. A party shall be
responsible  for actual damage caused to the other party only as a result of its
intentionally wrongful act in maintaining the records.  Neither party shall have
liability  to the  other  party or any  other  person  as a  consequence  of the
nonexistence of any record or such party's inability to locate any record unless
the loss or  destruction  of the  record  is  proven,  by clear  and  convincing
affirmative  evidence,  to have  been due to the  allegedly  possessing  party's
intentionally wrongful act.

                  4.07 Addresses, Mail and Deliveries

                  Purchaser  shall  have  the  right  to  receive  and  open for
inspection any mail or deliveries received at any of its offices,  including any
office that is an Assumed  Premises  Lease,  which is  addressed  to any name in
which the  Engineering  Division did business  prior to Closing or to any person
who was an employee  or former  employee  of the  Engineering  Division or which
otherwise   reasonably  appears  to  potentially  contain  Purchased  Assets  or
correspondence  or documents which would customarily be received by the owner of
the  Purchased  Assets  unless it is clear from the  envelope  that the contents
relate to the  business of Sellers  other than the  Engineering  Division or are
personal in nature.  Purchaser  and Sellers  agree to cooperate in good faith to
achieve the prompt delivery to each other of mail and  deliveries,  to use their
best efforts to avoid opening mail or deliveries which rightfully  belong to the
other and to turn over to the other  any  property,  including  checks or money,
belonging  to the other  within  three (3) days after  determining  its rightful
ownership.  Purchaser  shall  have the  exclusive  right to apply for  change of
address, change of telephone numbers or location of telephone numbers applicable
to


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the purchased names or Purchased Assets.  Sellers agree to execute and return to
Purchaser within three (3) days after receipt thereof such assignment or consent
forms as Purchaser requests to effect such changes of address,  telephone number
location or telephone numbers.

                  4.08 Related Agreements

                  Sellers  and  Purchaser  each agree to execute  and deliver at
Closing the Related Agreements to which they are a party referenced in 5.01.

                  4.09 Assignment of Agreements - Benefits of Ownership to be
                       Provided Where Assignment or Novation Not Possible

                  (a) Sellers  shall use their best efforts to attempt to secure
(and to assist  Purchaser in securing)  all consents and  approvals  required to
effect the  assignment  of the Customer  Contracts  and other  agreements  to be
transferred  to  Purchaser  hereunder.  Use of best  efforts  shall not  require
Sellers to pay funds to third  parties  for their  agreement  to provide  such a
consent.  Sellers agree that, upon the written  request of Purchaser,  they will
execute and return to Purchaser each and every assignment, consent to assignment
or novation,  or other document  reasonably  necessary to effect the transfer or
execution of any  Customer  Contract or other  contract,  asset or benefit to be
conveyed  hereunder within two (2) business days after receipt of such document.
Sellers'  covenant in this regard shall be absolute and not subject to any right
of non-performance  for any reason,  including breach by Purchaser,  and Sellers
expressly  acknowledge  and  agree:  (i)  that  this  covenant  is  of  critical
importance to Purchaser; (ii) that its breach will cause Purchaser immediate and
irreparable   harm  for  which  money   damages   alone  will  be  difficult  of
ascertainment  and  inadequate;  and (iii) that in the event of a breach hereof,
Purchaser  shall be entitled  to  immediate  equitable  relief in the form of an
emergency,  preliminary  injunction  or decree on a summary  basis for  specific
performance or mandatory  injunction  without any requirement for the posting of
any bond or undertaking or proof of immediate and irreparable harm.

                  (b) Sellers  agree that,  as of the  Closing  Date,  they will
appoint and authorize one or more persons to execute after Closing  assignments,
novations,  consents to assignment and other  documents  necessary to effect the
transfer of contracts, the Purchased Assets or the benefits thereof to Purchaser
in cases where such  documents,  in addition to those  executed and delivered at
Closing, are required by a customer, a title registration officer or other third
party as a condition  of  permitting  the  transfer or  conferring  the benefit.
Sellers shall provide such persons the corporate seals of Sellers to be used for
the purpose of  executing  transfer  documents.  Sellers  will  promptly  notify
Purchaser in writing of any changes


                                  - 38 of 49 -


<PAGE>




from time to time in the identity of the persons so  authorized.  If the persons
appointed  under this  section are  employees  of  Purchaser  or its  affiliate,
Purchaser  shall  indemnify  Seller  pursuant  to 1.03 for any damage  caused to
Sellers as a result of such appointed persons' acts or omissions.

                  (c) With  respect to any  Customer  Contract,  Subcontract  or
Assumed  Liability which Sellers and Purchaser are not able to promptly obtain a
consent to assign or novate,  which are  otherwise  not capable of assignment or
novation or which Purchaser is precluded from performing on a stand-alone  basis
because of a transitional  licensing  issue,  Purchaser  shall  nevertheless  be
deemed to be entitled to all  beneficial  interest  in such  Customer  Contract,
Subcontract,  or Assumed  Liability as against  Sellers,  and Sellers  shall use
their best  efforts  to:  (i)  subcontract  such  Customer  Contract  or Assumed
Liability to Purchaser on the same terms and conditions as the original  (except
that Sellers shall retain all  pre-closing  liability as provided in 1.02 except
as assumed as an Assumed Liability); and/or (ii) cooperate in any reasonable and
lawful arrangement to provide to the Purchaser all the benefits of such Customer
Contract or Assumed  Liability,  such as (but not limited to) re-hiring  such of
Purchaser's  employees  on a  part-time,  temporary  basis as are  necessary  to
perform such contractual  obligations on Purchaser's behalf,  provided Purchaser
pays all Sellers'  direct costs and expenses  associated with such re-hiring and
work and assumes and indemnifies  Sellers against all direct costs and liability
associated with such re-hiring and performance of services. Similarly, Purchaser
shall  cooperate with Sellers to ensure that Sellers  receive the benefit of the
assumption of the Assumed Liabilities by Purchaser.

                  (d)  Sellers  hereby  grant to  Purchaser  a one-year  limited
license to use the names "Smith Technology  Corporation,"  "Reidel Environmental
Services  Inc.," and "Canonie  Environmental  Services  Corp." on a transitional
basis to enable Purchaser to use, obtain the benefits from (including  payment),
and effect the transfer of, the Purchased Assets. Sellers authorize Purchaser to
endorse  checks  payable to any of these names where the check is  delivered  in
payment of amounts due under a Customer Contract,  an account receivable or work
in process,  any deposit,  bond, bond collateral,  proceeds,  refund, or prepaid
expenses which are Purchased  Assets.  Purchaser agrees to strictly restrict its
use of such names to the minimum  extent  necessary  to achieve the purposes set
forth in this  section.  Purchaser  shall not  conduct  any  sales or  marketing
activities  under such  licensed  names.  Purchaser  agrees to  indemnify  Smith
pursuant to 1.03 for Third Party Claims against Sellers arising from Purchaser's
use of such  names or for any  breach by  Purchaser  of the  limitations  on use
contained in 4.09(d).


                                  - 39 of 49 -


<PAGE>




                  4.10 Reserves and Allowances

                  To the extent  such  reserves  or  allowances  are  assumed as
Assumed Balance Sheet Liabilities, Purchaser shall be obligated to make payments
or reimbursements to or on behalf of Sellers for amounts recorded on the Closing
ED  Balance  Sheet  as  reserves  or  allowances  for  anticipated  expenses  or
liabilities.  Such payments shall be paid by Purchaser up to the recorded amount
of the reserve or allowance  upon  presentation  of vendor  invoices or proof of
payment  approved  in  writing by a person  designated  by Sellers in writing as
authorized  to submit  invoices for such purpose on Sellers'  behalf.  Purchaser
shall  have no  liability  to  Sellers  as a result of  paying  any  expense  so
approved.  Purchaser's  payment or reimbursement of expenses covered by Seller's
reserves or allowances which are Assumed Balance Sheet  Liabilities shall not be
construed as any indication  whatsoever that Purchaser has assumed liability for
Sellers' debts,  liabilities or  administrative  responsibility,  either for the
specific  class covered by such reserve or in general,  beyond the amount of the
recorded reserve except as such are themselves  assumed  specifically as Assumed
Liabilities.

                  4.11 Standard Rates

                  Whenever  any goods or  services  are  provided or procured by
Sellers or Purchaser to correct or remedy the other party's breach,  default, or
deficiency of performance  under any  representation,  warranty,  or covenant of
this  Agreement,  such  goods or  services  shall be  valued at  Purchaser's  or
Sellers'  Standard Rates,  respectively.  "Standard  Rates" means the rate which
Purchaser  or Sellers  would  charge an  ordinary  commercial  customer  for the
particular  class of services  being  performed  or the retail  market price for
goods supplied.  Such rates shall not exceed the rates which similar firms would
charge  for such  goods or  services  in the  location  in which  they are being
delivered.

                  4.12 Insurance after Closing

                  Sellers  shall  either:  (i) for a three (3) year period after
Closing, maintain in full force and effect, and timely pay all premiums on, each
policy of  insurance  in effect  prior to Closing  which was written on a claims
made basis or procure other  policies of equal  coverage and financial  strength
covering such three (3) year period in order to ensure coverage for a three year
period of claims or losses arising from Sellers'  alleged  professional or other
acts,  omissions  and  negligence;  or (ii) prior to the Closing or prior to the
expiration  of any policy  referred  to in (i),  procure an  extended  reporting
period under such policy  which shall not expire  sooner than the date three (3)
years after the Closing Date.  Such insurance shall have limits of not less than
$2,000,000  per occurrence and $5,000,000 in the aggregate with a deductible not
to exceed $150,000. Purchaser shall be named as an additional


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insured under each such policy. At Closing and thereafter, Sellers shall deliver
certificates  evidencing the continuing  existence and adequacy of the insurance
required  by this  section  and,  on request by  Purchaser,  a copy of each such
policy.

                  4.13 Successor Payroll Issues

                  Purchaser  shall be the  successor  employer to Sellers,  with
respect to the Hired  Employees,  for  purposes of  post-Closing  FICA taxes and
reporting,  FUTA taxes and reporting,  and corresponding  state payroll laws and
regulations. Purchaser agrees to perform the obligations of a successor employer
for such  taxes and  reporting  purposes  and will  indemnify,  defend  and hold
Sellers harmless from and against any and all liabilities or obligations arising
out of  Purchaser's  election  to be treated as a  successor  employer  for such
purposes  or its  failure to  perform or  properly  perform  all of  Purchaser's
obligations  as a successor  employer of Sellers for the  purposes  set forth in
this section,  including but not limited to completing accurately and completely
all Forms 941, 940, W-2 and W-3 related to  obligations  accruing  after Closing
required of Purchaser in its status as successor employer. Sellers shall perform
such obligations for pre-Closing  accruals.  This section shall not be construed
to imply that  Purchaser  is liable as a successor  employer or  otherwise  as a
successor to Sellers for any purpose  except for the limited  purposes set forth
in this section.

                  4.14 Unrecorded Payables

                  The parties  anticipate that Sellers will incur trade payables
in the ordinary  course  after  Closing  which  relate to goods  delivered to or
services performed for the Engineering  Division prior to Closing but which were
not recorded on Schedule  1.01(b)(5) and the Interim ED Balance Sheet because of
non-receipt  of invoice or delay in Sellers'  internal  routing and recording of
such payables.  Sellers agree that prompt payment of certain of accounts payable
that  are  from  utility  services   (including   telephone)  or  from  vendors,
subcontractors  or suppliers of direct materials  related to purchased  accounts
receivable  or work in process  (the  "Payables  in  Process")  are of  material
importance to Purchaser,  and Sellers  accordingly agree to either:  (i) pay any
Payable in Process within seven (7) days after  receipt;  or (ii) provide notice
to  Purchaser  within  seven (7) days of  Sellers'  receipt  of such  Payable in
Process and of its  intention  not to pay it within seven (7) days. If Purchaser
then  requests  Sellers to pay such Payable in Process,  Sellers shall use their
best efforts to pay the same within seven (7) days. If Sellers are unable to, or
otherwise do not, so pay,  Purchaser  shall be  authorized  to pursue its rights
under  1.01(b)(5),  and if such remedy is not  available,  its other  rights and
remedies  under this  Agreement.  Any dispute  between  the  parties  under this
section or 1.01(b)(5) shall be resolved as provided in 2.03(c).


                                  - 41 of 49 -


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                              V. RELATED AGREEMENTS

                  5.01 Related Agreements

                  The following  related  agreements (the "Related  Agreements")
shall be executed at Closing by the applicable parties:

                  (a) The Smith Non-Competition Agreement between Brian Smith
         and Purchaser.

                  (b) The  Joint  Services  Agreement  providing  for the  joint
         occupancy of shared premises and temporary access to information,  data
         processing,  computer  systems and other services which were,  prior to
         Closing,  used by both the  Engineering  Division  and  Sellers'  other
         operations.

                  (c) Audit  Representation  Letter  Agreements  of Brian Smith,
         Thomas  Campbell  and W. D.  Nelson  pursuant to which Mr.  Smith,  Mr.
         Campbell  and  Mr.  Nelson  will  each  agree  to  provide  a  standard
         representation  of  liabilities  and contingent  liabilities  letter in
         connection  with  any  audit  which  Purchaser  elects  to  perform  or
         auditor's consent which Purchaser requires.


                                   VI. CLOSING

                  6.01 Closing, Closing Date and Effective Time

                  The closing of the  transactions  contemplated  hereunder took
place at 3:00 p.m.  on August  19,  1997,  at the  offices  of Smith  Technology
Corporation,  at One Plymouth Meeting,  Plymouth Meeting, PA. The effective time
for the consummation of the transactions contemplated in this Agreement to occur
"at Closing" or "on the Closing Date" shall be 12:00 a.m. EST on August 20, 1997
(the "Effective Time").

                  6.02 Sellers' Obligations at Closing

                  At or prior to the Closing,  Sellers shall deliver or cause to
be delivered to Purchaser,  in form reasonably  satisfactory  to Purchaser,  the
following:

                  (a) A Bill of Sale and  Assignment  substantially  in the form
         set forth in Exhibit  6.02(a),  sufficient  to effect and  evidence the
         transfer, conveyance and delivery of the Purchased Assets.

                  (b) A  fully  executed  assignment  of each  Assumed  Premises
         Lease.

                  (c) The fully executed Smith Non-Competition Agreement between
         Purchaser  and  Brian  Smith  and  the  Audit  Representations   Letter
         Agreements of Brian Smith, Thomas Campbell and W. D. Nelson.


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                  (d) A  certificate  of title duly  assigned and a bill of sale
         for each vehicle which is a Purchased Asset.

                  (e) A fully executed  UCC-3 in the case of security  interests
         governed by the Uniform  Commercial  Code and, in other cases,  a fully
         executed  release and satisfaction of each security  interest,  lien or
         encumbrance  against any of the Purchased Assets except:  (i) those for
         which Purchaser has expressly  assumed in full as an Assumed  Liability
         either  the  obligation   underlying  such  security  interest  or  the
         responsibility  for  obtaining  the release of such interest or (ii) as
         provided in 2.14.

                  (f)   Certificates  of  insurance   naming   Purchaser  as  an
         additional insured evidencing the insurance policy(ies) under 4.12.

                  (g) A resolution  of Sellers'  Board of Directors  authorizing
         the  execution,  delivery and  performance  of this  Agreement  and all
         Related Agreements by Sellers, to the extent they are parties thereto.

                  (h) Fully executed  appointment or appointments of one or more
         officers  or agents to act on behalf of Sellers to execute  assignments
         and novations of contracts as provided in 4.09(b).

                  (i) An opinion of counsel to Sellers,  satisfactory to counsel
         for the Purchaser.

                  (j) All material  approvals,  consents and/or waivers that are
         necessary to effect the transactions contemplated hereby.

                  (k) Such other documents  (including  certificates of officers
         of Sellers) as the Purchaser may reasonably  request in order to enable
         the Purchaser to determine  whether the conditions to their obligations
         under  this  Agreement  have  been met and  otherwise  to carry out the
         provisions of this Agreement.

                  (l) All other  schedules,  certificates  and  other  documents
         required by this Agreement to be delivered on or before Closing.

                  (m) At any  time or times on or  after  the  Closing,  Sellers
         shall execute, acknowledge, and deliver any and all further assurances,
         documents,  and instruments  reasonably requested by Purchaser in order
         to  effectively  convey the Purchased  Assets and all ownership of such
         assets  free and  clear of  encumbrances  or title  defects  except  as
         expressly authorized herein and shall take all other actions consistent
         with the terms of this  Agreement  that may  reasonably be requested by
         Purchaser in order to effectuate the purposes and intent hereof.


                                  - 43 of 49 -


<PAGE>




                     6.03 Purchaser's Obligations at Closing

                  At or prior to the Closing,  Purchaser  shall deliver or cause
to be delivered to Sellers,  in form  reasonably  satisfactory  to Sellers,  the
following:

                  (a) The cash payable at Closing under 1.01(b)(1).

                  (b) The Note deliverable at Closing under 1.01(b)(2).

                  (c)  The  Short  Term  Note   deliverable   at  Closing  under
         1.01(b)(5).

                  (d) A  resolution  of the  Board  of  Directors  of  Purchaser
         authorizing its execution, delivery and performance of this Agreement.

                  (e) An  opinion  of  counsel  to  Purchaser,  satisfactory  to
         counsel for the Sellers.

                  (f) All material  approvals,  consents and/or waivers that are
         necessary to effect the transactions contemplated hereby.

                  (g) Such other documents  (including  certificates of officers
         of Purchaser) as the Sellers may reasonably  request in order to enable
         the Sellers to determine  whether the  conditions to their  obligations
         under  this  Agreement  have  been met and  otherwise  to carry out the
         provisions of this Agreement.

                  (h) At any time or times on or after  the  Closing,  Purchaser
         shall execute, acknowledge, and deliver any and all further assurances,
         documents,  and instruments reasonably requested by Sellers in order to
         effectively convey or assure payment for the Purchased Assets and shall
         take any other action  consistent with the terms of this Agreement that
         may  reasonably  be  requested  by Sellers in order to  effectuate  the
         purposes and intent hereof.


                               VII. MISCELLANEOUS

                  7.01 Brokerage Fees

                  (a)  Sellers  acknowledge  that  The  Environmental  Financial
Consulting  Group,  Inc. ("EFCG") acted as a broker for Sellers relative to this
transaction, and Sellers further acknowledge that they are obligated to pay EFCG
a commission  for such  services.  Sellers agree to pay such amounts and to hold
Purchaser harmless from any liability for the obligation to pay such finders fee
to EFCG.

                  (b) Except for such  brokerage  arrangement  specified in (a),
neither the Purchaser nor Sellers have consented to or authorized any broker, or
third party to act on its behalf, directly or



                                  - 44 of 49 -


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indirectly,   as  a  broker  or  finder  in  connection   with  the  transaction
contemplated by this Agreement. In the event any claim is made for a broker's or
finder's  fee  other  than  that  described  in  (a)  in  connection   with  the
transactions  contemplated  hereunder,  the party  responsible  for retaining or
securing  said broker or finder shall be solely  responsible  for the payment of
any  broker's  or  finder's  fees  incurred as a result  thereof.  Further,  the
responsible   party  shall  indemnify  the  other  party  against  any  loss  or
liabilities by reason of such broker's or finder's fees.

                  7.02 Further Actions

                  At any time and from time to time,  each party agrees,  at its
or his expense,  to take such actions and to execute and deliver such  documents
as  may be  reasonably  necessary  to  effectuate  the  transfer  of the  assets
hereunder and the purposes of this Agreement.

                     7.03 Availability of Equitable Remedies

                  Since a breach of the provisions of this  Agreement  could not
adequately  be  compensated  by money  damages  and would  cause  immediate  and
irreparable  harm,  either party shall be entitled,  either  before or after the
Closing,  in  addition  to any  other  right or  remedy  available  to it, to an
injunction  restraining  such  breach or a  threatened  breach  and to  specific
performance  of any such  provision of this  Agreement,  and the parties  hereby
consent to the  issuance of such an  injunction  and to the ordering of specific
performance  to  compel  performance  hereof  without  proof  of  immediate  and
irreparable  injury or  uniqueness  of the assets to be  conveyed or without the
necessity of the posting of a bond for such relief.

                  7.04 Survival

                  Except  as   otherwise   provided   herein,   the   covenants,
agreements,  representations,  and  warranties  contained in, made or undertaken
pursuant to this Agreement or any Related Agreement are (i) material,  (ii) have
been relied upon by the party to whom given,  irrespective of any  investigation
made by or on behalf of such  party,  (iii)  shall  survive  the Closing and any
delivery of the purchase price by the Purchaser and Purchased Assets by Sellers,
and (iv) shall not merge in the  performance  of any  obligation by any party to
this Agreement or any Related Agreement.

                  7.05 Entire Agreement - Modification

                  The  Agreement   and  the  exhibits,   schedules  and  Related
Agreements hereto set forth the entire understanding of the parties with respect
to the subject  matter  hereof,  supersede  all existing  agreements  among them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.


                                  - 45 of 49 -


<PAGE>




                  7.06 Notices

                  All   notices,   elections,   payments,   reports   or   other
correspondence required or permitted hereunder shall be in writing and deemed to
have been  properly  given or delivered  when  personally  delivered,  mailed by
certified  mail  or  delivered  by a  nationally  recognized  overnight  express
courier,  postage or delivery fees prepaid, to the party to whom directed at the
below specified addresses:

        A.        If to Sellers:

                  Thomas F. Herlihy
                  President and CEO
                  The Smith Technology Corporation
                  One Plymouth Meeting
                  Plymouth Meeting, PA 19462

with a copy sent in one of the prescribed manners to:

                  John E. Zamer, Esq.
                  Jones, Day, Reavis & Pogue
                  3500 SunTrust Plaza
                  303 Peach Street
                  Atlanta, GA 30308-3242

        B.        If to Purchaser:

                  Mr. Morry F. Rubin, President
                  ATC Group Services Inc.
                  104 East 25th Street, 10th Floor
                  New York, NY 10010

with a copy sent in one of the prescribed manners to:

                  John Smith, Esq.
                  ATC Group Services Inc.
                  1515 East 10th Street
                  Sioux Falls, South Dakota 57103-1721

Any such notice  shall be deemed given at the time of personal  delivery,  three
days after deposit with the mail or one day following  deposit with an overnight
express  courier.  The address of a party may be changed in accordance  with the
notice provisions of this section.

                  7.07 Waiver

                  Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of


                                  - 46 of 49 -


<PAGE>




any other breach of that  provision  or of any breach of any other  provision of
this  Agreement.  The failure of a party to insist upon strict  adherence to any
term of this  Agreement on one or more occasions will not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.

                  7.08 Binding Effect

                  The  provisions  of this  Agreement  shall be binding upon and
inure to the benefit of Sellers,  Purchaser, and their respective successors and
assigns,  and shall inure to the benefit of the indemnitees and their respective
successors, assigns, heirs, and personal representatives.

                  7.09 No Third-Party Beneficiaries

                  This Agreement does not create,  and shall not be construed as
creating,  any rights  enforceable  by any person not a party to this  Agreement
(except as provided in 7.08).

                  7.10 Separability

                  If any  provision of this  Agreement is invalid,  illegal,  or
unenforceable,  the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain  applicable  to all other  persons  and  circumstances  unless the result
thereof  would  result in an unjust  modification  of the  balance of rights and
obligations hereunder.

                  7.11 Headings

                  The headings of this  Agreement are solely for  convenience of
reference and shall be given no effect in the construction or  interpretation of
this Agreement.

                  7.12 Governing Law

                  To the  extent  permitted  by law,  this  Agreement  shall  be
governed by and construed in  accordance  with the laws of the state of Delaware
without giving effect to conflict of laws.  Each of the parties hereby  consents
to the jurisdiction of the courts of the state of Delaware,  agrees to submit to
service therefrom and waives any claim it may have as to forum non conveniens in
connection with any action brought in the state of Delaware.

                  7.13 Separate Counterparts

                  This  Agreement  is  being   executed  in  several   identical
counterparts, each one of which shall be considered an original and


                                  - 47 of 49 -


<PAGE>




all of which when taken together shall constitute but one instrument.

                  7.14 Incorporation of Recitals, Exhibits and Schedules

                  All exhibits, schedules and Related Agreements attached hereto
are  incorporated  herein  by  reference  and  expressly  made  a part  of  this
Agreement.

                  7.15 Mediation

                  Except in cases where the remedy of preliminary  injunction is
reasonably sought by a party because of the  irreparability and immediacy of the
harm  alleged to be caused or  threatened,  in the event  there  shall arise any
dispute or claim in law or equity  arising out of this  Agreement  or any breach
thereof or any resulting  transaction  between the parties under this  Agreement
and if such dispute cannot be resolved  through  negotiation  or, in the case of
those matters to be resolved under this Agreement by the procedure specified for
settlement of accounting and collection  related issues in 2.03(c),  the parties
agree that such dispute shall be submitted to  non-binding  mediation  under the
Commercial  Mediation  Rules  of the  American  Arbitration  Association  before
resorting to litigation. The mediation shall be held in Dover, Delaware before a
single mediator selected by the American Arbitration Association.

                  7.16 Non-Working Dates

                  When any date on which payment or any other performance is due
under this  agreement  falls on a  Saturday,  Sunday or national  holiday,  such
payment or  performance  shall be due on the next  business day  following  such
date.

                  7.17 Opportunity to Cure

                  All  parties to this  Agreement  shall be afforded a period of
ten (10) days  following  written  notice  thereof to cure any alleged breach of
this Agreement  unless the loss  threatened by such breach is of such gravity to
require immediate action.


                         VIII. DEFINED WORDS AND PHRASES

                     8.01 Convention for Definition of Terms

                  Words used in this Agreement shall have their ordinary meaning
unless specifically defined in this Agreement. Where a word or phrase appears in
quotation marks within parentheses  (whether or not listed in 8.02), the word or
phrase in  quotation  marks shall have the  meaning  throughout  this  Agreement
(unless a more  limited  scope is  specified  or is  obvious  from the  context)
defined by the


                                  - 48 of 49 -


<PAGE>




definition immediately preceding and in apposition to the quoted word or phrase.
Most (but not all) defined words or phrases are delineated as such by the use of
capitalized first letters.

                  8.02 Certain Definitions

                  (a) Unless  otherwise  expressly  stated in a particular case,
the term "including" shall mean "including, but not limited to."

                  (b) Unless  otherwise  expressly  stated in a particular case,
the term "knowledge of the Sellers" means the knowledge of an officer, director,
regional manager or branch manager of Smith or of any director, regional officer
or regional or branch manager of any Seller other than Smith.

                  (c) Unless  otherwise  expressly  stated in a particular case,
the term "Sellers" means the "Sellers, jointly and severally."


                  IN  WITNESS  WHEREOF,  the  parties  have duly  executed  this
Agreement as of the date set forth in the opening paragraph hereof.

ATC GROUP SERVICES INC.                             SMITH TECHNOLOGY CORPORATION


By /s/ Nicholas J Malino                             By /s/ Thomas F. Herlihy
  ----------------------                               ----------------------
   Nicholas J. Malino                                   Thomas F. Herlihy
   Senior Vice President                                President and CEO


BCM ENGINEERS INC., Delaware                         BCM ENGINEERS INC., Alabama


By /s/ William T. Campbell                           By /s/ William T. Campbell
  ------------------------                             ------------------------

BCM ENGINEERS INC., Penn.                            BCM ENGINEERS INC., West V.


By /s/ William T. Campbell                           By /s/ William T. Campbell
  ------------------------                             ------------------------


                                  - 49 of 49 -


<PAGE>




                                                                   EXHIBIT 10.25

                            STOCK PURCHASE AGREEMENT
                                     BETWEEN
                             ATC GROUP SERVICES INC.
                                       AND
                           BING YEN & ASSOCIATES, INC.
                                       and
                                  GLENN TOFANI

                                November 26, 1997


<PAGE>




                                TABLE OF CONTENTS

                                                                        Page No.

I. SALE AND PURCHASE..........................................................1
   ss. 1.01           Terms of Sale and Purchase..............................1
   ss. 1.02           Indemnity Against Debts and Liabilities.................3
   ss. 1.03           Right of Set-Off........................................6

II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS............................6
   ss. 2.01           Organization and Qualification..........................7
   ss. 2.02           Capitalization..........................................7
   ss. 2.03           Financial Condition.....................................8
   ss. 2.04           Tax and Other Liabilities...............................8
   ss. 2.05           Litigation and Claims...................................9
   ss. 2.06           Properties and Accounts Receivable......................9
   ss. 2.07           Contracts and Other Instruments........................10
   ss. 2.08           Employees..............................................12
   ss. 2.09           Patents, Trademarks, Etc...............................12
   ss. 2.10           Questionable Payments..................................13
   ss. 2.11           Authority to Sell......................................13
   ss. 2.12           Restricted Professional and Small
                      Business Set-Aside Revenues............................14
   ss. 2.13           Loans to be Repaid.....................................14
   ss. 2.14           Fictitious Names.......................................14
   ss. 2.15           Absence of Undisclosed Liabilities.....................14
   ss. 2.16           Hazardous Materials....................................14
   ss. 2.17           Completeness of Disclosure.............................15

III. REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................15
   ss. 3.01           Organization And Good Standing.........................15
   ss. 3.02           Execution and Performance Authorized...................15
   ss. 3.03           Absence of Litigation..................................16
   ss. 3.04           No Other Default.......................................16
   ss. 3.05           Permits and Filings....................................16
   ss. 3.06           Absence of Lien........................................16
   ss. 3.07           Solvency...............................................16
   ss. 3.08           Corporate Documents....................................16
   ss. 3.09           Purchase for Investment Purposes Only..................17
   ss. 3.10           Reliance on ATC Public Information.....................17
   ss. 3.11           Springing Representation and Warranty..................17

IV. COVENANTS................................................................17
   ss. 4.01           Insurance..............................................17
   ss. 4.02           Release by Shareholders................................18
   ss. 4.03           Collection of Accounts Receivable......................18
   ss. 4.04           Noncompetition.........................................18
   ss. 4.05           Public Statements......................................21

                                        i


<PAGE>




   ss. 4.06           Books, Records, Access to Information, Cooperation.....21
   ss. 4.07           Bankruptcy.............................................22
   ss. 4.08           Transaction Costs and Expenses.........................22
   ss. 4.09           Delivery of Property...................................22
   ss. 4.10           Related Agreements.....................................22
   ss. 4.11           Continuing Cooperation, Reporting of Changes,
                      Breaches and Status....................................22
   ss. 4.12           Profit Sharing Plan....................................23
   ss. 4.13           Cooperation Regarding Contingent Achievement...........23
   ss. 4.14           BYA Employee Bonuses...................................24
   ss. 4.15           Receipt of Notices.....................................24
   ss. 4.16           Transaction Notes Are Senior Indebtedness..............24
   ss. 4.17           Acceleration of Tofani Note, Transaction Note..........24

V. RELATED ARGUMENTS.........................................................26
   ss. 5.01           Related Agreements.....................................26

VI.   CLOSING................................................................26
   ss. 6.01           Closing, the Closing Date, and Effective Time..........26
   ss. 6.02           Shareholders' Obligations at Closing...................26
   ss. 6.03           Purchaser's Obligations at Closing.....................27

VII. MISCELLANEOUS...........................................................27
   ss. 7.01           Brokerage Fees and Shareholders' Legal Fees............27
   ss. 7.02           Further Actions........................................28
   ss. 7.03           Availability of Equitable Remedies.....................28
   ss. 7.04           Limitation on Survival of Representations
                      and Warranties.........................................28
   ss. 7.05           Modification...........................................28
   ss. 7.06           Notices................................................28
   ss. 7.07           Waiver.................................................29
   ss. 7.08           Binding Effect.........................................29
   ss. 7.09           No Third-Party Beneficiaries...........................29
   ss. 7.10           Severability...........................................29
   ss. 7.11           Headings; Gender.......................................30
   ss. 7.12           Governing Law..........................................30
   ss. 7.13           Separate Counterparts..................................30
   ss. 7.14           Incorporation of Recitals, Exhibits and Schedules......30
   ss. 7.15           Obligations in Payment Ratio...........................30
   ss. 7.16           Arbitration; Attorneys' Fees; Undisputed
                      Actions for Payment....................................30
   ss. 7.17           Opportunity to Cure....................................31


                                       ii


<PAGE>




                             EXHIBITS AND SCHEDULES

Exhibit 1.01B(2)
Exhibit 1.01B(3)
Exhibit 1.01B(4)
Exhibit 3.11-A
Exhibit 3.11-B

Schedule  2.01A  Schedule  2.01B  Schedule  2.02A  Schedule  2.02B Schedule 2.03
Schedule 2.04  Schedule  2.05  Schedule  2.06A  Schedule  2.06B  Schedule  2.06C
Schedule  2.06D  Schedule 2.07 Schedule  2.07B  Schedule  2.07C  Schedule  2.07D
Schedule  2.07E Schedule 2.08A Schedule 2.09 Schedule 2.1 Schedule 2.12 Schedule
2.14 Schedule 2.16A Schedule 3.03


                                       iii


<PAGE>




                                 STOCK PURCHASE
                                    AGREEMENT


                  This Agreement  (including the exhibits and schedules  hereto)
(collectively,  the "Agreement") is entered into as of ____________, 1997 by and
between ATC GROUP  SERVICES  INC.,  a Delaware  corporation  with its  principal
office at 104 East 25th Street, New York, New York 10010 ("Purchaser"), BING YEN
& ASSOCIATES,  INC. (a California corporation with its principal office at 17701
Mitchell North, Irvine,  California 92714 ("BYA"), and Bing Yen and Glenn Tofani
(collectively, "Shareholders").

                  Purchaser desires to acquire all of the issued and outstanding
shares of stock of BYA and certain  noncompetition  covenants  in  exchange  for
cash,  contingent and  noncontingent  promissory  notes and other  consideration
potentially  totaling  approximately  Five Million Four Hundred Thousand Dollars
($5,400,000),  as  hereinafter  provided,  Shareholders  desire to  effect  such
exchange and BYA desires to  implement  such  transaction.  Now,  therefore,  in
consideration  of the mutual covenants set forth below, and for reliance of each
other, the parties agree as follows.



                              I. SALE AND PURCHASE


                  1.01  Terms of Sale and Purchase

                  Subject to the terms and conditions set forth below:

                  A. At Closing  (as defined in ss.  6.01  below),  Shareholders
         shall sell to  Purchaser  all issued and  outstanding  shares of common
         stock of BYA (the "Shares") and shall deliver to Purchaser certificates
         evidencing all the Shares properly endorsed to effect the assignment of
         the Shares to Purchaser.

                  B.  Purchaser shall at Closing:

                           (1) As partial  consideration for the Shares,  pay to
                  Shareholders an aggregate of $2,750,000 in the ratio to 4/5 to
                  Mr.  Yen and  1/5 to Mr.  Tofani  (the  "Payment  Ratio"),  as
                  follows:  wire  transfer  $2,200,000  to Mr.  Yen to the  wire
                  address to be supplied by Mr. Yen and deliver to Mr.  Tofani a
                  promissory  note (the "Tofani Note") in the amount of $550,000
                  in the form of Exhibit 1.01B(1).

                           (2)  As  additional  consideration  for  the  Shares,
                  execute  and  deliver to  Shareholders  in the  Payment  Ratio
                  promissory notes in the form of Exhibit 1.01B(2) (the "Notes")
                  evidencing  Purchaser's  obligation to pay to Shareholders the
                  aggregate  sum  of  Three  Hundred  Fifty   Thousand   Dollars
                  ($350,000) in three equal annual  installments  of One Hundred
                  Sixteen Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven
                  Cents  ($116,666.67)  with eight  percent (8%) interest on the
                  unpaid  balance on the first  business  days of January  1999,
                  2000 and 2001.


<PAGE>




                           (3)  Execute  and  deliver  to  Shareholders  in  the
                  Payment  Ratio  unsecured  promissory  notes  in the  form  of
                  Exhibit   1.01B(3)  (the   "Non-Compete   Notes")   evidencing
                  Purchaser's  obligation to pay to  Shareholders  the aggregate
                  sum of Eight Hundred Thousand Dollars  ($800,000) in three (3)
                  equal annual  installments of Two Hundred  Sixty-Six  Thousand
                  Six   Hundred   Sixty-Six   Dollars  and   Sixty-Seven   Cents
                  ($266,666.67)  with eight  percent (8%) interest on the unpaid
                  principal on each of the first  business days of January 1999,
                  2000 and 2001.

                           (4)  Execute  and  deliver  to  Shareholders  in  the
                  Payment Ratio the Contingent  Achievement  Promissory Notes in
                  the form of Exhibit 1.01B(4) (the  "Contingent  Notes") in the
                  maximum aggregate principal amount of One Million Five Hundred
                  Thousand Dollars ($1,500,000).

         Shareholders  shall have the right to assign or  redirect to others any
         portion or all of the amounts otherwise  payable to Shareholders  under
         any or all of the promissory  notes described in B(2),(3) and (4) above
         (collectively the "Transaction Notes").

                  C. Within ninety (90) days  following  the Closing  Date,  BYA
         shall provide to Shareholders a draft unaudited  compiled balance sheet
         (the  "Closing  Balance  Sheet")  and  statements  of income,  retained
         earnings and cash flows of BYA for the period beginning January 1, 1997
         ending at the  Effective  Time (as  defined  in ss.  6.01  below)  (the
         "Closing Financial Statements"). The Closing Financial Statements shall
         be prepared in accordance with generally accepted accounting principles
         (GAAP) consistently  applied throughout the period involved (except for
         the  absence  of  cash  and  reserves  (unless  expressly  approved  by
         Shareholders in writing), and except for such other adjustments thereto
         which are known to and are  expressly  approved in writing by Purchaser
         and Shareholders) (the "Agreed Accounting Method"). At such time as the
         Closing Balance Sheet has been finally  determined between the parties,
         a final  adjustment to the principal  amount of the  Transaction  Notes
         shall be made  equal to the amount by which the total  assets  less the
         total  liabilities of BYA (the "Equity Value") as of the Effective Time
         (as defined in ss. 6.01  below) as shown on the Closing  Balance  Sheet
         exceeds or is less than Two Million Three Hundred Forty-Seven  Thousand
         Dollars ($2,347,000). If BYA's Equity Value as of the Effective Time as
         so  finally   determined   is  less  than  Two  Million  Three  Hundred
         Forty-Seven Thousand Dollars ($2,347,000),  Purchaser shall offset such
         amount,  in the Payment  Ratio,  and against  the next  available  cash
         payments to be made, first against the Non-Compete  Notes, then against
         the  Contingent  Notes,  and finally  against  the Notes (the  "Set-Off
         Order").  By the  foregoing  the  parties  intend  that if an offset is
         required under this  paragraph (or under ss. 1.03 below),  all payments
         on all of said notes  shall be subject to offset as soon as possible in
         the order due and  payable  but not before  January 4, 1999,  using all
         such notes as sources of setoff,  but if less than all cash payments to
         be made thereunder are necessary to satisfy the setoff, then the setoff
         shall be  effected  from cash  payments  to be made only in the Set-Off
         Order.  If the final  Equity  Value is greater  than Two Million  Three
         Hundred Forty-Seven Thousand Dollars ($2,347,000),  Purchaser shall add
         such  amount  in  the  Payment  Ratio  to  the  Notes.  In  such  case,
         Shareholders  shall  cancel  and  return to  Purchaser  the  previously
         executed  Notes,  and  Purchaser  shall  issue new Notes to reflect the
         increased principal amount owing thereunder.


                                       2


<PAGE>




                  After Closing Shareholders'  independent  accountants shall be
afforded free and full access to the  nonproprietary  working papers and records
used by  independent  accountants  and in-house  accountants  in  preparing  the
Closing  Financial  Statements.   In  addition,   Purchaser  shall  cause  BYA's
independent accountants and in-house accountants promptly to advise Shareholders
as soon as any of them becomes  aware of any items in BYA's draft of the Closing
Financial Statements that may be different from the Interim Financial Statements
(as defined in ss. 2.03). If Shareholders  notify Purchaser of any difference of
opinion as to the general  acceptability or consistency of any of the accounting
principles  followed under the Agreed  Accounting Method in connection with such
review and  preparation  of the  Closing  Financial  Statements,  or the results
indicated  thereby,  then they and/or their accountants shall promptly confer in
an effort to resolve such difference within thirty (30) days. If they are unable
to resolve any difference  within thirty (30) days, then the difference shall be
resolved by the dispute resolution provisions of ss. 7.16.

                  1.02  Indemnity Against Debts and Liabilities

                  A. In  addition  to  Purchaser's  other  rights  and  remedies
available  at law or in  equity  (and  not by way of  limitation),  Shareholders
shall,  in the Payment  Ratio,  protect,  defend,  indemnify  and hold  harmless
Purchaser, BYA, and their successors against, and in respect of, any and all:

                  (1) Claims, suits, actions,  proceedings (formal or informal),
         governmental   investigations,   judgments,   deficiencies,   set-offs,
         damages,  settlements,  liabilities,  and  reasonable  legal  and other
         expenses (including  reasonable  attorneys' fees and defense costs), as
         and when  incurred,  arising out of, or based  upon,  any breach of any
         representation,  warranty or covenant of Shareholders contained in this
         Agreement, but excluding any Related Agreements (as defined in ss. 5.01
         below), and

                  (2)  Debts  or  liabilities  of any  kind,  whether  known  or
         unknown,  asserted or unasserted,  and claims, liens, set-offs,  suits,
         actions,  and proceedings  (formal and informal) of persons or entities
         and related judgments,  deficiencies,  damages, settlements,  set-offs,
         liens, liabilities,  and legal and other expenses (including reasonable
         attorneys' fees), as and when incurred,  arising out of, or based upon,
         the  acts,  omissions,  contractual  performance,  or  conduct  of  the
         business of BYA before the Effective Time.

                  B. In  addition to  Shareholders'  other  rights and  remedies
available at law or in equity (and not by way of  limitation),  Purchaser  shall
protect,  defend,  indemnify and hold harmless Shareholders and their successors
against and in respect of any and all:

                  (1) Claims, suits, actions,  proceedings (formal or informal),
         governmental   investigations,   judgments,   deficiencies,   set-offs,
         damages,  settlements,  liabilities,  and  reasonable  legal  and other
         expenses (including  reasonable  attorneys' fees and costs of defense),
         as and when incurred,  arising out of, or based upon, any breach of any
         representation,  warranty or covenant of  Purchaser  contained  in this
         Agreement; and


                                       3


<PAGE>




                  (2)  Debts  or  liabilities  of any  kind,  whether  known  or
         unknown,  asserted or unasserted,  and claims, liens, set-offs,  suits,
         actions,  and proceedings  (formal and informal) of persons or entities
         and related judgments,  deficiencies,  damages, settlements,  set-offs,
         liens, liabilities,  and reasonable legal and other expenses (including
         reasonable attorneys' fees), as and when incurred,  arising out of: (i)
         the acts, omissions, contractual performance or conduct of the business
         of BYA after the Effective Time,  except for BYA's debts or liabilities
         caused or  continuing  from items  described  in 1.02A above so long as
         Purchaser   does  not  directly  or  indirectly   cause  or  materially
         exacerbate the  continuation of such debts or  liabilities;  or (ii) or
         based upon, the acts, omissions,  contractual performance or conduct of
         the business of Purchaser whether before or after the Effective Time.

                  C. The parties'  respective  indemnity  and other  obligations
under this Agreement for debts and liabilities shall be subject to the following
terms, limitations and conditions:

                  (1)  Purchaser  and  Shareholders  shall  each  give the other
         prompt notice of any allegedly indemnifiable item incurred, asserted or
         threatened  on the  basis  of  which  an  indemnitee  intends  to  seek
         indemnification  from  an  indemnitor  as  provided  herein;  provided,
         however,  that the obligation of an indemnitee shall be reduced for the
         failure to give notice at any  particular  time only to the extent that
         the  ability  of the  indemnitor  to defend or settle the item has been
         actually monetarily  prejudiced thereby.  Any indemnitee shall have the
         right (but not the  obligation) to select and be represented by counsel
         of its or his choice, to manage its or his own legal  representation or
         defense  and to settle  any  claim,  debt or other  indemnified  matter
         hereunder.  In the following cases, an indemnitee's expenses associated
         with  electing  to  provide  his or its own  defense  shall  constitute
         indemnified  costs:  (i) when the  indemnitor  has failed to assume the
         defense  of  the  claim  within  ten  days  following  receipt  of  the
         indemnitee's  notice  of  the  claim;  (ii)  when  the  claim  involves
         assertions of liability  against both the  indemnitee  and  indemnitor,
         including  a cross  claim or other  assertion  by the  indemnitor  that
         indemnitee  is  liable  for  all or a  portion  of  such  claim,  under
         circumstances  where the indemnitee's  and  indemnitor's  interests are
         sufficiently  adverse  in the  proceeding  to result in a  conflict  of
         interest in representation  under the rules of professional conduct for
         attorneys;  (iii) when the claim is one directly  between an indemnitee
         and the indemnitor involving a matter arising under this Agreement; and
         (iv)  when the  claim  seeks an order,  injunction  or other  equitable
         relief against the indemnitee which if successful,  could reasonably be
         expected to materially interfere with the business,  operations, assets
         or condition  (financial or otherwise) of the indemnitee.  With respect
         to (ii) and (iii) that proportion of the costs of the  indemnitee's own
         defense  shall  be  borne  by  indemnitee  in the  same  proportion  as
         comparative  liability for the claim is ultimately  apportioned  to lie
         with indemnitee.

                  (2) With  respect to any claim for which an  indemnitor  shall
         indemnify any  indemnitee,  the  indemnitor  shall be subrogated to all
         rights  of  indemnitees  against  any and all third  parties  up to the
         amount  paid  by  indemnitor  to  indemnitees  or set  off  against  an
         indemnitor.


                                       4


<PAGE>




                  (3)   Notwithstanding   anything  in  this  Agreement  to  the
         contrary,   Shareholders  shall  be  liable  to  Purchaser  under  this
         Agreement  (including,  without limitation,  under ss.ss. 1.02 and 1.03
         hereof) for any claim that would be covered by the Continuing Insurance
         or the E&O Insurance only after Purchaser has filed such claim with the
         carrier  providing  such coverage and then only to the extent that: (i)
         with respect to defense of the claim and the costs thereof,  defense of
         the  claim is not  assumed  by the  insurer;  (ii) the  insurer  denies
         coverage;  or (iii)  the  insurance  proceeds  are less  than the total
         amount of indemnified loss and expense from the claim. Without limiting
         the  generality  of the  foregoing,  no party  shall be liable for that
         portion of any claim for which the other party  actually  receives  the
         cost of  defense  or  insurance  proceeds  covering  such  claim.  (The
         deductible  pertaining to any such insurance shall not be considered to
         be cost of defense or  insurance  proceeds.)  Furthermore,  in no event
         shall Shareholders be liable for any claim that would have been covered
         by  the  Continuing   Insurance  if  Purchaser  had  maintained  it  in
         accordance with ss. 4.01.

                  (4) The indemnity  covenants contained in this Agreement shall
         inure  only  to  the  benefit  of  Purchaser,   BYA  and  Shareholders,
         respectively  (and their  respective  employees  and  successors to the
         extent they are  indemnitees),  and shall not be for the benefit of any
         other  person  or  entity.  These  indemnity  provisions  shall  not be
         construed to abrogate  the  corporate  liability  shield as provided by
         law,  to  extend a right of action  to any  third  party not  otherwise
         available,  or to enlarge the underlying liability of any indemnitor or
         indemnitee to any third party.

                  (5) Subject to (7) below, the maximum  aggregate  liability of
         Shareholders   under  this  Agreement  shall  not  exceed  the  sum  of
         $2,750,000  plus the  amounts  paid and yet to be paid under the Notes,
         the  Non-Compete  Notes and the  Contingent  Notes (the "Total  Maximum
         Purchase  Price"),  and  Shareholders  shall not be liable to Purchaser
         under this  Agreement  until and to the extent such  liability  exceeds
         $25,000 in the aggregate for all liability  other than liability  based
         upon the breach of Shareholders'  warranty under ss. 2.06B with respect
         to collectibility of accounts  receivable and  work-in-process or based
         upon breach of the covenant set forth in ss. 4.12.

                  (6)   Notwithstanding   anything  in  this  Agreement  to  the
         contrary, in no event shall Shareholders be liable under this Agreement
         for any  liabilities  quantified  and  reserved on the Closing  Balance
         Sheet.

                  (7)   Notwithstanding   anything  in  this  Agreement  to  the
         contrary,  Shareholders  shall not be  obligated  to make any  payments
         under ss.  1.02 of this  Agreement  until  January  4,  1999.  Then and
         thereafter all obligations,  if any, payable pursuant to ss. 1.02 shall
         be satisfied  first by exercise of set-off  rights under ss. 1.03 below
         and only after all  set-off  rights  have been  exhausted  against  the
         unpaid principal  balance of the Transaction Notes in the Set-Off Order
         shall Purchaser have the right to demand, and Shareholder have the duty
         to  pay,  cash in an  amount  up to the  cash  amount  paid at  Closing
         ($2,750,000), plus cash payments made in satisfaction of the


                                       5


<PAGE>




         principal  amounts  of the  Transaction  Notes.  For this  purpose  the
         principal balance of the Contingent Notes shall not be deemed to exist,
         except to the extent any portion or all of the principal  thereof is no
         longer contingent.

                  1.03  Right of Set-Off

                  A. Without limiting such other rights as it may have at law or
equity or by agreement  (but subject to the  limitations  described in ss. 1.02C
and this ss.1.03), Purchaser shall have the right upon fifteen (15) days' notice
to Shareholders and in the Payment Ratio to set off against,  and withhold from,
any payment otherwise due to Shareholders as set forth in this Agreement and the
Transaction  Notes in the Set-Off  Order:  (i) any amount  necessary  to cure or
remedy  any  breach,  default  or  deficiency  of  performance  or  warranty  by
Shareholders  under this  Agreement;  (ii) any amount for which Purchaser or BYA
(or their  employees or  successors)  is entitled to  indemnification  under ss.
1.02A; and (iii)  Purchaser's or BYA's  reasonable costs or expenses  (including
reasonable attorneys' fees) related to (i), (ii) or (iii).

                  B. Purchaser  shall have the right to redirect  temporarily as
described  below in ss. 1.03C all payments due and payable under the Transaction
Notes in the event (i) it determines in good faith with a reasonable belief that
its right to set-off has matured or will  imminently  mature with respect to any
particular matter, event or condition and, (ii) within the time limits set forth
in the following  sentence it commences and  diligently  pursues an  arbitration
proceeding  in  accordance  with ss. 7.16 below to determine  whether there is a
substantial  probability  that an event or condition  will occur or has occurred
and will cause or has caused  Purchaser  to be entitled to exercise  its set-off
rights  hereunder.  If the  parties  have a dispute  involving  the  exercise of
set-off  rights,  including  any issue as to  insurance  coverage  or  liability
exposure,  then  Shareholders  and  Purchaser  shall  within  three  (3) days of
commencement  of any such  dispute  confer in good faith in an effort to resolve
the dispute;  and if the parties are unable to reach  agreement  within ten (10)
days  following  commencement  of any such  dispute,  then such dispute shall be
resolved by binding arbitration as provided under ss. 7.16 of this Agreement.

                  C. Pending  delivery of an award in the arbitration  described
in ss.  1.03B,  Purchaser  shall  have the  right,  in lieu of  making  payments
directly  to  the  Shareholders,  to  make  all  payments  then  due  under  the
Transaction  Notes to the registry of a court,  arbitration  panel or joint bank
account  (accessible  only by the joint  signatures of Purchaser and the subject
Shareholder(s)), or otherwise as agreed in writing by the subject parties.



               II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS


                  As a  material  inducement  to  Purchaser  to enter  into this
Agreement, and subject to the following sentence,  Shareholders represent in the
Payment  Ratio,  and,  also,  Shareholders  warrant  in the  Payment  Ratio,  to
Purchaser  the truth,  correctness  and  completeness  of the matters  stated or
described  in this  Article II. The phrase "to the  knowledge  of  Shareholders"
shall be deemed to modify each and every representation given by Shareholders in
ss.ss.  2.03-2.18  of this  Article  II;  provided,  however,  that in each such
instance it shall modify and limit only the representation made by


                                       6


<PAGE>




Shareholders,  but in no way does the phrase modify,  limit or otherwise  affect
the concurrent warranty being made by Shareholders.

                  2.01  Organization and Qualification

                  A. Except as listed in Schedule  2.01A,  BYA has no subsidiary
or affiliated  corporations or business  enterprises of any type. Schedule 2.01A
sets  forth  as to BYA:  its  place  of  incorporation,  principal  place(s)  of
business,  jurisdictions in which it is qualified to do business,  and locations
in which it currently  maintains a place of business.  BYA is a corporation duly
organized,  validly existing, and in good standing under the laws of California,
with  all  requisite   power  and   authority,   and  all  necessary   consents,
authorizations,  approvals, orders, licenses,  certificates,  and permits of and
from, and  declarations and filings with, all federal,  state,  local, and other
governmental  authorities  and all courts and other  tribunals,  to own,  lease,
license, and use its properties and assets and to carry on the business in which
it is now engaged. BYA is duly qualified to transact the business in which it is
engaged and is in good standing as a foreign  corporation in every  jurisdiction
in which its ownership,  leasing, licensing, or use of property or assets or the
conduct of the business makes such qualification necessary.

                  B.  BYA  has   furnished   to   Purchaser   its   Articles  of
Incorporation and Bylaws and all amendments thereto, as presently in effect. BYA
is not in violation or breach of, or in default with respect to, any term of its
Articles of  Incorporation or Bylaws in a manner which would have a material and
adverse  effect on BYA's  business or  operations  and/or except as described on
Schedule 2.01B.

                  2.02  Capitalization

                  A. Schedule 2.02A  correctly sets forth:  (i) all  authorized,
issued and outstanding  capital stock and all ownership  interests of BYA of any
type,  including all options,  warrants or other rights under which an ownership
right of any type may be  acquired;  and (ii) the name and address of each owner
of, or claimant to, any such right. The Shares  constitute all of the issued and
outstanding  shares of capital stock of all classes of BYA.  Except as set forth
on  Schedule  2.02A,  each of such  outstanding  Shares  or  rights  is  validly
authorized,  validly issued, fully paid, and nonassessable,  has not been issued
and is not owned or held in violation of any preemptive  right of  Shareholders,
and is owned of record and  beneficially  by the  person so listed.  There is no
commitment,  plan,  arrangement to issue, option,  warrant,  security,  or other
right calling for the issuance of, any share of capital stock or other ownership
interest  in  BYA  or  any  security  or  other  instrument   convertible  into,
exercisable  for, or exchangeable  for,  capital stock of, or ownership in, BYA,
except as set forth in Schedule 2.02A.

                  B.  Schedule  2.02B sets forth,  with respect to all stock and
other  ownership  interests  or rights in BYA,  all liens,  security  interests,
pledges,  charges,  encumbrances,  Shareholders'  agreements,  voting trusts, or
other restriction or covenant respecting any such interest.  Except as set forth
on Schedule  2.02B,  all the Shares are free and clear of such  encumbrances  or
restrictions.


                                       7


<PAGE>




                  2.03  Financial Condition

                  Attached  hereto as Schedule 2.03 are true and correct  copies
of the following: (i) unaudited,  compiled balance sheets,  statements of income
and statements of retained  earnings of BYA for the last three completed  fiscal
years and (ii) the  unaudited,  compiled  balance  sheet (the  "Interim  Balance
Sheet") and  statements  of income and  retained  earnings of BYA for the period
from  January 1, 1997  through  October 31,  1997  (collectively,  the  "Interim
Financial Statements").

                  The  Interim  Financial   Statements  have  been  prepared  in
accordance with the Agreed  Accounting  Method,  are correct and complete in all
respects, and are in accordance with the books and records of BYA.

                  There is no fact presently known to BYA which could materially
and adversely affect the financial condition,  results of operations,  business,
properties,  assets, liabilities, or future business prospects of BYA, except as
otherwise  agreed in this Agreement or as recorded on Schedule 2.03 or the other
schedules  to this  Agreement  and as will be  quantified  and  reserved  on the
Closing Financial  Statements;  provided,  however, that Shareholders express no
representation  or  warranty  as to  political  or  economic  matters of general
applicability  (except as to adverse  market  conditions or client  relations of
which either has present knowledge).

                  2.04  Tax and Other Liabilities67

                  A. Except as disclosed on Schedule  2.04, or another  schedule
to this Agreement dealing with liabilities,  BYA has no liability of any nature,
accrued or contingent,  including,  without limitation,  liabilities for payroll
and other employee taxes, federal, state, local, or foreign taxes or liabilities
to customers or  suppliers,  other than  liabilities  which are reflected on the
Interim Balance Sheet or will be reflected on the Closing Balance Sheet or which
are incurred in the ordinary and usual course of business  and/or in  connection
with this transaction.

                  B.  Without  limiting the  generality  of the  foregoing,  the
amounts  reserved for taxes on the Interim Balance Sheet and the Closing Balance
Sheet are and will be as of their  dates  sufficient  for all accrued and unpaid
federal, state, local, employee-related and foreign taxes of BYA, whether or not
due and payable,  and whether or not  disputed,  under tax laws in effect on the
Closing  Date for the period  ended on such date and for all fiscal  years prior
thereto. BYA has filed all payroll and other federal,  state, local, and foreign
tax returns  required to be filed by it, has  delivered  to Purchaser a true and
correct copy thereof;  has paid all taxes,  assessments,  and other governmental
charges  payable  or  remittable  by it,  or levied  upon it or its  properties,
assets,  income,  or franchises which are due and payable;  and has delivered to
Purchaser a true and correct  copy of any report as to any audit or  adjustments
received  by BYA (or any of BYA's  officers  concerning  BYA)  from  any  taxing
authority  during the past five (5) years and a statement as to any  litigation,
governmental or other proceeding (formal or informal), or audit or investigation
pending,  threatened  or in  prospect,  with  respect to any such  report or the
subject matter of such report.


                                       8


<PAGE>




                  C. Except otherwise  provided in this Agreement,  Shareholders
have paid or will pay all taxes,  other  liabilities and Shareholders' and BYA's
expenses  accrued as of the Closing Date resulting from the  preparation  of, or
the transactions contemplated by, this Agreement.

                  D.   Purchaser   will  incur  no  liability  as  a  result  of
environmental or geotechnical conditions associated with any acts, omissions, or
real property ownership or leasing by BYA prior to the Effective Time.

                  2.05  Litigation and Claims

                  A.  Except  as set  forth on  Schedule  2.05:  (i) there is no
material  litigation,  arbitration,  claim,  governmental  or  other  proceeding
(formal or  informal),  or  investigation  pending or  threatened  (or any basis
therefor  known to  Shareholders)  with  respect to BYA or any of its  business,
properties,  or assets;  (ii) BYA is not  affected by any present or  threatened
strike, or other labor disturbance,  or is any union currently representing,  or
attempting to represent,  any employee of BYA as  collective  bargaining  agent;
(iii) BYA is not in violation of, or in default with respect to, any law,  rule,
regulation, order, judgment, or decree, including any insurance or environmental
laws or  regulations.  Schedule 2.05 sets forth with respect to BYA, among other
matters, all past and current citations,  violations, fines, judgments, decrees,
orders,  consent decrees or orders,  and pending  proceedings of any type issued
since  January 1, 1987,  arising out of the alleged  violation  of any  federal,
state or local  criminal,  bidding  or  procurement,  environmental,  health and
safety,  insurance,  licensing or labor law or regulation, or out of any alleged
act or omission, negligence, intentionally wrongful act or breach of contract in
the performance of services or otherwise.

                  B. Except for the liabilities  included on the Closing Balance
Sheet,  neither BYA,  nor  Purchaser  will incur any  liability,  including  any
environmental liability, as a result of BYA's acts, omissions, sales, litigation
support services,  consulting  services or contractual  performance prior to the
Effective Time.

                  2.06  Properties and Accounts Receivable

                  A. Except as set forth on Schedule 2.06A or Schedule 2.07, BYA
has good title to all  properties  and assets used in its business,  or owned by
it,  free and  clear  of all  liens,  mortgages,  security  interests,  pledges,
charges, and encumbrances.

                  B. All accounts receivable and work-in-process of BYA recorded
on the  interim  Balance  Sheet  are  described  on  Schedule  2.06B,  and those
reflected  on the  Closing  Balance  Sheet have or will have  arisen  from valid
transactions in the ordinary  course of BYA's  business,  have been fully earned
prior to Closing,  and except as described on Schedule 2.06B,  will be collected
by BYA within  twelve (12) months after the Closing Date,  employing  reasonable
and customary  collection  procedures  (i.e., the cost of measures such as legal
action, referral to outside collection agency or liens shall be a charge against
collections  from such accounts) and any  extraordinary  measures agreed upon as
contemplated by ss. 4.03B below. All accounts  receivable and work in process of
BYA recorded on the Interim  Balance  Sheet and the Closing  Balance Sheet as of
their dates were or will be fully earned as of the Effective


                                       9


<PAGE>




Time, and Purchaser will have no performance  obligations  for which it will not
be entitled to bill (no account receivable or work in process entry represents a
pre-billing except to the extent an allowance is reserved for it).

                  C. Schedule  2.06C sets forth a ledger of all  properties  and
assets,  owned, leased, or licensed by BYA, for which a value is recorded on the
Interim  Balance  Sheet,  detailing  estimated  value  with  respect to all such
properties  current as of the Effective  Time;  all such  properties  and assets
owned by BYA as of the date of the Interim  Balance  Sheet are  reflected on the
Interim Balance Sheet; and all assets and properties owned by BYA as of the date
of the Closing Balance Sheet will be reflected on the Closing Balance Sheet.

                  D. Except as noted on Schedule  2.06D, no real property owned,
leased, licensed, or used by BYA lies in an area which is subject to zoning use,
environmental or building code restrictions  which would prohibit,  and no state
of facts  relating  to the  condition  of any  building or property or action or
inaction  of a person or entity or the  ownership,  leasing,  licensing,  use or
regulation or any real or personal  property  exists or, to BYA's knowledge will
or is likely to exist which would  prevent  the  continued  leasing of such real
property by Purchaser  in the  business in which BYA is now  engaged.  Purchaser
will incur no environmental liability as a result of this transaction associated
with any real property owned, leased or used by BYA prior to Closing.

                  2.07  Contracts and Other Instruments

                  A. Schedule 2.07 sets forth a true and correct  listing of all
material  contracts to which BYA is a party,  including  leases and licenses and
all  supply,   distribution   agency,   financing  or  other   arrangements  and
understandings.  Shareholders  have  provided to  Purchaser,  or at  Purchaser's
election  made  available  for  its  review,  all of the  items  so  listed  and
described,  including,  but not limited to, the following:  (i) true and correct
copies of all written  contracts,  agreements,  and  instruments;  (ii) true and
correct  copies of all leases and licenses;  and (iii) true and correct  written
descriptions  of  all  supply,   distribution,   agency,   financing,  or  other
arrangements or understandings. Except as disclosed in Schedule 2.07 or Schedule
2.11,  neither  BYA,  nor any  other  party  to any  such  contract,  agreement,
instrument,  lease,  or  license  is now,  or  expects  in the  future to be, in
violation  or breach  of, or in  default  with  respect  to  complying  with any
material provision thereof and each such contract, agreement, instrument, lease,
or license is in full force and is the legal,  valid, and binding  obligation of
the parties  thereto and is enforceable as to them in accordance with its terms.
Except as is disclosed on Schedule 2.07, neither BYA, nor any other party to any
such arrangement or  understanding  has given notice of termination or taken any
action  inconsistent  with the continuance of such arrangement or understanding;
and the  execution,  delivery,  and  performance  of  this  Agreement  will  not
materially violate any such arrangement or understanding.

                  B. Except for  situations  disclosed on Schedule 2.07B and for
the cost of correction of which an adequate  reserve is, or will be, recorded on
the Interim  Balance Sheet (except for those  incurred in the ordinary and usual
course of business) and the Closing  Balance Sheet as a liability:  all services
rendered and products supplied by BYA prior to the Effective Time will have been
in conformity with the scope of performance defined by the


                                       10


<PAGE>




contract or arrangement;  and no BYA client is dissatisfied with such service or
products,  and, no curative or  corrective  work,  replacements  or payments are
necessary to render such performance legally or contractually  sufficient;  and,
all costs for performance completed prior to Closing shall have been and will be
duly recorded as of their respective dates as liabilities on the Interim Balance
Sheet (except for those  incurred in the ordinary and usual course of business),
and the Closing  Balance Sheet.  Billings by BYA on each contract or arrangement
shall not, as of the Effective  Time, have  constituted a greater  percentage of
total  allowable  billings  under  such  contract  than the  percentage  of work
performed,  or other  costs  accrued  prior to the  Effective  Time,  shall have
constituted,  of total work to be performed, or costs to be incurred, under such
contracts.  Except as so disclosed, no contract entered into by BYA prior to the
Effective Time will be a "Loss  Contract."  "Loss Contract" means a contract for
which fully-burdened costs to be incurred after the Effective Time in completing
the contract,  utilizing performance at industry standards of skill,  efficiency
and competence billable at Purchaser's  standard rate, exceeds amounts remaining
to be billed under such contract after the Effective Time.

                  C. Schedule 2.07C sets forth a description of each  agreement,
or  understanding  entered into, by any  Shareholders  or BYA as a condition for
obtaining any consent, authorization,  approval, order, license, certificate, or
permit required for the  consummation of the  transactions  contemplated by this
Agreement.

                  D. Schedule  2.07D sets forth a list of BYA's order backlog as
of the Effective Time. This schedule includes the customer's name, project name,
dollar amount and  anticipated  performance  dates.  The backlog items listed on
such  schedule  represent  written  commitments  or  expressions  of interest by
customers for the performance of services by BYA.

                  F. BYA enjoys  peaceful and undisturbed  possession  under all
leases and licenses under which it is operating.  BYA is not a party to or bound
by  any  contract,  agreement,   instrument,  lease,  license,  arrangement,  or
understanding, or subject to any charter or other restriction, which has had, or
to the  knowledge  of BYA is likely in the future to have,  a  material  adverse
affect on BYA's operations or business.  BYA has neither engaged within the last
five years in, is engaging  in, nor intends to engage in any  transaction  with,
nor has had  within  the last  five  years,  now  has,  or  intends  to have any
contract,  agreement,  lease, license,  arrangement,  or understanding with, any
Shareholders,  any  director,  officer,  or  employee  of BYA,  any  relative or
affiliate of any Shareholders or of any such director,  officer, or employee, or
any other corporation or enterprise in which BYA, any such director, officer, or
employee,  or any such relative or affiliate  then had or now has a five percent
(5%) or greater equity or voting or other substantial interest,  other than such
contracts and  agreements as so listed and  specified on Schedule  2.07E.  There
exists no contract,  agreement,  right or understanding material to the business
or officers  of BYA which is in the name of any  principal,  officer,  director,
Shareholders or any other person or entity other than Seller except as disclosed
and so identified on Schedule 2.07F.  Shareholders,  on behalf of themselves and
as  authorized  representatives  of  the  lessor  of  the  premises  in  Irvine,
California in which BYA maintains its  principal  office,  hereby  represent and
warrant that the lease for such  premises is in full force and effect,  rent has
been paid  through  November  1997 and BYA does not owe or has not  incurred any
unpaid debt or liability to said lessor, and said lessor hereby consents to the


                                       11


<PAGE>




change of control of BYA and the deemed  assignment  thereby of said lease.  The
foregoing  sentence  is not  intended  to  expand  any  duty  or  obligation  of
Shareholders otherwise provided for in this Agreement.

                  2.08  Employees

                  A.  Schedule  2.08A sets forth a  description  of all of BYA's
pension,  profit-sharing,  option,  other incentive  plans, or any other type of
employee  benefit plan (as defined in Section  3(3) of the  Employee  Retirement
Income  Security Act of 1974  ("ERISA")),  and all material  obligations  to, or
arrangements with, employees for wages, salary, bonuses, incentive compensation,
vacations,  severance pay, insurance,  or other benefits. BYA has furnished,  or
made available, to Purchaser true and correct copies of all documents evidencing
such plans,  obligations  or  arrangements  referred  to in  Schedule  2.08A (or
written summaries of such plans, obligations,  or arrangements to the extent not
evidenced by documents) and true and correct copies of all documents  evidencing
trusts  relating to any such plans.  Schedule  2.08A includes a true and correct
ledger  containing the name,  position/title,  and present rate of  compensation
(whether  in the form of salary,  bonuses,  commissions,  or other  supplemental
compensation now or hereafter  payable) of each director,  officer,  employee or
sales agent of BYA. All material  notices and  performance  required under COBRA
and other ERISA plans prior to the Effective  Time have been properly  given and
performed. Except for BYA's pension plan, all obligations, debts and liabilities
associated with BYA's employees or agents, including all of the above-referenced
matters have been paid or discharged  in full by BYA prior to Effective  Time or
will be properly reflected as liabilities on Closing Balance Sheet in accordance
with ss. 2.03.

                  B.  Except  as  described  on  Schedule  2.05,   there  is  no
litigation,  arbitration,  claim,  governmental or other proceedings  (formal or
informal),  or investigation  pending, or to Shareholders'  knowledge threatened
(or any basis for such known to Shareholders), with respect to any such employee
benefit plan,  compensation  arrangement or BYA's acts or omissions with respect
to its employees or its work environment.

                  C.  Except  for  BYA's   pension   plan  and  except  for  the
liabilities  recorded on the Closing  Balance Sheet,  neither BYA, nor Purchaser
will incur any  liability  to, or on behalf of, BYA's  employees  arising out of
their  employment  with BYA prior to the Effective  Time or out of BYA's acts or
omission  prior  to the  Effective  Time,  including  (but not  limited  to) any
liability  under  ERISA or the  Internal  Revenue  Code for  obligations  to, or
arrangements with, employees for wages, salary, bonuses, incentive compensation,
vacation pay, severance pay, insurance or other benefits, or employee taxes; for
personal  injury or  property  damage;  or for  discrimination,  harassment,  or
wrongful discharge under federal, state or local laws.

                  2.09  Patents, Trademarks, Etc.67

                  Except as described in Schedule 2.09, BYA neither owns nor has
pending,  or is licensed  under,  any  patent,  patent  application,  trademark,
trademark application, trade name, service mark, copyright,  franchise, or other
intangible  property  or  asset  (all  of  the  foregoing  being  herein  called
"Intangibles"), and neither any Shareholder, any director, officer, or


                                       12


<PAGE>




employee of BYA, any relative or  affiliate of any  Shareholders  or of any such
director, officer, or employee, nor any other corporation or enterprise in which
any Shareholders,  any such director, officer, or employee, or any such relative
or affiliate  had or now has a five percent (5%) or greater  equity or voting or
other  substantial  interest,  possesses  any  Intangible  which  relates to the
business  of BYA.  There is no right,  under any  Intangible,  necessary  to the
business of BYA as presently conducted or as it contemplates conducting. BYA has
neither  infringed,  is infringing,  nor has received  notice of infringement of
Intangibles  of  others.  As  far  as  Shareholders  can  foresee,  there  is no
Intangible  of others  which  may  materially  adversely  affect  the  financial
condition, results of operations,  business, properties, assets, liabilities, or
future prospects of BYA.

                  2.10  Questionable Payments

                  Neither  BYA,  nor any  director,  officer,  agent,  employee,
Shareholders or other person  associated  with, or acting on behalf of, BYA has,
directly or indirectly: (a) used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity,
(b) made any unlawful payment to foreign or domestic  governmental  officials or
employees  or to  foreign  or  domestic  political  parties  or  campaigns  from
corporate funds; (c) violated any provision of the Foreign Corrupt Practices Act
of 1977,  (d)  established  or  maintained  any unlawful or  unrecorded  fund of
corporate monies or other assets;  (e) made any false or fictitious entry on the
books or records of BYA; (f) made any bribe, rebate, payoff,  influence payment,
kickback,  or other unlawful  payment;  (g) given any favor or gift which is not
deductible for federal income tax purposes; or (h) made any bribe,  kickback, or
other payment of a similar or comparable  nature,  whether lawful or not, to any
person or  entity,  private  or public,  regardless  of form,  whether in money,
property,  or services, to obtain favorable treatment in securing business or to
obtain  special  concessions,  or to pay for  favorable  treatment  for business
secured or for special concessions already obtained.

                  2.11  Authority to Sell

                  Shareholders and BYA have all requisite power and authority to
execute,   deliver,   and  perform  this  Agreement.   All  necessary  corporate
proceedings  of BYA have been,  or as of the Closing  Date will have been,  duly
taken to authorize the execution, delivery, and performance of this Agreement by
BYA.  This  Agreement  has been duly  authorized,  executed,  and  delivered  by
Shareholders,   constitutes  the  legal,   valid,  and  binding   obligation  of
Shareholders, and, except for the duration of the noncompetition covenant of Mr.
Yen in ss. 4.04 hereof,  is enforceable as to them in accordance with its terms.
No consent,  authorization,  approval, order, license, certificate, or permit of
or from, or  declaration  or filing with, any federal,  state,  local,  or other
governmental   authority  or  any  court  or  other   tribunal  is  required  by
Shareholders  for the execution,  delivery,  or performance of this Agreement by
them.  Except as described in Schedule  2.11 hereof,  no consent of any party to
any material contract,  agreement,  instrument,  lease, license, arrangement, or
understanding  to which BYA or  Shareholders is a party, or to which it or they,
or any of its or their  properties or assets,  are subject,  is required for the
execution,  delivery,  or performance of this Agreement (except such consents as
have been obtained at or prior to the date of this  Agreement,  true and correct
copies of which  have been  delivered  to  Purchaser).  Except as  described  in
Schedule 2.11, the execution, delivery,


                                       13


<PAGE>




and performance of this Agreement will not violate,  result in a material breach
of,  conflict  with,  or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call a default under any term of
any such  contract,  agreement,  instrument,  lease,  license,  arrangement,  or
understanding,  or  materially  violate or result in a breach of any term of the
Articles of Incorporation  or Bylaws of BYA, or violate,  result in a breach of,
or conflict with, any law, rule, regulation,  order, judgment, or decree binding
on BYA or any  Shareholders,  or to  which  any of their  operations,  business,
properties, or assets are subject. Upon Closing,  Purchaser will have good title
to the  Shares,  free  and  clear of all  liens,  security  interests,  pledges,
charges,  Shareholders'  agreements,  and  encumbrances  except  those,  if any,
expressly consented to by Purchaser in writing.

                  2.12  Restricted Professional
                      and Small Business Set-Aside Revenues

                  Schedule 2.12 sets forth the gross revenues of BYA for each of
the  previous  two (2) fiscal  years and for the period  covered by the  Interim
Financial Statements, received from: (a) services of any type which BYA would be
precluded from performing after Closing because of Purchaser's  ownership of the
Shares,  Bylaws or  regulations  pertaining  to the  licensing or  regulation of
persons or  corporations  engaging in such  business;  or, (b) from contracts or
subcontracts (or services otherwise performed) under Small Business Set Aside or
comparable business size or racial, gender or other class-restricted programs of
the Small Business Administration or other federal or state agency.

                  2.13  Loans to be Repaid

                  BYA  has  not  made  any  loans  to  Shareholders,   officers,
directors,  employees  or any other  affiliated  person or entity other than the
loans set forth on Schedule 2.03 or 2.07.

                  2.14  Fictitious Names

                  Schedule  2.14 sets forth each name,  other than its corporate
name,  under which BYA has done  business  or  registered  in any  jurisdiction,
together with the jurisdiction of registration of each such name.

                  2.15  Absence of Undisclosed Liabilities

                  Except  as set forth in the  Schedules  to this  Agreement  or
incurred  in the usual and  ordinary  course of  business,  and  quantified  and
reserved on the Closing Balance Sheet,  BYA has no obligations or liabilities of
any  kind,  fixed,  accrued  or  contingent,  including,  but  not  limited  to,
obligations to perform after Closing under contracts or other  commitments which
would adversely affect BYA's financial condition or business.

                  2.16  Hazardous Materials

                  A. Except as disclosed on Schedule 2.16A, as of the Closing
Date BYA is not in possession of, or responsible for the care, custody or
disposal of, any hazardous substances, pollutants or contaminants (as those
terms are defined in 42 U.S.C. ss. 9601 or under any


                                       14


<PAGE>




applicable state or local law) or of any petroleum wastes or asbestos-containing
materials,  except for soil or groundwater samples,  unused laboratory chemicals
or commercially packaged supplies used in BYA's business.

                  B. In BYA's files,  books and records are materially  complete
descriptions  of all  laboratory  samples  upon which  work has been  completed,
including  the  location,  composition,  quantity,  method of storage,  intended
disposal  or  management  plan  for the  particular  material,  any  contractual
commitments  related  to  continuing  custody,  and all costs  related  to BYA's
responsibilities thereto.

                  2.17  Completeness of Disclosure

                  No   representation   or  warranty  by  Shareholders  in  this
Agreement  contains any materially untrue statement of a material fact, or omits
or will omit, to state a material fact necessary to make the statements made not
misleading.

                III. REPRESENTATIONS AND WARRANTIES OF PURCHASER

                  As a material  inducement to  Shareholders  to enter into this
Agreement, Purchaser hereby makes the following representations and warranties:

                  3.01  Organization And Good Standing

                  Purchaser is a corporation duly organized,  validly  existing,
and in good standing under the laws of the State of Delaware with full power and
authority to enter into and perform  each of the  transactions  contemplated  by
this Agreement.

                  3.02  Execution and Performance Authorized

                  The execution, delivery and performance of this Agreement, and
all other documents and Related  Agreements  contemplated  hereunder,  have been
duly  approved by  Purchaser's  board of directors and at Closing will have been
executed and delivered by Purchaser's duly authorized  officers.  Such execution
and delivery, and the consummation by Purchaser of the transactions contemplated
hereunder have been duly authorized by all necessary  corporate  action,  and no
further action is required by law, its corporate  charter,  Bylaws, or otherwise
to authorize all action to be taken by Purchaser  with respect to this Agreement
and the consummation of the transactions  contemplated hereunder.  The Agreement
and the other documents  contemplated  hereunder are binding and are enforceable
against Purchaser in accordance with their terms.


                                       15


<PAGE>




                  3.03  Absence of Litigation

                  Except  as set forth on  Schedule  3.03,  there is no  action,
lawsuit,  proceeding,  or  investigation  of  any  kind  or  nature  pending  or
threatened  against  Purchaser  before any court,  tribunal,  or  administrative
agency or board  which  Purchaser  reasonably  expects,  individually  or in the
aggregate, to materially and adversely affect (i) Purchaser's solvency, (ii) its
ability  to  perform  hereunder,  or  (iii)  to  render  any  one or more of the
transactions contemplated hereunder void or voidable.

                  3.04  No Other Default

                  The execution and delivery of this Agreement by Purchaser, and
the consummation of the transactions  contemplated hereunder,  will not conflict
with,  or  violate,  or require any  consent  under,  and will not result in any
breach or termination of Purchaser's  corporate charter,  Bylaws or minutes,  or
any agreement to which  Purchaser is a party, or by which any of its property is
subject, or by which it is bound.

                  3.05  Permits and Filings

                  There is no  requirement  applicable  to Purchaser to make any
further filing with, or to obtain any permit, authorization, consent or approval
of any governmental or other  regulatory  authority as a condition of the lawful
consummation of the transactions contemplated under this Agreement.

                  3.06  Absence of Lien

                  The monies and  promissory  notes to be paid or  delivered  by
Purchaser under ss. 1.01 shall be paid by Purchaser and received by Shareholders
free and clear of any lien,  charge or encumbrance  arising out of any agreement
or  instrument  to which  Purchaser  is subject or by which its  properties  are
bound.

                  3.07  Solvency

                  At Closing and after payment of the purchase price as required
under ss. 1.01, Purchaser will be, and will remain, solvent under all applicable
federal and state laws and regulations.  Purchaser will not intentionally  cause
its business to be conducted in a manner that results in its becoming insolvent;
provided,  however, that consistent with the foregoing,  this covenant shall not
restrict the future  business  decisions of Purchaser  which relate to its or to
BYA's business.

                  3.08  Corporate Documents

                  Purchaser has furnished to  Shareholders  its  Certificate  of
Incorporation and a Certificate of Good Standing in Delaware dated within thirty
(30) days of Closing and  evidence  of  Purchaser's  qualification  as a foreign
corporation in California.


                                       16


<PAGE>




                  3.09  Purchase for Investment Purposes Only

                  Purchaser  is  acquiring  the  Shares  from  Shareholders  for
investment  purposes  only and not with the view to the  resale or  distribution
thereof. Purchaser is an "accredited investor" under the regulations promulgated
under the  Securities  Act of 1933 as amended.  Purchaser  has not  received any
representations  or  warranties  from  BYA  or  Shareholders  other  than  those
contained in this Agreement and the attached  schedules  and/or exhibits hereto.
Purchaser  represents  and warrants that it has such knowledge and experience in
financial  and business  matters as to be capable of  evaluating  the merits and
risks of its investment.  Purchaser understands and acknowledges that the Shares
have not been registered under the Act or under any state securities acts as may
be  applicable  and are being sold to Purchaser  pursuant to an  exemption  from
registration  under said Act.  Shareholders'  reliance upon such  exemption,  is
predicated upon Purchaser's  representations and warranties contained herein. In
this regard,  Purchaser  understands and agrees that there may be affixed to the
certificates  representing  the Shares a legend  advising  of the  unregistered,
restricted nature of the Shares.

                  3.10  Reliance on ATC Public Information

                  The  information  filed since  February 27, 1997, by Purchaser
with the Securities and Exchange  Commission  pursuant to Section 13 or 15(d) of
the Securities  Exchange Act of 1934 are materially  accurate,  complete and not
misleading.

                  3.11  Springing Representation and Warranty

                  The  information  set forth in the draft Offering  Memorandum,
subject to completion, with respect to $100,000,000 in Senior Subordinated Notes
due 2007, in the form attached hereto as Exhibit 3.11-A and  supplemented by the
information attached hereto as Exhibit 3.11-B is materially  accurate,  complete
and not  misleading.  The merger (the  "Acquisition  Merger") of  Purchaser  and
Acquisition  Corp.,  a  Delaware   corporation  referred  to  in  said  Offering
Memorandum, shall not be completed prior to January 3, 1998.

                                  IV. COVENANTS

                  4.01  Insurance

                  For a period of at least  three (3) years  following  Closing,
Purchaser shall cause BYA to continue to carry  insurance  against risks similar
to that provided in BYA's insurance  coverage as of the date of Closing and with
coverage  limits not less than  $10,000,000  and a  deductible  not greater than
$250,000 (the  "Continuing  Insurance").  Prior to or  concurrent  with Closing,
Shareholders  shall  purchase and maintain in force an extended  period of BYA's
current Errors and Omissions  (Professional)  Liability Policy ("E&O Insurance")
for a period of three (3) years following Closing.


                                       17


<PAGE>




                  4.02  Release by Shareholders

                  Effective at Closing,  each  Shareholder  hereby  releases and
waives  all  claims  he  now  has  against  BYA,  or the  Shares  for  any  past
compensation, bonus, distribution, dividend, or other consideration or claim for
payment from any cause that may have otherwise been due such Shareholders at the
time of Closing,  except  that Glenn  Tofani does not waive his right to payment
under the BYA 401(k) profit sharing plan and neither of the Shareholders  waives
any right to payment under BYA's pension plan.

                     4.03 Collection of Accounts Receivable

                  A. Any account  receivable  recorded  on the  Closing  Balance
Sheet or work in process for which  revenue is  recorded on the Closing  Balance
Sheet and warranted as collectible under ss. 2.06B, which has not been collected
by  Purchaser  within  twelve (12) months after  Closing,  shall be deemed to be
uncollected  and  uncollectible  by Purchaser or BYA,  except as Purchaser shall
otherwise  agree in  writing.  Accounts  or  work-in-process  may also be deemed
uncollectible  by  agreement  of the  parties  as  provided  in ss.  4.03B.  All
uncollected accounts and work-in-process shall be subject to Purchaser's set-off
rights  under ss. 1.03 (or,  if set-off is not  available,  then by  Purchaser's
indemnification and repayment rights under ss. 1.02). Purchaser's set-off rights
shall be applicable for  uncollected  accounts or work in process at the earlier
of: (i) twelve (12) months after the Closing Date; or, (ii) such earlier time as
the account is agreed to be uncollectible  by Shareholders  under this ss. 4.03.
Upon such remedy, the account shall be assigned to Shareholders.

                  B. Purchaser shall provide  Shareholders  with a monthly aging
report of the purchased accounts receivable and  work-in-process,  together with
contact log summary of problem accounts.  If, at any time,  Purchaser determines
that measures in addition to Purchaser's  customary collection procedures (e.g.,
measures,  such as  mechanics  lien,  legal  action,  or referral to  collection
agency) should be employed on a specific account to obtain collection, Purchaser
shall notify  Shareholders  in writing of the measures  proposed to be taken. If
Shareholders agree in writing that the proposed extraordinary measures should be
taken, or if Shareholders  deem such action to be necessary  without notice from
Purchaser,  Shareholders shall notify Purchaser in writing of their agreement to
such  measures.  Shareholders'  agreement  to the  employment  of  extraordinary
collection  measures shall constitute their agreement to having the cost of such
measures  subject to remedy by set-off  or refund,  if set-off is not  available
pursuant to this Agreement.

                  C. At any time the parties may, by mutual  written  agreement,
deem an account  uncollectible,  Purchaser shall assign it to  Shareholders  and
subject it to remedy under ss. 1.03 or, if set-off is not available, a claim for
refund  under ss. 1.02.  Upon  written  notice to  Purchaser,  Shareholders  may
request  to have  any  account  receivable  which  is  uncollected  assigned  to
Shareholders.  Purchaser shall not unreasonably deny such request.  Such request
by  Shareholders  for assignment  shall  constitute  Shareholders'  agreement to
subject it to remedy under ss. 1.03 or, if set-off is not available, a claim for
refund under ss. 1.02.


                                       18


<PAGE>




                  4.04  Noncompetition

                  A. As consideration  for the Notes, the Non-Compete  Notes and
the Contingent  Notes,  for a period of twenty (20) years after Closing Date Mr.
Yen shall not,  and for a period  commencing  on the Closing Date and ending two
(2) years after the Closing Date, Mr. Tofani shall not:

                  (1) Noncompetition. Within the regulated zone, either directly
         or  indirectly,  perform-for-hire  or  participate  in any  business or
         enterprise (including a sole proprietorship  consisting of only Messrs.
         Yen or Tofani),  which  performs the same or similar  services in which
         BYA has been engaged  within one (1) year prior to the Effective  Time,
         other than for BYA or Purchaser, without the express written consent of
         Purchaser.  The "regulated zone" means Orange,  Los Angeles,  San Diego
         and  Ventura  Counties.  The  services  which BYA has been  performing,
         within one (1) year prior to the  Effective  Time  include (but are not
         necessarily limited to): all specialties and subspecialties  associated
         with  any  and  all   geotechnical  and   environmental   services  and
         capabilities.

                  (2)   Nondisclosure.   Use  for  his  benefit,   or  disclose,
         communicate or divulge to, or use for the direct or indirect benefit of
         any  person,  firm,  association  or  company  other  than  BYA  or its
         affiliates,   any  confidential   information  regarding  the  business
         methods,  business  policies,  procedures,   techniques,  research,  or
         development projects or results, trade secrets, customers,  clients, or
         any other  confidential  information  relating to, or dealing with, the
         business operations of BYA, Purchaser or their affiliates.

                  (3)   Nonsolicitation   -   Employees.   Either   directly  or
         indirectly,  for  himself  or any  person or entity  other  than BYA or
         Purchaser  hire or induce or attempt to induce any  employee  or former
         employee  of BYA,  Purchaser  or their  affiliates  to  terminate  such
         employment. An "employee" shall be considered a "former employee" for a
         period of one (1) year following  termination  of employment  with BYA,
         Purchaser or their affiliates.

                  (4)  Nonsolicitation  - Customers.  Within the regulated zone,
         and  with  respect  to  any  customer  with  whom  he has  developed  a
         relationship,  or  about  whom  he  acquired  knowledge  of its  needs,
         preferences, pricing or other information of material competitive value
         while  associated  with BYA,  within  any  location  where  anyone  BYA
         performed  services  for  or  sent a  proposal  to is  doing  business:
         directly or indirectly,  on behalf of himself or any third parry,  make
         any sales  contact  with,  or solicit,  or accept  business  from,  any
         customers, provided, however, that this restriction shall apply only to
         products or services which are competitive with those of BYA within one
         (1) year prior to the Effective Time.

                  (5) Use of Names.  Within the regulated  zone,  except for the
         benefit of BYA, Purchaser, or their affiliates,  use the name "Bing Yen
         &  Associates"  or  "BYA"  or  any  customarily   utilized  portion  or
         abbreviation thereof as a business name, either


                                       19


<PAGE>




         alone,  or in  conjunction  with,  other  words,  or  represent  to any
         potential  client  that they are the "old" or "real"  BYA or Bing Yen &
         Associates.

                  B.  Except as  otherwise  defined in this  section,  or as the
context otherwise  plainly  requires,  terms used in this section shall have the
same meaning as elsewhere in this  Agreement.  Undefined  terms shall have their
ordinary meaning.  The term "participate in" means "directly or indirectly,  for
his or their own benefit,  or for,  with, or through any other person or entity,
own, manage,  operate,  control, loan money to, give money to, or participate in
the ownership  (except as a  noncontrolling  owner of less than 5 percent of the
stock of a publicly held corporation),  management, operation, or control of, or
be connected as a director,  shareholder,  officer,  employee,  partner, member,
advisor, joint venturer, consultant, agent, independent contractor, or otherwise
with, or acquiesce in the use of his name in."

                  C. Messrs. Yen and Tofani agree that the restrictive covenants
of this ss. 4.04 are  reasonable  in scope and  duration  and are  necessary  to
protect the bona fide confidential  business  information of BYA, its contracts,
its customer and employee relationships, its assets, its good will and the value
of the Shares.  They expressly  agree that the customer names and other customer
and business information,  both developed by BYA before Closing, or developed by
BYA or Purchaser after Closing, is proprietary, and Messrs. Yen and Tofani agree
that a breach of any of these  provisions  will be subject to ss.ss.  1.03, 7.03
and 7.16 of this Agreement.

                  D. If any  restrictive  covenant  contained  in this ss.  4.04
shall  be  deemed  by  a  court  or  arbitrator  to  be  invalid,   illegal,  or
unenforceable  under the laws of any  jurisdiction,  by  reason  of the  extent,
duration,  or  geographical  scope  thereof or  otherwise,  the  balance of this
section shall remain in effect in such  jurisdiction,  and the entire  agreement
shall remain in effect in all  jurisdictions  in which such  provision is lawful
and enforceable.  If any such provision is unenforceable as to any circumstance,
it shall nevertheless remain applicable to all other circumstances. The court or
arbitrator shall be authorized to reform such provision by reducing such extent,
duration, geographical scope, or other provisions hereof, or otherwise modifying
or limiting  such  provision  to the  minimum  extent  necessary  to render such
provision  enforceable,  and in its  reformed  form  such  restriction  shall be
enforceable in the manner contemplated hereby.

                  E. The covenants,  restrictions  and limitations  imposed upon
Messrs.  Yen and Tofani  under this ss.  4.04 are  conditioned  upon,  and shall
remain in effect,  only so long as there shall be no failure by  Purchaser,  its
successors and assigns,  to make any one or more of the payments as and when due
and within any applicable  grace periods under the Transaction  Notes,  provided
that  Purchaser's  recourse  to the  set-off  provisions  of ss.  1.03 or to any
provision  of law which  permits a party to  withhold  performance  following  a
material  first  breach by the other  parry  shall not  constitute  breaches  or
violations  of  this  Agreement  under  this  paragraph.  Without  limiting  the
generality of the foregoing,  any breach by a Shareholder of this ss. 4.04 shall
be subject to  arbitration  as provided in ss. 7.16 to  determine  the extent of
damage  suffered by Purchaser  and/or BYA and the  application of all applicable
indemnification and set-off rights under ss.ss. 1.02 and 1.03 hereof.


                                       20


<PAGE>




                  F.  Nothing  contained  in this ss. 4.04 shall be construed to
prohibit  Shareholders from teaching in, or otherwise being retained or employed
by, a university,  college or high school to teach geotechnical,  environmental,
engineering and related subjects.

                  4.05  Public Statements

                  Before  Shareholders,  or either  of them  shall  release  any
information  concerning this Agreement or the transactions  contemplated by this
Agreement which is intended for, or may result in, public dissemination thereof,
they shall  cooperate with  Purchaser,  shall furnish drafts of all documents or
proposed oral  statements  to Purchaser for comments,  and shall not release any
such statement or information without the written consent of Purchaser.  Nothing
contained herein shall prevent  Shareholders  from furnishing any information to
any governmental authority, if required to do so by law.

                  4.06  Books, Records, Access to Information, Cooperation

                  A. Each party  shall  provide to the  other,  with  reasonable
promptness  following a request in writing not to exceed ten (10) business days,
such  information  and data  with  respect  to (1)  BYA's  business  before  the
Effective   Time,   (2)  this   transaction   and  (3)  the   parties'   ongoing
representations,  warranties,  covenants and agreements after the Effective Time
pursuant to this Agreement,  as may from time-to-time reasonably be requested by
the other party. In the event either  Purchaser,  or any Shareholder is required
to prepare  audited  statements,  or to produce  or  compile  information  for a
government  agency  which  requires  access  to  information  or for  any  other
reasonable  purpose,  including the verification of any information  provided to
the other party  relative to this  Agreement,  the parties shall allow the other
party reasonable access to records,  including the nonproprietary working papers
of  the  other  party's  accountants,  and  to  provide  reasonable  cooperative
assistance in the preparation of reports, documents, etc. without charge, except
for reimbursement of any actual out-of-pocket expenses, exclusive of the cost of
in-house staff time.  Notwithstanding  the foregoing,  in the event that a party
is, or anticipates  becoming, a party to litigation,  this ss. 4.06 or any other
provision  of this  Agreement  shall not be  construed  to require such party to
provide  information  to the other which could  prevent such party from making a
bona fide claim of attorney/client  privilege or such other privileges as may be
applicable with respect to such information.

                  B.  Except  for  archived  job  files,   neither  party  shall
intentionally dispose of or destroy any of the records of BYA in its possession,
except in conformity  with the procedures set forth in this section.  If a party
wishes to dispose of or destroy any of such records,  it shall first give thirty
(30) days' prior  written  notice to the other party of the action it intends to
take, and the other party shall have the right, at its option and expense,  upon
prior written notice to the notifying  party within such thirty-day  period,  to
take possession of such affected  records within thirty (30) days after the date
of the notice of intent to take possession.

                  C. Each  party  shall  exercise  reasonable  care in the care,
custody and maintenance of the records of BYA in its  possession.  A party shall
be  responsible  for actual damage caused to the other party only as a result of
its negligence or intentionally wrongful act in maintaining


                                       21


<PAGE>




the records.  Neither party shall have liability to the other party or any other
person as a  consequence  of the  nonexistence  of any record,  or such  party's
inability to locate any record,  unless the loss or destruction of the record is
proven, by clear and convincing  affirmative  evidence,  to have been due to the
allegedly possessing party's negligence or intentionally wrongful act.

                  4.07  Bankruptcy

                  For a period of one (1) year after  Closing,  no party to this
Agreement shall file an application or petition for voluntary  bankruptcy  under
the United States  Bankruptcy Code or any application under any similar state or
federal statute.

                  4.08  Transaction Costs and Expenses

                  Purchaser,  on the one hand, and  Shareholders  and/or BYA, on
the other hand,  shall each pay or cause to be paid their own  respective  costs
incurred in connection with this transaction, including, without limitation, all
brokerage,   finders,  legal,   accounting,   auditing  and  appraisal  fees  in
negotiating  and  preparing  this  Agreement  and in  consummating,  closing and
carrying out the transactions  contemplated  hereby.  Any costs to be charged to
BYA shall be included on the Closing  Balance  Sheet and  included in the Equity
Value determination.

                  4.09  Delivery of Property

                  Purchaser and  Shareholders  shall each use their best efforts
to avoid opening mail or  deliveries  which  rightfully  belong to the other and
shall  turn over to the other any  property  received  by the  party,  including
checks or money,  belonging  to the other  within  twenty-four  (24) hours after
determining its rightful ownership.

                  4.10  Related Agreements

                  Mr. Tofani and BYA shall execute and deliver at Closing the
Related Agreements referenced in ss. 5.01 which require execution by them in
accordance with their terms.

                  4.11 Continuing Cooperation, Reporting of Changes, Breaches
                       and Status

                  The parties shall cooperate in good faith following Closing to
secure  to each  other the  benefits  and  performance  to be  provided  by this
Agreement  and to promptly  execute such  documents or  instruments  as shall be
reasonably  requested by another party, without charge, to that end. At any time
or times on or after Closing,  Shareholders,  BYA, and Purchaser  shall execute,
acknowledge,  and  deliver  any  and  all  further  assurances,  documents,  and
instruments reasonably requested by the other in order to effectively convey the
Shares  and all  ownership  thereof  free  and  clear of  encumbrances  or title
defects,  except as expressly  authorized herein and shall take any other action
consistent  with the terms of this Agreement that may reasonably be requested by
the other party in order to effectuate the purposes and intent hereof.  Promptly
after becoming aware,  the parties shall each advise the other in writing of (i)
the  occurrence  of any  event  which  renders  any of  the  representations  or
warranties set forth herein inaccurate in


                                       22


<PAGE>




any  material  respect,  and (ii) the  failure  of the party to  comply  with or
accomplish  any of the covenants or agreements  set forth herein in any material
respect.

                  4.12  Profit Sharing Plan

                  Shareholders assume all cost, expense and liability for
correcting any underfunding of BYA's pension plan. Shareholders waive any and
all statutes of limitation with respect to this covenant. The limitations
imposed by ss.ss. 7.04 and 1.02C(5) shall not apply to this section ss. 4.12.

                  4.13  Cooperation Regarding Contingent Achievement

                  A.  Until  an  average  of  at  least  Three  Million  Dollars
($3,000,000)  in  "Net  Revenue"  in any  one or more  twelve-month  period  (as
described in the Contingent Notes) has been achieved (the "Net Revenue Target"),
or three (3) years after the Closing  Date has passed,  whichever  occurs  first
(collectively,  the "Achievement  Period"),  Purchaser shall cause Mr. Yen to be
employed as BYA's  president  and CEO at an annual  salary of One Hundred  Forty
Thousand  Dollars  ($140,000).  In such  capacities  Mr.  Yen  shall  report  to
Purchaser's president, or, in his absence, Purchaser's president's designee. BYA
shall pay to Mr.  Yen for a period  of three (3) years so long as Mr.  Yen is an
employee  of  BYA,  $300  per  month  as a car  allowance.  Notwithstanding  the
foregoing,  Mr. Yen's  employment  as BYA's  president and CEO is subject to the
provisions of ss. 4.13B. During the Achievement Period, Purchaser covenants that
it shall not, and that it shall cause BYA's board of directors to not, interfere
with BYA's business or business operations as conducted by Mr. Yen and the other
BYA officers, including, without limitation,  efforts to achieve the Net Revenue
Target,  as long as such  business and business  operations  are  conducted in a
manner  which is  consistent  with BYA's  past  practices.  Notwithstanding  the
foregoing  provisions  of this ss.  4.13A,  Mr.  Yen  agrees  that all fixed fee
contracts  over $150,000 and other  contracts  estimable in good faith to exceed
$150,000  must be approved by the  president  of  Purchaser  or the  president's
designee,  which approval shall not be unreasonably withheld or delayed. Without
limiting the general applicability of ss. 7.03 below, Purchaser acknowledges the
applicability of said ss. 7.03 to this ss. 4.13.

                  B. Notwithstanding the foregoing provisions of this ss. 4.13A:
(1) Mr. Yen's  employment with BYA shall be on an "at will" basis  terminable by
BYA or by Mr. Yen at any time without  affecting the terms and conditions of the
Contingent Notes; provided, however, that upon any noncompliance by Purchaser of
its covenants under ss. 4.13A, or termination by BYA of Mr. Yen's employment for
reasons other than as described in ss. 4.13(B)(2) or for Mr. Yen's noncompliance
with ss. 4.13C(1),  the entire unpaid maximum principal amount of the Contingent
Notes shall be immediately  paid to Shareholders  irrespective of whether or not
the Net Revenue Target has been  achieved;  and (2) should Mr. Yen die or become
disabled  for a  period  of six  (6)  or  more  consecutive  months  during  the
Achievement  Period,  he and his beneficiaries and heirs shall still be paid the
entire unpaid principal  amount due to him under the Contingent  Notes, but only
if and when owed thereunder.


                                       23


<PAGE>




                  C.  Notwithstanding the foregoing provisions of this ss. 4.13,
(1) Mr. Yen shall be required  while employed by BYA to work at least forty (40)
hours per month for one full year  from the  Closing  Date,  and (2) if Mr.  Yen
terminates  his  employment  at any time during the first year after the Closing
Date for  reasons  other  than as  described  in ss.  4.13B  or  other  than any
noncompliance  by Purchaser under ss. 4.13A, Mr. Yen shall no longer be eligible
for payments  under the  Contingent  Notes issued to him, such  Contingent  Note
shall  thereupon  terminate and Mr. Yen shall cancel and assign such  Contingent
Note back to Purchaser.

                  4.14  BYA Employee Bonuses

                  On or before  December 13, 1997,  Purchaser shall cause BYA to
pay to its  employees  the  sum of  $50,000  as a  December  bonus.  Mr.  Yen in
consultation  with other officers of BYA shall  determine who such bonus will be
paid to and in what amounts.  Such bonus will not be used to provide  additional
compensation to the Shareholders.

                  4.15  Receipt of Notices

                  Purchaser   shall   deliver  or  cause  to  be   delivered  to
Shareholders  all notices  delivered or to be delivered to holders of the Senior
Subordinated  Notes identified in Exhibit 3.11-A within the time frames required
for the  delivery of such  notices to the  holders of such  Senior  Subordinated
Notes.

                  4.16  Transaction Notes Are Senior Indebtedness

                  Subject only to the  effectiveness of the Acquisition  Merger,
Purchaser  hereby  represents,  warrants and covenants for all purposes that the
Transaction  Notes are Senior  Indebtedness  as  referred  to in Exhibit  3.11-A
hereto.

                  4.17  Acceleration of Tofani Note, Transaction Notes

                  A. Shareholders are accepting the Transaction Notes, including
without limitation their amount, terms and conditions, based in material part on
the  material  accuracy and  completeness  of the  information  set forth in the
Offering  Memorandum,  subject to completion,  with respect to  $100,000,000  in
principal  amount of Senior  Subordinated  Notes due 2007,  in the form attached
hereto as Exhibit 3.11-A and supplemented by the information  attached hereto as
Exhibit 3.11-B. In the event both the Acquisition  Merger is effected and either
(a) such Senior Subordinated Notes as finally issued, or the information in such
Offering Memorandum as finally  distributed,  are/is different from the form and
description  attached as  Exhibits  3.11-A and 3.11-B  hereto in a manner  which
materially and adversely affects  Purchaser's ability to meet its obligations as
set forth in the  Transaction  Notes or (b)  there is any  unwaived  or  uncured
default under said Senior  Subordinated Notes subsequent to any applicable grace
period,  then either of the  Shareholders  or other  holders of the  Transaction
Notes  shall have the right to give ten (10)  calendar  days  written  notice of
default under the Transaction Notes to Purchaser, whereupon the entire principal
balance of the  Transaction  Notes and all accrued and unpaid  interest  thereon
shall  become  immediately  due and  payable  at the  option  of the  applicable
Shareholder or the then holder of the Transaction Notes.

                                      24


<PAGE>




                  B. Shareholders are accepting the Transaction Notes, including
without limitation their amount, terms and conditions, based in material part on
the material  accuracy and  completeness of the  information  filed by Purchaser
since February 28, 1997, with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the  Securities  Exchange Act of 1934.  In the event such
information is inaccurate, incomplete or misleading in a manner which materially
and adversely affects  Purchaser's  ability to meet its obligations as set forth
in the Transaction  Notes,  then either of the  Shareholders or other holders of
the  Transaction  Notes  shall  have the  right to give ten (10)  calendar  days
written notice of default thereof to Purchaser,  whereupon the entire  principal
balance of the  Transaction  Notes and all accrued and unpaid  interest  thereon
shall  become  immediately  due and  payable  at the  option  of the  applicable
Shareholder or the then holder of the Transaction Notes.

                  C. If Purchaser  fails to pay in full when due any installment
of principal and interest under the Tofani Note or any of the Transaction Notes,
or in the event of  Purchaser's  insolvency or bankruptcy  under any  applicable
federal  or state  laws or  regulations,  or in the event  Purchaser  materially
defaults or breaches its warranty,  performance or obligation under any material
provision of Articles  III or IV of this  Agreement,  undertaken,  made or to be
performed  by  Purchaser  hereunder,  then either of the  Shareholders  or other
holders of the Tofani Note or any of the Transaction  Notes shall have the right
to give written notice of default  thereof to Purchaser.  In the event Purchaser
fails to cure any such default within ten (10) calendar days following  delivery
of such written notice to Purchaser,  the entire principal balance of the Tofani
Note and the Transaction Notes and all accrued and unpaid interest thereon shall
become  immediately due and payable at the option of the applicable  Shareholder
or the  then  current  holder  of the  Tofani  Note and the  Transaction  Notes,
respectively.

                  D.  Subject  to the  limitations  described  in the  following
sentence,  following the Acquisition  Merger the entire principal balance of the
Transaction  Notes and all accrued  and unpaid  interest  thereon  shall be paid
prior to payment of any principal on the Senior  Subordinated Notes described in
Exhibit 3.11-A hereto.  Any principal or interest on the  Non-Compete  Notes and
the Contingent Notes not otherwise then due and payable at the time of principal
prepayment on said Senior  Subordinated  Notes shall be paid by Purchaser into a
trust  (administered  by a bank or trust company licensed in California with the
cost to be paid by Purchaser) for the benefit of  Shareholders  and Purchaser to
disburse  the amounts  paid into said trust to  Shareholders  and  Purchaser  in
accordance  with the  conditions  precedent and  subsequent,  and subject to the
rights of acceleration,  set-off,  withholding and arbitration in this Agreement
and the Non-Compete  Notes and Contingent  Notes in the same manner as though no
prepayment  of  principal  on said  Senior  Subordinated  Notes  had been  made.
Notwithstanding the foregoing sentences,  Purchaser shall have no duty to pay or
prepay any  principal  or  interest  on the  Transaction  Notes not then due and
payable  in the  event  principal  on  said  Senior  Subordinated  Notes  is (i)
refinanced  to reduce the  interest  rate  thereon  (and  therewith  other minor
revisions  to  the  provisions  thereof  may be  made  which  do not  materially
adversely affect Purchaser's


                                       25


<PAGE>




ability to pay the  Transaction  Notes) or (ii) reduced in whole or in part with
the proceeds of an offering of equity securities by Purchaser.

                              V. RELATED AGREEMENTS


                  5.01  Related Agreements

                  The following  related  agreements (the "Related  Agreements")
shall be executed at Closing by the applicable parties:

                  A.  An Employment Agreement between Glenn Tofani and BYA; and

                  B.  An Employment Agreement between Larry Taylor and BYA.

                                   VI. CLOSING


                  6.01  Closing, the Closing Date, and Effective Time

                  Closing of the transactions contemplated hereunder ("Closing")
shall take place at the offices of  McDermott,  Will & Emery,  2049 Century Park
East, 34th floor, Los Angeles,  California,  8:30 a.m., November 26, 1997 unless
otherwise agreed in writing among the parties hereto (the "Closing  Date").  The
effective time for the  consummation  of the  transactions  contemplated in this
Agreement to occur "at Closing" or "on the Closing  Date" shall be 11:59 p.m. on
the Closing Date (the "Effective Time").

                  6.02  Shareholders' Obligations at Closing

                  At or prior to Closing,  Shareholders shall deliver,  or cause
to be delivered, to Purchaser, in form satisfactory to Purchaser, the following:

                  A. Stock certificates for all of the Shares,  duly assigned to
         Purchaser by Shareholders and their spouses, if any.

                  B. A true copy of the Minutes of the Meeting of BYA's Board of
         Directors authorizing the execution,  delivery, and performance of this
         Agreement  and any  Related  Agreement  to  which  BYA is a  party  and
         designating the officers entitled to execute it.

                  C. A Certificate of Good Standing for BYA issued within twenty
         (20)  days  prior  to the  Closing  Date by the  Secretary  of State of
         California.

                  D. All other  schedules,  certificates,  and  other  documents
         required by this Agreement to be delivered by Shareholders on or before
         Closing.

                  E. Their resignations as directors of BYA.


                                       26


<PAGE>




                  6.03  Purchaser's Obligations at Closing

                  At or prior to Closing, Purchaser shall deliver or cause to be
delivered to Shareholders,  in executed form  satisfactory to Shareholders,  the
following:

                  A. The cash payable pursuant to ss. 1.01B(1).

                  B. The Notes, Non-Compete Notes and Contingent Notes.

                  C. A  Certificate  of Good  Standing  for  Purchaser  from the
         Secretary  of State of  Delaware as of a date not more than twenty (20)
         days prior to the Closing Date.

                  D. A true copy of the  Minutes of the  Meeting of the Board of
         Directors  of  Purchaser  authorizing  its  execution,   delivery,  and
         performance of this Agreement and  designating  the office  entitled to
         execute it.

                  E. All other  schedules,  certificates,  and  other  documents
         required by this  Agreement  to be  delivered by Purchaser on or before
         Closing.

                               VII. MISCELLANEOUS

                  7.01  Brokerage Fees and Shareholders' Legal Fees

                  A. BYA acknowledges that Global Capital Markets,  Incorporated
acted  as a broker  for BYA  relative  to this  transaction.  Subsequent  to the
Closing,  Shareholders  shall indemnify and hold harmless BYA and Purchaser from
any  liability  for any  commission  to Global  Capital  Markets,  Incorporated,
regardless of when such commission was or will be earned.  BYA and  Shareholders
acknowledge that Carlsmith Ball,  Wichman,  Case & Ichiki acted as legal counsel
for BYA and Shareholders relative to this transaction. Subsequent to the Closing
Shareholders  shall  indemnify  and hold  harmless  BYA and  Purchaser  from any
liability for the obligation to pay any fee to Carlsmith,  Ball, Wichman, Case &
Ichiki.

                  B. Purchaser  acknowledges that Goldmark Advisers,  Inc. acted
as a broker for Purchaser  relative to this  transaction,  and Purchaser further
acknowledges  that it is obligated to pay Goldmark  Advisers,  Inc. a commission
for such services.  Purchaser agrees to pay such commission and to indemnify and
hold harmless  Shareholders  from any  liability for the  obligation to pay such
commission to Goldmark Advisers, Inc.

                  C. Except for such brokerage  arrangements specified in ss.ss.
7.01A and B, neither  Purchaser nor BYA nor  Shareholders  have  consented to or
authorized  any  broker  or  third  party to act on their  behalf,  directly  or
indirectly,   as  a  broker  or  finder  in  connection   with  the  transaction
contemplated by this Agreement. In the event any claim is made for a broker's or
finder's fee other than that described in ss.ss.  7.01A and B in connection with
the transactions  contemplated hereunder, the party responsible for retaining or
securing  said broker or finder shall be solely  responsible  for the payment of
any broker's or finder's fees incurred as a result


                                       27


<PAGE>




thereof.  Further, the responsible party shall indemnify the other party against
any loss or liabilities by reason of such broker's or finder's fees.

                  7.02  Further Actions

                  At any time and from time to time, each party shall, at its or
his expense,  take such actions and to execute and deliver such documents as may
be reasonably necessary to effectuate the purposes of this Agreement.

                  7.03  Availability of Equitable Remedies

                  Since a breach of the provisions of this  Agreement  could not
adequately be  compensated  by money  damages,  either  Purchaser,  or either of
Shareholders  shall be  entitled,  in  addition  to any  other  right or  remedy
available  to  it  or  them,  to  a  temporary  restraining  order,  preliminary
injunction and an injunction restraining such breach or threatened breach and to
specific  performance of any such provision of this  Agreement,  and the parties
hereby  consent to the  issuance of such an  injunction  and to the  ordering of
specific performance without the requirement of a bond or proof of immediate and
irreparable harm.

                  7.04  Limitation on Survival of Representations and Warranties

                  Except as otherwise provided in this Agreement or construed by
its context,  the representations and warranties  contained in, or made pursuant
to, this  Agreement  shall  survive  the Closing  Date for a period of three (3)
years, irrespective of any investigation made by or on behalf of any party.

                  7.05  Modification

                  The  Agreement  and  the  Exhibits,   Schedules,  and  Related
Agreements hereto set forth the entire understanding of the parties with respect
to the subject  matter  hereof,  supersede  all existing  agreements  among them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.

                  7.06  Notices

                  All  notices,  elections,   reports  or  other  correspondence
required or  permitted  hereunder  shall be in writing and given or delivered by
certified  mail,  postage  prepaid,  delivered  by  overnight  express  courier,
delivery fees prepaid,  or  transmitted  by fax with receipt  confirmed,  to the
party to whom directed at the below specified addresses:

                  If to Purchaser:

                  ATC GROUP SERVICES INC.
                  104 E. 25th Street, Tenth Floor
                  New York, New York  10010-2917


                                       28


<PAGE>




                  If to Shareholders:

                  Mr. Bing Yen
                  17701 Mitchell North
                  Irvine, California  92614

                  Mr. Glenn Tofani
                  17701 Mitchell North
                  Irvine, California  92614

                  Any such notice  shall be deemed  given one (1)  business  day
following  receipt thereof.  The address of a party may be changed in accordance
with the notice provisions of this section.

                  7.07  Waiver

                  Any waiver by any party of a breach of any  provision  of this
Agreement  shall  not  operate  as or be  construed  to be a waiver of any other
breach  of that  provision  or of any  breach  of any  other  provision  of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this  Agreement  on one or more  occasions  will not be  considered  a waiver or
deprive that party of the right  thereafter  to insist upon strict  adherence to
that term or any other term of this Agreement. Any waiver must be in writing.

                  7.08  Binding Effect

                  The  provisions of this  Agreement  shall be binding upon, and
inure to, the benefit of Purchaser and its  respective  successors  and assigns,
and Shareholders and their assigns,  heirs,  and personal  representatives,  and
shall inure to the benefit of the indemnitees and their  respective  successors,
assigns, heirs, and personal representatives.

                  7.09  No Third-Party Beneficiaries

                  This Agreement does not create,  and shall not be construed as
creating,  any rights  enforceable  by any person not a party to this  Agreement
(except as provided in ss. 7.08).

                  7.10  Severability

                  If any  provision  of this  Agreement  is invalid,  illegal or
unenforceable,  the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and circumstances.


                                       29


<PAGE>




                  7.11  Headings; Gender

                  The headings of this  Agreement are solely for  convenience of
reference and shall be given no effect in the construction or  interpretation of
this Agreement. Each reference to the masculine, feminine or neuter gender shall
include reference to all other genders unless the context otherwise requires.

                  7.12  Governing Law

                  To the  extent  permitted  by law,  this  Agreement  shall  be
governed by and construed in accordance with the laws of the State of California
without  giving effect to conflict of laws. To the maximum  extent  permitted by
law, any action or proceeding  initiated by  Purchaser,  any  Shareholders,  any
indemnitee,  or any other party claiming  rights under this  Agreement  shall be
brought in an appropriate  state or federal court in Orange County,  California,
and any person claiming rights under this Agreement consents to the jurisdiction
and proper venue of such forum.

                  7.13  Separate Counterparts

                  This  Agreement  is  being   executed  in  several   identical
counterparts, each one of which shall be considered an original and all of which
when taken together shall constitute but one instrument.

                  7.14  Incorporation of Recitals, Exhibits and Schedules

                  All exhibits and schedules  attached  hereto are  incorporated
herein by this reference and expressly made a part of this Agreement.

                  7.15  Obligations in Payment Ratio

                  Notwithstanding  anything in this  Agreement to the  contrary,
the representations,  warranties,  covenants,  and agreements of Shareholders in
this  Agreement are made in proportion to the Payment  Ratio,  and  Shareholders
shall only be liable to Purchaser in the Payment Ratio for any  liability  under
this Agreement.

                  7.16  Arbitration; Attorneys' Fees; Undisputed Actions for
                        Payment

                  In the event  there shall arise any dispute or claim in law or
equity arising out of this Agreement,  or any breach  thereof,  or any resulting
transaction between the parties under this Agreement,  the parties  specifically
agree that such dispute shall be submitted to and decided by a neutral,  binding
arbitration of three (3) arbitrators  selected in accordance with the procedures
of the American  Arbitration  Association  at a location  mutually  agreed to in
writing by the parties,  or if they cannot  agree,  at the office of  McDermott,
Will & Emery,  Newport Beach,  California and in accordance  with the Commercial
Arbitration Rules of the American Arbitration


                                       30


<PAGE>




Association  and not by court action,  except as provided by California  law for
judicial review of arbitration proceedings,  with appropriate recovery of costs,
escrow fees,  attorneys' and  arbitration  fees being awarded and apportioned by
the  arbitrators  in  accordance  with  the  comparative  fault  awarded  by the
arbitrators. Judgment of the award rendered by the arbitrators may be entered in
any   court   having   jurisdiction   thereof.   Anything   in   the   foregoing
notwithstanding,  in the event either of the  Shareholders or the holder thereof
has given written notice of default to Purchaser under the Tofani Note or any of
the Transaction  Notes and Purchaser fails to dispute the merits of such written
demand within ten (10) calendar days  following  delivery of such written notice
to Purchaser, then such Shareholder or holder shall have the right to proceed to
enforce  his or its  rights  under  the  subject  instrument(s)  in any court of
competent jurisdiction without proceeding to arbitration in accordance with this
paragraph.

                  7.17  Opportunity to Cure

                  All  parties to this  agreement  shall be afforded a period of
ten (l0)  days  following  notice  thereof  to cure any  alleged  breach of this
Agreement.

                  IN  WITNESS  WHEREOF,  the  parties  have duly  executed  this
Agreement as of the date first set forth above.


ATC GROUP SERVICES INC.                             BING YEN & ASSOCIATES, INC.


By:   /s/ Nicholas J. Malino                          By: /s/ Bing Yen
   -------------------------                             ----------------------
   Name:  Nicholas J. Malino                                  Bing Yen
   Title: Senior Vice President                               President and CEO


                                                           /s/ Bing Yen
                                                         ----------------------
                                                                        BING YEN


                                                           /s/ Glen Tofani
                                                         ----------------------
                                                                     GLEN TOFANI



                                       31


<PAGE>




                                                                   EXHIBIR 10.26

                            STOCK PURCHASE AGREEMENT


         This agreement (the  "Agreement")  is entered into as of the 4th day of
November,  1997, by and among ATC GROUP  SERVICES  INC., a Delaware  corporation
with its principal office at 104 East 25th Street, New York, New York 10010 (the
"Purchaser");  CONNING  INSURANCE  CAPITAL  LIMITED  PARTNERSHIP  II, a Delaware
limited  partnership  with its  principal  office at City  Place II,  185 Asylum
Street,   Hartford,   CT  06103  ("Conning  II");   CONNING   INSURANCE  CAPITAL
INTERNATIONAL  PARTNERS  II,  a  Cayman  Island  limited  partnership  with  its
principal  office at City  Place  II,  185  Asylum  Street,  Hartford,  CT 06103
("Conning  Intl.   II");   CULLINANE  &  DONNELLY  VENTURE   PARTNERS,   LIMITED
PARTNERSHIP,  a Connecticut limited partnership with its principal office at One
Century Tower,  265 Church Street,  New Haven, CT 06510  ("Cullinane");  LAWYERS
TITLE ENVIRONMENTAL INSURANCE SERVICES AGENCY, INC., a Virginia corporation with
its principal  office at 6630 West Broad  Street,  Richmond,  VA  ("LTEISA");and
CHARLES L. PERRY,  JR., a Connecticut  resident  residing at 61 High Farms Road,
West Hartford, CT 06107 ("Perry") (Conning II, Conning Intl. II, Cullinane,  and
LTEISA are referred to  collectively  as the "Preferred  Shareholders"  and with
Perry are referred to collectively as the "Qualified Stockholders."

                                    RECITALS

         Environmental  Warranty,  Inc. is a  Connecticut  corporation  with its
principal office at 970 Farmington Avenue, West Hartford,  CT 06107 ("EWI"). EWI
has authorized  20,000 shares of capital stock  consisting of 15,000 shares,  no
par value, designated as Common Stock and 5,000 shares, no par value, designated
as  Preferred  Stock,  of which 2,668 are  designated  Series A Preferred  Stock
("Series A"), 1334 are designated  Series B Preferred Stock ("Series B") and 998
are  undesignated  (and unissued).  The Series A and Series B are all issued and
outstanding and are held by the Preferred  Shareholders in the numbers indicated
on  Exhibit  A  attached  hereto.  The  Preferred   Shareholders  have  invested
$4,000,000  in EWI,  and,  as of June 30,  1997,  had an  aggregate  liquidation
preference  in excess of  $5,300,000,  taking  into  account  accrued and unpaid
dividends.

         EWI has 1,100 shares of Common Stock issued and  outstanding  which are
held by seven  (7)  individuals  (the  "Common  Shareholders")  as set  forth on
Exhibit A attached hereto.

         The  Purchaser  desires  to acquire  all of the issued and  outstanding
shares of stock and  ownership  rights in any form of EWI in exchange  for cash,
stock  and  other   consideration   as  hereinafter   provided,   and  Qualified
Stockholders  desire to sell the EWI stock which they own, and, on or before the
Closing Date,  Preferred  Shareholders  will seek to cause the 1100  outstanding
shares of Common  Stock to be tendered  (the  "Tendered  Common  Shares") by the
holders thereof


<PAGE>




(the  "Tendering  Common  Shareholders"),  so that at Closing  Escrow Agent,  on
behalf of the Preferred Shareholders and Tendering Common Shareholders,  will be
able to deliver to Purchaser stock certificates,  duly endorsed for transfer, in
blank  or to  Purchaser,  representing  substantially  all  of  the  issued  and
outstanding  capital stock of EWI. The Preferred  Shareholders and the Tendering
Common Shareholders are referred to herein as the "Tendering Shareholders."

         Qualified  Stockholders  and Pepe &  Hazard  LLP  have  entered  into a
certain escrow  agreement dated as of October 1, 1997,  pursuant to which Pepe &
Hazard  LLP,  as escrow  agent  ("Escrow  Agent"),  on  behalf of the  Qualified
Stockholders,  will (i) deliver  the  certificates  representing  the issued and
outstanding  Preferred  Stock  of  EWI  to  the  Purchaser,   (ii)  deliver  the
certificates representing the Tendered Common Shares to the Purchaser, and (iii)
distribute  the  consideration  received from the  Purchaser  hereunder for such
capital stock (the "Escrow Agreement").

         On  the  basis  of  the  representations,  warranties,  covenants,  and
agreements  contained in this  Agreement and subject to the terms and conditions
of this Agreement, the parties agree as follows:

                              I. SALE AND PURCHASE


1.01 Terms of Sale and Purchase

         (a) At  Closing,  Qualified  Stockholders  shall  sell and  deliver  to
Purchaser  certificates for the shares set forth after their names in Schedule A
attached hereto, endorsed to effect the assignment to Purchaser,  and shall have
Escrow Agent deliver to Purchaser  certificates  evidencing the Tendered  Common
Shares,  all endorsed for  transfer;  provided that tender of 1000 shares of the
Common Stock of EWI,  which  exclude the 100 shares of EWI Common Stock owned by
Thomas S. Lux, shall satisfy the obligation of the Qualified  Stockholders  with
respect to the delivery of shares of EWI. All shares of the capital stock of EWI
so tendered or delivered are referred to as the "Shares."

                  (1) At Closing Date,  Qualified  Stockholders shall provide to
         Purchaser the Closing Financial Statements (as defined in ss.2.03). Any
         disagreements between Purchaser and Qualified  Stockholders  concerning
         EWI's final net  tangible  book value  shall be resolved in  accordance
         with Section 2.03(c).

         (b) As consideration for the Shares, the Tendered Common Shares and the
other promises,  agreements,  warranties,  and covenants  hereof,  the Purchaser
shall:

                  (1) Transfer and pay to Escrow Agent,  as agent of and for the
         benefit of the  Qualified  Stockholders,  at Closing,  the sum of Eight
         Hundred Twenty-Eight Thousand Dollars ($828,000.00) payable as follows:


                                       2


<PAGE>




                           (a) One Hundred  Fifty  Thousand  and 00/100  Dollars
                               ($150,000.00) by money order,  cashier's check or
                               wire  transfer  of  immediately  available  funds
                               payable  to  Escrow  Agent   pursuant  to  Escrow
                               Agent's instructions, and

                           (b) the   Purchaser's   conditional,   non-negotiable
                               promissory note evidencing Purchaser's obligation
                               to pay to the Escrow  Agent,  as agent of and for
                               the benefit of Qualified Stockholders, the sum of
                               Six  Hundred  Seventy-Eight  Thousand  and 00/100
                               Dollars ($678,000.00),  with no interest thereon,
                               substantially  in  the  form  of  Exhibit  B (the
                               "Note").  The Note shall  provide for the payment
                               of three  substantially equal annual installments
                               of  principal   without  interest  on  the  three
                               successive anniversary dates of the Closing Date.
                               The Note shall be subject to the  condition  that
                               Purchaser  shall have  available to it the rights
                               of set-off against  payments to be made under the
                               Note in accordance with the provisions of Section
                               1.03.

                  (2) Issue Thirty-Three Thousand (33,000) shares of Purchaser's
         unregistered,  restricted  common  stock (the "ATC Stock") in the names
         and for the number of shares set forth in Schedule  1.01(b)(2) attached
         hereto. Within thirty (30) days after Closing,  Purchaser shall deliver
         to the Escrow  Agent the  certificates  for the ATC Stock,  marked with
         ATC's customary  securities  legend reflecting the fact that the shares
         are unregistered and that their transfer is subject to restrictions, in
         the names and for the number of shares set forth in Schedule 1.01(b)(2)
         attached hereto.

         (c) On  behalf  of  the  Tendering  Shareholders,  Robert  E.  Clifford
("Clifford")  and  William A.  Gildea,  Jr.  ("Gildea"),  Escrow  Agent shall be
responsible for the  distribution of the cash paid under Section  1.01(b)(1)(a),
the cash  payments  made  under the Note,  and the ATC Stock  transferred  under
Section  1.01(b)(2),  in  accordance  with the Escrow  Agreement.  The Qualified
Stockholders  acknowledge  that  payment and delivery to the Escrow Agent of the
items set forth in Section 1.01(b) hereof satisfies the Purchaser's  obligations
to the Qualified Stockholders under that section.

1.02 Indemnity Against Debts and Liabilities

         (a)  Subject  to the  limitation  to  the  value  of the  Consideration
received  or  receivable  provided  for in Section  1.02(c)(2),  in  addition to
Purchaser's other rights and remedies  available at law or in equity (and not by
way of limitation),  each of the Qualified  Stockholders,  severally,  agrees to
indemnify  and hold  harmless  EWI,  the  Purchaser,  and  their  employees  and
successors against and in respect of any and all:


                                       3


<PAGE>




                  (1) Claims, suits, actions,  proceedings (formal or informal),
         governmental   investigations,   judgments,   deficiencies,   set-offs,
         damages,  settlements,  liabilities,  and  reasonable  legal  and other
         expenses  (including  reasonable  attorneys' fees and defense costs) as
         and when  incurred,  arising out of, or based  upon,  any breach of any
         representation,  warranty,  covenant,  or agreement  of such  Qualified
         Stockholder  contained  in this  Agreement  or under any of the Related
         Agreements;

                  (2)  Debts  or  liabilities  of any kind  and  claims,  liens,
         set-offs,  suits,  actions,  and  proceedings  (formal and informal) of
         persons or  entities  and  related  judgments,  deficiencies,  damages,
         settlements, set-offs, liens, liabilities, and legal and other expenses
         (including reasonable attorneys' fees) as and when incurred arising out
         of or based  upon  the  acts,  omissions,  contractual  performance  or
         conduct of the business of EWI before the Effective Time, except to the
         extent  expressly  assumed by Purchaser  and as more fully set forth on
         Schedule 1.02(a) (the "Assumed Liabilities");

                           (a) The indemnity provided by this Section 1.02(a)(2)
                               shall explicitly  include (but is not limited to)
                               the  excess of (I) the sum of (X) the  expense of
                               resolving  all  claims  in  connection  with  the
                               litigation concerning severance compensation with
                               EWI's former  employee,  Thomas S. Lux (including
                               claims  under the $50,000  litigation  bond which
                               has been  posted by EWI) and (Y) the  expense  of
                               purchasing the EWI Common Stock held by Thomas S.
                               Lux (if  any),  over  (II) the  reserve  therefor
                               listed on the Closing Balance Sheet; and

                           (b) Any loss,  damage or cost for which the Qualified
                               Stockholders have agreed to indemnify  Purchaser,
                               EWI or their  employees  under any  provision  of
                               this Agreement.

         (b) In addition to  Qualified  Stockholders'  other rights and remedies
available at law or in equity (and not by way of limitation),  Purchaser  agrees
to indemnify and hold harmless the Qualified  Stockholders  and their  employees
and successors against and in respect of any and all:

                  (1) Claims, suits, actions,  proceedings (formal or informal),
         governmental   investigations,   judgments,   deficiencies,   set-offs,
         damages,  settlements,  liabilities,  and  reasonable  legal  and other
         expenses (including reasonable attorneys' fees and costs of defense) as
         and when  incurred,  arising out of, or based  upon,  any breach of any
         representation, warranty, covenant, or agreement of Purchaser contained
         in this Agreement or any of the Related Agreements;

                  (2)  Debts  or  liabilities  of any kind  and  claims,  liens,
         set-offs,  suits,  actions,  and  proceedings  (formal and informal) of
         persons or entities and related judgments,


                                       4


<PAGE>




         deficiencies,  damages, settlements,  set-offs, liens, liabilities, and
         reasonable legal and other expenses  (including  reasonable  attorneys'
         fees) as and when incurred arising out of (i) the business of EWI after
         the Effective Time, except for EWI's debts or liabilities not expressly
         assumed by Purchaser as Assumed Liabilities;  (ii) based upon the acts,
         omissions,  contractual  performance  or  conduct  of the  business  of
         Purchaser,  whether before or after the Effective Time; or (iii) out of
         the Assumed Liabilities;

                           (a) The indemnity provided by this Section 1.02(b)(2)
                               shall explicitly  include (but is not limited to)
                               the  sum of (X)  the  expense  of  resolving  all
                               claims in  connection  with the  litigation  with
                               EWI's former  employee,  Thomas S. Lux (including
                               claims  under the $50,000  litigation  bond which
                               has been posted by EWI), including all settlement
                               amounts,  all  attorneys'  fees and other defense
                               costs  relating  thereto  and (Y) the  expense of
                               purchasing the EWI Common Stock held by Thomas S.
                               Lux (if any),  as limited  in Section  1.02(c)(8)
                               below; and

                           (b) Any loss,  damage or cost for which the Purchaser
                               has agreed to  indemnify  Qualified  Stockholders
                               under any provision of this Agreement.

         (c) The parties' respective  indemnity  obligations  hereunder shall be
subject to the following terms, limitations and conditions:

                  (1) Purchaser and the Qualified  Stockholders  shall each give
         the other prompt notice of any  allegedly  indemnified  item  incurred,
         asserted or threatened  on the basis of which an indemnitee  intends to
         seek indemnification  from an indemnitor as provided herein;  provided,
         however,  that the obligation of an indemnitor shall be reduced for the
         failure to give notice at any  particular  time only to the extent that
         the indemnitor has been actually  prejudiced  thereby.  Each indemnitor
         shall  have  the  right  (but  not the  obligation)  to  select  and be
         represented  by  counsel  of  its  choice,  to  manage  its  own  legal
         representation  or  defense  and to  settle  any  claim,  debt or other
         indemnified  matter  hereunder;  provided,  however,  that if any  such
         settlement  would not accomplish a complete  release or satisfaction of
         such claim, debt or other matter, then the indemnitor shall be required
         to obtain the indemnitee's prior written consent to such settlement.

                  (2) With the  exception of claims  covered by insurance to the
         extent of such coverage  (including  the  deductible),  each  Qualified
         Stockholders'  indemnity  obligation  hereunder shall be limited to the
         value of his or its  allocable  share of the  amount of  consideration,
         including the value of the ATC Stock (valued as of the date  received),
         cash


                                       5


<PAGE>




         and amounts payable under the Note,  which Purchaser either has paid or
         is obligated to pay under this Agreement to such Qualified Stockholder.

                  (3) The parties' respective  indemnity  obligations  hereunder
         (i) are limited to individual losses,  claims,  etc., having a value of
         $1,000.00 or more (an  "Indemnified  Claim");  and (ii) only arise when
         Indemnified Claims, in the aggregate, exceed $10,000.00 (the "Indemnity
         Claim Threshold").

                  (4) The  following  are not subject to the  Indemnified  Claim
         Threshold  and are  covered  from the  first  dollar  over  any  amount
         reserved   therefor  on  the  Closing  Balance  Sheet:   (i)  Qualified
         Stockholders'  warranty that accounts  receivable  and recorded work in
         process,  net of  reserves,  will be  collected as specified in Section
         2.06(b); and (ii) Qualified  Stockholders' warranty in Sections 2.06(b)
         or 2.07(b) that there are no unearned billings or receipts in excess of
         reserves for such purpose on the Closing Balance Sheet.

                  (5) With  respect to any claim for which an  indemnitor  shall
         indemnify any  indemnitee,  the  indemnitor  shall be subrogated to all
         rights  of  indemnitees  against  any and all third  parties  up to the
         amount paid by indemnitor  to, or on behalf of,  indemnitees or set-off
         against an indemnitor.

                  (6) No party shall be liable for that portion of any claim for
         which an indemnitee  actually receives the cost of defense or insurance
         proceeds  covering  such claim (the  deductible  pertaining to any such
         insurance  shall not be considered to be insurance  proceeds or cost of
         defense).

                  (7) The indemnity agreements contained in this Agreement shall
         inure only to the benefit of Purchaser, EWI and Qualified Stockholders,
         respectively,  (and their  respective  successors  and employees to the
         extent they are  indemnitees),  and shall not be for the benefit of any
         other  person  or  entity.  These  indemnity  provisions  shall  not be
         construed to abrogate  the  corporate  liability  shield as provided by
         law,  to  extend a right of action  to any  third  party not  otherwise
         available,  or to enlarge the underlying liability of any indemnitor or
         indemnitee to any third party.

                  (8)   The   indemnity    obligation   contained   in   Section
         1.02(b)(2)(a)  is  limited  to the  reserve  therefor  set forth on the
         Closing Balance Sheet (the "Lux Reserve");  provided, however, that the
         Purchaser is obligated to defend the Lux  litigation  in good faith and
         to mitigate damages thereunder and agrees not to settle such litigation
         for an amount  exceeding  the Lux  Reserve  without  the consent of the
         Qualified   Stockholders,   which  consent  will  not  be  unreasonably
         withheld.


                                       6


<PAGE>




1.03 Right of Set-Off

         (a) Without  limiting such other rights as it may have at law or equity
or by agreement,  the  Purchaser  shall have the right to set-off  against,  and
withhold from, any payment due to Escrow Agent as Holder under the Note: (i) any
amount  necessary  to cure or  remedy  any  breach,  default  or  deficiency  of
performance or warranty by Qualified Stockholders under this Agreement; (ii) any
amount  for  which  Purchaser  or EWI  (or  their  successors)  is  entitled  to
indemnification under Section 1.02(a); and (iii) Purchaser's or EWI's reasonable
costs or expenses (including reasonable attorneys' fees) related to (i) or (ii).
Purchaser shall have no right to set-off  against salary or commission  payments
to Perry under Perry's Employment Agreement.

         (b) Subject to the procedures of Section 1.03(c) below, it shall not be
necessary that a breach,  default or Indemnified  Claim or a threatened  breach,
default or Indemnified Claim has resulted in actual damage to Purchaser,  EWI or
their  successors  or employees  for  Purchaser  to exercise its set-off  rights
provisionally  under this section,  but rather Purchaser shall have the right to
withhold  payment  provisionally  to cover the  future  effects  of any  breach,
default, or Indemnified Claim or threatened breach, default or Indemnified Claim
pending  actual  conclusion of the matter,  provided that  Purchaser  shall have
produced sufficient objective evidence of facts and sufficient  supporting legal
authority for a competent, experienced attorney to conclude that:

                  (1) Either the loss-threatening event has occurred or there is
         a substantial probability that it will occur;

                  (2) There is a substantial  probability that the occurrence or
         probable occurrence will cause a loss;

                  (3) An  action  to hold the party  liable  for the loss  could
         withstand a motion to dismiss or a motion for summary judgment;

                  (4)  There  is  a  substantial   probability  that  the  loss,
         including  associated  attorney  fees and costs of defense,  will be as
         great as the amount asserted for provisional set-off;

                  (5)  Either  there is a  substantial  issue as to  whether  an
         available  insurance policy provides coverage for the claim, there is a
         substantial potential that the insurance coverage available will not be
         adequate in amount to pay the portion of the loss asserted as a set-off
         or  there  is a  deductible  to  be  satisfied  with  respect  to  such
         insurance; and

                  (6) If  the  set-off  is not  asserted  at the  present  time,
         insufficient  funds may remain following the next payment to enable the
         Purchaser to protect its interests  through the exercise of its set off
         rights.


                                       7


<PAGE>




If such loss or damage does not, in fact,  occur,  Purchaser  shall then pay the
provisionally  withheld  amount to  Escrow  Agent,  on  behalf of the  Qualified
Stockholders.

         (c) Prior to  exercising  its right of set-off under this Section 1.03,
Purchaser must give written notice to Qualified  Stockholders of the facts which
Purchaser  asserts give rise to such right and the amount  Purchaser  intends to
set-off (the "Set-Off Notice").

                  (1) If within  fifteen  (15) days  after  any  Set-Off  Notice
         Purchaser does not receive notice from any Qualified Stockholder of his
         or its intention to contest such set-off  ("Set-Off  Contest  Notice"),
         Purchaser  may  exercise  its right of set-off  under this Section 1.03
         with respect to the next installment due under the Note.

                  (2) If within  fifteen  (15) days  after any  Set-Off  Notice,
         Purchaser   receives  a  Set-Off  Contest  Notice  from  any  Qualified
         Stockholder,  Purchaser  shall submit its claim for  set-off,  and each
         Qualified  Stockholder opposing such set-off shall submit the basis for
         his or its opposition to such set-off, to Mediation  Consultants LLC, 1
         Long Wharf,  New Haven,  Connecticut  06511,  with all facts supporting
         their respective positions.

                  (3) The parties agree to proceed with such  mediation  process
         in good faith and without  delay in accordance  with the  directives of
         the mediator.

                           (a) The decision of the mediator shall be binding and
                               effective   upon  the   parties   and   shall  be
                               non-appealable.

                           (b) If the  mediator  decides in favor of  Purchaser,
                               Purchaser may exercise its right of set-off under
                               this  Section  1.03  with  respect  to  the  next
                               installment or successive  installments due under
                               the Note for the amount  awarded by the  mediator
                               which may include expenses incurred in connection
                               with the mediation process.

                           (c) If the mediator  decides in favor of the opposing
                               Qualified   Stockholder(s),   Purchaser  may  not
                               exercise its right of set-off  under this Section
                               1.03 with  respect to the  amount  claimed in the
                               Set-Off   Notice  and  will  pay  such  Qualified
                               Stockholders   the  expenses   they  incurred  in
                               connection with the mediation process.


                                       8


<PAGE>




                           (d) If while such  mediation  process is pending,  an
                               installment payment under the Note comes due, the
                               Purchaser shall pay such installment  payment net
                               of  its  claimed   set-off.   If  thereafter  the
                               mediator   decides  in  favor  of  the   opposing
                               Qualified  Stockholder(s),  the Purchaser  shall,
                               within  three  (3)  days  of date  on  which  the
                               mediator  issues his decision,  make a payment of
                               the   difference   between   the  amount  of  the
                               installment  which was due under the Note and the
                               amount which was previously paid plus interest in
                               the  amount of 10% per annum,  compounded  daily,
                               for the period during which such partial  payment
                               was due but not paid.

         (d) Subject to the  provisions  of this Section 1.03,  the  Purchaser's
right of set-off,  provided for in this Section 1.03, shall not be contingent in
any way upon or subject to allocation of the amount of such set-off,  severally,
among the Qualified Stockholders by Purchaser.  Any such allocation shall be the
responsibility  of the Qualified  Stockholders  and shall be handled by separate
agreement with the Escrow Agent.

          II. REPRESENTATIONS AND WARRANTIES OF QUALIFIED STOCKHOLDERS

         As a material  inducement  to Purchaser  to enter into this  Agreement,
Qualified  Stockholders,  severally,  represent  and warrant to the Purchaser as
follows:

2.01 Organization and Qualification

         (a)  EWI has no  subsidiary  or  affiliated  corporations  or  business
enterprises  of any  type.  Schedule  2.01  sets  forth as to EWI:  its place of
incorporation,  principal  place(s) of  business,  jurisdictions  in which it is
qualified to do business,  and locations in which it currently maintains a place
of business. EWI is a corporation duly organized,  validly existing, and in good
standing under the laws of Connecticut,  with all requisite power and authority,
and  all  necessary  consents,  authorizations,   approvals,  orders,  licenses,
certificates,  and permits of and from, and  declarations  and filings with, all
federal,  state,  local, and other  governmental  authorities and all courts and
other tribunals,  to own, lease,  license, and use its properties and assets and
to carry on the  business in which it is now engaged.  EWI is duly  qualified to
transact  the  business  in which it is  engaged  and is in good  standing  as a
foreign  corporation  in every  jurisdiction  in which its  ownership,  leasing,
licensing,  or use of property or assets or the  conduct of the  business  makes
such qualification necessary.


                                       9


<PAGE>




         (b) EWI has furnished to the Purchaser its certificate of incorporation
(or other charter document) and by-laws and all amendments thereto, as presently
in  effect,  certified  by  the  Secretary  of  the  corporation.  EWI is not in
violation  or  breach  of,  or in  default  with  respect  to,  any  term of its
certificate  of  incorporation  (or other  charter  document)  or  by-laws.  The
corporate  minute book of EWI, as furnished to  Purchaser,  is true and complete
and  accurately  reflects  all  proceedings  to  date  of  EWI's  directors  and
shareholders.

2.02 Capitalization

         (a) Schedule 2.02 correctly sets forth: (i) all authorized,  issued and
outstanding  capital  stock  and all  ownership  interests  in EWI of any  type,
including all options,  warrants or other rights under which an ownership  right
of any type may be  acquired;  (ii) the name and  address  of each  owner of, or
claimant to, any such right.  Except as set forth on Schedule 2.02, each of such
outstanding shares or rights is validly authorized,  validly issued, fully paid,
and nonassessable,  has not been issued and is not owned or held in violation of
any federal or state  securities  law or regulation or any  preemptive  right of
stockholders,  and is owned of record and  beneficially by the person so listed.
There is no commitment,  plan, arrangement to issue, option, warrant,  security,
or other right  calling for the issuance of, any share of capital stock or other
ownership interest in EWI or any security or other instrument  convertible into,
exercisable  for, or exchangeable for capital stock of or ownership in EWI other
than as set forth in Schedule 2.02.

         (b)  Schedule  2.02  sets  forth  with  respect  to all stock and other
ownership  interests or rights in EWI all liens,  security  interests,  pledges,
charges,  encumbrances,   stockholders'  agreements,  voting  trusts,  or  other
restriction or covenant  respecting any such interest,  if any (collectively the
"Encumbrances").  Except as set forth on Schedule  2.02, all shares are free and
clear of all Encumbrances.

2.03 Financial Condition

         (a) Qualified Stockholders have delivered to the Purchaser and attached
hereto as Schedule 2.03 true and correct  copies of the unaudited  balance sheet
("Interim  Balance Sheet") and statements of income,  retained earnings and cash
flows of EWI for the period from July 1, 1996  through  June 30, 1997  ("Interim
Financial Statements").  At Closing,  Qualified Stockholders shall provide final
unaudited  balance sheet  ("Closing  Balance  Sheet") and  statements of income,
retained  earnings and cash flows of EWI for the period  beginning  July 1, 1997
and ending on the Effective Time (the "Closing Financial Statements").

         The financial statements referred to in this ss.2.03 have been prepared
in  accordance   with  generally   accepted   accounting   principles   ("GAAP")
consistently  applied  throughout the periods  involved  (except for adjustments
thereto which are known to and expressly


                                       10


<PAGE>




approved by Purchaser in writing), are correct and complete in all respects, and
are in accordance with the books and records of EWI.

         There is no fact  presently  known to EWI which  could  materially  and
adversely  affect the  financial  condition,  results of  operations,  business,
properties,  assets, liabilities, or future business prospects of the EWI except
as disclosed or recorded on Schedule 2.03, the Closing  Financial  Statements or
the  other  schedules  to this  Agreement;  provided,  however,  that  Qualified
Stockholders  express no opinion as to political or economic  matters of general
applicability  (except as to market conditions of which a Qualified  Stockholder
has present knowledge).

         (b) As of the Effective Time, the net tangible book value, as set forth
on the Closing Financial Statements, will be correct.

         (c) After Closing,  Purchaser's  in-house and  independent  accountants
shall be afforded free and full access to the non-proprietary working papers and
records  used by EWI's  independent  accountants  and  in-house  accountants  in
preparing  their  unaudited  last  completed  fiscal  year,  Interim and Closing
Financial  Statements.   If  there  is  a  difference  of  opinion  between  the
Purchaser's and EWI's accountants as to the general acceptability or consistency
of any of the accounting  principles followed in connection with such review and
report or preparation of financial  statements or the results indicated thereby,
the parties or their  accountants  shall promptly confer in an effort to resolve
such  differences.  If they are unable to resolve a difference,  the  difference
shall be resolved by the indemnity, set-off and dispute resolution provisions of
Sections 1.02 and 1.03.

2.04 Tax and Other Liabilities

         (a) Except as disclosed on Schedule  2.04,  EWI has no liability of any
nature, accrued or contingent,  including,  without limitation,  liabilities for
payroll and other employee  taxes,  federal,  state,  local, or foreign taxes or
liabilities  to  customers  or  suppliers,  other  than  liabilities  which  are
reflected on the Closing Balance Sheet.

         (b) Without  limiting  the  generality  of the  foregoing,  the amounts
reserved for taxes on the Closing  Balance Sheet are  sufficient for all accrued
and unpaid federal,  state,  local,  employee-related  and foreign taxes of EWI,
whether or not due and payable and  whether or not  disputed,  under tax laws in
effect on the Closing  Date for the period ended on such date and for all fiscal
years prior thereto. EWI has filed all payroll and other federal,  state, local,
and  foreign  tax  returns  required  to be filed by it;  has  delivered  to the
Purchaser a true and correct copy thereof; has paid all taxes, assessments,  and
other governmental  charges payable or remittable by it or levied upon it or its
properties,  assets,  income,  or franchises which are due and payable;  and has
delivered to the Purchaser a true and correct copy of any report as to any audit
or adjustments  received by EWI (or any of EWI's officers  concerning  EWI) from
any taxing authority during the past five years and


                                       11


<PAGE>




a statement as to any litigation,  governmental or other  proceeding  (formal or
informal),  or audit or investigation pending,  threatened,  or in prospect with
respect to any such report or the subject matter of such report.

         (c) The Closing  Balance Sheet contains an adequate  reserve for vendor
or supplier  invoices in process,  including any taxes or expenses in connection
with this transaction which are to be paid or charged to EWI.

         (d) EWI has engaged in no act,  omission,  ownership  or operation of a
property or facility or contractual  or  professional  performance  prior to the
Effective Time which will render it liable in the future for personal, economic,
environmental,  or  natural  resource  damage,  except  as may be set  forth  in
Schedule 2.05.

2.05 Litigation and Claims

         (a) Except as set forth on Schedule  2.05:  (i) there is no litigation,
arbitration,  claim,  governmental or other proceeding (formal or informal),  or
investigation  pending or threatened (or any basis  therefore known to Qualified
Stockholders) with respect to EWI or any of its business, properties, or assets;
(ii) EWI is not  affected  by any  present or  threatened  strike or other labor
disturbance  nor  to the  knowledge  of  Qualified  Stockholders  is  any  union
currently  representing  or  attempting  to  represent  any  employee  of EWI as
collective  bargaining  agent;  (iii) EWI is not in violation  of, or in default
with  respect  to,  any law,  rule,  regulation,  order,  judgment,  or  decree,
including any insurance or environmental laws or regulations. Schedule 2.05 sets
forth with respect to EWI, among other matters,  all past (previous three years)
and current citations,  violations,  fines, judgments,  decrees, orders, consent
decrees  or  orders,  and,  to the  best  knowledge  of  each  of the  Qualified
Stockholders,  all pending  proceedings  of any type  arising out of the alleged
violation  of any  federal,  state or local  criminal,  bidding or  procurement,
environmental,  health and safety, insurance, licensing or labor or other law or
regulation  or out of any alleged  act or  omission,  negligence,  intentionally
wrongful act or breach of contract in the performance of services or otherwise.

         (b) Except for the  liabilities  included on the Closing Balance Sheet,
neither EWI nor Purchaser will incur any liability,  including any environmental
liability, as a result of EWI's acts, omissions, sales, underwriting, consulting
services or contractual performance prior to the Effective Time.

         (c) In  consideration  of a payment from the cash proceeds set forth in
Section   1.01(b)(1)(a)  by  the  Escrow  Agent,  on  behalf  of  the  Preferred
Shareholders, the holders of the Tendered Common Shares have given the following
release to the Preferred  Shareholders in connection with the tendering of their
shares to the Escrow Agent:


                                       12


<PAGE>




         "Satisfaction. Each of the Tendering Common Shareholders hereby accepts
the cash  distributed  pursuant  to Section  1.01,  in  consideration  for their
shares,  and in full  satisfaction of and in release of all claims they may have
as shareholders of EWI against EWI, its directors,  officers,  and  shareholders
and  each  of  their  affiliates,  employees,  agents,  representatives,  heirs,
successors and assigns."

2.06 Properties

         (a) Except as set forth on  Schedule  2.06 or on the list of leases set
forth on Schedule  2.07, EWI has good title to all properties and assets used in
its  business  or owned by it free and clear of all liens,  mortgages,  security
interests, pledges, charges, and encumbrances.

         (b) All accounts  receivable and work in process of EWI recorded on the
Closing Balance Sheet have arisen from valid transactions in the ordinary course
of EWI's  business  and will be collected by EWI within six (6) months after the
Closing Date,  net of any reserve  amount on the Closing  Balance Sheet which is
excess of reserves  that EWI will be  required  to  maintain  after such six (6)
month period to conform with GAAP (the "Excess Reserve"),  employing  reasonable
and customary  collection  procedures  (i.e.  the cost of measures such as legal
action, referral to outside collection agency or liens shall be a charge against
collections from such accounts).  All accounts receivable of EWI recorded on the
Closing Balance Sheet were fully earned as of the Effective  Time,  there are no
existing  set-offs or  counterclaims  available  against EWI or  Purchaser,  and
Purchaser will have no performance obligations for which it will not be entitled
to bill (no account  receivable  entry  represents a  pre-billing  except to the
extent an allowance is reserved for it).

         (c)  Schedule  2.06 sets forth a ledger of all  properties  and assets,
including  Intangibles,  owned,  leased, or licensed by EWI for which a value is
recorded on the Closing  Balance Sheet,  detailing  location,  cost and net book
value with respect to all such properties  current as of the Effective Time. All
such  properties  and assets owned by EWI are  reflected on the Closing  Balance
Sheet.  Except as  disclosed  on Schedule  2.06,  each  physical  asset having a
depreciated  value on EWI's books  greater than Five Hundred  Dollars  ($500.00)
will be in fully  operational  condition  as of the  Effective  Time (except for
normal wear and tear which is not such as to affect their operability).

2.07 Contracts and Other Instruments

         (a) Schedule 2.07 lists and  describes all material  contracts to which
EWI is a party  including  leases and  licenses  and all  supply,  distribution,
agency,   financing  or  other   arrangements  and   understandings.   Qualified
Stockholders  have  provided  to  Purchaser,  or at  Purchaser's  election  made
available for its review,  all of the items so listed and described,  including,
but not limited to, the following: (i) true and correct copies of all


                                       13


<PAGE>




material written contracts,  agreements, and instruments;  (ii) true and correct
copies  of  all  leases  and  licenses;  and  (iii)  true  and  correct  written
descriptions  of  all  supply,   distribution,   agency,   financing,  or  other
arrangements or understandings. Any of the foregoing not disclosed on a schedule
elsewhere in this agreement are listed and described on Schedule  2.07.  Neither
EWI nor any other party to any such contract,  agreement,  instrument, lease, or
license is now or, to the  knowledge of Qualified  Stockholders,  expects in the
future to be in  violation or breach of, or in default with respect to complying
with,  any  material  provision  thereof,  and each  such  contract,  agreement,
instrument,  lease,  or license is in full  force and is the legal,  valid,  and
binding  obligation  of the  parties  thereto and is  enforceable  as to them in
accordance with its terms,  except as is disclosed on Schedule 2.07. Neither EWI
nor any other party to any such arrangement or understanding has given notice of
termination  or taken  any  action  inconsistent  with the  continuance  of such
arrangement or understanding;  and the execution,  delivery,  and performance of
this   Agreement   will  not   materially   violate  any  such   arrangement  or
understanding.  EWI enjoys peaceful and undisturbed  possession under all leases
and licenses under which it is operating.  EWI is not a party to or bound by any
contract, agreement,  instrument, lease, license, arrangement, or understanding,
or  subject  to any  charter  or other  restriction,  which  has had,  or to the
knowledge of EWI is likely in the future to have, a material  adverse  affect on
EWI's operations or business. EWI has neither engaged within the last five years
in, is engaging in, nor intends to engage in any  transaction  with, nor has had
within the last five years, now has, or intends to have any contract, agreement,
lease,  license,  arrangement,  or  understanding  with,  any  stockholder,  any
director,  officer,  or  employee  of EWI,  any  relative  or  affiliate  of any
Stockholder  or of any  such  director,  officer,  or  employee,  or  any  other
corporation or enterprise in which EWI, any such director, officer, or employee,
or any such  relative or  affiliate  then had or now has a five  percent (5%) or
greater  equity  or  voting  or other  substantial  interest,  other  than  such
contracts and  agreements as listed and so  identified on Schedule  2.07.  There
exists no contract,  agreement,  right or understanding material to the business
or officers  of EWI which is in the name of any  principal,  officer,  director,
stockholder or any other person or entity other than EWI except as disclosed and
so identified on Schedule 2.07.  Schedule 2.07 describes EWI's membership in any
customer or user organization or trade association.

         (b) Schedule  2.07(b)  sets forth a  description  of each  agreement or
understanding  entered  into  by  any  Stockholder  or EWI  as a  condition  for
obtaining any consent, authorization,  approval, order, license, certificate, or
permit required for the  consummation of the  transactions  contemplated by this
Agreement.

         (c) To the best of each  Qualified  Stockholder's  knowledge,  Schedule
2.07(c) sets forth a list of EWI's backlog as of the Effective Time.

         (d) To the best of each Qualified Stockholder's knowledge,


                                       14


<PAGE>




                  (1) the Qualified  Stockholders have no reason to believe that
         business   relations   currently   maintained  with  EWI's  significant
         customers will not be similarly  maintained in all substantial respects
         after the date hereof and the  Effective  Time;  without  limiting  the
         generality of the  foregoing,  no customer of EWI has notified EWI that
         it intends to discontinue its relationship with EWI;

                  (2) EWI has all properties and rights necessary to conduct its
         business and operations in all material  respects in substantially  the
         same manner as such business has been conducted by it prior to the date
         hereof;

                  (3) except as disclosed on Schedule  2.07, EWI is not required
         by any  person  or  governmental  authority  to  obtain  any  consents,
         authorizations,  licenses, permits, order certificates,  registrations,
         qualifications   or  clearances  for  the  conduct  of  EWI's  business
         (including qualifications to transact business as a foreign corporation
         in various states);

                  (4) except as set forth on Schedule 2.07, EWI has obtained all
         such consents, authorizations, licenses, permits, orders, certificates,
         registrations,  qualifications  and clearances;  the same are valid and
         subsisting and, the  consummation of this Agreement will not invalidate
         the same;

                  (5) the business and  operations of the Company have been, and
         are  being  conducted  in  compliance  with  all  applicable  statutes,
         ordinances,  orders,  rules and  regulations  of any federal,  state or
         local governmental authority.

2.08 Employees

         (a) Set forth on Schedule  2.08 is a list of (i) all of EWI's  pension,
profit-sharing,  option,  other  incentive  plans, or any other type of employee
benefit  plan (as  defined in Section  3(3) of the  Employee  Retirement  Income
Security Act of 1974  ("ERISA")),  and (ii) all  obligations to, or arrangements
with,  EWI's  employees  for wages,  salary,  bonuses,  incentive  compensation,
vacations,  severance pay,  insurance,  or other benefits.  EWI has furnished or
made  available  to the  Purchaser  true and  correct  copies  of all  documents
evidencing such plans,  obligations or arrangements referred to in Schedule 2.08
(or written summaries of such plans, obligations,  or arrangements to the extent
not  evidenced  by  documents)  and true and  correct  copies  of all  documents
evidencing trusts relating to any such plans.  Schedule 2.08 includes a true and
correct  ledger  containing  the  name,  position/title,  and  present  rate  of
compensation  (whether  in the form of salary,  bonuses,  commissions,  or other
supplemental  compensation now or hereafter payable) of each director,  officer,
employee or sales agent of EWI. All notices and performance required under COBRA
and other ERISA plans prior to the Effective  Time have been properly  given and
performed.  All  obligations,   debts  and  liabilities  associated  with  EWI's
employees or agents,  including  all of the  above-referenced  matters have been
paid or


                                       15


<PAGE>




discharged in full by EWI prior to Effective Time or will be properly  reflected
as liabilities on the Closing Balance Sheet in accordance  with ss.2.03.  Except
as set forth on Schedule 2.08 (i) EWI has made all payments due to date under or
with  respect to each plan set forth on Schedule  2.08 and all amounts  properly
accrued to date due as  liabilities  of EWI,  under or with respect to each such
plan,  for the current plan years,  have been recorded on the books of EWI; (ii)
EWI has performed all material obligations required to be performed,  and is not
in material default under, or in material  violation of any such plan; (iii) EWI
is in compliance in all material aspects with the requirements prescribed by all
statutes,  orders or governmental  rules or regulations  applicable to each such
plan, and each trust related to each such plan, and,  neither EWI, any such plan
nor any related  trust is required to take any action to avoid  violation of any
of such requirements;  and (v) there are no unfunded or underfunded  obligations
under any such  plan nor has any such  plan  incurred  any  accumulated  funding
deficiencies as defined in ERISA or the Internal Revenue Code.

         (b)  Except  as set forth on  Schedule  2.05,  there is no  litigation,
arbitration,  claim,  governmental or other proceedings (formal or informal), or
investigation pending, or to Stockholder's  knowledge threatened,  (or any basis
for such known to  Qualified  Stockholders)  with  respect to any such  employee
benefit plan,  compensation  arrangement or EWI's acts or omissions with respect
to its employees or its work environment.

         (c) Except for the  liabilities  recorded on the Closing Balance Sheet,
neither EWI nor  Purchaser  will incur,  any  liability to or on behalf of EWI's
employees  arising out of their  employment with EWI prior to the Effective Time
or out of EWI's acts or omissions prior the Effective  Time,  including (but not
limited  to) any  liability:  under  ERISA or the  Internal  Revenue  Code;  for
obligations  to, or  arrangements  with  employees for wages,  salary,  bonuses,
incentive  compensation,  vacation  pay,  severance  pay,  insurance,  or  other
benefits,  or employee  taxes;  for personal injury or property  damage;  or for
discrimination,  harassment, or wrongful discharge under federal, state or local
laws.

2.09 Patents, Trademarks, Et Cetera

         Except as set forth and  described in Schedule  2.09,  EWI neither owns
nor  has  pending,  or  is  licensed  under,  any  patent,  patent  application,
trademark,   trademark   application,   trade  name,  service  mark,  copyright,
franchise,  or other  intangible  property or asset (all of the foregoing  being
herein called "Intangibles"), all of which are in good standing and uncontested.
Schedule 2.09 accurately  sets forth with respect to Intangibles  owned by EWI a
statement of cost, book value and reserve for  depreciation of each item for tax
purposes,  and net book value of each item for financial reporting purposes, and
with  respect  to  Intangibles  licensed  by EWI  from  or to a third  party,  a
description of such license. Neither any stockholder,  any director, officer, or
employee of EWI, any relative or  affiliate  of any  stockholder  or of any such
director, officer, or employee, nor any other corporation or enterprise in which
any stockholder,  any such director,  officer, or employee, or any such relative
or affiliate had or now has a five percent (5%) or greater


                                       16


<PAGE>




equity or voting or other substantial  interest,  possesses any Intangible which
relates to the business of EWI except as such  interest is disclosed on Schedule
2.09. There is no right under any Intangible necessary to the business of EWI as
presently  conducted  or as it  contemplates  conducting,  except such as are so
designated in Schedule 2.09. EWI has neither  infringed,  is infringing,  or has
received notice of  infringement  of Intangibles of others.  To the knowledge of
Qualified Stockholders there is no infringement by others of Intangibles of EWI.
As far as Qualified  Stockholders can foresee,  there is no Intangible of others
which may  materially  adversely  affect  the  financial  condition,  results of
operations,  business,  properties,  assets, liabilities, or future prospects of
EWI.

2.10 Questionable Payments

         To the  knowledge  of  Qualified  Stockholders,  neither  EWI,  nor any
director, officer, agent, employee,  stockholder or other person associated with
or acting on behalf of EWI has,  directly or indirectly:  (a) used any corporate
funds  for  unlawful  contributions,  gifts,  entertainment,  or other  unlawful
expenses  relating  to  political  activity;  (b) made any  unlawful  payment to
foreign or domestic government  officials or employees or to foreign or domestic
political  parties or campaigns from corporate funds; (c) violated any provision
of the Foreign Corrupt  Practices Act of 1977; (d) established or maintained any
unlawful or unrecorded  fund of corporate  monies or other assets;  (e) made any
false of  fictitious  entry on the books or records of EWI;  (f) made any bribe,
rebate,  payoff,  influence payment,  kickback,  or other unlawful payment;  (g)
given any favor or gift which is not deductible for federal income tax purposes;
or (h) made any bribe,  kickback,  or other  payment of a similar or  comparable
nature,  whether  lawful or not,  to any  person or  entity,  private of public,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special  concessions,  or to pay for
favorable  treatment  for business  secured or for special  concessions  already
obtained.

2.11 Authority to Sell

         The Qualified  Stockholders  have all requisite  power and authority to
execute,   deliver,   and  perform  this  Agreement.   All  necessary  corporate
proceedings of EWI have been or as of the Closing Date will have been duly taken
to authorize the execution,  delivery, and performance of this Agreement by EWI.
This Agreement has been duly  authorized,  executed,  and delivered by Qualified
Stockholders,  constitutes the legal, valid, and binding obligation of Qualified
Stockholders,  and is  enforceable as to them in accordance  with its terms.  No
consent,  authorization,  approval, order, license, certificate, or permit of or
from,  or  declaration  or filing with,  any  federal,  state,  local,  or other
governmental  authority or any court or other  tribunal is required by Qualified
Stockholders for the execution, delivery, or


                                       17


<PAGE>




performance  of this Agreement by them. No consent of any party to any contract,
agreement,  instrument,  lease, license,  arrangement, or understanding to which
EWI or any Qualified  Stockholder  is a party,  or to which it or they or any of
its or their  properties or assets are subject,  is required for the  execution,
delivery,  or performance  of this Agreement  (except such consents as have been
obtained at or prior to the date of this  Agreement,  true and correct copies of
which have been  delivered  to the  Purchaser).  The  execution,  delivery,  and
performance of this Agreement will not violate,  result in a material breach of,
conflict  with,  or (with or without the giving of notice or the passage of time
or both)  entitle any party to terminate or call a default under any term of any
such  contract,   agreement,   instrument,   lease,  license,   arrangement,  or
understanding,  or  materially  violate or result in a breach of any term of the
certificate of  incorporation  (or other charter  document) or by-laws of EWI or
violate,  result in a breach of, or  conflict  with any law,  rule,  regulation,
order,  judgment, or decree binding on EWI or any Stockholder or to which any of
their operations, business, properties, or assets are subject. Upon the Closing,
Purchaser  will  have good  title to the  Shares,  free and clear of all  liens,
security  interests,  pledges,  charges,  stockholders'  agreements,  preemptive
rights  and  encumbrances  except  those,  if  any,  expressly  consented  to by
Purchaser in writing.

2.12 Qualified Stockholders. Exchange for Investment Purposes Only

         Except for Clifford and Gildea,  no Stockholder  who is not a Qualified
Stockholder will receive any of the ATC Stock. Each Stockholder who is acquiring
part of the ATC Stock from  Purchaser  is  acquiring  such stock for  investment
purposes only and not with the view to the resale or distribution  thereof. Each
Stockholder  receiving ATC Stock under ss.1.01(b)(3) or any distribution to them
of such ATC Stock  pursuant to the Escrow  Agreement  or any other  agreement or
rights expressly represents and warrants that:

         (a) He or it has  received a copy of  Purchaser's  report to the United
States  Securities  Exchange  Commission  ("SEC")  on Form 10-K for  Purchaser's
fiscal year ended February 28, 1997;

         (b) Purchaser has provided access to all information which he or it has
requested to verify or investigate the matters referred to in such Form 10-K and
all other matters related to the Purchaser, its business or the ATC Stock;

         (c) He or it has had the opportunity to communicate with such officers,
employees,  accountants  or other  representatives  of Purchaser as he or it has
deemed  necessary or prudent to fully inform  himself or itself  concerning  the
Purchaser, its business, the ATC Stock and the risks associated therewith;

         (d)  Except as  contained  in this  Agreement,  no  representations  or
warranties  from  Purchaser  have  been  made  to  any  Stockholder,   Qualified
Stockholder or other person in connection with the ATC Stock;

         (e) He or it fully understands that the Shares have not been registered
under the  Securities  Act of 1933,  as amended (the "Act"),  or under any state
securities acts as may


                                       18


<PAGE>




be applicable and are being delivered to him or it pursuant to an exemption
from registration under the Act;

         (f)  Purchaser's  reliance upon such exemption is predicated  upon each
Qualified  Stockholder's   representations  and  warranties  contained  in  this
section;

         (g) He or it fully  understands that due to the unregistered  status of
the ATC Stock, it will be subject to a prohibition imposed by law and regulation
on transfer,  pledge or hypothecation during a one-year restriction period which
will prevent liquidation of the investment during such period, and the ATC Stock
may only be sold after such one-year  restriction  period upon  compliance  with
Rule 144, as promulgated by the  Securities  and Exchange  Commission  under the
Act;

         (h) He or it  has  such  knowledge  and  experience  in  financial  and
business  matters as to be capable of evaluating the merits and risks of such an
investment;

         (i) He or it is either an "accredited investor" within the meaning Rule
501 of  Regulation D promulgated  under the Act or represents  and warrants that
each of the  statements  contained  in  subsections  (h) and (i) are  true  with
respect to him or it;

         (j) He or it  has  such  knowledge  and  experience  in  financial  and
business  matters that he or it is capable of evaluating the merits and risks of
an investment in Purchaser and of making an informed investment decision; and

         (k)  He or it has  had  significant  prior  investment  experience  and
recognizes  the  speculative  nature  of this  unregistered  investment  and the
additional  risks resulting from the lack of liquidity  attending  unregistered,
restricted stock.

2.13 Loans to be Repaid

         EWI has not  made  any  loans  to  stockholders,  officers,  directors,
employees  or any other  affiliated  person or entity  other  than the loans set
forth on Schedules 2.03, 2.07 or 2.13.

2.14 Fictitious Names

         EWI has not done business or registered in any  jurisdiction  under any
name, other than its corporate name.

2.15 Absence of Undisclosed Liabilities

         Except  as set  forth  in the  Schedules  to this  Agreement  or on the
Closing Balance Sheet, EWI has no obligations or liabilities of any kind, fixed,
accrued or contingent,


                                       19


<PAGE>




including  but not limited to,  obligations  to perform  after the Closing under
contracts or other  commitments  which would  adversely  affect EWI's  financial
condition or business.

2.16 Books and Records

         Except as  described  in Schedule  2.16,  the books and records of EWI,
including its corporate minute book, are in all material  respects  complete and
correct.

2.17 Completeness of Disclosure

         No  representation  or  warranty  by  Qualified  Stockholders  in  this
Agreement  contains or on the date of the Closing  will  contain any  materially
untrue  statement of a material fact or omits, or on the Closing Date will omit,
to state a material fact necessary to make the statements made not misleading.

                III. REPRESENTATIONS AND WARRANTIES OF PURCHASER

         As a material  inducement to Qualified  Stockholders to enter into this
Agreement, Purchaser hereby makes the following representations and warranties:

3.01 Organization and Good Standing

         Purchaser is a corporation duly organized, validly existing and in good
standing  under the laws of the State of Delaware  with full power and authority
to  enter  into  and  perform  each  of the  transactions  contemplated  by this
Agreement.

3.02 Execution and Performance Authorized

         The execution, delivery and performance of this Agreement and all other
documents and Related Agreements  contemplated hereunder have been duly approved
by  Purchaser's  board of  directors,  at Closing  will have been  executed  and
delivered by Purchaser's duly authorized  officers,  such execution and delivery
and the  consummation by Purchaser of the  transactions  contemplated  hereunder
have been duly  authorized by all  necessary  corporate  action,  and no further
action is  required  by law,  its  corporate  charter,  bylaws or  otherwise  to
authorize all action to be taken by Purchaser with respect to this Agreement and
the consummation of the transactions  contemplated hereunder.  The Agreement and
the other  documents  contemplated  hereunder  are binding  and are  enforceable
against Purchaser in accordance with their terms.

3.03 Absence of Litigation

         Except as set forth on  Schedule  3.03,  there is no  action,  lawsuit,
proceeding or investigation of any kind or nature pending or threatened  against
Purchaser before any


                                       20


<PAGE>




court,  tribunal or  administrative  agency or board which Purchaser  reasonably
expects,  individually or in the aggregate,  to materially and adversely  affect
(i) Purchaser's  solvency,  (ii) its ability to perform  hereunder,  or (iii) to
render  any one or  more  of the  transactions  contemplated  hereunder  void or
voidable.

3.04 No Other Default

         The  execution  and delivery of this  Agreement  by  Purchaser  and the
consummation of the transactions  contemplated  hereunder will not conflict with
or  violate or require  any  consent  under and will not result in any breach or
termination  of  Purchaser's  corporate  articles,  by-laws  or  minutes  or any
agreement  to which  Purchaser  is a party or by which  any of its  property  is
subject or by which it is bound.

3.05 Permits and Filings

         There is no  requirement  applicable  to  Purchaser to make any further
filing with, or to obtain any permit, authorization,  consent or approval of any
governmental  or  other  regulatory  authority  as a  condition  of  the  lawful
consummation of the transactions contemplated under this Agreement.

3.06 Absence of Lien

         The monies and ATC Stock to be paid or  delivered  by  Purchaser  under
Section  1.01 shall be paid by  Purchaser  and received by Escrow Agent free and
clear of any  lien,  charge  or  encumbrance  arising  out of any  agreement  or
instrument to which Purchaser is subject or by which their properties are bound.

3.07 Solvency

         At the  Closing  and after  payment of the  purchase  price as required
under  Section  1.01,  Purchaser  will be and  will  remain  solvent  under  all
applicable federal and state laws and regulations. Purchaser also agrees that it
will not  intentionally  cause its  business  to be  conducted  in a manner that
results in its becoming insolvent;  provided,  however, that consistent with the
foregoing,  this covenant  shall not restrict the future  business  decisions of
Purchaser which relate to its or to EWI's business.  Purchaser acknowledges that
EWI  may  require  working  capital  in the  short-term  in  order  to  continue
operations.

3.08 Corporate Documents

         Purchaser has furnished to Qualified  Stockholders  its  certificate of
incorporation and a certificate of good standing in Delaware dated within thirty
(30) days of the closing.


                                       21


<PAGE>




3.09 Purchase for Investment Purposes Only

         Purchaser  is  acquiring  the Shares from  Qualified  Stockholders  for
investment  purposes  only and not with the view to the  resale or  distribution
thereof. Purchaser is an "accredited investor" under the regulations promulgated
under the Act. Purchaser has not received any representations or warranties from
EWI or Qualified  Stockholders  other than those contained in this Agreement and
the attached schedules and/or exhibits hereto. Purchaser represents and warrants
that it has such knowledge and  experience in financial and business  matters as
to be capable of evaluating  the merits and risks of its  investment.  Purchaser
understands and acknowledges  that the Shares have not been registered under the
Act or under any state  securities  acts as may be applicable and are being sold
to Purchaser  pursuant to  exemptions  from  registration  under the Act and any
pertinent state  securities  acts.  Qualified  Stockholders'  reliance upon such
exemption  is  predicated  upon  Purchaser's   representations   and  warranties
contained  herein. In this regard,  Purchaser  understands and agrees that there
may be affixed to the certificates  representing the Shares a legend advising of
the unregistered, restricted nature of the Shares.

                                  IV. COVENANTS

4.01 Insurance

         Purchaser shall cause EWI to continue to carry insurance  against risks
similar to that provided in EWI's  insurance  coverage as of the date of Closing
and with coverage  limits not less than  $2,000,000 and a deductible not greater
than $100,000.

4.02 Release by Qualified Stockholders

         Each Qualified Stockholder agrees to release and waive all claims he or
it  now  has  against  EWI or the  Shares  for  any  past  compensation,  bonus,
distribution,  dividend or other  consideration  or claim for  payment  from any
cause that may have otherwise been due such Qualified Stockholder at the time of
Closing,  except to the extent such obligations are reaffirmed in this Agreement
or any Related Agreement.

4.03 Collection of Accounts Receivable

         (a) Any EWI account  receivable or work in process for which revenue is
recorded on the Closing Balance Sheet and warranted as collectible under Section
2.06(b),  which has not been collected by Purchaser within six (6) months, shall
be deemed to be uncollected and  uncollectible  by Purchaser except as Purchaser
shall otherwise agree in writing. Accounts or work in process may also be deemed
uncollectible  by agreement of the parties as provided in Section  5.03(b).  All
uncollected  accounts and work in process,  net of reserves  therefor,  shall be
remedied by set-off under Section 1.03 (or if set-off is not available,  then by
indemnification and repayment). Set-off shall be available to the


                                       22


<PAGE>




Purchaser for uncollected accounts or work in process at the earlier of: (i) six
(6) months  after the Closing  Date or (ii) such  earlier time as the account is
agreed to be  uncollectible  by the Escrow Agent under this  section.  Upon such
remedy, the account shall be assigned to the Escrow Agent.

         (b)  Purchaser  shall  provide  the Escrow  Agent with a monthly  aging
report of the purchased  accounts  receivable and work in process  together with
contact log summary of problem  accounts.  If at any time  Purchaser  determines
that measures in addition to Purchaser's  customary collection procedures (e.g.,
measures such as mechanics lien, legal action or referral to collection  agency)
should be employed on a specific account to obtain  collection,  Purchaser shall
notify the Escrow Agent in writing of the measures  proposed to be taken. If the
Escrow Agent agrees in writing that the proposed  extraordinary  measures should
be taken or if the Escrow Agent itself deems such action to be necessary without
notice from Purchaser, the Escrow Agent shall notify Purchaser in writing of its
agreement to such measures.  The Escrow  Agent's  agreement to the employment of
extraordinary  collection  measures shall constitute its agreement to having the
cost of such measures first charged against the Excess Reserve for uncollectible
accounts and the remainder,  if any, remedied by set-off or refund if set-off is
not available.

         (c) At any time the parties  may by mutual  written  agreement  deem an
account uncollectible,  Purchaser shall assign it to the Escrow Agent and charge
it off of the Excess  Reserve and set off the  remainder,  if any, under Section
1.03 or make a claim for refund  under  Section  1.02.  Upon  written  notice to
Purchaser,  the Escrow Agent may request to have any account receivable which is
uncollected assigned to the Escrow Agent.  Purchaser shall not unreasonably deny
such request.  Such request by the Escrow Agent for assignment  shall constitute
Qualified  Stockholders'  agreement to a charge  against the Excess  Reserve for
uncollectible  accounts  by such  amount  or, to the extent  that the  remaining
Excess Reserve balance is thereby  exceeded,  to a set-off or indemnity claim in
such excess amount, which Purchaser may exercise immediately.

4.04 Public Statements

         Before the Escrow Agent or Qualified  Stockholders or any of them shall
release  any  information   concerning   this  Agreement  or  the   transactions
contemplated  by this  Agreement  which is intended  for or may result in public
dissemination  thereof,  they shall cooperate with the Purchaser,  shall furnish
drafts of all  documents  or  proposed  oral  statements  to the  Purchaser  for
comments,  and shall not release any such statement or  information  without the
written  consent of the Purchaser.  Nothing  contained  herein shall prevent the
Escrow Agent or Qualified  Stockholders  from  furnishing any information to any
governmental authority if required to do so by law.


                                       23


<PAGE>




4.05 Books, Records, Access to Information

         (a) Each party shall provide to the other,  with reasonable  promptness
following  a request in writing  (not to exceed ten (10)  business  days),  such
information  and data with respect to EWI's  business  before the Effective Time
and this  transaction  as may from time to time be requested by the other party.
In the event  either  Purchaser  or any  Qualified  Stockholder  is  required to
prepare audited statements or to produce or compile information for a government
agency which requires access to information or for any other reasonable purpose,
including  the  verification  of any  information  provided  to the other  party
relative  to this  agreement,  the  parties  agree  to  allow  the  other  party
reasonable access to records,  including the  non-proprietary  working papers of
the other party's accountants,  and to provide reasonable cooperative assistance
in the  preparation  of  reports,  documents,  etc.  without  charge  except for
reimbursement of any actual,  out-of-pocket  expenses,  exclusive of the cost of
in-house staff time. Notwithstanding the foregoing, in the event that a party is
or anticipates  becoming a party to  litigation,  this Section 5.06 or any other
provision  of this  Agreement  shall not be  construed  to require such party to
provide  information  to the other which could  prevent such party from making a
bona fide claim of attorney/client  privilege or such other privileges as may be
applicable with respect to such information.

         (b) Neither party shall intentionally  dispose of or destroy any of the
records of EWI in its  possession  except in conformity  with the procedures set
forth in this  section.  If a party  wishes to dispose of or destroy any of such
records,  it shall first give thirty (30) days prior written notice to the other
party of the  action it  intends  to take,  and the other  party  shall have the
right,  at its option and expense,  upon prior  written  notice to the notifying
party within such 30-day  period,  to take  possession of such affected  records
within 30 days after the date of the notice of intent to take possession.

         (c) Each party shall exercise  reasonable care in the care, custody and
maintenance  of the  records  of  EWI  in  its  possession.  A  party  shall  be
responsible  for actual damage caused to the other party only as a result of its
negligence or  intentionally  wrongful act in maintaining  the records.  Neither
party  shall  have  liability  to the  other  party  or any  other  person  as a
consequence  of the  non-existence  of any record or such  party's  inability to
locate any record  unless the loss or  destruction  of the record is proven,  by
clear and  convincing  affirmative  evidence,  to have been due to the allegedly
possessing party's negligence or intentionally wrongful act.

4.06 Transaction Costs and Expenses

         The Purchaser on the one hand and Qualified  Stockholders and/or EWI on
the other hand shall each pay their own respective  costs incurred in connection
with this transaction  including,  without  limitation,  all legal,  accounting,
auditing and appraisal fees in  negotiating  and preparing this Agreement and in
consummating, closing and carrying out


                                       24


<PAGE>




the transactions contemplated hereby. Any costs to be charged to EWI shall be
included on the Closing Balance Sheet.

4.07 Conduct of Business After Closing

         Until such time as Purchaser has had the opportunity in accordance with
EWI's  certificate of incorporation  and by-laws to duly call and hold a general
or special meeting of the  stockholders of EWI for the purpose of electing a new
board of directors,  Perry agrees,  as sole director and President of EWI, that,
without the written consent of Purchaser, he will:

         (a) Take no action in respect  of its  business,  assets or  management
other than continuing to conduct business in the ordinary course;

         (b) Issue no shares or other  securities  or make any  distribution  or
other like payment to any person or entity;

         (c) Borrow any money;

         (d) Sell any assets.

4.08 Delivery of Property

         Purchaser and Qualified  Stockholders shall each use their best efforts
to avoid opening mail or deliveries  which  rightfully  belongs to the other and
shall  turn over to the other any  property  received  by the  party,  including
checks  or  money,  belonging  to  the  other  within  twenty-four  hours  after
determining its rightful ownership.

4.09     Related Agreements

         Qualified  Stockholders and Purchaser each agree to execute and deliver
at Closing the  Related  Agreements  referenced  in Section  7.01 which  require
execution by them in accordance with their terms.

         4.10 Continuing Cooperation, Reporting of Changes, Breaches and Status

         The  parties  agree to  cooperate  in good faith  following  Closing to
secure  to each  other the  benefits  and  performance  to be  provided  by this
Agreement  and to promptly  execute such  documents or  instruments  as shall be
reasonably  requested by another party, without charge, to that end. At any time
or times on or after the Closing,  Qualified  Stockholders  and Purchaser  shall
execute, acknowledge, and deliver any and all further assurances, documents, and
instruments reasonably requested by the other in order to effectively convey the
Shares, the ATC Stock and all ownership thereof free and clear of


                                       25


<PAGE>




encumbrances  or title defects except as expressly  authorized  herein and shall
take any  other  action  consistent  with the terms of this  Agreement  that may
reasonably be requested by the other party in order to  effectuate  the purposes
and intent hereof.  The parties shall each promptly  advise the other in writing
of (i) the occurrence of any event which renders any of the  representations  or
warranties  set forth herein  inaccurate in any material  respect,  and (ii) the
failure  of the party to  comply  with or  accomplish  any of the  covenants  or
agreements set forth herein in any material respect.

4.11 Tax Returns

         In consideration  for its ability to utilize EWI's net operating losses
(subject  to any  limits  thereon),  Purchaser  agrees to  prepare  and file all
required  federal,  state and local tax returns  required  for the period  which
ended June 30, 1997.

4.12 ATC Acquisition Proposal

         The parties  acknowledge  that  Purchaser has received an offer for the
acquisition of any and all outstanding  shares of the  Purchaser's  stock from a
group  led by  senior  members  of  Purchaser's  management  and  WPG  Corporate
Development Associates V, L.P., a financial investor group,  (collectively,  the
"Offerors")  pursuant to the terms and conditions of a proposed merger agreement
(the "Merger  Agreement")  in the form  attached to the letter dated October 17,
1997 from  Weiss,  Peck & Greer,  L.L.C.  to the  Purchaser  (as the same may be
negotiated and entered into by the Purchaser) (the "Acquisition  Proposal").  If
(i) the tender offer contemplated in the Acquisition Proposal is consummated and
(ii) the persons listed on Schedule 1.01(b)(2) (the "ATC Stockholders") have not
been  issued the ATC Stock,  as  provided  for in this  Agreement,  prior to the
record date (the "Record Date")  established for the merger  contemplated in the
Acquisition  Proposal, in lieu of issuing such shares of ATC Stock following the
Record Date, the Purchaser shall pay to each of the ATC Stockholders  cash in an
amount per share  equal to the amount  paid per share to holders of  Purchaser's
stock in connection  with the  consummation of the  Acquisition  Proposal.  Such
price shall be paid to the Escrow Agent on the same  schedule as payment is made
to the other  holders of  Purchaser's  stock whose shares are being  canceled in
connection with the merger contemplated in the Acquisition Proposal.

     V. CONDITIONS PRECEDENT TO QUALIFIED STOCKHOLDERS' OBLIGATION TO CLOSE

         The  obligation of Qualified  Stockholders  to close and to perform the
covenants  and actions  required of them on the Closing Date shall be subject to
the  satisfaction  or waiver,  on or prior to the Closing Date, of the following
conditions precedent:


                                       26


<PAGE>




5.01 Truth of Representations and Warranties

         Purchaser's  representations and warranties contained in this Agreement
shall be true in all material respects at and as of the Closing Date.

5.02 Performance

         Purchaser  shall have  performed and complied in all material  respects
with its obligations  under this Agreement which are to be performed or complied
with by it prior to or on the Closing Date.

5.03 Documents

         Purchaser  shall provide to Escrow Agent all of the documents and shall
perform  such acts as are  prescribed  in  Section  7.03.  Purchaser  shall have
delivered to the Escrow  Agent at or prior to the Closing  such other  documents
(including  certificates  of officers of  Purchaser)  as the Escrow  Agent,  the
Qualified  Stockholders  or their  counsel  may  reasonably  request in order to
enable the Qualified  Stockholders to determine  whether the conditions to their
obligations  under this  Agreement  have been met and otherwise to carry out the
provisions of this Agreement.

5.04 Authorization

         Any consent, approval, authorization, order or filing with any court or
governmental  agency or administrative body required for the consummation of the
transactions contemplated by this Agreement shall have been obtained or made and
shall be in effect on the Closing Date.

5.05 Absence of Suit

         No action,  suit or proceeding  before any court or any governmental or
regulatory  authority shall have been commenced or threatened  against Purchaser
or any of  Purchaser's  officers  or  directors,  and  no  investigation  by any
governmental  or  regulatory  authority  shall  have  been  commenced,   against
Purchaser  or  any  affiliate,  seeking  to  restrain,  prevent  or  change  the
transactions  contemplated hereby or challenging the validity or legality of any
such   transactions,   or  seeking  damages  in  connection  with  any  of  such
transactions.

5.06 Payment of Purchase Price

         Purchaser shall have tendered the cash and other consideration required
to be paid or delivered at closing under Section l.0l(b).


                                       27


<PAGE>




5.07 Documents

         Qualified  Stockholders  shall  have  received  all  of  the  documents
required to be delivered to them  pursuant to Section 7.03 and elsewhere in this
Agreement.  Purchaser  shall have delivered to the Qualified  Stockholders at or
prior to the Closing such other documents (including certificates of officers of
Purchaser) as the Escrow Agent, the Qualified  Stockholders or their counsel may
reasonably  request in order to enable the Qualified  Stockholders  to determine
whether the conditions to their  obligations  under this Agreement have been met
and otherwise to carry out the provisions of this Agreement.

5.08 Opinion of Counsel

         Purchaser  shall have  delivered to the Qualified  Stockholders  before
Closing the  opinion of counsel to  Purchaser,  satisfactory  to counsel for the
Qualified Stockholders.

5.09 Receipt of Approvals, Etc.

         All material  approvals,  consents and/or waivers that are necessary to
effect the transactions contemplated hereby shall have been received.

5.10 Review of Proceedings

         All actions, proceedings,  instruments, and documents required to carry
out this  Agreement or  incidental  thereto and all other  related legal matters
shall  be  subject  to the  reasonable  approval  of the  counsel  to  Qualified
Stockholders,  and Purchaser shall have furnished such counsel such documents as
such counsel may have  reasonably  requested  for the purpose of enabling him to
pass upon such matters.

5.11 Approval by Lenders

         Unless exempted pursuant to Schedule 5.11, prior to Closing,  Purchaser
shall have obtained written consent from its banks and the holders of its senior
secured notes for Purchaser to execute this Agreement and the Note.

5.12 No Governmental Action

         There  shall  not  have  been  any  action  taken,  or any  law,  rule,
regulation, order, or decree proposed, promulgated,  enacted, entered, enforced,
or deemed  applicable to the transactions  contemplated by this Agreement by any
federal,  state, local, or other governmental authority or by any court or other
tribunal,  including the entry of a preliminary or permanent injunction,  which,
in the reasonable judgment of the Qualified  Stockholders,  (a) makes any of the
transactions  contemplated by this Agreement illegal,  (b) results in a delay in
the ability of the Qualified Stockholders to consummate any of the


                                       28


<PAGE>




transactions contemplated by this Agreement, (c) imposes material limitations on
the ability of  Qualified  Stockholders  effectively  to exercise  their  rights
hereunder  or  (d)  otherwise  prohibits,   materially   restricts,   or  delays
consummation  of any of the  transactions  contemplated  by  this  Agreement  or
impairs the contemplated benefits to Qualified  Stockholders of the transactions
contemplated by this Agreement.

               VI. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS

         The  obligation  of the Purchaser to close and to perform the covenants
and actions  required of it on the Closing Date are subject to the  satisfaction
or  waiver,  on or  prior  to the  Closing  Date,  of the  following  conditions
precedent:

6.01 Truth of Representations and Warranties

         Qualified  Stockholders'  representations  and warranties  contained in
this Agreement  shall be true and correct in all material  respects at and as of
the Closing Date as though such  representations and warranties were made at and
as of the Closing Date.

6.02 Performance

         As of the Closing,  Qualified Stockholders and EWI shall have performed
and complied  with all  covenants and  agreements  and satisfied all  conditions
required  to be  performed  and  complied  with by any of them at or before  the
Closing Date by this Agreement or any of the Related Agreements.

6.03 Absence of Suit

         No action,  suit or proceeding  before any court or any governmental or
regulatory  authority  shall  have been  commenced  or  threatened  against  the
Qualified Stockholders, EWI, or any affiliate, associate, officer or director of
any of them, and no investigation  by any  governmental or regulatory  authority
shall have been commenced, against Qualified Stockholders, EWI or any affiliate,
associate,  officer or director of any of them, seeking to restrain,  prevent or
change the  transactions  contemplated  hereby,  or challenging  the validity or
legality of any such transactions,  or seeking damages in connection with any of
such transactions.

6.04 Receipt of Approvals, Etc.

         All material  approvals,  consents and/or waivers that are necessary to
effect  the  transactions  contemplated  hereby  shall  have been  delivered  to
Purchaser by Qualified Stockholders.


                                       29


<PAGE>




6.05 Authorization

         Any consent, approval, authorization, order or filing with any court or
governmental  agency or administrative body required for the consummation of the
transactions  contemplated by this Agreement shall have been obtained or made by
the Qualified Stockholders or EWI, as appropriate, and shall be in effect on the
Closing Date.

6.06 Documents

         Purchaser  shall have  received  all of the  documents  required  to be
delivered  to it  pursuant  to Section  7.02 and  elsewhere  in this  Agreement.
Qualified  Stockholders shall have delivered to the Purchaser at or prior to the
Closing such other  documents  (including  certificates of officers of Qualified
Stockholders or EWI) as the Purchaser may reasonably  request in order to enable
the Purchaser to determine  whether the  conditions to their  obligations  under
this  Agreement  have been met and otherwise to carry out the provisions of this
Agreement.

6.07 Completion of Due Diligence Investigation

         Purchaser  shall have completed its  investigation  of EWI prior to the
Closing Date with  Purchaser's  accountants,  attorneys and officers having been
afforded  free  access to perform  due  diligence  investigations  of the books,
records  and  operations  of EWI and  interviews  with EWI's  sales and  project
management employees.

6.08 Opinion of Counsel

         Qualified  Stockholders  shall have  delivered to the Purchaser  before
Closing  the  opinion of  counsel to  Qualified  Stockholders,  satisfactory  to
counsel for the Purchaser.

6.09 Review of Proceedings

         All actions, proceedings,  instruments, and documents required to carry
out this  Agreement or  incidental  thereto and all other  related legal matters
shall be subject to the reasonable approval of the counsel to the Purchaser, and
Qualified  Stockholders shall have furnished such counsel such documents as such
counsel may have  reasonably  requested  for the purpose of enabling him to pass
upon such matters.

6.10 No Governmental Action

         There  shall  not  have  been  any  action  taken,  or any  law,  rule,
regulation, order, or decree proposed, promulgated,  enacted, entered, enforced,
or deemed  applicable to the transactions  contemplated by this Agreement by any
federal,  state, local, or other governmental authority or by any court or other
tribunal including the entry of a


                                       30


<PAGE>




preliminary or permanent  injunction,  which, in the reasonable  judgment of the
Purchaser,  (a) makes any of the  transactions  contemplated  by this  Agreement
illegal,  (b) results in a delay in the ability of the  Purchaser to  consummate
any of the  transactions  contemplated  by  this  Agreement,  (c)  requires  the
divestiture  by the  Purchaser  of any of the  Shares  or of the  assets or of a
material  portion of the  business of EWI or  Purchaser,  (d)  imposes  material
limitations on the ability of the Purchaser  effectively to exercise full rights
of  ownership of the Shares or (e)  otherwise  prohibits,  restricts,  or delays
consummation  of any of the  transactions  contemplated  by  this  Agreement  or
impairs  the  contemplated   benefits  to  the  Purchaser  of  the  transactions
contemplated by this Agreement.

6.11 Restricted Business

         The  percentages of EWI's gross revenues  attributable  to professional
services  which EWI would be precluded  from  performing  after  Closing by law,
regulation  or  order  shall  not  exceed  such as  Purchaser  shall  reasonably
determine  will   materially   negatively   affect  the  future   viability  and
profitability of EWI's business following Closing.

6.12 Personnel

         EWI shall have secured on terms  acceptable to Purchaser,  including in
appropriate cases the securing of written employment agreements,  the continuing
employment of the key employees of EWI listed on Schedule 6.12 attached hereto.

6.13 Execution of Related Agreements

         Qualified  Stockholders  shall have executed and delivered to Purchaser
the Related  Agreements  referenced in Section 7.01 which by their terms require
such execution.

6.14 Repayment of Loans

         Principal and interest on the loans identified in Schedule 2.13 owed to
EWI shall have been repaid at or prior to the Closing in full or the  Purchaser,
in its sole  discretion,  shall have consented to arrangements for the repayment
thereof.

                                  VII. CLOSING

7.01 Closing, Closing Date and Effective Time

         The closing of the transactions  contemplated hereunder (the "Closing")
shall take place at the office of Pepe & Hazard LLP at a.m. on  November_,  1997
(the  "Closing   Date").   The  effective  time  for  the  consummation  of  the
transactions  contemplated  in this  Agreement  to occur "at Closing" or "on the
Closing  Date"  shall be 12:00  a.m.  EST on the  Closing  Date (the  "Effective
Time").


                                       31


<PAGE>




7.02 Qualified Stockholders' Obligations at Closing

         At or prior to the Closing,  Qualified  Stockholders  shall  deliver or
cause to be delivered to  Purchaser,  in form  satisfactory  to  Purchaser,  the
following:

         (a)  Stock  certificates  for  all  of  the  Shares  duly  assigned  to
Purchaser.

         (b) A release and  satisfaction  (or  agreement to provide the same) of
each security  interest,  lien or  encumbrance  against any of the Shares except
those to which Purchaser has expressly consented in writing.

         (c) A  certificate  of good  standing for EWI issued within thirty (30)
days prior to the Closing Date by the Secretary of State of Connecticut.

         (d) A  certificate  or  certificates,  executed  by a  duly  authorized
officer of each Qualified  Stockholder  certifying that all  representations and
warranties of Qualified  Stockholders  contained in this  Agreement are true and
correct in all  material  respects in  accordance  with their terms at and as if
made as of the  Closing  Date,  provided  that  such  certificates  will  not be
required if this  Agreement  is executed by the  Qualified  Stockholders  on the
Closing Date.

         (e) A certificate as to the  incumbency of officers and  genuineness of
signatures  covering  all  officers of EWI,  the Escrow  Agent or any  Qualified
Stockholder executing any document delivered by any of them at the Closing.

         (f)  Resignations of all members of EWI's Board of Directors other than
Perry.

         (g) Satisfactory evidence of the termination of all outstanding options
or rights to purchase the capital stock of EWI.

         (h) All other schedules,  certificates and other documents  required by
this Agreement to be delivered by Qualified Stockholders on or before Closing.

7.03 Purchaser's Obligations at Closing

         At or prior to the  Closing,  Purchaser  shall  deliver  or cause to be
delivered to the Escrow Agent, in form  satisfactory to Qualified  Stockholders,
the following:

         (a) The cash payable at Closing pursuant to Section 1.01(b)(1).

         (b) The Note deliverable at Closing pursuant to Section 1.01(b)(2).

         (c) An employment agreement by and between EWI and Perry.


                                       32


<PAGE>




         (d) Its certificate, executed by an authorized officer, certifying that
all  representations and warranties of Purchaser contained in this Agreement are
true and correct in all material  respects in accordance with their terms at and
as if made as of the Closing Date,  provided that such  certificates will not be
required if this Agreement is executed by the Purchaser on the Closing Date.

         (e) A certificate  of good standing for Purchaser from the Secretary of
State of  Delaware  as of a date not more than  thirty  (30)  days  prior to the
Closing Date.

         (f) A true copy of the minutes of the meeting of the Board of Directors
of  Purchaser  authorizing  its  execution,  delivery  and  performance  of this
Agreement, the Note and the ATC Stock.

         (g) A certificate as to the  incumbency of officers and  genuineness of
signatures of all of the officers of Purchaser  executing any document delivered
by Purchaser at the Closing.

         (h) An instrument, effective at Closing, appointing a new agent for the
service of process in Connecticut  for EWI who shall be designated in advance by
Purchaser.

         (i)  An  instrument   pursuant  to  which  Purchaser  assumes  LTEISA's
obligations as Guarantor of certain performance bonds issued to EWI as set forth
on Schedule 7.03(i).

         (j)  Written  consent  from its banks  and the  holders  of its  senior
secured notes of its execution of this Agreement and of the Note.

         (k) An Opinion of Purchaser's  counsel  substantially as to the matters
set forth in Schedule 7.03(k).

         (1) All other schedules,  certificates and other documents  required by
this Agreement to be delivered by Purchaser on or before Closing.

                               VIII. MISCELLANEOUS

8.01 Brokerage Fees

         Neither the Purchaser,  EWI or any Qualified  Stockholder has consented
to or  authorized  any  broker  or  agent  to  act on its  behalf,  directly  or
indirectly,   as  a  broker  or  finder  in  connection   with  the  transaction
contemplated by this Agreement. In the event any claim is made for a broker's or
finder's fee in connection with the  transactions  contemplated  hereunder,  the
party  responsible  for  retaining  or securing  said broker or finder  shall be
solely responsible for the payment of any broker's or finder's fees incurred


                                       33


<PAGE>




as a result thereof.  Further,  the responsible  individuals shall indemnify the
other  parties  against any loss or  liabilities  by reason of such  broker's or
finder's fees.

8.02 Further Actions

         At any time and from time to time,  each  party  agrees,  at its or his
expense,  to take such actions and to execute and deliver such  documents as may
be reasonably necessary to effectuate the purposes of this Agreement.

8.03 Availability of Equitable Remedies

         Since a breach of the provisions of this Agreement could not adequately
be  compensated  by money damages,  either  Purchaser or Qualified  Stockholders
acting  jointly  shall be  entitled,  in  addition  to any other right or remedy
available to it, to a preliminary  injunction and an injunction restraining such
breach or a threatened breach and to specific  performance of any such provision
of this  Agreement,  and the parties  hereby  consent to the issuance of such an
injunction and to the ordering of specific  performance  without the requirement
of bond.

8.04 Survival

         Except  as  otherwise  provided  herein,  the  covenants,   agreements,
representations,  and warranties contained in or made pursuant to this Agreement
shall  survive  the  Closing  and any  delivery  of the  purchase  price  by the
Purchaser  irrespective of any  investigation  made by or on behalf of any party
and shall  continue  until the later of (i) the Maturity  Date  specified in the
Note and (ii) the last date on which any necessary action is taken by a party in
connection with the resolution of a controversy under Section 1.03 pursuant to a
decision of the mediator.

8.05 Modification

         The Agreement and the exhibits, schedules and Related Agreements hereto
set forth the entire  understanding  of the parties  with respect to the subject
matter hereof,  supersede all existing  agreements  among them  concerning  such
subject matter,  and may be modified only by a written  instrument duly executed
by each party.

8.06 Notices

         All notices,  elections,  reports or other  correspondence  required or
permitted  hereunder  shall be in writing and deemed to have been properly given
or  delivered  when mailed by  certified  mail,  postage  prepaid,  delivered by
overnight  express  courier,  delivery fees prepaid,  or transmitted by fax with
receipt confirmed, to the party to whom directed


                                       34


<PAGE>




at the below  specified  addresses or at such other  address for which any party
shall give the other parties written notice:

         If to EWI (prior to Closing):

         Mr. Charles L. Perry, President
         Environmental Warranty, Inc.
         970 Farmington Avenue
         West Hartford, CT 06107
         Fax (860) 521-5810

         If to Purchaser:

         Mr. Nicholas J. Malino, Senior Vice President
         ATC Group Services Inc.
         104 East 25th Street, 10th Floor
         New York, NY 10010
         Fax (212) 598-4283

         with a copy to:

         Alexander W. Samor, Esq.
         Kleban & Samor
         2425 Post Road
         P.O. Box 763
         Southport, CT 06490

         If to Perry:

         Mr. Charles L. Perry
         61 High Farm Road
         West Hartford, CT 06107

         If to Preferred Shareholders:

         Pepe & Hazard LLP
         Goodwin Square
         Hartford, CT 06103
         Fax: (860) 522-2796
         Attn.:  Stephen B. Hazard, Esq.

Any such notice  shall be deemed  given three days after  deposit with the mail,
one day  following  delivery  thereof to an  overnight  express  courier or upon
receipt when sent by


                                       35


<PAGE>




confirmed fax. The address of a party may be changed in accordance with the
notice provisions of this section.

8.07 Waiver

         Any waiver by any party of a breach of any provision of this  Agreement
shall not operate as or be  construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict  adherence to any term of this Agreement on one
or more  occasions  will not be considered a waiver or deprive that party of the
right  thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.

8.08 Binding Effect

         The provisions of this Agreement shall be binding upon and inure to the
benefit  of the  Purchaser,  and its  respective  successors  and  assigns,  and
Qualified Stockholders and their assigns,  heirs, and personal  representatives,
and  shall  inure  to  the  benefit  of the  indemnitees  and  their  respective
successors, assigns, heirs, and personal representatives.

8.09 No Third-Party Beneficiaries

         This Agreement does not create, and shall not be construed as creating,
any rights  enforceable by any person not a party to this  Agreement  (except as
provided in Section 8.08).

8.10 Severability; Reformation

         If  any   provision  of  this   Agreement  is  invalid,   illegal,   or
unenforceable,  the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and circumstances.

8.11 Headings

         The headings of this Agreement are solely for  convenience of reference
and shall be given no  effect  in the  construction  or  interpretation  of this
Agreement.

8.12 Governing Law

         To the extent permitted by law, this Agreement shall be governed by and
construed  in  accordance  with the laws of the  State of  Connecticut,  without
giving effect to conflict of laws. To the maximum  extent  permitted by law, any
action or proceeding initiated by Purchaser, any Stockholder,  the Escrow Agent,
any indemnitee or any other party claiming rights


                                       36


<PAGE>




under this agreement  shall be brought in an appropriate  state or federal court
in Hartford  County,  Connecticut,  and any person  claiming  rights  under this
agreement consents to the jurisdiction and proper venue of such forum.

8.13 Separate Counterparts

         This  Agreement is being  executed in several  identical  counterparts,
each one of which shall be  considered  an original  and all of which when taken
together shall constitute but one instrument.

8.14 Incorporation of Recital, Exhibits and Schedules

         All exhibits,  schedules  and Related  Agreements  attached  hereto are
incorporated  herein  by  this  reference  and  expressly  made a part  of  this
Agreement.

8.15 Several Obligations

         The representations,  warranties,  covenants, and agreements of EWI and
Qualified Stockholders in this Agreement are several.

8.16 Mediation

         In the event  there  shall  arise any dispute or claim in law or equity
arising out of this Agreement or any breach thereof or any resulting transaction
between the parties under this Agreement,  the parties  specifically  agree that
such dispute shall be submitted to mediation pursuant to the provisions provided
in Section 1.03.  Judgment of any award  rendered by the mediator may be entered
in any court having jurisdiction thereof.

8.17 Opportunity to Cure

         All  parties to this  agreement  shall be afforded a period of ten (10)
days following notice thereof to cure any alleged breach of this agreement.

         [The remainder of this page has been left blank intentionally.]






                                       37


<PAGE>




                 [This page has been left blank intentionally.]























                                       38


<PAGE>




         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date of this day of , 1997.

                                                    ATC GROUP SERVICES INC.

                                                    /s/ Nicholas J. Malino
                                                  -----------------------------
                                                        Nicholas J. Malino
                                                        Senior Vice President


                                                    CONNING INSURANCE CAPITAL
                                                    LIMITED PARTNERSHIP II
                                                    By:  Conning & Company,
                                                         General Partner

                                                     /s/ John Clinton
                                                  -----------------------------
                                                    By:  John Clinton
                                                         Senior Vice President


                                                    CONNING INSURANCE CAPITAL
                                                    INTERNATIONAL PARTNERS II
                                                    By: Conning & Company,
                                                        General Partner

                                                    /s/ John Clinton
                                                  -----------------------------
                                                    By: John Clinton
                                                        Senior Vice President

                                                    CULLINANE & DONNELLY VENTURE
                                                    PARTNERS,LIMITED PARTNERSHIP
                                                    By:  Marsh Point Partners,
                                                         General Partner

                                                       /s/ J. Donnelly
                                                  -----------------------------
                                                     By: a General Partner

                                                    LAWYERS TITLE ENVIRONMENTAL
                                                    INSURANCE SERVICES AGENCY,
                                                    INC.

                                                     /s/ Jeffrey D. Vaughan
                                                  -----------------------------
                                                    By: Jeffrey D. Vaughan
                                                        President


<PAGE>




                                                     /s/ Charles L. Perry
                                                  -----------------------------
                                                         CHARLES L. PERRY

The undersigned are executing this agreement with respect to the representations
found in Section 2.12 only:


                                                     /s/ Robert E. Clifford
                                                  -----------------------------
                                                         Robert E. Clifford


                                                     /s/ William A. Gildea, Jr.
                                                  -----------------------------
                                                         William A. Gildea, Jr.



                                       39


<PAGE>



                                                                   EXHIBIT 21

                                ATC Subsidiaries


ATC Blattert Inc.
ATC Construction Services Inc.
ATC Environmental Inc.
ATC InSysTechnology Inc.
ATC Management Inc.
Bing Yen & Associates, Inc.
ATC New England Corp.
Environmental Warranty, Inc.
Hygeia Laboratories Inc.


<PAGE>


ATC GROUP SERVICES INC. AND SUBSIDIARIES                              EXHIBIT 27

FINANCIAL DATA SCHEDULE
FEBRUARY 28, 1998 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                                                                 As of
        Item Number                                             Item Description                           February 28, 1998

-----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                                                          <C> 

     5-02(1)                   Cash and cash items                                                           $   5,268,705
     5-02(2)                   Marketable securities and short-term investments                                          -
     5-02(3)(a)(1)             Notes and accounts receivable - trade                                            43,012,131
     5-02(4)                   Allowances for doubtful accounts                                                  3,077,829
     5-02(6)                   Inventory                                                                                 -
     5-02(9)                   Total current assets                                                             63,913,861
     5-02(13)                  Property, plant and equipment                                                    11,007,061
     5-02(14)                  Accumulated depreciation                                                          5,213,133
     5-02(18)                  Total assets                                                                    188,873,233
     5-02(21)                  Total current liabilities                                                        34,172,157
     5-02(22)                  Bonds, mortgages and similar debt                                               120,419,684
     5-02(28)                  Preferred stock - mandatory redemption                                                    -
     5-02(29)                  Preferred stock - no mandatory redemption                                                 -
     5-02(30)                  Common stock                                                                             10
     5-02(31)                  Other stockholders' equity                                                       26,937,371
     5-02(32)                  Total liabilities and stockholders' equity                                      188,873,233

                                                                                                                   Year ended
                                                                                                              February 28, 1998

------------------------------------------------------------------------------------------------------------------------------------
     5-03(b)1(a)               Net sales of tangible                                                                     -
     5-03(b)1                  Total revenues                                                                  141,436,677
     5-03(b)2(a)               Costs of tangible goods sold                                                              -
     5-03(b)2                  Total costs and expenses applicable to sales and revenues                        88,093,876
     5-03(b)3                  Other costs and expenses                                                         44,136,145
     5-03(b)5                  Provision for doubtful accounts and notes                                         2,503,618
     5-03(b)(8)                Interest and amortization of debt discount                                        4,218,253
     5-03(b)(10)               Income before taxes and other items                                               2,484,785
     5-03(b)(11)               Income tax expense                                                                1,335,000
     5-03(b)(14)               Income (loss) continuing operations                                               1,149,785
     5-03(b)(15)               Discontinued operations                                                                   -
     5-03(b)(17)               Extraordinary items                                                                       -
     5-03(b)(18)               Cumulative effect - changes in accounting principles                                      -
     5-03(b)(19)               Net income (loss)                                                                 1,149,785
     5-03(b)(20)               Earnings per share - primary                                                            N/A
     5-03(b)(20)               Earnings per share - fully diluted                                                      N/A

</TABLE>

<PAGE>
                                                                     SCHEDULE II

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
  Provisions 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
====================                        ==========    =========  ===========

<PAGE>

<PAGE>




                                                                     EXHIBIT 3.1

                         CERTIFICATE OF INCORPORATION OF

                             ATC GROUP SERVICES INC.


FIRST:   The name of the Corporation is ATC Group Services Inc.

SECOND:  The registered office of the Corporation in the State of Delaware is
located at 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle.  The name of its registered agent at such address is The Corporation
Trust Company.

THIRD:  The nature of the business  and the objects and purposes  proposed to be
transacted,  promoted  and  carried  on  are to do  any  or  all  things  herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz:

         The  purpose  of the  corporation  is to  engage in any  lawful  act or
         activity  for which  corporations  may be  organized  under the General
         Corporation Law of Delaware.

FOURTH: The total number of shares of all classes of stock which the corporation
shall have  authority to issue is 10,000 shares of Common Stock,  par value $.01
per share.

FIFTH:   The name and address of the incorporator is as follows:

         Rita J. Deakins
         410 South State Street
         Dover, Delaware  19901

SIXTH: The Directors shall have power to make and to alter or amend the By-Laws;
to fix the amount to be reserved as working capital,  and to authorize and cause
to be executed,  mortgages and liens  without  limit as to the amount,  upon the
property and franchise of this Corporation.

         With the consent in writing, and pursuant to a vote of the holders of a
majority of the capital stock issued and  outstanding,  the Directors shall have
authority to dispose, in any manner, of the whole property of this corporation.


<PAGE>




         The By-Laws shall determine  whether and to what extent the account and
books of this  corporation,  or any of them,  shall be open to the inspection of
the stockholders; no stockholder shall have any right of inspecting any account,
or book, or document of this Corporation,  except as conferred by the law or the
By-Laws, or by resolution of the stockholders.

         The  stockholders and directors shall have power to hold their meetings
and keep the books, documents and papers of the corporation outside of the State
of  Delaware,  at such  places as may be, from time to time,  designated  by the
By-Laws or by resolution of the  stockholders or directors,  except as otherwise
required by the laws of Delaware.

         It is the intention that the objects,  purposes and powers specified in
the THIRD  paragraph  hereof  shall,  except where  otherwise  specified in said
paragraph, be nowise limited or restricted by reference to or inference from the
terms of any other clause or paragraph in this certificate of incorporation, but
that the objects,  purposes and powers  specified in the THIRD  paragraph and in
each of the  clauses  or  paragraphs  of  this  charter  shall  be  regarded  as
independent objects, purposes and powers.

SEVENTH:  No director of the  Corporation  shall be liable to the Corporation or
its  stockholders  for  monetary  damages  for  breach  of  fiduciary  duty as a
director,  except for  liability  (i) for any breach of the  director's  duty of
loyalty to the Corporation or its  stockholders,  (ii) for acts or omissions not
in good faith or which involve intentional  misconduct or a knowing violation of
law,  (iii)  under  ss.  174 of the  General  Corporation  Law,  or (iv) for any
transaction from which the director derived an improper personal benefit.

                                       2


<PAGE>




                                                                     EXHIBIT 3.2

                               ATC GROUP SERVICES
                          f/k/a ATC ENVIRONMENTAL INC.
                                     BY-LAWS


                                    ARTICLE I

                                     OFFICES

                  Section 1. The registered office shall be at such place within
the  State  of  Delaware  as the  board of  directors  may,  from  time to time,
determine.

                  Section 2. The corporation may also have offices at such other
places both  within and without the State of Delaware as the board of  directors
may from time to time determine or the business of the corporation may require.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

                  Section 1. All meetings of the  stockholders  for the election
of  directors  shall be held in the State of New York,  at such  place as may be
fixed,  from  time to time by the board of  directors,  or at such  other  place
either within or without the State of Delaware as shall be designated  from time
to time by the  board of  directors  and  stated in the  notice of the  meeting.
Meetings  of  stockholders  for any other  purpose  may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.

                  Section 2. Annual  meetings of  stockholders  shall be held on
the fifteenth day of the fifth month following the end of each fiscal year or as
soon thereafter as practicable,  as shall be designated from time to time by the
board of director and stated in the notice of the  meeting,  at which they shall
elect by a plurality vote a board of directors, and transact such other business
as may properly be brought before the meeting.

                  Section 3. Written notice of the annual meeting stating
place, date and hour of the meeting shall be given


<PAGE>




to each stockholder  entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.

                  Section 4. The officer  who has charge of the stock  ledger of
the  corporation  shall prepare and make, at least ten days before every meeting
of  stockholders,  a complete list of the  stockholders  entitled to vote at the
meeting,  arranged  in  alphabetical  order,  and  showing  the  address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any  stockholder,  for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days  prior to the  meeting,  either at a place  within  the city  where the
meeting  is to be held,  which  place  shall be  specified  in the notice of the
meeting, or, if not so specified,  at the place where the meeting is to be held.
The list shall also be  produced  and kept at the time and place of the  meeting
during the whole time thereof,  and may be inspected by any  stockholder  who is
present.

                  Section  5.  Special  meetings  of the  stockholders,  for any
purpose  or  purposes,   unless  otherwise  prescribed  by  statute  or  by  the
certificate  of  incorporation,  may be called by the chairman or president  and
shall be called by the  president  or  secretary  at the request in writing of a
majority of the board of directors, or at the request in writing of stockholders
owning a  majority  in amount of the  entire  capital  stock of the  corporation
issued and  outstanding  and  entitled  to vote.  Such  request  shall state the
purpose or purposes of the proposed meeting.

                  Section 6.  Written  notice of a special  meeting  stating the
place,  date and hour of the meeting  and the purpose or purposes  for which the
meeting  is  called,  shall be given not less than ten nor more than  sixty days
before the date of the  meeting,  to each  stockholder  entitled to vote at such
meeting.

                  Section  7.  Business  transacted  at any  special  meeting of
stockholders shall be limited to the purposes stated in the notice.

                  Section 8. The holders of a majority  of the stock  issued and
outstanding  and entitled to vote thereat,  present in person or  represented by
proxy,  shall  constitute a quorum at all meetings of the  stockholders  for the
transaction of


                                       2


<PAGE>




business  except as  otherwise  provided  by  statute or by the  certificate  of
incorporation.  If, however,  such quorum shall not be present or represented at
any meeting of the  stockholders,  the  stockholders  entitled to vote  thereat,
present in person or  represented  by proxy,  shall  have  power to adjourn  the
meeting  from  time to time,  without  notice  other  than  announcement  at the
meeting,  until a quorum  shall be present  or  represented.  At such  adjourned
meeting, at which a quorum shall be present or represented,  any business may be
transacted  which  might  have been  transacted  at the  meeting  as  originally
notified.  If the  adjournment  is for more than  thirty  days,  or if after the
adjournment  a new record date is fixed for the adjourned  meeting,  a notice of
the adjourned  meeting shall be given to each  stockholder of record entitled to
vote at the meeting.

                  Section 9. When a quorum is present at any  meeting,  the vote
of the holders of a majority of the stock having  voting power present in person
or represented  by proxy shall decide any question  brought before such meeting,
unless the question is one upon which by express  provision of the statutes,  of
the certificate of incorporation or other provisions of the by-laws, a different
vote is required in which case such express  provision  shall govern and control
the decision of such question.

                  Section 10. Unless  otherwise  provided in the  certificate of
incorporation  each  stockholder  shall at every meeting of the  stockholders be
entitled to one vote in person or by proxy for each share of the  capital  stock
having  voting  power held by such  stockholder,  but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.

                  Section 11. Unless  otherwise  provided in the  certificate of
incorporation,  any action required to be taken at any annual or special meeting
of such stockholders,  may be taken without a meeting,  without prior notice and
without a vote,  if a consent  in  writing,  setting  forth the action so taken,
shall be signed by the  holders of  outstanding  stock  having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares  entitled  to vote  thereon  were  present  and
voted.  Prompt notice of the taking of the corporate action without a meeting by
less than unanimous  written  consent shall be given to those  stockholders  who
have not consented in writing.


                                       3


<PAGE>




                  Section 12. At each meeting of the stockholders,  the chairman
of the board or, in his absence or inability  to act,  any person  chosen by the
majority of those  stockholders  present in person or represented by proxy shall
act as chairman of the meeting. The secretary or, in his absence or inability to
act, any person  appointed by the chairman of the meeting shall act as secretary
of the meeting and keep the minutes thereof.

                  Section  13.  The board  may,  in  advance  of any  meeting of
stockholders,  appoint  one or more  inspectors  to act at such  meeting  or any
adjournment  thereof.  If the inspectors  shall not be so appointed or if any of
them shall fail to appear or act,  the  chairman  of the meeting  shall  appoint
inspectors.  Each  inspector,  before entering upon the discharge of his duties,
shall take and sign an oath  faithfully  to execute the duties of  inspector  at
such meeting with strict  impartiality and according to the best of his ability.
The inspectors  shall determine the number of shares  outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies,  and shall receive votes,  ballots
or  consents,  hear and  determine  all  challenges  and  questions  arising  in
connection  with the right to vote,  count and  tabulate  all votes,  ballots or
consents,  determine  the result,  and do such acts as are proper to conduct the
election or vote with fairness to all  stockholders.  On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and shall  execute a  certificate  of any fact  found by them.  No  director  or
candidate for the office of director shall act as an inspector of an election of
directors. Inspectors need not be stockholders.

                                   ARTICLE III

                                    DIRECTORS

                  Section 1. The number of directors which shall  constitute the
whole  board  shall be not less  than two nor more  than  nine.  The  number  of
directors  shall be determined by resolution of the board of directors or by the
stockholders  at the annual meeting of the  stockholders,  except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.


                                       4


<PAGE>




                  Section 2. Vacancies and newly created directorships resulting
from any  increase  in the  authorized  number of  directors  may be filled by a
majority of the  directors  then in office,  though less than a quorum,  or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual  election  and until  their  successors  are duly  elected and shall
qualify,  unless sooner displaced.  If there are no directors in office, then an
election of directors may be held in the manner provided by statute.  If, at the
time of filling any vacancy or any newly  created  directorship,  the  directors
then in office  shall  constitute  less than a majority  of the whole  board (as
constituted immediately prior to any such increase),  the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total  number of the shares at the time  outstanding  having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships,  or to replace the directors chosen by
the directors then in office.

                  Section 3. The business of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful  acts and things as are not by statute or by the  certificate
of  incorporation  or by these  by-laws  directed or required to be exercised or
done by the stockholders.

                       MEETINGS OF THE BOARD OF DIRECTORS

                  Section 4. The board of directors of the  corporation may hold
meetings,  both  regular  and  special,  either  within or without  the State of
Delaware.

                  Section 5. The first  meeting of each newly  elected  board of
directors shall be held immediately following the annual meeting of stockholders
at the  place of such  annual  meeting  of  stockholders  and no  notice of such
meeting  shall be necessary to the newly  elected  directors in order legally to
constitute  the meeting,  provided a quorum shall be present.  In the event such
meeting is not held immediately  following the annual meeting of stockholders at
the place of such  annual  meeting of  stockholders,  the meeting may be held at
such  time and  place as shall be  specified  in a notice  given as  hereinafter
provided  for  special  meetings  of the  board  of  directors,  or as  shall be
specified in a written waiver signed by all of the directors.


                                       5


<PAGE>




                  Section 6. Regular  meetings of the board of directors  may be
held without notice at such time and at such place as shall from time to time be
determined by the board.

                  Section 7. Special  meetings of the board may be called by the
president on one day's notice to each director,  either personally or by mail or
by telegram;  special  meetings shall be called by the president or secretary in
like  manner and on like  notice on the written  request of two  directors  (one
director in the event that there be a single director in office).

                  Section  8. At all  meetings  of the board a  majority  of the
directors shall  constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall  be  the  act  of the  board  of  directors,  except  as may be  otherwise
specifically  provided by statute or by the certificate of  incorporation.  If a
quorum  shall  not be  present  at any  meeting  of the board of  directors  the
directors  present  thereat may adjourn the meeting  from time to time,  without
notice other than announcement at the meeting, until a quorum shall be present.

                  Section 9. Unless  otherwise  restricted by the certificate of
incorporation or these by-laws,  any action required or permitted to be taken at
any meeting of the board of directors or of any  committee  thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent  thereto in  writing,  and the  writing or  writings  are filed with the
minutes of proceedings of the board or committee.

                  Section 10. Unless otherwise  restricted by the certificate of
incorporation  or these  by-laws,  members  of the  board of  directors,  or any
committee designated by the board of directors,  may participate in a meeting of
the board of directors,  or any committee,  by means of conference  telephone or
similar communications  equipment by means of which all persons participating in
the meeting  can hear each  other,  and such  participation  in a meeting  shall
constitute presence in person at the meeting.

                  Section  11. No  contract or other  transaction  between  this
corporation  and  any  other   corporation   shall  be  impaired,   affected  or
invalidated,  nor shall any  director be liable in any way by reason of the fact
that any one or more


                                       6


<PAGE>




of the directors of this  corporation  is or are interested in, or is a director
or officer, or are directors of such other corporation, provided that such facts
are disclosed or made known to the board of directors.

                  Any director,  personally and individually,  may be a party to
or may be interested in any contract or transaction of this corporation,  and no
director  shall be liable in any way by reason of such  interest,  provided that
the fact of such  interest be disclosed or made known to the board of directors,
and provided that the board of directors shall authorize, approve or ratify such
contract or transaction by the vote (not counting the vote of any such director)
of a majority of a quorum,  notwithstanding the presence of any such director at
the meeting at which such action is taken.  Such  director or  directors  may be
counted in  determining  the presence of a quorum at such meeting.  This Section
shall not be construed to impair or invalidate or in any way affect any contract
or other  transaction  which would  otherwise  be valid  under the law  (common,
statutory or otherwise) applicable thereto.

                             COMMITTEES OF DIRECTORS

                  Section 12. The board of directors  may, by resolution  passed
by a  majority  of the  whole  board,  designate  one or more  committees,  each
committee  to consist of one or more of the  directors of the  corporation.  The
board may designate one or more directors as alternate members of any committee,
who may  replace  any  absent  or  disqualified  member  at any  meeting  of the
committee.  In the absence or disqualification  of a member of a committee,  the
member or members  thereof  present at any  meeting  and not  disqualified  from
voting,  whether or not he or they constitute a quorum, may unanimously  appoint
another member of the board of directors to act at a meeting in the place of any
such absent or disqualified  member. Any such committee,  to the extent provided
in the resolution of the board of directors, shall have and may exercise all the
powers and authority of the board of directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee  shall have
the  power  or  authority  in   reference   to  amending  the   certificate   of
incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially  all of the
corporation's property and assets, recommending to the


                                       7


<PAGE>




stockholders a dissolution of the  corporation or a revocation of a dissolution,
or amending the by-laws of the  corporation;  and,  unless the resolution or the
certificate of incorporation  expressly so provide, no such committee shall have
the power or  authority  to declare a dividend or to  authorize  the issuance of
stock.  Such  committee  or  committees  shall have such name or names as may be
determined  from time to time by  resolution  adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors when required.

                            COMPENSATION OF DIRECTORS

                  Section 13. Unless otherwise  restricted by the certificate of
incorporation or these by-laws,  the board of directors shall have the authority
to fix the compensation of directors.  The directors may be paid their expenses,
if any, of  attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation  therefor.  Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

                              REMOVAL OF DIRECTORS

                  Section 14. Unless otherwise  restricted by the certificate of
incorporation  or by-laws,  any director or the entire board of directors may be
removed,  with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.

                                   ARTICLE IV

                                     NOTICES

                  Section 1.  Whenever,  under the provisions of the statutes or
of the certificate of incorporation  or of these by-laws,  notice is required to
be given to any  director  or  stockholder,  it shall not be  construed  to mean
personal notice, but such notice may be given in writing, by mail,  addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United


                                       8


<PAGE>




States mail. Notice to directors may also be given by telegram.

                  Section 2.  Whenever  any notice is required to be given under
the  provisions of the statutes or of the  certificate  of  incorporation  or of
these  by-laws,  a waiver  thereof in  writing,  signed by the person or persons
entitled to said notice,  whether before or after the time stated therein, shall
be deemed equivalent thereto.

                                    ARTICLE V

                                    OFFICERS

                  Section 1. The officers of the corporation  shall be chosen by
the board of directors  and shall be a president,  a secretary  and a treasurer.
The board of directors may also choose a chairman,  one or more vice-presidents,
and one or more assistant  secretaries and assistant  treasurers.  Any number of
offices may be held by the same person,  unless the certificate of incorporation
or these by-laws otherwise provide.

                  Section 2. The board of directors at its first  meeting  after
each  annual  meeting of  stockholders  shall  choose a  president,  one or more
vice-presidents, a secretary and a treasurer.

                  Section  3. The board of  directors  may  appoint  such  other
officers and agents as it shall deem  necessary who shall hold their offices for
such terms and shall  exercise  such powers and perform  such duties as shall be
determined from time to time by the board.

                  Section  4. The  salaries  of all  officers  and agents of the
corporation shall be fixed by the board of directors.

                  Section 5. The officers of the  corporation  shall hold office
until their successors are chosen and qualify.  Any officer elected or appointed
by the board of directors may be removed at any time by the affirmative  vote of
a majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.


                                       9


<PAGE>




            THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE PRESIDENT

                  Section 6. In the event that the corporation elects a Chairman
of the  board of  directors,  he  shall,  if  present,  at each  meeting  of the
stockholders  and  of  the  board  and  shall  be an ex  officio  member  of all
committees of the board.  He shall perform all duties  incident to the office of
chairman of the board and such other duties as may from time to time be assigned
to him by the board.

                  The president shall be the chief  executive  officer and chief
operating  officer  of  the  Corporation  and  shall  have  general  and  active
supervision  and  direction  over the  business  operations  and  affairs of the
Corporation  and over its  several  officers,  agents  and  employees,  subject,
however, to the direction and the control of the board of directors.  In general
the  president  shall have such other powers and shall perform such other duties
as  usually  pertaining  to office of  president  or as from time to time may be
assigned to him by the board or these by-laws.

                  Section 7. The president  shall execute  bonds,  mortgages and
other  contracts  requiring a seal,  under the seal of the  corporation,  except
where  required or  permitted  by law to be  otherwise  signed and  executed and
except where the signing and execution  thereof shall be expressly  delegated by
the board of directors to some other officer or agent of the corporation.

                               THE VICE PRESIDENTS

                  Section 8. In the absence of the  president or in the event of
his  inability or refusal to act, the vice  president  (or in the event there be
more than one vice president, the vice presidents in the order designated by the
directors,  or in the  absence  of any  designation,  then in the order of their
election) shall perform the duties of the president,  and when so acting,  shall
have  all  the  powers  of and be  subject  to all  the  restrictions  upon  the
president.  The vice  presidents  shall  perform such other duties and have such
other powers as the board of directors may from time to time prescribe.

                     THE SECRETARY AND ASSISTANT SECRETARIES

                  Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings


                                       10


<PAGE>




of the  corporation  and of the board of directors in a book to be kept for that
purpose and shall perform like duties for the standing committees when required.
He shall give, or cause to be given,  notice of all meetings of the stockholders
and special  meetings of the board of  directors,  and shall  perform such other
duties as may be prescribed by the board of directors or president,  under whose
supervision  he shall be. He shall  have  custody of the  corporate  seal of the
corporation and he, or an assistant secretary, shall have the authority to affix
the same to any instrument  requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant  secretary.  The board of
directors  may give general  authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.

                  Section 10. The assistant secretary,  or if there be more than
one, the assistant secretaries in the order determined by the board of directors
(or if there be no such  determination,  then in the  order of their  election),
shall,  in the  absence of the  secretary  or in the event of his  inability  or
refusal to act,  perform the duties and exercise the power of the  secretary and
shall  perform  such other  duties  and have such  other  powers as the board of
directors may from time to time prescribe.

                     THE TREASURER AND ASSISTANT TREASURERS

                  Section  11.  The  treasurer  shall  have the  custody  of the
corporate  funds and  securities  and shall keep full and  accurate  accounts of
receipts  and  disbursements  in books  belonging to the  corporation  and shall
deposit all moneys and other  valuable  effects in the name and to the credit of
the  corporation  in such  depositories  as may be  designated  by the  board of
directors.

                  Section 12. He shall disburse the funds of the  corporation as
may be  ordered  by the board of  directors,  taking  proper  vouchers  for such
disbursements,  and shall render to the president and the board of directors, at
its regular meetings,  or when the board of directors so requires, an account of
all  his  transactions  as  treasurer  and of  the  financial  condition  of the
corporation.

                  Section 13. If required  by the board of  directors,  he shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of


                                       11


<PAGE>




directors for the faithful  performance  of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever  kind  in  his  possession  or  under  his  control  belonging  to  the
corporation.

                  Section 14. The assistant treasurer, or if there shall be more
than one,  the  assistant  treasurers  in the order  determined  by the board of
directors  (or if there  be no such  determination,  then in the  order of their
election),  shall,  in the  absence  of the  treasurer  or in the  event  of his
inability  or refusal to act,  perform the duties and exercise the powers of the
treasurer  and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.

                                   ARTICLE VI

                              CERTIFICATES OF STOCK

                  Section 1. Every holder of stock in the  corporation  shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the chairman or  vice-chairman  of the board of directors or the  president or a
vice-president and the treasurer or an assistant treasurer,  or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.

                  If the corporation  shall be authorized to issue more than one
class of stock or more than one series of any class,  the powers,  designations,
preferences  and relative,  participating,  optional or other special  rights of
each class of stock or series  thereof  and the  qualification,  limitations  or
restrictions  of such  preferences  and/or  rights shall be set forth in full or
summarized on the face or back of the certificate  which the  corporation  shall
issue to  represent  such  class or series of stock,  provided  that,  except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing  requirements,  there may be set forth on the face or back
of the certificate  which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each  stockholder  who so requests  the powers,  designations,  preferences  and
relative, participating, optional or other special rights of each class of stock
or series thereof and


                                       12


<PAGE>




the qualifications, limitations or restrictions of such preferences and/or
rights.

                  Section 2. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile  signature has been placed upon a certificate  shall have ceased
to be such  officer,  transfer  agent or registrar  before such  certificate  is
issued,  it may be issued by the corporation  with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.

                                LOST CERTIFICATES

                  Section 3. The board of directors may direct a new certificate
or  certificates  to be  issued  in place  of any  certificate  or  certificates
theretofore  issued by the  corporation  alleged  to have been  lost,  stolen or
destroyed,  upon the making of an affidavit of that fact by the person  claiming
the certificate of stock to be lost, stolen or destroyed.  When authorizing such
issue of a new certificate or  certificates,  the board of directors may, in its
sole discretion and as a condition  precedent to the issuance  thereof,  require
the owner of such lost, stolen or destroyed certificate or certificates,  or his
legal  representative,  to advertise the same in such manner as it shall require
and/or give,  the  corporation  a bond in such sum as it may direct as indemnity
against any claim that may be made against the  corporation  with respect to the
certificate alleged to have been lost, stolen or destroyed.

                                TRANSFER OF STOCK

                  Section 4. Upon  surrender to the  corporation or the transfer
agent  of  the  corporation  of  a  certificate  for  shares  duly  endorsed  or
accompanied  by proper  evidence  of  succession,  assignment  or  authority  to
transfer,  it shall be the duty of the corporation to issue a new certificate to
the  person  entitled  thereto,  cancel  the  old  certificate  and  record  the
transaction upon its books.

                               FIXING RECORD DATE

                  Section 5. In order that the  corporation  may  determine  the
stockholders  entitled to notice of or to vote at any meeting of stockholders or
any adjournment  thereof,  or to express consent to corporate  action in writing
without a meeting, or entitled to receive payment of any dividend or


                                       13


<PAGE>




other  distribution  or  allotment  of any rights,  or entitled to exercise  any
rights in respect of any  change,  conversion  or  exchange  of stock or for the
purpose of any other lawful action,  the board of directors may fix, in advance,
a record date,  which shall not be more than sixty nor less than ten days before
the date of such meeting,  nor more than sixty days prior to any other action. A
determination  of  stockholders  of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.

                             REGISTERED STOCKHOLDERS

                  Section 3. The corporation  shall be entitled to recognize the
exclusive  right of a person  registered  on its books as the owner of shares to
receive  dividends,  and to vote as such owner, and to hold liable for calls and
assessments a person  registered on its books as the owner of shares,  and shall
not be bound to  recognize  any  equitable or other claim to or interest in such
share or shares on the part of any other  person,  whether  or not it shall have
express or other notice  thereof,  except as  otherwise  provided by the laws of
Delaware.

                                   ARTICLE VII

                               GENERAL PROVISIONS

                                    DIVIDENDS

                  Section  1.   Dividends   upon  the   capital   stock  of  the
corporation,  subject to the provisions of the certificate of incorporation,  if
any,  may be  declared  by the board of  directors  at any  regular  or  special
meeting,  pursuant to law.  Dividends  may be paid in cash,  in property,  or in
shares of the capital  stock,  subject to the  provisions of the  certificate of
incorporation.

                  Section 2. Before  payment of any  dividend,  there may be set
aside out of any funds of the  corporation  available for dividends  such sum or
sums as the directors  from time to time, in their  absolute  discretion,  think
proper  as a  reserve  or  reserves  to meet  contingencies,  or for  equalizing
dividends,  or for repairing or maintaining any property of the corporation,  or
for such other purposes as the directors  shall think  conducive to the interest
of


                                       14


<PAGE>




the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.

                                ANNUAL STATEMENT

                  Section 3. The board of directors shall present at each annual
meeting,  and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.

                                     CHECKS

                  Section 4. All  checks or  demands  for money and notes of the
corporation  shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.

                                   FISCAL YEAR

                  Section 5. The  fiscal  year of the  corporation  shall end on
February 28 of each year.

                                      SEAL

                  Section 6. The corporate seal shall have inscribed thereon the
name of the  corporation,  the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

                                  ARTICLE VIII

                                   AMENDMENTS

                  Section 1. These  by-laws may be altered,  amended or repealed
or new by-laws may be adopted by the  stockholders or by the board of directors,
at any meeting of the  stockholders  or of the board of  directors  if notice of
such  alteration,  amendment,  repeal or adoption of new by-laws be contained in
the  notice of such  special  meeting.  The  by-laws  may also be amended by the
stockholders  pursuant  to Section 11 of  Article  II  without  prior  notice of
alteration,  amendment,  repeal or adoption of new by-laws.  The power to adopt,
amend or repeal by-laws by the board of directors  shall not divest or limit the
power of the stockholders to adopt, amend or repeal by-laws.


                                       15


<PAGE>




                                   ARTICLE IX

                                 INDEMNIFICATION

                  The  officers  and  directors  of  the  corporation  shall  be
entitled to indemnification to the maximum extent permitted by Delaware Law.







                                       16


<PAGE>




                                                                     EXHIBIT 4.1
                               ACQUISITION CORP.,

                                    as Issuer

                                       and

                       STATE STREET BANK AND TRUST COMPANY

                                   as Trustee

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

                                    INDENTURE

                          Dated as of January 29, 1998

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


                               up to $150,000,000

                12% Senior Subordinated Notes due 2008, Series A

                12% Senior Subordinated Notes due 2008, Series B


<PAGE>




                              CROSS-REFERENCE TABLE

  TIA                                                        Indenture
Section                                                       Section

   310(a)(1)...................................................7.10
      (a)(2)...................................................7.10
      (a)(3)...................................................N.A.
      (a)(4)...................................................N.A.
      (a)(5)...................................................7.10; 7.11
      (b)......................................................7.08; 7.10; 11.02
      (c)......................................................N.A.
   311(a)......................................................7.11
      (b)......................................................7.11
      (c)......................................................N.A.
   312(a)......................................................2.05
      (b).....................................................11.03
      (c).....................................................11.03
   313(a)......................................................7.06
      (b)(1)...................................................7.06
      (b)(2)...................................................7.06
      (c)......................................................7.06; 11.02
      (d)......................................................7.06
   314(a)......................................................4.06; 4.08; 11.02
      (b)......................................................N.A.
      (c)(1)...................................................7.02; 11.04
      (c)(2)...................................................7.02; 11.04
      (c)(3)...................................................N.A.
      (d)......................................................N.A.
      (e).....................................................11.05
      (f)......................................................N.A.
   315(a)......................................................7.01(b)
      (b)......................................................7.05; 11.02
      (c)......................................................7.01(a)
      (d)......................................................6.05; 7.01(c)
      (e)......................................................6.11
316(a)(last sentence)..........................................2.09
      (a)(1)(A)................................................6.05
      (a)(1)(B)................................................6.04
      (a)(2)...................................................N.A.
      (b)......................................................6.07
      (c)......................................................9.05
317(a)(1)......................................................6.08
      (a)(2)...................................................6.09
      (b)......................................................2.04
   318(a).....................................................11.01
      (c).....................................................11.01
----------------------
N.A. means Not Applicable

NOTE:  This Cross-Reference Table shall not, for any purpose, be deemed to be a
       part of the Indenture.


                                       -i-


<PAGE>




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                                TABLE OF CONTENTS
                                      Page

                                   ARTICLE ONE
                   DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  Definitions....................................................1
SECTION 1.02.  Incorporation by Reference of TIA.............................32
SECTION 1.03.  Rules of Construction.........................................32

                                   ARTICLE TWO
                                    THE NOTES

SECTION 2.01.  Form and Dating...............................................33
SECTION 2.02.  Execution and Authentication; Aggregate Principal Amount......34
SECTION 2.03.  Registrar and Paying Agent....................................36
SECTION 2.04.  Paying Agent To Hold Assets in Trust..........................36
SECTION 2.05.  Holder Lists..................................................37
SECTION 2.06.  Transfer and Exchange.........................................37
SECTION 2.07.  Replacement Notes.............................................38
SECTION 2.08.  Outstanding Notes.............................................38
SECTION 2.09.  Treasury Notes................................................39
SECTION 2.10.  Temporary Notes...............................................39
SECTION 2.11.  Cancellation..................................................40
SECTION 2.12.  Defaulted Interest............................................40
SECTION 2.13.  CUSIP Number..................................................41
SECTION 2.14.  Deposit of Monies.............................................41
SECTION 2.15.  Restrictive Legends...........................................42
SECTION 2.16.  Book-Entry Provisions for Global Security.....................42
SECTION 2.17.  Special Transfer Provisions...................................44
SECTION 2.18.  Liquidated Damages Under Registration Rights Agreement........47

                                  ARTICLE THREE
                                   REDEMPTION

SECTION 3.01.  Notices to Trustee............................................47
SECTION 3.02.  Selection of Notes To Be Redeemed.............................48
SECTION 3.03.  Optional Redemption...........................................48
SECTION 3.04.  Notice of Redemption..........................................49
SECTION 3.05.  Effect of Notice of Redemption................................50
SECTION 3.06.  Deposit of Redemption Price............................/......51
SECTION 3.07.  Notes Redeemed in Part........................................51


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SECTION 3.08. Special Redemption Provisions Prior to Effectiveness of
 the Merger..................................................................51

                                  ARTICLE FOUR
                                    COVENANTS

SECTION 4.01.  Payment of Notes..............................................52
SECTION 4.02.  Maintenance of Office or Agency...............................52
SECTION 4.03.  Corporate Existence...........................................52
SECTION 4.04.  Payment of Taxes and Other Claims.............................53
SECTION 4.05.  Maintenance of Properties and Insurance.......................53
SECTION 4.06.  Compliance Certificate; Notice of Default.....................54
SECTION 4.07.  Compliance with Laws..........................................55
SECTION 4.08.  Reports to Holders............................................55
SECTION 4.09.  Waiver of Stay, Extension or Usury Laws.......................55
SECTION 4.10.  Limitation on Restricted Payments.............................56
SECTION 4.11.  Limitation on Transactions with Affiliates....................59
SECTION 4.12.  Limitation on Incurrence of Additional Indebtedness...........60
SECTION 4.13.  Limitation on Dividend and Other Payment Restrictions
 Affecting Subsidiaries......................................................61
SECTION 4.14.  [Intentionally Omitted].......................................62
SECTION 4.15.  Change of Control.............................................62
SECTION 4.16.  Limitation on Asset Sales.....................................65
SECTION 4.17.  Limitation on Preferred Stock of Subsidiaries.................69
SECTION 4.18.  Limitation on Liens...........................................69
SECTION 4.19.  Conduct of Business...........................................70
SECTION 4.20.  Additional Subsidiary Guarantees..............................70
SECTION 4.21. Prohibition on Incurrence of Senior Subordinated Debt..........71
SECTION 4.22. Special Covenants Prior to Effectiveness of the Merger.........71
SECTION 4.23. Certain Net Proceeds to be Held by the Trustee.................72
SECTION 4.24. Guarantees of Certain Indebtedness.............................73

                                  ARTICLE FIVE
                              SUCCESSOR CORPORATION

SECTION 5.01.  Merger, Consolidation and Sale of Assets......................74
SECTION 5.02.  Successor Corporation Substituted.............................76


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                                   ARTICLE SIX
                                    REMEDIES

SECTION 6.01.  Events of Default.............................................76
SECTION 6.02.  Acceleration..................................................78
SECTION 6.03.  Other Remedies................................................79
SECTION 6.04.  Waiver of Past Defaults.......................................80
SECTION 6.05.  Control by Majority...........................................80
SECTION 6.06.  Limitation on Suits...........................................80
SECTION 6.07.  Right of Holders To Receive Payment...........................81
SECTION 6.08.  Collection Suit by Trustee....................................81
SECTION 6.09.  Trustee May File Proofs of Claim..............................82
SECTION 6.10.  Priorities....................................................82
SECTION 6.11.  Undertaking for Costs.........................................83
SECTION 6.12.  Restoration of Rights and Remedies............................83

                                  ARTICLE SEVEN
                                     TRUSTEE

SECTION 7.01.  Duties of Trustee.............................................83
SECTION 7.02.  Rights of Trustee.............................................85
SECTION 7.03.  Individual Rights of Trustee..................................86
SECTION 7.04.  Trustee's Disclaimer..........................................86
SECTION 7.05.  Notice of Default.............................................87
SECTION 7.06.  Reports by Trustee to Holders.................................87
SECTION 7.07.  Compensation and Indemnity....................................88
SECTION 7.08.  Replacement of Trustee........................................89
SECTION 7.09.  Successor Trustee by Merger, Etc..............................90
SECTION 7.10.  Eligibility; Disqualification.................................90
SECTION 7.11.  Preferential Collection of Claims Against the Company.........91

                                  ARTICLE EIGHT
                       DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01.  Termination of Company's Obligations..........................91
SECTION 8.02.  Application of Trust Money....................................94
SECTION 8.03.  Repayment to the Company......................................94
SECTION 8.04.  Reinstatement.................................................95
SECTION 8.05.  Acknowledgment of Discharge by Trustee........................95

                                  ARTICLE NINE
                          MODIFICATION OF THE INDENTURE

SECTION 9.01.  Without Consent of Holders....................................96
SECTION 9.02.  With Consent of Holders.......................................96
SECTION 9.03.  Effect on Senior Indebtedness and Guarantor Senior
 Indebtedness................................................................97


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SECTION 9.04.  Compliance with TIA...........................................97
SECTION 9.05.  Revocation and Effect of Consents.............................98
SECTION 9.06.  Notation on or Exchange of Notes..............................98
SECTION 9.07.  Trustee To Sign Amendments, Etc...............................99

                                   ARTICLE TEN
                                  SUBORDINATION

SECTION 10.01. Notes Subordinated to Senior Indebtedness Upon
 Effectiveness of the Merger.................................................99
SECTION 10.02. Suspension of Payment When Senior Indebtedness
 is in Default..............................................................100
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior
 Indebtedness on Dissolution, Liquidation or Reorganization of Company......101
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of
 Senior Indebtedness........................................................103
SECTION 10.05. Obligations of the Company Unconditional.....................103
SECTION 10.06. Trustee Entitled to Assume Payments Not
 Prohibited in Absence of Notice............................................105
SECTION 10.07. Application by Trustee of Assets Deposited with It...........105
SECTION 10.08. No Waiver of Subordination Provisions........................106
SECTION 10.09. Holders Authorize Trustee To Effectuate
 Subordination of Notes.....................................................106
SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.................107
SECTION 10.11. This Article Ten Not To Prevent Events of Default............107
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
 Indebtedness...............................................................108

                                 ARTICLE ELEVEN
                                  MISCELLANEOUS

SECTION 11.01.  TIA Controls................................................108
SECTION 11.02.  Notices.....................................................108
SECTION 11.03.  Communications by Holders with Other Holders................109
SECTION 11.04.  Certificate and Opinion as to Conditions Precedent..........110
SECTION 11.05.  Statements Required in Certificate or Opinion...............110
SECTION 11.06.  Rules by Trustee, Paying Agent, Registrar...................111


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SECTION 11.07.  Legal Holidays..............................................111
SECTION 11.08.  Governing Law...............................................111
SECTION 11.09.  No Adverse Interpretation of Other Agreements...............111
SECTION 11.10.  No Personal Liability.......................................111
SECTION 11.11.  Successors..................................................112
SECTION 11.12.  Duplicate Originals.........................................112
SECTION 11.13.  Severability................................................112

                                 ARTICLE TWELVE
                               GUARANTEE OF NOTES

SECTION 12.01.  Unconditional Guarantee.....................................112
SECTION 12.02.  Limitations on Guarantees...................................114
SECTION 12.03.  Execution and Delivery of Guarantee.........................115
SECTION 12.04.  Release of a Subsidiary Guarantor...........................115
SECTION 12.05.  Waiver of Subrogation.......................................116
SECTION 12.06.  No Set-Off..................................................117
SECTION 12.07.  Obligations Absolute........................................117
SECTION 12.08.  Obligations Continuing......................................118
SECTION 12.09.  Obligations Not Reduced.....................................118
SECTION 12.10.  Obligations Reinstated......................................118
SECTION 12.11.  Obligations Not Affected....................................119
SECTION 12.12.  Waiver......................................................120
SECTION 12.13.  No Obligation To Take Action Against the Company............120
SECTION 12.14.  Dealing with the Company and Others.........................121
SECTION 12.15.  Default and Enforcement.....................................121
SECTION 12.16.  Amendment, Etc..............................................122
SECTION 12.17.  Acknowledgment..............................................122
SECTION 12.18.  Costs and Expenses..........................................122
SECTION 12.19.  No Merger or Waiver; Cumulative Remedies....................122
SECTION 12.20.  [Intentionally omitted].....................................122
SECTION 12.21.  Guarantee in Addition to Other Obligations..................123
SECTION 12.22.  Severability................................................123
SECTION 12.23.  Successors and Assigns......................................123

                                ARTICLE THIRTEEN
                           SUBORDINATION OF GUARANTEE

SECTION 13.01.  Obligations of Guarantors Subordinated to Guarantor
 Senior Indebtedness........................................................123
SECTION 13.02.  Suspension of Guarantee Obligations When Guarantor
 Senior Indebtedness is in Default..........................................124


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SECTION 13.03.  Guarantee Obligations Subordinated to Prior Payment
 of All Guarantor Senior Indebtedness on Dissolution, Liquidation or
 Reorganization of Such Subsidiary Guarantor................................126
SECTION 13.04.  Holders of Guarantee Obligations To Be Subrogated to
 Rights of Holders of Guarantor Senior Indebtedness.........................127
SECTION 13.05.  Obligations of the Subsidiary Guarantors'
 Unconditional..............................................................128
SECTION 13.06.  Trustee Entitled To Assume Payments Not Prohibited
 in Absence of Notice.......................................................130
SECTION 13.07.  Application by Trustee of Assets Deposited with It..........130
SECTION 13.08.  No Waiver of Subordination Provisions.......................131
SECTION 13.09.  Holders Authorize Trustee To Effectuate Subordination
 of Guarantee Obligations...................................................131
SECTION 13.10.  Right of Trustee to Hold Guarantor Senior Indebtedness......132
SECTION 13.11.  No Suspension of Remedies...................................132
SECTION 13.12.  No Fiduciary Duty of Trustee to Holders of Guarantor
 Senior Indebtedness........................................................133

SIGNATURES..................................................................S-1

EXHIBIT A -           Form of Series A Note.................................A-1
Exhibit B -           Form of Series B Note.................................B-1
Exhibit C -           Form of Legend for Global Notes.......................C-1
Exhibit D -           Form of Certificate To Be Delivered
                     in Connection with Transfers to Non-QIB
            Accredited Investors..................................D-1
Exhibit E -           Form of Certificate To Be Delivered in
                      Connection with Transfers Pursuant to
            Regulation S..........................................E-1
Exhibit F -           Form of Guarantee.....................................F-1


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<PAGE>




                  INDENTURE,  dated as of January 29,  1998,  among  Acquisition
Corp., a Delaware  corporation  (the  "Company") and State Street Bank and Trust
Company, as Trustee (the "Trustee").

                  The Company has duly  authorized  the  creation of an issue of
12% Senior  Subordinated  Notes due 2008, Series A, and 12% Senior  Subordinated
Notes  due  2008,  Series  B, to be  issued  in  exchange  for  the  12%  Senior
Subordinated  Notes due 2008,  Series A,  pursuant  to the  Registration  Rights
Agreement  (as defined  herein) and, to provide  therefor,  the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Notes (as defined),  when duly issued and executed by the Company,  and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding  agreement of the Company,  have been
done.

                  Each party  hereto  agrees as follows  for the  benefit of the
other parties and for the equal and ratable  benefit of the Holders (as defined)
of the Company's 12% Senior Subordinated Notes due 2008, Series A and Series B.


                                   ARTICLE ONE

                   DEFINITIONS AND INCORPORATION BY REFERENCE


                  SECTION 1.01. Definitions.

                  "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.

                  "Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.

                  "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


<PAGE>




                                      -2-


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.

                  "Affiliate Transaction" has the meaning provided in Section
4.11.

                  "Agent" means any Registrar, Paying Agent or co-Registrar.

                  "Agent Members" has the meaning provided in Section 2.16.

                  "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 Section 5.01 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


<PAGE>




                                      -3-


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 the Company of assets or property
to one or more  Wholly  Owned  Subsidiaries  of the Company in  connection  with
Investments permitted under Section 4.10.

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

                  "Authenticating Agent" has the meaning provided in Section
2.02.

                  "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors.

                  "Blockage Period" has the meaning provided in Section 10.02.

                  "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.

                  "Business Day" means any day other than a Saturday,  Sunday or
any other day on which banking  institutions in the city of New York or the city
in which  the  principal  office of the  Trustee  is  located  are  required  or
authorized by law or other governmental action to be closed.

                  "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


<PAGE>




                                      -4-


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 this
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 this
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


<PAGE>




                                      -5-


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  aggregate  percentage  of  Voting  Power  owned by  Permitted  Holders
together  with any  Group  controlled  by  Permitted  Holders,  (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.

                  "Change of Control Offer" has the meaning provided in Section
4.15.

                  "Change of Control Payment Date" has the meaning provided in
Section 4.15.

                  "Commission" means the Securities and Exchange Commission.

                  "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.

                  "Company"  means  the  party  named as such in this  Indenture
until a successor  replaces it pursuant to this Indenture and  thereafter  means
such  successor and also  includes for the purposes of any  provision  contained
herein and required by the TIA any other obligor on the Notes.

                  "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


<PAGE>




                                      -6-


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, (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  includable  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 incur-


<PAGE>




                                      -7-


rence,  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


<PAGE>




                                      -8-


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 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 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,  non-recurring  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.


<PAGE>




                                      -9-


                  "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).

                  "consolidation"   means,  with  respect  to  any  Person,  the
consolidation  of the accounts of the  Subsidiaries of such Person with those of
such  Person,  all in  accordance  with  GAAP.  The  term  "consolidated"  has a
correlative meaning to the foregoing.

                  "Corporate  Trust  Office"  means the office of the Trustee at
which at any particular  time its corporate  trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Two International Place, Boston, Massachusetts 02110.

                  "Covenant Defeasance" has the meaning set forth in Section
8.01.

                  "Credit  Agreement"  means the  Credit  Agreement  dated as of
January 29, 1998 among Holdings, the Company, 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  agreements  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  Subsidiary of the Company  against  fluctuations  in
currency values.


<PAGE>




                                      -10-


                  "Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.

                  "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.

                  "Defeasance   Payment"   means  any   distribution   from  any
defeasance trust described under Section 8.01.

                  "Depository" means The Depository Trust Company, its nominees
and successors.

                  "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 of the Notes.

                  "Event of Default" has the meaning provided in Section 6.01.

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

                  "Exchange Notes" means the 12% Senior  Subordinated  Notes due
2008,  Series B to be issued in exchange for the Initial  Notes  pursuant to the
Registration  Rights  Agreement  or, with respect to Initial  Notes issued under
this  Indenture  subsequent  to the Issue  Date  pursuant  to  Section  2.02,  a
registration rights agreement substantially identical to the Registration Rights
Agreement.


<PAGE>




                                      -11-


                  "Exchange Offer" has the meaning provided in the Registration
Rights Agreement.

                  "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.

                  "Global Note" has the meaning provided in Section 2.01.

                  "guarantee" means any obligation,  contingent or otherwise, of
any  Person  directly  or  indirectly  guaranteeing  any  Indebtedness  or other
obligation  of any other  Person and,  without  limiting the  generality  of the
foregoing, any obligation,  direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or  advance or supply  funds for the  purchase or
payment of) such  Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements,  or by agreement to keep-well, to
purchase assets, goods,  securities or services, to take-or-pay,  or to maintain
financial  statement  conditions or otherwise) or (ii) entered into for purposes
of  assuring  in any other  manner  the  obligee of such  Indebtedness  or other
obligation of the payment thereof or


<PAGE>




                                      -12-


to protect  such obligee  against loss in respect  thereof (in whole or in part)
(but if in part, only to the extent thereof);  provided,  however, that the term
"guarantee"  shall not include (A) endorsements for collection or deposit in the
ordinary  course of  business  and (B)  guarantees  (other  than  guarantees  of
Indebtedness) by the Company in respect of assisting one or more Subsidiaries in
the ordinary course of their respective businesses, including without limitation
guarantees of trade  obligations  and  operating  leases,  on ordinary  business
terms. The term "guarantee" used as a verb has a corresponding meaning.

                  "Guarantee"  means the guarantee of the obligations under this
Indenture  and the Notes by each of the  Subsidiary  Guarantors  as set forth in
Article Twelve.

                  "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


<PAGE>




                                      -13-


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  provisions  set forth under  Section
4.12 (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  this   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.

                  "Holder" means any holder of Notes.

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

                  "IAI Global Note" means, a permanent global note in registered
form representing the aggregate  principal amount of Notes sold to Institutional
Accredited Investors.

                  "incur" has the meaning set forth in Section 4.12.

                  "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


<PAGE>




                                      -14-


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  of such Person under  Currency
Agreements  and all  Interest  Swap  Obligations  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 this  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 issuer of such Disqualified Capital Stock.

                  "Indenture"  means this Indenture,  as amended or supplemented
from time to time in accordance with the terms hereof.

                  "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 material 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  Notes"  means,  collectively,  (i)  the  12%  Senior
Subordinated  Notes due 2008,  Series A, of the Company issued on the Issue Date
and (ii) one or more series of 12% Senior  Subordinated  Notes due 2008 that are
issued under this  Indenture  subsequent  to the Issue Date  pursuant to Section
2.02,  in  each  case  for so  long as  such  securities  constitute  Restricted
Securities.

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


<PAGE>




                                       -15-


                  "Initial Purchaser" means BT Alex. Brown Incorporated.

                  "Institutional  Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1),  (2), (3)
or (7) under the Securities Act.

                  "interest"  means,  when used with  respect  to any Note,  the
amount of all interest accruing on such Note, including any applicable defaulted
interest  pursuant to Section 2.12 and any Additional  Interest  pursuant to the
Registration Rights Agreement.

                  "Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.

                  "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.

                  "Internal  Revenue  Code" means the  Internal  Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.

                  "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 Section 4.10, 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, re-


<PAGE>




                                      -16-


duced 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 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.

                  "Legal Defeasance" has the meaning set forth in Section 8.01.

                  "Legal Holiday" has the meaning provided in Section 11.07.

                  "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).

                     "Maturity Date" means January 15, 2008.

                  "Merger" means the merger of the Company 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 the  Company,  Holdings  and ATC  pursuant to which the
Company is to be 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


<PAGE>




                                      -17-


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.

                  "Net Proceeds Offer" has the meaning set forth in Section
4.16.

                  "Net Proceeds Offer Amount" has the meaning set forth in
Section 4.16.

                  "Net Proceeds Offer Payment Date" has the meaning set forth in
Section 4.16.

                  "Net Proceeds Offer Trigger Date" has the meaning set forth in
Section 4.16.

                  "Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.

                  "Notes" means,  collectively,  the Initial Notes,  the Private
Exchange Notes, if any, and the Unrestricted Notes, treated as a single class of
securities,  as amended or supplemented from time to time in accordance with the
terms of this Indenture, that are issued pursuant to this Indenture.

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

                  "Officer"  means,  with  respect to any Person  other than the
Trustee,  the Chairman of the Board of Directors,  the Chief Executive  Officer,
the President,  any Vice President,  the Chief Financial Officer, the Treasurer,
the Controller, or the Secretary of such Person, or any other officer designated
by


<PAGE>




                                      -18-


the Board of Directors  serving in a similar  capacity,  and with respect to the
Trustee, a Trust Officer.

                  "Officers' Certificate" means a certificate signed by two
Officers of the Company.

                  "Opinion  of  Counsel"  means a  written  opinion  from  legal
counsel  who  is  reasonably  acceptable  to  the  Trustee  complying  with  the
requirements  of  Sections  11.04 and 11.05,  as they relate to the giving of an
Opinion of Counsel.

                  "Paying Agent" has the meaning provided in Section 2.03.

                  "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 this 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 Section 4.16 (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  of  the  Company  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 this 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;


<PAGE>




                                      -19-


                  (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 or any
         collateral agent 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  or any  collateral  agent 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 issuer
         of such Indebtedness  unless such  Indebtedness is otherwise  permitted
         hereunder;

                  (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 or any collateral agent
         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 this 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 or any collateral agent
         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 hereunder;

                 (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


<PAGE>




                                      -20-


         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
this Indenture,  provided that in the case of a guarantee by a Subsidiary,  such
Subsidiary   complies  with  the  provisions  of  Section  4.24  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 this Indenture;  (iii) Investments in
cash and Cash 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


<PAGE>




                                      -21-


Agreements and Interest Swap Obligations  entered into in the ordinary course of
the Company's or its  Subsidiaries'  businesses and otherwise in compliance with
this Indenture;  (vi)  Investments in securities of trade creditors or customers
received pursuant to any plan or 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  Section  4.16;  (viii)
Investments  existing  on  the  Issue  Date;  (ix)  guarantees  of  Indebtedness
otherwise  permitted  under  this  Indenture,  provided  that  in the  case of a
guarantee by a  Subsidiary,  such  Subsidiary  complies  with the  provisions of
Section  4.24 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


<PAGE>




                                      -22-


         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;

                  (xii) Liens  encumbering  deposits made to secure  obligations
         arising from statutory, regulatory, contractual,


<PAGE>




                                      -23-


         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 this 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; and

                  (xvi)  Liens  securing  Acquired   Indebtedness   incurred  in
         accordance with Section 4.12;  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,  limited liability
company, corporation,  unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.

                  "Physical Notes" has the meaning provided in Section 2.01.

                  "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.

                  "principal"  of any  Indebtedness  (including the Notes) means
the  principal  amount of such  Indebtedness  plus the premium,  if any, on such
Indebtedness.


<PAGE>




                                      -24-


                  "Private Exchange Notes" has the meaning provided in the
Registration Rights Agreement.

                  "Private  Placement  Legend"  means the legend  initially  set
forth on the Initial Notes in the form set forth in Exhibit A.

                  "pro forma"  means,  with respect to any  calculation  made or
required to be made pursuant to the terms of this  Indenture,  a calculation  in
accordance  with Article 11 of Regulation S-X under the Securities  Act,  except
where such calculation specifies that Pro Forma Adjustments may be used.

                  "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;


<PAGE>




                                      -25-


                  (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);

                  (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.

                  "Property" means, with respect to any Person, any interests of
such Person in any kind of property or asset,  whether real,  personal or mixed,
or  tangible  or  intangible,  including,  without  limitation,  Capital  Stock,
partnership  interests  and other  equity or  ownership  interests  in any other
Person.

                  "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.


<PAGE>




                                      -26-


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

                  "Qualified  Institutional  Buyer"  or  "QIB"  shall  have  the
meaning specified in Rule 144A.

                  "Record Date" means the Record Dates specified in the Notes.

                  "Redemption Date" means, when used with respect to any Note to
be redeemed,  the date fixed for such redemption  pursuant to this Indenture and
the Notes.

                  "Redemption  Price" means,  when used with respect to any Note
to be redeemed,  the price fixed for such  redemption,  including  principal and
premium, if any, pursuant to this Indenture and the Notes.

                  "Reference Date" has the meaning set forth in Section 4.10.

                  "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  incurred in accordance
with Section 4.12 (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
this 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
matur-


<PAGE>




                                     -27-


ity 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.

                  "Registrar" has the meaning provided in Section 2.03.

                  "Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date between the Company and the Initial
Purchaser.

                  "Regulation S" means Regulation S under the Securities Act.

                  "Regulation  S Global  Note" means a permanent  global note in
registered form  representing  the aggregate  principal  amount of Notes sold in
reliance on Regulation S under the Securities Act.

                  "Related Person" means, with respect to any Person,  any other
Person  directly  or  indirectly  owning 10% or more of the  outstanding  voting
Common  Stock  of  such  Person  (or,  in the  case  of a  Person  that is not a
corporation, 10% or more of the equity interest in such Person).

                  "Replacement Assets" shall have the meaning set forth in
Section 4.16.

                  "Representative" means the 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.

                  "Restricted Payment" shall have the meaning set forth in
Section 4.10.

                  "Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities  Act;  provided,  however,  that the Trustee
shall be entitled to request and con-


<PAGE>




                                      -28-


clusively  rely on an  Opinion  of Counsel  with  respect  to  whether  any Note
constitutes a Restricted Security.

                  "Rule 144A" means Rule 144A under the Securities Act.

                  "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.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.

                  "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.

                  "Senior  Indebtedness"  means, upon and after  consummation of
the Merger,  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


<PAGE>




                                      -29-


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 provisions set forth under Section 4.12 (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 this  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 this
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 in-


<PAGE>




                                      -30-


terest under  ordinary  circumstances  is at the time,  directly or  indirectly,
owned by such Person.

                  "Subsidiary  Guarantor"  means,  at and  after the time of the
Merger, 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  Subsidiaries that in the future executes a supplemental  indenture in
which such  Subsidiary  agrees to be bound by the terms of this  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  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 this Indenture.

                  "Surviving Entity" shall have the meaning set forth in Section
5.01.

                  "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.

                  "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.04.


<PAGE>




                                      -31-


                  "Trustee"  means  the  party  named as such in this  Indenture
until  a  successor  replaces  it in  accordance  with  the  provisions  of this
Indenture and thereafter means such successor.

                  "Trust Officer" means any officer or assistant  officer of the
Trustee assigned by the Trustee to administer this Indenture,  or in the case of
a successor  trustee,  an officer assigned to the department,  division or group
performing  the  corporation  trust  work  of such  successor  and  assigned  to
administer this Indenture.

                  "U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.

                  "U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.

                  "Unrestricted  Notes"  means one or more Notes that do not and
are not required to bear the Private  Placement  legend in the form set forth in
Exhibit A, including, without limitation, the Exchange Notes.

                  "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).


<PAGE>




                                      -32-


                  SECTION 1.02. Incorporation by Reference of TIA.

                  Whenever this Indenture refers to a provision of the TIA, such
provision is  incorporated  by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:

                     "indenture securities" means the Notes.

                  "indenture security holder" means a Holder.

                  "indenture to be qualified" means this Indenture.

                  "indenture trustee" or "institutional trustee" means the
                  Trustee.

                  "obligor" on the indenture securities means the Company or any
                  other obligor on the Notes.

                  All other TIA terms used in this Indenture that are defined by
the TIA,  defined by TIA  reference to another  statute or defined by Commission
rule and not  otherwise  defined  herein  have  the  meanings  assigned  to them
therein.

                  SECTION 1.03. Rules of Construction.

                  Unless the context otherwise requires:

                  (1) a term has the meaning assigned to it;

                  (2) an accounting  term not otherwise  defined has the meaning
         assigned to it in accordance with GAAP of any date of determination;

                  (3) "or" is not exclusive;

                  (4) words in the singular include the plural, and words in the
         plural include the singular;

                  (5) "herein," "hereof" and other words of similar import refer
         to this Indenture as a whole and not to any particular Article, Section
         or other subdivision; and

                  (6) any reference to a statute,  law or regulation  means that
         statute,  law or  regulation as amended and in effect from time to time
         and  includes  any  successor  statute,  law or  regulation;  provided,
         however, that any refer-


<PAGE>




                                      -33-


         ence to the  Bankruptcy Law shall mean the Bankruptcy Law as applicable
to the relevant case.


                                   ARTICLE TWO

                                    THE NOTES


                  SECTION 2.01. Form and Dating.

                  The  Initial  Notes,  the  notation  thereon  relating  to the
Guarantees,  if any, and the Trustee's  certificate of  authentication  relating
thereto shall be substantially in the form of Exhibit A hereto,  provided,  that
any Initial Notes issued in a public offering shall be substantially in the form
of Exhibit B hereto.  The Exchange Notes,  the notation  thereon relating to the
Guarantees,  if any, and the Trustee's  certificate of  authentication  relating
thereto shall be  substantially  in the form of Exhibit B hereto.  The Notes may
have notations,  legends or endorsements required by law, stock exchange rule or
depository rule or usage.  The Company and the Trustee shall approve the form of
the Notes and any notation,  legend or endorsement  on them.  Each Note shall be
dated the date of its  issuance  and shall show the date of its  authentication.
Upon  consummation  of the Merger,  each Note shall have an  executed  Guarantee
endorsed thereon substantially in the form of Exhibit F hereto.

                  The  terms  and  provisions  contained  in the  Notes  and the
Guarantees,  if any, annexed hereto as Exhibits A and B, shall  constitute,  and
are  hereby  expressly  made,  a part  of  this  Indenture  and,  to the  extent
applicable,  the Company, the Subsidiary Guarantors, if any, and the Trustee, by
their  execution and delivery of this  Indenture,  expressly agree to such terms
and provisions and to be bound thereby.

                  Notes offered and sold in reliance on Rule 144A, Notes offered
and sold to institutional  "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and Notes offered and sold in reliance
on Regulation S shall be issued  initially in the form of one or more  permanent
global Notes in registered form,  substantially in the form set forth in Exhibit
A (the  "Global  Note"),  deposited  with  the  Trustee,  as  custodian  for the
Depository,  duly  executed  by the Company  (and  having an executed  Guarantee
endorsed thereon) and  authenticated by the Trustee as hereinafter  provided and
shall bear the legend set forth in Exhibit C. The aggregate


<PAGE>




                                      -34-


principal  amount  of the  Global  Note may from  time to time be  increased  or
decreased by  adjustments  made on the records of the Trustee,  as custodian for
the Depository, as hereinafter provided.

                  Notes  issued  in  exchange  for  interests  in a Global  Note
pursuant to Section 2.16 may be issued and Notes offered and sold in reliance on
any other  exemption  from  registration  under the Securities Act other than as
described in the  preceding  paragraph  shall be issued in the form of permanent
certificated  Notes in registered  form in  substantially  the form set forth in
Exhibit A (the "Physical Notes").

                  All Notes  offered and sold in reliance on  Regulation S shall
remain in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement;  provided,  however,  that all of
the time periods  specified in the Registration  Rights Agreement to be complied
with by the Company and the Subsidiary Guarantors have been so complied with.

              SECTION 2.02. Execution and Authentication; Aggregate
                                Principal Amount.

                  Two Officers,  or an Officer and an Assistant Secretary of the
Company and each Subsidiary Guarantor, shall sign, or one Officer shall sign and
one Officer or an Assistant  Secretary  (each of whom shall,  in each case, have
been duly  authorized by all requisite  corporate  actions) shall attest to, the
Notes for the Company and the Guarantees for the Subsidiary Guarantors by manual
or facsimile signature.

                  If an Officer or Assistant  Secretary  whose signature is on a
Note or a Guarantee  was an Officer or  Assistant  Secretary at the time of such
execution  but no longer  holds that  office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.

                  A Note shall not be valid until an authorized signatory of the
Trustee  manually  signs the  certificate  of  authentication  on the Note.  The
signature  shall be  conclusive  evidence  that the Note has been  authenticated
under this Indenture.

          The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $150,000,000 in one or more series,
(ii) Private  Exchange  Notes from time to time for issue only in exchange for a
like principal amount of Initial Notes and (iii) Unrestricted Notes from


<PAGE>




                                      -35-


time to time only (A) in exchange for a like  principal  amount of Initial Notes
or (B) in an  aggregate  principal  amount  of  not  more  than  the  excess  of
$150,000,000 over the sum of the aggregate principal amount of (x) Initial Notes
then   outstanding,   (y)  Private  Exchange  Notes  then  outstanding  and  (z)
Unrestricted Notes issued in accordance with (iii)(A) above, in each case upon a
written  order of the  Company in the form of an  Officers'  Certificate  of the
Company.  Each  such  written  order  shall  specify  the  amount of Notes to be
authenticated and the date on which the Notes are to be  authenticated,  whether
the Notes are to be Initial Notes,  Private Exchange Notes or Unrestricted Notes
and whether the Notes are to be issued as Physical Notes or Global Notes or such
other information as the Trustee may reasonably request. The aggregate principal
amount of Notes outstanding at any time may not exceed  $150,000,000,  except as
provided in Sections 2.07 and 2.08.

                  In the event  that the  Company  shall  issue and the  Trustee
shall authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the  immediately
preceding paragraph,  the Company shall use its reasonable efforts to obtain the
same  "CUSIP"  number for such Notes as is printed on the Notes  outstanding  at
such time;  provided,  however,  that if any series of Notes  issued  under this
Indenture subsequent to the Issue Date is determined,  pursuant to an Opinion of
Counsel of the Company in a form reasonably  satisfactory to the Trustee to be a
different class of security than the Notes  outstanding at such time for federal
income tax purposes, the Company may obtain a "CUSIP" number for such Notes that
is  different  than the "CUSIP"  number  printed on the Notes then  outstanding.
Notwithstanding the foregoing,  all Notes issued under this Indenture shall vote
and  consent  together  on all  matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.

                  The  Trustee  may   appoint  an   authenticating   agent  (the
"Authenticating  Agent")  reasonably  acceptable to the Company to  authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent may
authenticate  Notes  whenever  the  Trustee may do so.  Each  reference  in this
Indenture  to  authentication  by the Trustee  includes  authentication  by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent to
deal with the Company or with any Affiliate of the Company.


<PAGE>




                                      -36-


                  The Notes  shall be issuable  in fully  registered  form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.

                  SECTION 2.03. Registrar and Paying Agent.

                  The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York,  State of New York)
where (a) Notes may be presented or surrendered for  registration of transfer or
for  exchange  ("Registrar"),  (b) Notes may be  presented  or  surrendered  for
payment  ("Paying  Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served.  The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company may have
one or more  co-Registrars  and one or more additional  paying agents reasonably
acceptable  to the Trustee.  The term  "Paying  Agent"  includes any  additional
Paying Agent.  The Company may act as its own Paying Agent,  except that for the
purposes of payments on the Notes  pursuant to Sections  4.15 and 4.16,  neither
the Company nor any Affiliate of the Company may act as Paying Agent.

                  The Company shall enter into an appropriate  agency  agreement
with any Agent not a party to this Indenture,  which agreement shall incorporate
the  provisions of the TIA and implement the  provisions of this  Indenture that
relate to such  Agent.  The  Company  shall  notify the  Trustee of the name and
address of any such Agent.  If the Company shall fail to maintain a Registrar or
Paying Agent the Trustee shall act as such.

                  The  Company  initially  appoints  the  Trustee as  Registrar,
Paying Agent and agent for service of demands and notices in connection with the
Notes,  until such time as the  Trustee has  resigned  or a  successor  has been
appointed.  Any of the Registrar, the Paying Agent or any other agent may resign
upon 30 days' notice to the Company.

                  SECTION 2.04. Paying Agent To Hold Assets in Trust.

                  The Company  shall  require  each Paying  Agent other than the
Trustee to agree in writing  that such Paying  Agent shall hold in trust for the
benefit of the Holders or the  Trustee  all assets held by the Paying  Agent for
the payment of principal of, premium, if any, or interest on, the Notes (whether
such assets have been  distributed  to it by the Company or any other obligor on
the Notes), and the Company and the Paying Agent shall notify the Trustee of any
Default by the


<PAGE>




                                      -37-


Company  (or any other  obligor on the Notes) in making  any such  payment.  The
Company at any time may require a Paying Agent to distribute  all assets held by
it to the Trustee and  account for any assets  disbursed  and the Trustee may at
any time during the continuance of any payment Default,  upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed.  Upon distribution to the
Trustee of all  assets  that shall  have been  delivered  by the  Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.

                  SECTION 2.05. Holder Lists.

                  The  Trustee  shall  preserve  in  as  current  a  form  as is
reasonably  practicable  the most recent list  available  to it of the names and
addresses of the Holders and shall otherwise comply with TIA ss. 312(a).  If the
Trustee is not the  Registrar,  the Company shall furnish or cause the Registrar
to furnish to the Trustee five (5) Business  Days before each Record Date and at
such other  times as the  Trustee  may request in writing a list as of such date
and in such  form  as the  Trustee  may  reasonably  require  of the  names  and
addresses  of the  Holders,  which list may be  conclusively  relied upon by the
Trustee, and the Company shall otherwise comply with TIA ss. 312(a).

                  SECTION 2.06. Transfer and Exchange.

                  Subject to Sections 2.16 and 2.17, when Notes are presented to
the Registrar or a co-Registrar  with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal  amount of Notes or other
authorized  denominations,  the  Registrar or  co-Registrar  shall  register the
transfer  or make  the  exchange  as  requested  if its  requirements  for  such
transaction are met; provided,  however, that the Notes presented or surrendered
for  registration  of transfer or exchange shall be duly endorsed or accompanied
by a written  instrument of transfer in form  satisfactory  to the Company,  the
Trustee and the Registrar or  co-Registrar,  duly executed by the Holder thereof
or his attorney duly authorized in writing.  To permit registration of transfers
and  exchanges,  the Company shall  execute and the Trustee  shall  authenticate
Notes and, at and after  consummation of the Merger,  the Subsidiary  Guarantors
shall execute Guarantees  thereon at the Registrar's or co-Registrar's  request.
No service  charge shall be made for any  registration  of transfer or exchange,
but the Company may require  payment of a sum  sufficient  to cover any transfer
tax, fee or similar governmental charge payable in connection there-


<PAGE>




                                      -38-


with (other than any such transfer taxes or similar  governmental charge payable
upon exchanges or transfers  pursuant to Section 2.10, 3.04, 4.15, 4.16 or 9.05,
in which event the Company shall be responsible for the payment of such taxes).

                  The  Registrar  or  co-Registrar  shall  not  be  required  to
register the  transfer of or exchange of any Note (i) during a period  beginning
at the opening of business 15 days before the mailing of a notice of  redemption
of Notes and ending at the close of business on the day of such mailing and (ii)
selected for  redemption in whole or in part pursuant to Article  Three,  except
the unredeemed portion of any Note being redeemed in part.

                  Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial  interests in
such Global Notes may be effected only through a book entry system maintained by
the  Holder  of such  Global  Note  (or its  agent),  and  that  ownership  of a
beneficial  interest  in the Note shall be required  to be  reflected  in a book
entry system.

                  SECTION 2.07. Replacement Notes.

                  If a mutilated  Note is  surrendered  to the Trustee or if the
Holder of a Note claims  that the Note has been lost,  destroyed  or  wrongfully
taken, the Company shall issue and the Trustee shall  authenticate a replacement
Note and, at and after  consummation  of the Merger,  the Subsidiary  Guarantors
shall  execute a Guarantee  thereon if the  Trustee's  requirements  are met. If
required by the Trustee or the  Company,  such Holder must  provide an indemnity
bond or other  indemnity  of  reasonable  tenor,  sufficient  in the  reasonable
judgment of the Company,  the Subsidiary  Guarantors and the Trustee, to protect
the Company, the Subsidiary  Guarantors,  the Trustee or any Agent from any loss
which any of them may suffer if a Note is replaced. Every replacement Note shall
constitute  an  additional   obligation  of  the  Company  and  the   Subsidiary
Guarantors.

                  SECTION 2.08. Outstanding Notes.

                  Notes outstanding at any time are all the Notes that have been
authenticated  by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the  provisions  of  Section  2.09,  a Note does not cease to be  outstanding
because the Company or any of its Affiliates holds the Note.


<PAGE>




                                      -39-


                  If a Note is replaced  pursuant to Section  2.07 (other than a
mutilated Note surrendered for replacement),  it ceases to be outstanding unless
the Trustee receives proof  satisfactory to it that the replaced Note is held by
a bona fide purchaser.  A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.

                  If on a Redemption  Date or the Maturity Date the Paying Agent
holds U.S. Legal Tender or U.S. Government  Obligations sufficient to pay all of
the  principal,  premium,  if any, and interest due on the Notes payable on that
date  and is not  prohibited  from  paying  such  money to the  Holders  thereof
pursuant to the terms of this Indenture,  then on and after that date such Notes
shall be deemed  not to be  outstanding  and  interest  on them  shall  cease to
accrue.

                  SECTION 2.09. Treasury Notes.

                  In determining  whether the Holders of the required  principal
amount of Notes have  concurred  in any  direction,  waiver,  consent or notice,
Notes owned by the Company or an Affiliate of the Company shall be considered as
though they are not  outstanding,  except that for the  purposes of  determining
whether the Trustee shall be protected in relying on any such direction,  waiver
or consent,  only Notes which a Trust Officer of the Trustee  actually knows are
so owned  shall be so  considered.  The Company  shall  notify the  Trustee,  in
writing, when either it or, to its knowledge,  any of its Affiliates repurchases
or otherwise acquires Notes, of the aggregate  principal amount of such Notes so
repurchased or otherwise  acquired and such other information as the Trustee may
reasonably request and the Trustee shall be entitled to rely thereon.

                  SECTION 2.10. Temporary Notes.

                  Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee  shall  authenticate  temporary  Notes upon receipt of a
written  order of the  Company  in the  form of an  Officers'  Certificate.  The
Officers'  Certificate  shall  specify  the  amount  of  temporary  Notes  to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be  substantially  in the form of definitive Notes but may
have variations that the Company consider appropriate for temporary Notes and so
indicate in the Officers'  Certificate.  Without unreasonable delay, the Company
shall prepare,  the Trustee shall authenticate and, at and after consummation of
the Merger, the Subsidiary Guarantors


<PAGE>




                                      -40-


shall  execute  Guarantees  on, upon  receipt of a written  order of the Company
pursuant to Section 2.02, definitive Notes in exchange for temporary Notes.

                  SECTION 2.11. Cancellation.

                  The Company at any time may  deliver  Notes to the Trustee for
cancellation.  The  Registrar  and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee,  the Registrar or the Paying Agent,  and no one
else, shall cancel and, at the written direction of the Company,  shall dispose,
in its  customary  manner,  of all Notes  surrendered  for  transfer,  exchange,
payment or cancellation.  Subject to Section 2.07, the Company may not issue new
Notes to  replace  Notes that they have paid or  delivered  to the  Trustee  for
cancellation.  If the Company shall acquire any of the Notes,  such  acquisition
shall  not  operate  as  a  redemption  or  satisfaction  of  the   Indebtedness
represented  by such  Notes  unless  and until the same are  surrendered  to the
Trustee for cancellation pursuant to this Section 2.11.

                  SECTION 2.12. Defaulted Interest.

                  The Company will pay interest on overdue  principal  from time
to time on demand at the rate of interest  then borne by the Notes.  The Company
shall,  to the extent lawful,  pay interest on overdue  installments of interest
(without regard to any applicable  grace periods) from time to time on demand at
the rate of interest  then borne by the Notes.  Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months, and, in the case of a
partial month, the actual number of days elapsed.

                  If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted  interest,  plus (to the extent  lawful) any interest
payable  on the  defaulted  interest,  to  the  Persons  who  are  Holders  on a
subsequent special record date, which special record date shall be the fifteenth
day next  preceding  the date fixed by the Company for the payment of  defaulted
interest or the next succeeding Business Day if such date is not a Business Day.
The  Company  shall  notify the  Trustee  in writing of the amount of  defaulted
interest  proposed to be paid on each Note and the date of the proposed  payment
(a "Default  Interest  Payment  Date"),  and at the same time the Company  shall
deposit  with the  Trustee  an amount  of money  equal to the  aggregate  amount
proposed  to be paid in  respect  of  such  defaulted  interest  or  shall  make
arrangements satisfactory to


<PAGE>




                                      -41-


the Trustee for such  deposit on or prior to the date of the  proposed  payment,
such money when  deposited  to be held in trust for the  benefit of the  Persons
entitled to such  defaulted  interest as  provided  in this  Section;  provided,
however,  that in no event shall the Company  deposit monies proposed to be paid
in respect of defaulted interest later than 11:00 a.m. New York City time of the
proposed  Default  Interest Payment Date. At least 15 days before the subsequent
special  record  date,  the  Company  shall mail (or cause to be mailed) to each
Holder, as of a recent date selected by the Company, with a copy to the Trustee,
a notice that states the  subsequent  special  record date, the payment date and
the  amount of  defaulted  interest,  and  interest  payable  on such  defaulted
interest, if any, to be paid.  Notwithstanding the foregoing, any interest which
is paid  prior to the  expiration  of the  30-day  period  set forth in  Section
6.01(i) shall be paid to Holders as of the regular  record date for the Interest
Payment  Date  for  which  interest  has  not  been  paid.  Notwithstanding  the
foregoing,  the Company may make payment of any defaulted  interest in any other
lawful manner not inconsistent with the requirements of any securities  exchange
on which the Notes may be listed,  and upon such  notice as may be  required  by
such exchange.

                  SECTION 2.13. CUSIP Number.

                  The  Company  in issuing  the Notes may use a "CUSIP"  number,
and, if so, the Trustee  shall use the CUSIP number in notices of  redemption or
exchange as a convenience to Holders; provided,  however, that no representation
is hereby deemed to be made by the Trustee as to the  correctness or accuracy of
the CUSIP number printed in the notice or on the Notes, and that reliance may be
placed  only on the other  identification  numbers  printed  on the  Notes.  The
Company shall promptly notify the Trustee of any change in the CUSIP number.

                  SECTION 2.14. Deposit of Monies.

                  Prior  to  11:00  a.m.  New York  City  time on each  Interest
Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and
Net Proceeds  Offer Payment  Date,  the Company  shall have  deposited  with the
Paying  Agent in  immediately  available  funds  money  sufficient  to make cash
payments,  if any, due on such Interest Payment Date, Maturity Date,  Redemption
Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the
case may be, in a timely  manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date, Maturity Date, Redemption Date,


<PAGE>




                                      -42-


Change of Control  Payment Date and Net Proceeds Offer Payment Date, as the case
may be.

                  SECTION 2.15. Restrictive Legends.

                  Each  Global  Note  and  Physical  Note  that   constitutes  a
Restricted  Security shall bear the legend (the "Private  Placement  Legend") as
set forth in Exhibit A on the face thereof until after the second anniversary of
the  later of the  Issue  Date and the last  date on which  the  Company  or any
Affiliate  of the  Company  was the  owner  of  such  Note  (or any  predecessor
security) (or such shorter  period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision  thereunder) (or such longer period of
time as may be required under the Securities Act or applicable  state securities
laws in the opinion of counsel for the Company,  unless  otherwise agreed by the
Company and the Holder thereof).

                  Each  Global  Note  shall also bear the legend as set forth in
Exhibit C.

                  SECTION 2.16. Book-Entry Provisions for Global Security.

                  (a) The Global Notes  initially shall (i) be registered in the
name of the Depository or the nominee of such  Depository,  (ii) be delivered to
the Trustee as custodian  for such  Depository  and (iii) bear the legend as set
forth in Exhibit C.

                  Members  of,  or  participants  in,  the  Depository   ("Agent
Members")  shall have no rights under this  Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Notes,  and the Depository  may be treated by the Company,  the
Trustee  and any Agent of the Company or the  Trustee as the  absolute  owner of
such Global Note for all purposes  whatsoever.  Notwithstanding  the  foregoing,
nothing  herein  shall  prevent  the  Company,  the  Trustee or any Agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other  authorization  furnished  by the  Depository  or impair,  as between  the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.

                  (b)  Transfers  of a Global Note shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of benefi-


<PAGE>




                                      -43-


cial owners in a Global Note may be  transferred or exchanged for Physical Notes
in accordance with the rules and procedures of the Depository and the provisions
of Section  2.17.  In  addition,  Physical  Notes  shall be  transferred  to all
beneficial owners in exchange for their beneficial interests in a Global Note if
(i) the  Depository  notifies  the  Company  that it is  unwilling  or unable to
continue as  Depository  for the Global Notes and a successor  depositary is not
appointed  by the  Company  within  90 days of such  notice  or (ii) an Event of
Default has occurred and is continuing  and the Registrar has received a written
request from the Depository to issue Physical Notes.

                  (c) In  connection  with any transfer or exchange of a portion
of the  beneficial  interest in a Global Note to beneficial  owners  pursuant to
paragraph  (b), the  Registrar  shall (if one or more  Physical  Notes are to be
issued)  reflect  on its  books  and  records  the  date and a  decrease  in the
principal  amount of such Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute,  the Subsidiary  Guarantors shall execute  Guarantees on, and the
Trustee shall authenticate and deliver, one or more Physical Notes of like tenor
and amount.

                  (d) In  connection  with the transfer of an entire Global Note
to beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation,  and the
Company shall execute, the Subsidiary Guarantors shall execute Guarantees on and
the Trustee shall authenticate and deliver,  to each beneficial owner identified
by the Depository in exchange for its beneficial interest in the Global Note, an
equal aggregate principal amount of Physical Notes of authorized denominations.

                  (e) Any  Physical  Note  constituting  a  Restricted  Security
delivered in exchange for an interest in a Global Note pursuant to paragraph (b)
or (c) of this Section 2.16 shall,  except as otherwise  provided by  paragraphs
(a)(i)(x) and (c) of Section 2.17, bear the Private Placement Legend.

                  (f)  The  Holder  of a  Global  Note  may  grant  proxies  and
otherwise  authorize  any Person,  including  Agent Members and Persons that may
hold  interests  through  Agent  Members,  to take any action  which a Holder is
entitled to take under this Indenture or the Notes.


<PAGE>




                                      -44-


                  SECTION 2.17. Special Transfer Provisions.

                  (a) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:

                   (i) the  Registrar  shall  register  the transfer of any Note
         constituting a Restricted Security,  whether or not such Note bears the
         Private Placement  Legend,  if (x) the requested  transfer is after the
         second anniversary of the Issue Date (provided,  however,  that neither
         the Company nor any  Affiliate  of the Company has held any  beneficial
         interest in such Note, or portion  thereof,  at any time on or prior to
         the second  anniversary  of the Issue Date) or (y) (1) in the case of a
         transfer to an  Institutional  Accredited  Investor  which is not a QIB
         (excluding Non-U.S.  Persons), the proposed transferee has delivered to
         the  Registrar  a  certificate  substantially  in the form of Exhibit D
         hereto  or (2) in the case of a  transfer  to a  Non-U.S.  Person,  the
         proposed  transferor  has  delivered  to the  Registrar  a  certificate
         substantially in the form of Exhibit E hereto; and

                 (ii) if the  proposed  transferee  is an Agent  Member  and the
         Notes to be transferred  consist of Physical Notes which after transfer
         are to be evidenced by an interest in the IAI Global Note or Regulation
         S Global Note, as the case may be, upon receipt by the Registrar of (x)
         written  instructions given in accordance with the Depository's and the
         Registrar's  procedures and (y) the  appropriate  certificate,  if any,
         required by clause (y) of  paragraph  (i) above,  the  Registrar  shall
         register the transfer and reflect on its books and records the date and
         an  increase  in  the  principal  amount  of the  IAI  Global  Note  or
         Regulation S Global Note,  as to case may be, in an amount equal to the
         principal  amount of Physical Notes to be transferred,  and the Trustee
         shall cancel the Physical Notes so transferred; and

                (iii) if the proposed  transferor is an Agent Member  seeking to
         transfer an interest in a Global Note, upon receipt by the Registrar of
         (x) written  instructions given in accordance with the Depository's and
         the Registrar's procedures and (y) the appropriate certificate, if any,
         required by clause (y) of paragraph (i) above, the Regis-


<PAGE>




                                      -45-


         trar shall  register  the transfer and reflect on its books and records
         the date and (A) a decrease in the principal  amount of the Global Note
         from which such  interests are to be  transferred in an amount equal to
         the principal amount of the Notes to be transferred and (B) an increase
         in the  principal  amount of the IAI Global  Note or the  Regulation  S
         Global Note,  as the case may be, in an amount  equal to the  principal
         amount of the Notes to be transferred.

                  (b) Transfers to QIBs.  The following  provisions  shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):

                   (i)  the  Registrar   shall  register  the  transfer  of  any
         Restricted  Security  if such  transfer  is  being  made by a  proposed
         transferor  who has  checked the box  provided  for on the form of Note
         stating,  or has  otherwise  advised the Company and the  Registrar  in
         writing,  that the sale has been made in compliance with the provisions
         of Rule 144A to a transferee who has signed the certification  provided
         for on the form of Note stating,  or has otherwise  advised the Company
         and the Registrar in writing,  that it is  purchasing  the Note for its
         own  account or an account  with  respect  to which it  exercises  sole
         investment  discretion and that it and any such account is a QIB within
         the  meaning  of Rule  144A,  and is aware that the sale to it is being
         made in reliance  on Rule 144A and  acknowledges  that it has  received
         such information  regarding the Company as it has requested pursuant to
         Rule 144A or has determined not to request such information and that it
         is  aware  that  the   transferor   is  relying   upon  its   foregoing
         representations  in order  to claim  the  exemption  from  registration
         provided by Rule 144A; and

                  (ii) if the proposed  transferee is an Agent  Member,  and the
         Notes to be transferred  consist of Physical Notes which after transfer
         are to be evidenced  by an interest in a Global  Note,  upon receipt by
         the  Registrar of written  instructions  given in  accordance  with the
         Depository's  and  the  Registrar's  procedures,  the  Registrar  shall
         reflect  on its  books  and  records  the date and an  increase  in the
         principal  amount  of  such  Global  Note  in an  amount  equal  to the
         principal  amount  of the  Physical  Notes to be  transferred,  and the
         Trustee shall cancel the Physical Notes so transferred; and


<PAGE>




                                      -46-


                 (iii) if the proposed  transferor is an Agent Member seeking to
         transfer an interest in the IAI Global Note or the  Regulation S Global
         Note,  upon receipt by the Registrar of written  instructions  given in
         accordance with the  Depository's and the Registrar's  procedures,  the
         Registrar  shall  register  the  transfer  and reflect on its books and
         records the date and (A) a decrease in the principal  amount of the IAI
         Global Note or the  Regulation S Global Note, as the case may be, in an
         amount equal to the principal amount of the Notes to be transferred and
         (B) an increase in the principal amount of the Global Note in an amount
         equal to the principal amount of the Notes to be transferred.

                  (c)  Restrictions  on Transfer and  Exchange of Global  Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred  as a whole except by the  Depository to a nominee of the Depository
or by a nominee of the  Depository  to the  Depository  or any such nominee to a
successor Depository or a nominee of such successor Depository.

                  (d) Private Placement Legend.  Upon the transfer,  exchange or
replacement  of Notes not bearing the Private  Placement  Legend,  the Registrar
shall  deliver  Notes that do not bear the Private  Placement  Legend.  Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar  shall deliver only Notes that bear the Private  Placement  Legend
unless (i) the requested  transfer is after the second  anniversary of the Issue
Date  (provided,  however,  that  neither the Company nor any  Affiliate  of the
Company has held any beneficial  interest in such Note, or portion  thereof,  at
any time prior to or on the second anniversary of the Issue Date), or (ii) there
is delivered to the Registrar an Opinion of Counsel  reasonably  satisfactory to
the  Company  and the  Trustee to the effect  that  neither  such legend nor the
related  restrictions  on transfer are required in order to maintain  compliance
with the provisions of the Securities Act.

                  (e) General. By its acceptance of any Note bearing the Private
Placement  Legend,  each Holder of such a Note  acknowledges the restrictions on
transfer of such Note set forth in this  Indenture and in the Private  Placement
Legend and  agrees  that it will  transfer  such Note only as  provided  in this
Indenture.

                  The Registrar shall retain copies of all letters,  notices and
other written  communications  received pursuant to Section 2.16 or this Section
2.17. The Company shall have


<PAGE>




                                      -47-


the right to  inspect  and make  copies of all such  letters,  notices  or other
written  communications  at any reasonable  time during the  Registrar's  normal
business hours upon the giving of reasonable written notice to the Registrar.

                  (f) Transfers of Notes Held by Affiliates. Any certificate (i)
evidencing  a Note that has been  transferred  to an  Affiliate  of the  Company
within  two years  after the Issue  Date,  as  evidenced  by a  notation  on the
Assignment Form for such transfer or in the  representation  letter delivered in
respect  thereof  or (ii)  evidencing  a Note  that  has been  acquired  from an
Affiliate  of the  Company  (other  than by an  Affiliate  of the  Company) in a
transaction or a chain of transactions not involving any public offering, shall,
until two years after the last date on which the Company or any Affiliate of the
Company  was an owner of such Note,  in each case,  bear the  Private  Placement
Legend,  unless  otherwise agreed by the Company (with written notice thereof to
the Trustee).

                  SECTION 2.18. Liquidated Damages Under Registration Rights
                                   Agreement.

                  Under certain circumstances, the Company shall be obligated to
pay certain liquidated damages to the Holders,  all as set forth in Section 5 of
the Registration  Rights  Agreement.  The terms thereof are hereby  incorporated
herein by reference.


                                  ARTICLE THREE

                                   REDEMPTION


                  SECTION 3.01. Notices to Trustee.

                  If the Company  elects to redeem  Notes  pursuant to Paragraph
(5) of the Notes, it shall notify the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of the Notes to be redeemed.

                  The  Company  shall  give  each  notice  provided  for in this
Section  3.01 at least 10 days  before  the date that  notice of  redemption  is
mailed to Holders  (unless a shorter notice period shall be  satisfactory to the
Trustee,  as evidenced in a writing  signed on behalf of the Trustee),  together
with an Officers' Certificate stating that such redemption shall comply with the
conditions  contained  herein and in the Notes. Any such notice may be cancelled
at any time prior to notice of


<PAGE>




                                      -48-


such redemption being mailed to any Holder and shall thereby be void and of no
effect.

                  SECTION 3.02. Selection of Notes To Be Redeemed.

                  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.

                  SECTION 3.03. 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 years set forth
below, plus, in each case,  accrued and unpaid interest thereon,  if any, to the
date of redemption:


<PAGE>




                                      -49-


    Year                                                   Percentage
    ----                                                   ----------
    2003....................................................106.000%
    2004....................................................104.500%
    2005....................................................103.000%
    2006....................................................101.500%
    2007 and thereafter.....................................100.000%

                  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,  up to 35% 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% 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.

                  SECTION 3.04. Notice of Redemption.

                  At least 30 days but not more than 60 days before a Redemption
Date (unless a different  period is required by Section 3.08), the Company shall
mail or cause to be mailed a notice of  redemption  by first  class mail to each
Holder of Notes to be redeemed  at its  registered  address,  with a copy to the
Trustee and any Paying Agent. At the Company's  request,  the Trustee shall give
the notice of redemption in the Company's name and at the Company's expense. The
Company  shall  provide such notices of  redemption to the Trustee at least five
days before the intended mailing date.

                  Each notice of redemption shall identify  (including the CUSIP
number) the Notes to be redeemed and shall state:

                  (1) the Redemption Date;

                  (2) the Redemption Price and the amount of accrued interest,
         if any, to be paid;

                  (3) the name and address of the Paying Agent;

                  (4) the subparagraph of the Notes pursuant to which such
         redemption is being made;


<PAGE>




                                      -50-


                  (5) that Notes called for  redemption  must be  surrendered to
         the Paying Agent to collect the Redemption Price plus accrued interest,
         if any;

                  (6) that, unless the Company defaults in making the redemption
         payment,  interest on Notes or applicable  portions  thereof called for
         redemption  ceases to accrue on and after the Redemption  Date, and the
         only remaining right of the Holders of such Notes is to receive payment
         of the  Redemption  Price plus  accrued  interest as of the  Redemption
         Date, if any, upon surrender to the Paying Agent of the Notes redeemed;

                  (7) if any Note is being  redeemed in part, the portion of the
         principal  amount  of such  Note to be  redeemed  and  that,  after the
         Redemption  Date,  and upon surrender of such Note, a new Note or Notes
         in the  aggregate  principal  amount  equal to the  unredeemed  portion
         thereof will be issued; and

                  (8) if  fewer  than  all the  Notes  are to be  redeemed,  the
         identification  of the  particular  Notes (or  portion  thereof)  to be
         redeemed,  as well as the  aggregate  principal  amount  of Notes to be
         redeemed and the aggregate  principal amount of Notes to be outstanding
         after such partial redemption.

                  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
purchase of Notes.

                  SECTION 3.05. Effect of Notice of Redemption.

                  Once notice of redemption is mailed in accordance with Section
3.04,  such  notice of  redemption  shall be  irrevocable  and Notes  called for
redemption  become due and payable on the Redemption  Date and at the Redemption
Price plus  accrued  interest as of such date,  if any.  Upon  surrender  to the
Trustee or Paying Agent,  such Notes called for redemption  shall be paid at the
Redemption  Price plus accrued  interest  thereon to the  Redemption  Date,  but
installments of interest, the maturity of which is on or prior to the Redemption
Date,  shall be payable to  Holders  of record at the close of  business  on the
relevant  record  dates  referred to in the Notes.  Interest  shall accrue on or
after the Redemption  Date and shall be payable only if the Company  defaults in
payment of the Redemption Price.


<PAGE>




                                      -51-


                  SECTION 3.06. Deposit of Redemption Price.

                  On or  before  the  Redemption  Date  and in  accordance  with
Section 2.14,  the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the  Redemption  Price plus accrued  interest,  if any, of all
Notes to be redeemed on that date. The Paying Agent shall promptly return to the
Company  any U.S.  Legal  Tender so  deposited  which is not  required  for that
purpose,  except  with  respect to monies  owed as  obligations  to the  Trustee
pursuant to Article Seven.

                  Unless  the  Company   fails  to  comply  with  the  preceding
paragraph  and  defaults in the payment of such  Redemption  Price plus  accrued
interest,  if any,  interest on the Notes to be redeemed will cease to accrue on
and  after  the  applicable  Redemption  Date,  whether  or not such  Notes  are
presented for payment.

                  SECTION 3.07. Notes Redeemed in Part.

                  Upon  surrender of a Note that is to be redeemed in part,  the
Trustee shall authenticate for the Holder a new Note or Notes equal in principal
amount to the unredeemed portion of the Note surrendered.

                  SECTION 3.08. Special Redemption Provisions Prior to
                          Effectiveness of the Merger.

                  (a) Optional  Redemption  Prior to Consummation of the Merger.
Upon  termination  of the Merger  Agreement,  or upon the  Company's  reasonable
determination  that the Merger cannot or will not be  consummated by October 29,
1998,  the  Company,  at its  option,  may redeem the Notes in whole at any time
prior to October 29,  1998,  upon not less than 10 nor more than 60 days' notice
(but in no event after October 29, 1998), at a redemption price of 102.5% of the
principal  amount  thereof,  plus  accrued  and unpaid  interest  to the date of
redemption.

                  (b)  Mandatory  Redemption if Merger not  Consummated.  In the
event that the Merger is not  consummated  on or before  October 29,  1998,  the
Company shall immediately  redeem the Notes in whole at a Redemption Price equal
to 102.5% of the principal amount of the Notes, plus accrued and unpaid interest
to the Redemption Date.


<PAGE>




                                      -52-


                                  ARTICLE FOUR

                                    COVENANTS


                  SECTION 4.01. Payment of Notes.

                  (a) The Company shall pay the principal of,  premium,  if any,
and  interest on the Notes on the dates and in the manner  provided in the Notes
and in this Indenture.

                  (b) An  installment  of  principal of or interest on the Notes
shall be  considered  paid on the date it is due if the Trustee or Paying  Agent
(other than the Company or any of its Affiliates) holds, prior to 11:00 a.m. New
York City time on that date, U.S. Legal Tender  designated for and sufficient to
pay the  installment in full and is not prohibited from paying such money to the
Holders pursuant to the terms of this Indenture or the Notes.

                  (c) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or  withhold  income or other  similar  taxes  imposed by the  United  States of
America from principal or interest payments hereunder.

                  SECTION 4.02. Maintenance of Office or Agency.

                  The Company shall maintain the office or agency required under
Section 2.03.  The Company shall give prior written notice to the Trustee of the
location,  and any change in the location,  of such office or agency.  If at any
time the Company  shall fail to maintain any such  required  office or agency or
shall fail to furnish the Trustee with the address thereof,  such presentations,
surrenders,  notices  and  demands  may be made or served at the  address of the
Trustee set forth in Section 11.02.

                  SECTION 4.03. Corporate Existence.

                  Except as  otherwise  permitted by Article  Five,  the Company
shall do or cause to be done, at its own cost and expense,  all things necessary
to preserve and keep in full force and effect its  corporate  existence  and the
corporate  existence  of  each  of  its  Subsidiaries  in  accordance  with  the
respective  organizational  documents of each such  Subsidiary  and the material
rights  (charter  and  statutory)  and  franchises  of the Company and each such
Subsidiary; provided, however, that the Com-


<PAGE>




                                      -53-


pany shall not be required to  preserve,  with  respect to itself,  any material
right or  franchise  and,  with  respect  to any of its  Subsidiaries,  any such
existence, material right or franchise, if the Board of Directors of the Company
shall  determine  in good  faith  that the  preservation  thereof  is no  longer
desirable  in the conduct of the  business of the Company and its  Subsidiaries,
taken as a whole.

                  SECTION 4.04. Payment of Taxes and Other Claims.

                  The  Company  shall  pay or  discharge  or cause to be paid or
discharged,  before the same shall become  delinquent,  (i) all material  taxes,
assessments  and  governmental  charges  (including  withholding  taxes  and any
penalties,  interest and additions to taxes) levied or imposed upon it or any of
its  Subsidiaries  or properties of it or any of its  Subsidiaries  and (ii) all
material lawful claims for labor,  materials and supplies that, if unpaid, might
by  law  become  a  Lien  upon  the  property  of  the  Company  or  any  of its
Subsidiaries;  provided,  however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment,  charge
or claim whose  amount,  applicability  or validity is being  contested  in good
faith  by  appropriate  negotiations  or  proceedings  properly  instituted  and
diligently  conducted for which adequate reserves,  to the extent required under
GAAP, have been taken.

                  SECTION 4.05. Maintenance of Properties and Insurance.

                  (a)  The   Company   shall,   and  shall  cause  each  of  the
Subsidiaries to, maintain all material  properties used or useful in the conduct
of its business in good working  order and  condition  (subject to ordinary wear
and tear) and make all necessary  repairs,  renewals,  replacements,  additions,
betterments  and  improvements  thereto  and  actively  conduct and carry on its
business; provided, however, that nothing in this Section 4.05 shall prevent the
Company  or any of  the  Subsidiaries  of the  Company  from  discontinuing  the
operation and maintenance of any of its properties,  if such  discontinuance  is
(i) in the ordinary course of business  pursuant to customary  business terms or
(ii) in the good faith judgment of the  respective  Boards of Directors or other
governing  body of the Company or Subsidiary,  as the case may be,  desirable in
the conduct of their  respective  businesses and is not  disadvantageous  in any
material respect to the Holders.


<PAGE>




                                      -54-



                  (b) The Company  shall  provide or cause to be  provided,  for
itself  and  each  of the  Subsidiaries  of the  Company,  insurance  (including
appropriate  self-insurance)  against  loss or damage of the kinds that,  in the
good faith judgment of the Company, are adequate and appropriate for the conduct
of the business of the Company and its  Subsidiaries in a prudent  manner,  with
reputable insurers.

                  SECTION 4.06. Compliance Certificate; Notice of Default.

                  (a) The Company shall deliver to the Trustee,  within 120 days
after the end of each of the Company's  fiscal years,  an Officers'  Certificate
(provided,  however,  that  one  of  the  signatories  to  each  such  Officers'
Certificate  shall  be the  Company's  principal  executive  officer,  principal
financial  officer  or  principal  accounting  officer),  as to  such  Officers'
knowledge,  without independent investigation,  of the Company's compliance with
all conditions and covenants under this Indenture  (without regard to any period
of grace or  requirement  of  notice  provided  hereunder)  and in the event any
Default of the Company's exists,  such Officers shall specify the nature of such
Default.  Each such Officers'  Certificate  shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year-end.

                  (b)  So   long   as  not   contrary   to  the   then   current
recommendations of the American Institute of Certified Public  Accountants,  the
annual  financial  statements  delivered  pursuant  to  Section  4.08  shall  be
accompanied by a written report of the Company's  independent  certified  public
accountants (who shall be a firm of established national reputation) stating (A)
that  their  audit  examination  has  included  a  review  of the  terms of this
Indenture  and the form of the Notes as they relate to accounting  matters,  and
(B) whether, in connection with their audit examination, any Default or Event of
Default  has come to their  attention  and if such a Default or Event of Default
has come to their  attention,  specifying  the nature  and  period of  existence
thereof; provided, however, that, without any restriction as to the scope of the
audit  examination,  such independent  certified public accountants shall not be
liable by reason of any failure to obtain knowledge of any such Default or Event
of Default  that would not be  disclosed  in the course of an audit  examination
conducted in accordance with generally accepted auditing standards.

                  (c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exer-


<PAGE>




                                      -55-


cise any remedy hereunder with respect to a claimed Default under this Indenture
or the Notes, the Company shall deliver to the Trustee, at its address set forth
in Section 11.02,  by registered or certified mail or by facsimile  transmission
followed by hard copy by registered or certified  mail an Officers'  Certificate
specifying  such event,  notice or other  action  within 10 days of its becoming
aware of such occurrence.

                  SECTION 4.07. Compliance with Laws.

                  The  Company  shall  comply,  and  shall  cause  each  of  its
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America,  all states and municipalities
thereof,  and of any  governmental  department,  commission,  board,  regulatory
authority,  bureau,  agency and instrumentality of the foregoing,  in respect of
the conduct of their respective businesses and the ownership of their respective
properties,  except  for such  noncompliances  as  could  not  singly  or in the
aggregate  reasonably  be  expected  to have a  material  adverse  effect on the
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole.

                  SECTION 4.08. Reports to Holders.

                  The Company will  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 15(d) of the Exchange Act, the Company
will 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. The Company will
also comply with the other provisions of Section 314(a) of the TIA.

                  SECTION 4.09. Waiver of Stay, Extension or Usury Laws.

                  The Company  covenants  (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the  benefit or  advantage  of, any stay or  extension  law or any
usury law or other law that would  prohibit or forgive  the Company  from paying
all or any portion of the principal of or interest on the Notes as


<PAGE>




                                      -56-


contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent  that it may  lawfully  do so) the Company  hereby  expressly  waives all
benefit or  advantage of any such law,  and  covenants  that it will not hinder,
delay or impede the  execution of any power herein  granted to the Trustee,  but
will suffer and permit the  execution  of every such power as though no such law
had been enacted.

                  SECTION 4.10. 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


<PAGE>




                                      -57-


Permitted  Indebtedness) in compliance with Section 4.12, 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 proceeds  (including  the fair
         market value of any business or property  other than cash)  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 clause (iii)(x) above and this
         clause (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  above  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;


<PAGE>




                                      -58-


                  (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
         fiscal year (starting March 1, 1998, with no amount  allowable prior to
         March 1, 1998) which, to the extent not used in any fiscal year, may be
         carried forward to succeeding fiscal years, provided that the aggregate
         amount  which may be carried  forward at any time 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
         issuer  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


<PAGE>




                                      -59-


         Initial  Public  Equity  Offering  and  any  subsequent  Public  Equity
         Offering  (or any  Restricted  Payment  made to  Holdings or such other
         issuer  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 this
Section 4.10,  amounts  expended  pursuant to clauses (1),  (2)(ii),  (3)(ii)(A)
shall be included in such calculation.

                  SECTION 4.11. Limitation 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) of this Section  4.11 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 ob-


<PAGE>




                                      -60-


tainable 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, shall,  prior to the consummation  thereof,  obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant 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 hereunder;
(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 hereunder.

                  SECTION 4.12. 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


<PAGE>




                                      -61-


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
this  Indenture,  the  Company  may,  in its sole  discretion,  designate  which
provision such Indebtedness shall have been incurred under.

                  For  purposes  of  determining   any   particular   amount  of
Indebtedness  under this Section  4.12,  guarantees  of  Indebtedness  otherwise
included in the determination of such amount shall not also be included.

                  Indebtedness  of a Person  existing  at the time  such  Person
becomes a Subsidiary (whether by merger,  consolidation,  acquisition of Capital
Stock or otherwise)  or is merged with or into the Company or any  Subsidiary or
which is secured by a Lien on an asset  acquired by the Company or a  Subsidiary
(whether or not such  Indebtedness is assumed by the acquiring  Person) shall be
deemed  incurred at the time the Person  becomes a Subsidiary  or at the time of
the asset acquisition, as the case may be.

                  SECTION 4.13. 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) this Indenture;  (3) the
Credit Agree-


<PAGE>




                                      -62-


ment;  (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 this Indenture  imposed by the holder of such Lien;
(8)  restrictions  imposed by any agreement to sell assets  permitted under this
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.

                  SECTION 4.14. [Intentionally Omitted]

                  SECTION 4.15. Change of Control.

                  (a) Upon the  occurrence  of a Change of Control,  each Holder
will have 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% of the  principal  amount
thereof plus accrued and unpaid interest to the date of purchase.

                  (b) 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


<PAGE>




                                      -63-


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 Section 6.01(iv) and not Section 6.01(ii).

                  (c) Within 30 days  following  the date upon which a Change of
Control  occurs,  the Company  shall 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.  The notice
to the Holders shall contain all instructions and materials  necessary to enable
such  Holders to tender  Notes  pursuant  to the Change of Control  Offer.  Such
notice shall state:

                   (i) that the Change of Control  Offer is being made  pursuant
         to this Section 4.15, that all Notes tendered and not withdrawn will be
         accepted for payment and that the Change of Control  Offer shall remain
         open for a period of 20 Business  Days or such longer  period as may be
         required by law;

                  (ii) the  purchase  price  (including  the  amount of  accrued
         interest) and the purchase date (which shall 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");

                  (iii)  that any Note not  tendered  will  continue  to  accrue
         interest;

                  (iv)  that,  unless the  Company  defaults  in making  payment
         therefor,  any Note  accepted  for  payment  pursuant  to the Change of
         Control  Offer  shall  cease to accrue  interest  after  the  Change of
         Control Payment Date;

                   (v) that 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;

                  (vi) that Holders will be entitled to withdraw  their election
         if the Paying Agent  receives,  not later than the second  Business Day
         prior to the Change of Control  Payment  Date,  a  telegram,  facsimile
         transmission or letter setting


<PAGE>




                                      -64-


         forth the name of the  Holder,  the  principal  amount of the Notes the
         Holder  delivered  for  purchase  and a  statement  that such Holder is
         withdrawing its election to have such Notes purchased;

                 (vii) that Holders whose Notes are purchased  only in part will
         be issued  new Notes in a  principal  amount  equal to the  unpurchased
         portion of the Notes  surrendered;  provided,  however,  that each Note
         purchased  and each new Note issued  shall be in an original  principal
         amount of $1,000 or integral multiples thereof; and

                  (viii) the  circumstances  and relevant  facts  regarding such
         Change of Control.

                  On or before the Change of Control  Payment Date,  the Company
shall (i) accept for payment Notes or portions thereof tendered  pursuant to the
Change of Control Offer,  (ii) deposit with the Paying Agent in accordance  with
Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest,  if any,  of all Notes so  tendered  and (iii)  deliver to the Trustee
Notes so accepted  together with an Officers'  Certificate  stating the Notes or
portions  thereof  being  purchased by the  Company.  Upon receipt by the Paying
Agent of the monies  specified in clause (ii) above and a copy of the  Officers'
Certificate  specified in clause (iii)  above,  the Paying Agent shall  promptly
mail to the  Holders  of Notes so  accepted  payment  in an amount  equal to the
purchase  price plus accrued  interest,  if any, and the Trustee shall  promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. For purposes of this Section 4.15,
the Trustee shall act as the Paying Agent.

                  Neither the Board of  Directors of the Company nor the Trustee
may  waive  the  provisions  of this  Section  4.15  relating  to the  Company's
obligation to make a Change of Control Offer.

                  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
provisions  of this Section 4.15,  the Company shall comply with the  applicable
securities  laws and  regulations  and shall not be deemed to have  breached its
obligations under the provisions of this Section 4.15 by virtue thereof.


<PAGE>




                                      -65-


                  SECTION 4.16. Limitation on Asset Sales.

                  (a) 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


<PAGE>




                                      -66-


         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 (a "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 Section 4.16.  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).

                  (b) 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.

                  (c)  Subject  to  the  deferral  of  the  Net  Proceeds  Offer
contained in clause (a)(iii) above, each notice of a Net Proceeds Offer pursuant
to this  Section  4.16  shall be mailed or caused to be mailed,  by first  class
mail, by the Company not more than 25 days after the Net Proceeds  Offer Trigger
Date to all  Holders  at their  last  registered  addresses,  with a copy to the
Trustee.  The notice shall contain all instructions  and materials  necessary to
enable such Holders to tender Notes pursu-


<PAGE>




                                     -67-


ant to the Net Proceeds Offer and shall state the following terms:

                   (i) that the Net  Proceeds  Offer is being made  pursuant  to
         this  Section  4.16,  that all  Notes  tendered  will be  accepted  for
         payment;  provided,  however, that if the aggregate principal amount of
         Notes  tendered in a Net Proceeds  Offer plus  accrued  interest at the
         expiration  of such  offer  exceeds  the  aggregate  amount  of the Net
         Proceeds Offer, the Company shall select the Notes to be purchased on a
         pro rata basis (with such  adjustments as may be deemed  appropriate by
         the Company so that only Notes in  denominations of $1,000 or multiples
         thereof  shall be  purchased)  and that the Net  Proceeds  Offer  shall
         remain open for a period of 20 Business  Days or such longer  period as
         may be required by law;

                  (ii) the  purchase  price  (including  the  amount of  accrued
         interest)  and the Net Proceeds  Offer Payment Date (which shall be not
         less than 30 nor more than 45 days (unless a longer  period is required
         by law)  following the  applicable  Net Proceeds Offer Trigger Date and
         which shall be at least five Business  Days after the Trustee  receives
         notice thereof from the Company);

                  (iii)  that any Note not  tendered  will  continue  to  accrue
         interest;

                  (iv)  that,  unless the  Company  defaults  in making  payment
         therefor,  any Note  accepted for payment  pursuant to the Net Proceeds
         Offer  shall  cease to accrue  interest  after the Net  Proceeds  Offer
         Payment Date;

                   (v) that Holders  electing to have a Note purchased  pursuant
         to a Net Proceeds  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 Net Proceeds Offer Payment Date;

                  (vi) that Holders will be entitled to withdraw  their election
         if the Paying Agent  receives,  not later than the second  Business Day
         prior to the Net Proceeds  Offer  Payment  Date, a telegram,  facsimile
         transmission  or  letter  setting  forth  the name of the  Holder,  the
         principal amount of the Notes the Holder delivered for purchase and a


<PAGE>




                                      -68-


         statement that such Holder is withdrawing its election to have such
         Note purchased; and

                 (vii) that Holders whose Notes are purchased  only in part will
         be issued  new Notes in a  principal  amount  equal to the  unpurchased
         portion of the Notes  surrendered;  provided,  however,  that each Note
         purchased  and each new Note issued  shall be in an original  principal
         amount of $1,000 or integral multiples thereof;

                  On or before the Net Proceeds  Offer Payment Date, the Company
shall (i) accept for payment Notes or portions thereof tendered  pursuant to the
Net  Proceeds  Offer which are to be purchased  in  accordance  with item (b)(i)
above,  (ii) deposit with the Paying Agent in accordance  with Section 2.14 U.S.
Legal Tender sufficient to pay the purchase price plus accrued interest, if any,
of all Notes to be purchased  and (iii) deliver to the Trustee Notes so accepted
together  with an Officers'  Certificate  stating the Notes or portions  thereof
being  purchased by the Company.  The Paying  Agent shall  promptly  mail to the
Holders of Notes so accepted  payment in an amount equal to the  purchase  price
plus accrued  interest,  if any. For purposes of this Section 4.16,  the Trustee
shall act as the Paying Agent. The Trustee shall promptly  authenticate and mail
to such Holders new Notes equal in principal  amount to any unpurchased  portion
of the Notes  surrendered.  Upon the payment of the purchase price for the Notes
accepted for purchase, the Trustee shall cancel such Notes. Any monies remaining
after the purchase of Notes  pursuant to a Net Proceeds  Offer shall be returned
within three  Business Days by the Trustee to the Company except with respect to
monies  owed as  obligations  to the  Trustee  pursuant  to Article  Seven.  For
purposes of this Section 4.16, the Trustee shall act as the Paying Agent.

                  To the extent the amount of Notes tendered pursuant to any Net
Proceeds Offer is less than the amount of Net Cash Proceeds  subject to such Net
Proceeds  Offer,  the  Company  may use any  remaining  portion of such Net Cash
Proceeds  not  required to fund the  repurchase  of  tendered  Notes for general
corporate purposes and such Net Proceeds Offer Amount shall be reset to zero.

                  (d) 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 Net Proceeds  Offer.  To the extent
that the provisions of any securities laws or regulations conflict with the


<PAGE>




                                      -69-


provisions  of this Section 4.16,  the Company shall comply with the  applicable
securities  laws and  regulations  and shall not be deemed to have  breached its
obligations under the provisions of this Section 4.16 by virtue thereof.

                  SECTION 4.17. 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  Subsidiary of the
Company.

                  SECTION 4.18. 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 this  Indenture and which has been incurred in accordance  with
the provisions of this 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.


<PAGE>




                                      -70-


                  SECTION 4.19. 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,  giving  effect to the  Merger,  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
shall not,  and 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.

                  SECTION 4.20. 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 this  Indenture on the terms set forth in this  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 which 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


<PAGE>




                                      -71-


supplemental indenture,  such Subsidiary shall be a Subsidiary Guarantor for all
purposes of this Indenture.

                  SECTION 4.21. 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.

                  SECTION 4.22. Special Covenants Prior to Effectiveness of the
                                     Merger.

                  In  addition  to,  and  not in  substitution  for,  any  other
covenant or agreement contained in this Indenture, prior to the effectiveness of
the Merger,

                  (a) the  Company  will  not  incur  or  suffer  to  exist  any
Indebtedness of the Company other than this Indenture and the Notes;

                  (b) the Company  will not permit any of its  Subsidiaries  to,
incur or suffer to exist any  Indebtedness  other  than  Permitted  Indebtedness
(other than Permitted  Indebtedness  incurred pursuant to clause (xii) or (xiii)
of the definition thereof);

                  (c) the  Company  will  not,  and will not  permit  any of its
Subsidiaries  to,  sell,  transfer or  otherwise  dispose of, or create,  incur,
assume or permit or suffer to exist any Lien on, any shares of capital  stock of
ATC owned by the Company or any of its  Subsidiaries  except for the  concurrent
sale in a  single  transaction  for cash  (other  than to an  Affiliate)  by the
Company  and its  Subsidiaries  of all such  shares  then  owned by them and the
concurrent  application of the net proceeds  thereof to  permanently  retire and
redeem the Notes;

                  (d) the  Company  will not fail to  perform or  terminate,  or
permit ATC to fail to perform or terminate, the Merger Agreement and the Company
will, and will cause ATC to, take all steps  necessary to complete the Merger as
soon as practicable but in no event later than October 29, 1998;


<PAGE>




                                      -72-


                  (e) the Company will not engage in any activities not directly
related to the consummation of the Merger (except that the Company may engage in
attempts  to  obtain  the  consent  of  Holders  of the  Notes  pursuant  to the
provisions of Article Nine);

                  (f) the Company  will not permit ATC and its  Subsidiaries  to
engage  in any  transactions  other  than ones in the  ordinary  course of their
business  consistent with past practice and other than ones directly  related to
consummation of the Merger;

                  (g) the Company  will not, and will not cause or permit any of
its Subsidiaries,  directly or indirectly to make any Restricted  Payment (other
than payments pursuant to the Tax Sharing Agreement);

                  (h) the Company  will not, and will not cause or permit any of
its  Subsidiaries  to, make any  Investment  (other than  Permitted  Investments
described in clauses (ii), (iii), (iv), (v), (vi) and (vii) of the definition of
Permitted Investments);

                  (i) the  Company  will not  permit  ATC to sell or  issue  any
shares of its capital stock other than to the Company;  and the Company will not
permit  ATC or any of its  Subsidiaries  to sell or issue any  shares of capital
stock  of  any of  ATC's  Subsidiaries  other  than  to  ATC  or a  wholly-owned
Subsidiary thereof;

                  (j) the Company will not have any Subsidiaries (other than ATC
and its Subsidiaries); and

                  (k) the Company  will not sell any shares of capital  stock of
ATC owned by it except  for fair  value and for cash and will  either (a) invest
the net  proceeds of any such sale in cash and Cash  Equivalents  or (b) use the
net proceeds to pay,  prepay or redeem the Notes  substantially  concurrent with
such sale.

                  SECTION 4.23. Certain Net Proceeds to be Held by the Trustee.

                  Until the effectiveness of the Merger, the net proceeds of the
Notes after  consummation of the Tender Offer (the "Proceeds")  shall be held in
trust by the  Trustee for the sole and  exclusive  benefit of the holders of the
Notes and as security for such Notes, and the Company shall not be entitled to


<PAGE>




                                      -73-


the Proceeds nor have any interest in the Proceeds;  provided, however, that the
Trustee  shall,  upon any  redemption of the Notes pursuant to the provisions of
Section 3.08,  apply the Proceeds then held by it to the redemption of the Notes
together with other funds therefor provided by the Company.

                  Upon or concurrently  with the effectiveness of the Merger, as
evidenced by an Officers'  Certificate,  the Trustee  shall release the Proceeds
then held by it to the Company.  In  addition,  in the event that the Merger has
not been consummated by the date of the first semiannual  interest payment,  the
Trustee  shall,  upon  written  request of the  Company,  release  the amount of
Proceeds necessary to make such payment.

                  Until  so  applied  or so  released,  the  Proceeds  shall  be
invested solely in U.S. Legal Tender or U.S. Government  Obligations held by the
Trustee which do not have a stated  maturity of more than the earlier of 30 days
from the date acquired by the Trustee or the date the Notes would be required to
be redeemed pursuant to Section 3.08.

                  SECTION 4.24. 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 Section 4.12.


<PAGE>




                                      -74-


                                  ARTICLE FIVE

                              SUCCESSOR CORPORATION


                  SECTION 5.01. Merger, Consolidation and Sale of Assets.

                  (a) 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,  this  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  Section  4.12  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 limita-


<PAGE>




                                      -75-


tion,  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 or be
continuing;  and (iv) the Company or the Surviving  Entity,  as the case may be,
shall have delivered to the Trustee an Officers'  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  hereof and that all conditions
precedent in this Indenture relating to such transaction have been satisfied.

                  (b) 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.

                  (c) Each  Subsidiary  Guarantor  (other  than  any  Subsidiary
Guarantor  whose Guarantee is to be released in accordance with the terms of the
Guarantee and this Indenture in connection with any  transaction  complying with
the  provisions  of Section  4.16) 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  Section  5.01.  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 paragraph (a) of this Section 5.01.


<PAGE>




                                      -76-


                  SECTION 5.02. Successor Corporation Substituted.

                  Upon any consolidation,  combination or merger or any transfer
of all or  substantially  all of the assets of the  Company in  accordance  with
Section 5.01, 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 this  Indenture  and the Notes with the same effect as if
such successor had been named as the Company  herein and  thereafter  (except in
the case of a lease) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Notes.


                                   ARTICLE SIX

                                    REMEDIES


                  SECTION 6.01. Events of Default.

                  An "Event of Default" means any of the following events:

                   (i) the failure to pay  interest  (including  any  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 is prohibited by Article Ten of this 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 is prohibited by Article
         Ten of this Indenture);

                  (iii)  a  default  in the  observance  or  performance  of the
         covenants and agreements described in Section 4.22 and Section 4.23;

                  (iv) a default in the  observance or  performance of any other
         covenant  or  agreement  contained  in  this  Indenture  which  default
         continues  for a period of 30 days after the Company  receives  written
         notice specifying the default


<PAGE>




                                      -77-


         (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 Section  5.01,
         which will constitute an Event of Default with such notice  requirement
         but without such passage of time requirement);

                  (v) 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;

                  (vi) 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 non-appealable;

                  (vii)  the  Company  or any of  its  Significant  Subsidiaries
         pursuant to or under or within the meaning of any Bankruptcy Law:

                     (a) commences a voluntary case or proceeding;

                     (b) consents to the entry of an order for relief against it
                  in an involuntary case or proceeding;

                     (c) consents to the appointment of a Custodian of it or for
                  all or substantially all of its property; or

                     (d) makes a general assignment for the benefit of its
                  creditors; or

                  (viii) a court of  competent  jurisdiction  enters an order or
         decree under any Bankruptcy Law that:


<PAGE>




                                      -78-


                     (a) is for relief against the Company or any Significant
                  Subsidiary of the Company in an involuntary case or
                  proceeding,

                     (b) appoints a Custodian of the Company or any  Significant
                  Subsidiary of the Company for all or substantially  all of its
                  Properties, or

                     (c)  orders  the   liquidation   of  the   Company  or  any
                  Significant Subsidiary of the Company,

         and in each case the order or decree remains unstayed and in effect for
         60 consecutive days; or

                  (ix) any of the Guarantees of a Subsidiary Guarantor that is a
         Significant  Subsidiary  cease to be in full force and effect or any of
         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 this Indenture);
         and

                   (x) at any time prior to the  consummation  of the Merger the
         Merger  Agreement  shall cease to be in full force and effect or any of
         the obligations of Holdings, the Company or ATC are declared to be null
         and void or invalid and  unenforceable or any of Holdings,  the Company
         or ATC denies or  disaffirms  any of its  obligations  under the Merger
         Agreement or a majority  stockholders of ATC vote against the Merger in
         accordance with Delaware law.

                  SECTION 6.02. Acceleration.

                  (a) Upon the  happening  of an Event of Default  specified  in
Section 6.01 (other than an Event of Default specified in clause (vii) or (viii)
of Section  6.01 with respect to the Company) the Trustee may, 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,"  (an  "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


<PAGE>




                                      -79-


Credit Agreement of such  Acceleration  Notice but only if such Event of Default
is then continuing. If an Event of Default of the type described in clause (vii)
or (viii) of Section 6.01 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.

                  (b) 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 then outstanding by written
notice to the Company  and the  Trustee 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  (vii) or (viii) of Section  6.01,  the  Trustee  shall have  received an
Officers'  Certificate  and an Opinion of Counsel that such Event of Default has
been cured or waived;  provided,  however,  that such  counsel  may rely,  as to
matters of fact, on a certificate or certificates of officers of the Company. No
such  rescission  shall  affect  any  subsequent  Default  or  impair  any right
consequent thereto.

                  SECTION 6.03. Other Remedies.

                  If an Event of Default occurs and is  continuing,  the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of the  principal  of,  premium,  if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.

                  All rights of action and claims  under this  Indenture  or the
Notes may be  enforced  by the  Trustee  even if it does not  possess any of the
Notes or does not produce any of them in the proceeding.  A delay or omission by
the Trustee or any Holder in  exercising  any right or remedy  accruing  upon an
Event of Default  shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy


<PAGE>




                                      -80-


is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.

                  SECTION 6.04. Waiver of Past Defaults.

                  Prior to the  declaration of  acceleration  of the Notes,  the
Holders of not less than a majority in aggregate  principal  amount of the Notes
then  outstanding  by notice to the Trustee may, on behalf of the Holders of all
the Notes,  waive any existing  Default or Event of Default and its consequences
under this Indenture,  except a Default or Event of Default specified in Section
6.01(i) or (ii) or in respect of any  provision  hereof which cannot be modified
or amended  without the  consent of the Holder so  affected  pursuant to Section
9.02. When a Default or Event of Default is so waived,  it shall be deemed cured
and shall cease to exist. This Section 6.04 shall be in lieu of ss. 316(a)(1)(B)
of the TIA and such ss.  316(a)(1)(B)  of the TIA is hereby  expressly  excluded
from this Indenture and the Notes, as permitted by the TIA.

                  SECTION 6.05. Control by Majority.

                  Subject  to  Section  2.09,  the  Holders of the Notes may not
enforce  this  Indenture or the Notes except as provided in this Article Six and
under the TIA.  The Holders of not less than a majority in  aggregate  principal
amount of the outstanding  Notes shall 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,  provided,  however,
that the Trustee may refuse to follow any direction (a) that  conflicts with any
rule of law or this  Indenture,  (b) that the Trustee  determines  may be unduly
prejudicial to the rights of another Holder,  or (c) that may expose the Trustee
to personal  liability for which  reasonable  indemnity  provided to the Trustee
against such liability shall be inadequate; provided, further, however, that the
Trustee  may take any other  action  deemed  proper by the  Trustee  that is not
inconsistent  with such direction or this Indenture.  This Section 6.05 shall be
in lieu of ss.  316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is
hereby expressly excluded from this Indenture and the Notes, as permitted by the
TIA.

                  SECTION 6.06. Limitation on Suits.

                  No Holder of any Notes shall have any right to  institute  any
proceeding with respect to this Indenture or the Notes or any remedy  hereunder,
unless  the  Holders  of at  least  25% in  aggregate  principal  amount  of the
outstanding Notes have made


<PAGE>




                                      -81-


written request, and offered reasonable  indemnity,  to the Trustee to institute
such proceeding as Trustee under the Notes and this  Indenture,  the Trustee has
failed to institute such proceeding within 25 days after receipt of such notice,
request and offer of indemnity and the Trustee,  within such 25-day period,  has
not received directions inconsistent with such written request by Holders of not
less than a majority in aggregate principal amount of the outstanding Notes.

                  The foregoing limitations shall not apply to a suit instituted
by a Holder of a Note for the  enforcement  of the payment of the  principal of,
premium,  if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.

                  A Holder may not use this Indenture to prejudice the rights of
any other Holders or to obtain priority or preference over such other Holders.

                  SECTION 6.07. Right of Holders To Receive Payment.

                  Notwithstanding  any other  provision in this  Indenture,  the
right of any Holder of a Note to receive  payment of the principal of,  premium,
if any,  and  interest  on such  Note,  on or after  the  respective  due  dates
expressed or provided for in such Note, or to bring suit for the  enforcement of
any such  payment  on or  after  the  respective  due  dates,  is  absolute  and
unconditional  and shall not be impaired or affected  without the consent of the
Holder.

                  SECTION 6.08. Collection Suit by Trustee.

                  If an Event of  Default  specified  in  clause  (i) or (ii) of
Section 6.01 occurs and is continuing,  the Trustee may recover  judgment in its
own name and as trustee of an express  trust  against the Company,  or any other
obligor on the Notes for the whole amount of the principal of, premium,  if any,
and  accrued  interest  remaining  unpaid,  together  with  interest  on overdue
principal  and, to the extent that payment of such interest is lawful,  interest
on overdue installments of interest, in each case at the rate per annum provided
for by the Notes and such  further  amount as shall be  sufficient  to cover the
costs  and  expenses  of  collection,  including  the  reasonable  compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.


<PAGE>




                                      -82-


                  SECTION 6.09. Trustee May File Proofs of Claim.

                  The Trustee may file such proofs of claim and other  papers or
documents  as may be  necessary  or advisable in order to have the claims of the
Trustee  (including  any  claim  for  the  reasonable  compensation,   expenses,
disbursements and advances of the Trustee, its agents, counsel,  accountants and
experts)  and the Holders  allowed in any judicial  proceedings  relative to the
Company or Subsidiaries  (or any other obligor upon the Notes),  their creditors
or their property and shall be entitled and empowered to collect and receive any
monies or other  property  payable  or  deliverable  on any such  claims  and to
distribute  the same,  and any  Custodian in any such  judicial  proceedings  is
hereby  authorized  by each Holder to make such  payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the  Holders,  to pay to the Trustee any amount due to it for the  reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. The Company's
payment  obligations under this Section 6.09 shall be secured in accordance with
the  provisions of Section 7.07.  Nothing  herein  contained  shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of  reorganization,  arrangement,  adjustment or composition
affecting  the Notes or the rights of any Holder  thereof,  or to authorize  the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

                  SECTION 6.10. Priorities.

                  If the Trustee collects any money pursuant to this Article Six
it shall pay out such money in the following order:

         First: to the Trustee for compensation, expenses, disbursements and
         advances, and any other amounts in each case due under Section 7.07;

         Second: to Holders for interest accrued on the Notes, ratably, without
         preference or priority of any kind, according to the amounts due and
         payable on the Notes for interest;

         Third: to Holders for the principal amounts (including any premium)
         owing under the Notes, ratably, without preference or priority of any
         kind, according to the amounts due and payable on the Notes for the
         principal (including any premium); and


<PAGE>




                                      -83-


         Fourth: the balance, if any, to the Company.

                  The Trustee, upon prior written notice to the Company, may fix
a record  date and  payment  date for any  payment to Holders  pursuant  to this
Section 6.10.

                  SECTION 6.11. Undertaking for Costs.

                  In any suit for the  enforcement  of any right or remedy under
this  Indenture  or in any suit  against  the  Trustee  for any action  taken or
omitted by it as Trustee,  a court may in its  discretion  require the filing by
any party  litigant in the suit of an  undertaking to pay the costs of the suit,
and  the  court  in  its  discretion  may  assess  reasonable  costs,  including
reasonable  attorneys' fees,  against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses  made by the party
litigant.  This Section 6.11 does not apply to any suit by the Trustee, any suit
by a Holder  pursuant to Section  6.07, or a suit by a Holder or Holders of more
than 10% in aggregate principal amount of the outstanding Notes.

                  SECTION 6.12. Restoration of Rights and Remedies.

                  If the Trustee or any Holder has  instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been  discontinued  or  abandoned  for any  reason,  or has been  determined
adversely  to the  Trustee  or to such  Holder,  then and in every such case the
Company, the Trustee and the Holders shall, subject to any determination in such
proceeding,  be restored  severally and  respectively to their former  positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.


                                  ARTICLE SEVEN

                                     TRUSTEE


                  SECTION 7.01. Duties of Trustee.

                  (a) If an Event of Default has occurred and is continuing, the
Trustee  may  exercise  such  of the  rights  and  powers  vested  in it by this
Indenture  and  shall  use the same  degree  of care and  skill in its  exercise
thereof as a prudent person


<PAGE>




                                      -84-


would exercise or use under the circumstances in the conduct of his own affairs.

                  (b) Except during the continuance of an Event of Default:

                  (1)  The  Trustee  need  perform  only  those  duties  as  are
         specifically  set forth in this  Indenture and no duties,  covenants or
         obligations of the Trustee shall be implied in this Indenture.

                  (2) In the  absence of bad faith on its part,  the Trustee may
         conclusively   rely,  as  to  the  truth  of  the  statements  and  the
         correctness of the opinions  expressed  therein,  upon  certificates or
         opinions furnished to the Trustee and conforming to the requirements of
         this  Indenture.  However,  in the  case of any  such  certificates  or
         opinions that by any provision hereof are  specifically  required to be
         furnished to the Trustee,  the Trustee shall  examine the  certificates
         and  opinions  to  determine   whether  or  not  they  conform  to  the
         requirements of this Indenture.

                  (c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:

                  (1) This  paragraph does not limit the effect of paragraph (b)
         of this Section 7.01.

                  (2) The Trustee  shall not be liable for any error of judgment
         made in good  faith by a Trust  Officer,  unless it is proved  that the
         Trustee was negligent in ascertaining the pertinent facts.

                  (3) The Trustee shall not be liable with respect to any action
         it takes or omits to take in good faith in accordance  with a direction
         received by it pursuant to Section 6.02, 6.04 or 6.05.

                  (d) No provision of this  Indenture  shall require the Trustee
to expend or risk its own funds or otherwise  incur any  financial  liability in
the performance of any of its duties  hereunder or in the exercise of any of its
rights  or  powers  if it shall  have  reasonable  grounds  for  believing  that
repayment of such funds or adequate  indemnity against such risk or liability is
not reasonably assured to it.


<PAGE>




                                      -85-


                  (e) Every  provision of this Indenture that in any way relates
to the Trustee is subject to  paragraphs  (a),  (b), (c) and (d) of this Section
7.01 and Section 7.02.

                  (f) The Trustee  shall not be liable for interest on any money
or assets  received by it except as the  Trustee  may agree in writing  with the
Company.  Assets held in trust by the Trustee need not be segregated  from other
assets except to the extent required by law.

                  (g) The Trustee may refuse to perform any duty or exercise any
right or power hereunder  unless (i) it is provided  adequate funds to enable it
to do so and (ii) it receives  indemnity  reasonably  satisfactory to it against
any loss, liability, fee or expense.

                  SECTION 7.02. Rights of Trustee.

                  Subject to Section 7.01:

                  (a) The  Trustee  may rely and  shall  be fully  protected  in
         acting or refraining from acting upon any document believed by it to be
         genuine and to have been signed or presented by the proper Person.  The
         Trustee need not and shall not be required to  investigate  any fact or
         matter stated in the document.

                  (b) Before the Trustee acts or refrains  from  acting,  it may
         consult  with  counsel of its  selection  and may require an  Officers'
         Certificate or an Opinion of Counsel,  or both,  which shall conform to
         Sections  11.04 and  11.05.  The  Trustee  shall not be liable  for any
         action  it takes or omits  to take in good  faith in  reliance  on such
         Officers' Certificate or Opinion of Counsel.

                  (c) The Trustee may act through its  attorneys  and agents and
         shall not be responsible  for the misconduct or negligence of any agent
         appointed with due care.

                  (d) The  Trustee  shall not be liable for any  action  that it
         takes or omits to take in good faith which it reasonably believes to be
         authorized or within its rights or powers.

                  (e) The Trustee  shall not be bound to make any  investigation
         into the  facts  or  matters  stated  in any  resolution,  certificate,
         statement,  instrument,  opinion, notice, request, direction,  consent,
         order, bond, debenture,


<PAGE>




                                      -86-


         or other paper or document,  but the Trustee,  in its  discretion,  may
         make such further inquiry or  investigation  into such facts or matters
         as it may see fit,  and, if the Trustee  shall  determine  to make such
         further inquiry or investigation, it shall be entitled, upon reasonable
         notice to the Company, to examine the books,  records,  and premises of
         the Company, personally or by agent or attorney and to consult with the
         officers and  representatives  of the Company,  including the Company's
         accountants and attorneys.

                  (f) The Trustee  shall be under no  obligation to exercise any
         of the rights or powers vested in it by this  Indenture at the request,
         order or direction of any of the Holders  pursuant to the provisions of
         this  Indenture,  unless such Holders shall have offered to the Trustee
         security or indemnity  reasonably  satisfactory  to the Trustee against
         the costs,  expenses  and  liabilities  which may be  incurred by it in
         compliance with such request, order or direction.

                  (g) The  Trustee  shall  not be  required  to give any bond or
         surety  in  respect  of  the  performance  of  its  powers  and  duties
         hereunder.

                  (h)  Delivery of reports,  information  and  documents  to the
         Trustee under Section 4.08 is for  informational  purposes only and the
         Trustee's  receipt of the foregoing  shall not constitute  constructive
         notice  of any  information  contained  therein  or  determinable  from
         information contained therein,  including the Company's compliance with
         any of their  covenants  hereunder (as to which the Trustee is entitled
         to rely exclusively on Officers' Certificates).

                  SECTION 7.03. Individual Rights of Trustee.

                  The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may  otherwise  deal with the Company,  any of
their Subsidiaries, or their respective Affiliates with the same rights it would
have if it were not  Trustee.  Any  Agent  may do the  same  with  like  rights.
However, the Trustee must comply with Sections 7.10 and 7.11.

                  SECTION 7.04. Trustee's Disclaimer.

                  The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture


<PAGE>




                                      -87-


or the  Notes,  and it shall not be  accountable  for the  Company's  use of the
proceeds from the Notes,  and it shall not be  responsible  for any statement of
the  Company  in this  Indenture  or any  document  entered  into or  issued  in
connection with the issuance and sale of the Notes or any statement in the Notes
other than the Trustee's certificate of authentication.

                  SECTION 7.05. Notice of Default.

                  If a Default or an Event of Default  occurs and is  continuing
and if it is known to a Trust  Officer,  the  Trustee  shall mail to each Holder
notice of the uncured Default or Event of Default within 90 days after obtaining
knowledge  thereof.  Except in the case of a Default  or an Event of  Default in
payment of  principal  of, or interest on, any Note,  including  an  accelerated
payment,  a Default in payment on the Change of Control Payment Date pursuant to
a Change of Control Offer or on the Net Proceeds  Offer Payment Date pursuant to
a Net Proceeds Offer and a Default in compliance  with Article Five hereof,  the
Trustee may  withhold the notice if and so long as its Board of  Directors,  the
executive  committee of its Board of  Directors or a committee of its  directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Holders.  The foregoing  sentence of this Section 7.05 shall
be in lieu of the  proviso  to ss.  315(b)  of the TIA and such  proviso  to ss.
315(b) of the TIA is hereby  expressly  excluded  from  this  Indenture  and the
Notes, as permitted by the TIA.

                  SECTION 7.06. Reports by Trustee to Holders.

                  Within 60 days after May 15 of each year  beginning with 1998,
the Trustee  shall,  to the extent that any of the events  described  in TIA ss.
313(a) occurred within the previous  twelve months,  but not otherwise,  mail to
each  Holder a brief  report  dated as of such date that  complies  with TIA ss.
313(a). The Trustee also shall comply with TIA ss.ss. 313(b), (c) and (d).

                  A copy of each  report at the time of its  mailing  to Holders
shall be mailed to the  Company  and filed  with the  Commission  and each stock
exchange, if any, on which the Notes are listed.

                  The  Company  shall  promptly  notify the Trustee if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA ss.
313(d).


<PAGE>




                                      -88-


                  SECTION 7.07. Compensation and Indemnity.

                  The Company  shall pay to the  Trustee  from time to time such
compensation  for its  services as has been  agreed to in writing  signed by the
Company and the Trustee. The Trustee's  compensation shall not be limited by any
law on  compensation  of a  trustee  of an  express  trust.  The  Company  shall
reimburse   the  Trustee   upon   request  for  all   reasonable   out-of-pocket
disbursements,  advances or expenses  incurred or made by it in connection  with
the performance of its duties under this Indenture.  Such expenses shall include
the reasonable fees and expenses of the Trustee's agents,  counsel,  accountants
and experts.

                  The  Company  shall  indemnify  each  of the  Trustee  (or any
predecessor  Trustee) and its agents,  employees,  stockholders,  Affiliates and
directors  and officers for, and hold them each  harmless  against,  any and all
loss,  liability,  damage,  claim  or  expense  (including  reasonable  fees and
expenses of counsel),  including  taxes (other than taxes based on the income of
the  Trustee)  incurred  by any of them  except  for such  actions to the extent
caused by any negligence, bad faith or willful misconduct on their part, arising
out of or in  connection  with the  acceptance or  administration  of this trust
including the reasonable costs and expenses of defending  themselves against any
claim or liability in  connection  with the  exercise or  performance  of any of
their rights,  powers or duties hereunder.  The Trustee shall notify the Company
promptly  of any  claim  asserted  against  the  Trustee  for  which it may seek
indemnity,  provided,  however,  that failure to so notify the Company shall not
release the Company of its obligations  hereunder  unless and to the extent such
failure  results in the  forfeiture  by the  Company of  substantial  rights and
defenses.  At the Trustee's sole discretion,  the Company shall defend the claim
and the Trustee shall  cooperate and may  participate in the defense;  provided,
however,  that any  settlement  of a claim  shall be  approved in writing by the
Trustee if such  settlement  would  result in an  admission  of liability by the
Trustee or if such settlement  would not be accompanied by a full release of the
Trustee for all  liability  arising out of the events giving rise to such claim.
Alternatively,  the Trustee may at its option have  separate  counsel of its own
choosing  and the Company  shall pay the  reasonable  fees and  expenses of such
counsel.

                  To secure the Company's  payment  obligations  in this Section
7.07,  the  Trustee  shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee,  in its capacity as Trustee,  except assets or
money held in trust to


<PAGE>




                                      -89-


pay principal of or premium, if any, or interest on particular Notes.

                  When the Trustee incurs expenses or renders  services after an
Event of Default specified in Section 6.01(vii) or (viii) occurs,  such expenses
and the  compensation  for such services are intended to constitute  expenses of
administration under any Bankruptcy Law.

                  The   provisions  of  this  Section  7.07  shall  survive  the
termination of this Indenture.

                  SECTION 7.08. Replacement of Trustee.

                  The Trustee may resign at any time by so notifying the Company
in writing at least 30 days in advance of such resignation;  provided,  however,
that no such  resignation  shall be  effective  until a  successor  Trustee  has
accepted  its  appointment  pursuant  to this  Section  7.08.  The  Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee and
appoint a successor  Trustee with the  Company's  consent,  by so notifying  the
Company and the Trustee. The Company may remove the Trustee if:

                  (1) the Trustee fails to comply with Section 7.10;

                  (2) the Trustee is adjudged  bankrupt or insolvent or an order
         for relief is entered with respect to the Trustee under any  Bankruptcy
         Law;

                  (3) a receiver or other public officer takes charge of the
         Trustee or its property; or

                  (4) the Trustee becomes incapable of acting.

                  If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason,  the Company  shall  notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the  successor  Trustee  takes  office,  the Holders of a majority in  aggregate
principal  amount of the  outstanding  Notes may appoint a successor  Trustee to
replace the successor Trustee appointed by the Company.

                  A successor Trustee shall deliver a written  acceptance of its
appointment to the retiring Trustee and to the Company.  Immediately after that,
the retiring  Trustee  shall  transfer all property held by it as Trustee to the
successor


<PAGE>




                                      -90-


Trustee,  subject to the lien  provided  in Section  7.07,  the  resignation  or
removal of the  retiring  Trustee  shall  become  effective,  and the  successor
Trustee  shall have all the rights,  powers and duties of the Trustee under this
Indenture.  The successor Trustee shall mail notice of such successor  Trustee's
appointment to each Holder.

                  If a successor  Trustee  does not take  office  within 60 days
after the retiring  Trustee  resigns or is removed,  the retiring  Trustee,  the
Company or the  Holders  of at least 10% in  aggregate  principal  amount of the
outstanding  Notes may  petition  any court of  competent  jurisdiction  for the
appointment of a successor Trustee.

                  If the Trustee fails to comply with Section  7.10,  any Holder
may petition any court of competent  jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

                  Notwithstanding  any resignation or replacement of the Trustee
pursuant to this Section  7.08,  the  Company's  obligations  under Section 7.07
shall continue for the benefit of the retiring Trustee.

                  SECTION 7.09. Successor Trustee by Merger, Etc.

                  If the Trustee  consolidates with, merges or converts into, or
transfers all or  substantially  all of its corporate trust business  (including
its business pursuant to this Indenture) to, another corporation, the resulting,
surviving  or  transferee  corporation  without any  further act shall,  if such
resulting,  surviving or transferee corporation is otherwise eligible hereunder,
be the successor  Trustee;  provided,  however,  that such corporation  shall be
otherwise qualified and eligible under this Article Seven.

                  SECTION 7.10. Eligibility; Disqualification.

                  This  Indenture  shall always have a Trustee who satisfies the
requirement of TIA ss.ss.  310(a)(1),  (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation  included in a bank holding  company  system,
the related bank holding  company) shall have a combined  capital and surplus of
at least $100 million as set forth in its most recent published annual report of
condition,  and  have a  Corporate  Trust  Office  in the City of New  York.  In
addition,  if the Trustee is a  corporation  included in a bank holding  company
system, the Trustee, independently of such bank holding company, shall meet the


<PAGE>




                                      -91-


capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. The provisions of TIA ss. 310 shall apply to the Company, as
obligor of the Notes.

                  SECTION 7.11. Preferential Collection of Claims Against the
                                    Company.

                  The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
The provisions of TIA ss. 311 shall apply to the Company, as obligor of the
Notes.


                                  ARTICLE EIGHT

                       DISCHARGE OF INDENTURE; DEFEASANCE


                  SECTION 8.01. Termination of Company's Obligations.

                  This  Indenture  will be  discharged  and will  cease to be of
further effect  (except as to surviving  rights of  registration  of transfer or
exchange of the Notes,  as expressly  provided for in this  Indenture) as to all
outstanding  Notes when (i) either (a) all 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 this Indenture by the Company;
and (iii) the Company has delivered to the Trustee an Officers'


<PAGE>




                                      -92-


Certificate  and an Opinion of Counsel  stating  that all  conditions  precedent
under  this  Indenture  relating  to the  satisfaction  and  discharge  of  this
Indenture have been complied with.

                  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,  and
satisfied all of its obligations  with respect to the 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 this Section
8.01. 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 covenants  contained in Sections  4.10 through 4.24 and Article
Five  ("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 of Covenant  Defeasance,  those events  described under
Section 6.01 (except those events  described in Section  6.01(i),(ii),(vii)  and
(viii)) 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 U.S. 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
         reasonably acceptable to the Trustee


<PAGE>




                                      -93-


         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 this  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
         under  Section  6.01(vii) or (viii) 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 this
         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


<PAGE>




                                      -94-


         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; provided,  however,  that such counsel may rely, as to matters of
         fact, on a certificate or certificates of officers of the Company;

                (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;  provided,  however,  that such
         counsel  may  rely,  as  to  matters  of  fact,  on  a  certificate  or
         certificates of officers of the Company; and

                  (ix)  certain  other   customary   conditions   precedent  are
         satisfied.

                  SECTION 8.02. Application of Trust Money.

                  The  Trustee or Paying  Agent  shall hold in trust U.S.  Legal
Tender or U.S.  Government  Obligations  deposited  with it  pursuant to Section
8.01,  and shall apply the deposited  U.S.  Legal Tender and the money from U.S.
Government  Obligations in accordance  with this Indenture to the payment of the
principal of and interest on the Notes. The Trustee shall be under no obligation
to invest said U.S. Legal Tender or U.S. Government Obligations except as it may
agree in writing with the Company.

                  The Company shall pay and  indemnify  the Trustee  against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or
U.S. Government  Obligations deposited pursuant to Section 8.01 or the principal
and interest  received in respect  thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.

                     SECTION 8.03. Repayment to the Company.

                  Subject to Section  8.01,  the  Trustee  and the Paying  Agent
shall  promptly pay to the Company upon request any excess U.S.  Legal Tender or
U.S. Government Obligations held by them


<PAGE>




                                      -95-


at any time and thereupon  shall be relieved from all liability  with respect to
such  money.  The Trustee  and the Paying  Agent  shall pay to the Company  upon
request any money held by them for the  payment of  principal  or interest  that
remains  unclaimed  for one year;  provided,  however,  that the Trustee or such
Paying Agent,  before being required to make any payment,  may at the expense of
the Company cause to be published once in a newspaper of general  circulation in
the City of New York or mail to each Holder  entitled to such money  notice that
such money remains unclaimed and that after a date specified therein which shall
be at least 30 days from the date of such  publication  or mailing any unclaimed
balance  of such  money  then  remaining  will be repaid to the  Company.  After
payment to the Company,  Holders entitled to such money must look to the Company
for payment as general  creditors  unless an applicable law  designates  another
Person.

                  SECTION 8.04. Reinstatement.

                  If the  Trustee  or  Paying  Agent is unable to apply any U.S.
Legal Tender or U.S.  Government  Obligations in accordance with Section 8.01 by
reason of any legal  proceeding  or by  reason of any order or  judgment  of any
court or governmental authority enjoining,  restraining or otherwise prohibiting
such application,  the Company's  obligations under this Indenture and the Notes
shall be revived and  reinstated  as though no deposit had occurred  pursuant to
Section  8.01 until such time as the  Trustee or Paying  Agent is  permitted  to
apply all such U.S.  Legal Tender or U.S.  Government  Obligations in accordance
with Section 8.01; provided,  however,  that if the Company has made any payment
of interest on or principal of any Notes because of the  reinstatement  of their
obligations,  the Company  shall be  subrogated  to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.

                  SECTION 8.05. Acknowledgment of Discharge by Trustee.

                  After (i) the conditions of Section 8.01 have been  satisfied,
(ii) the Company has paid or caused to be paid all other sums payable  hereunder
by the Company and (iii) the Company has  delivered  to the Trustee an Officers'
Certificate  and an  Opinion  of  Counsel,  each  stating  that  all  conditions
precedent  referred  to in clause (i) above  relating  to the  satisfaction  and
discharge of this  Indenture  have been complied  with, the Trustee upon request
shall  acknowledge in writing the discharge of the Company's  obligations  under
this Indenture except


<PAGE>




                                      -96-


for those surviving  obligations  specified in Section 8.01;  provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers' Certificates of the Company.


                                  ARTICLE NINE

                          MODIFICATION OF THE INDENTURE


                  SECTION 9.01. Without Consent of Holders.

                  Notwithstanding  Section  9.02,  the Company,  the  Subsidiary
Guarantors and the Trustee may amend, waive or supplement this Indenture without
notice  to or  consent  of any  Holder:  (a) to cure any  ambiguity,  defect  or
inconsistency; (b) to comply with Section 5.01 of this Indenture; (c) to provide
for uncertificated  Notes in addition to certificated  Notes; (d) to comply with
any  requirements  of  the  Commission  in  order  to  effect  or  maintain  the
qualification  of this  Indenture  under the TIA; or (e) to make any change that
would provide any  additional  benefit or rights to the Holders or that does not
adversely   affect  the  rights  of  any   Holder  in  any   material   respect.
Notwithstanding the foregoing (but except as otherwise provided by Section 9.02)
the Trustee and the Company may not make any change that  adversely  affects the
rights of any Holder under this Indenture without the consent of such Holder. 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;  provided,  however,  that in delivering  such Opinion of
Counsel,  such  counsel  may rely as to matters  of fact,  on a  certificate  or
certificates of officers of the Company.

                  SECTION 9.02. With Consent of Holders.

                  All  other  modifications,  waivers  and  amendments  of  this
Indenture may be made with the consent of the Holders of a majority in principal
amount of the then outstanding  Notes,  except that, without the consent of each
Holder of the Notes 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 redemp-


<PAGE>




                                      -97-


tion 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 this  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 this
Indenture  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 this  Indenture  other than in  accordance  with the terms of this
Indenture.

                  After an  amendment,  supplement  or waiver under this Section
9.02 becomes  effective (as provided in Section 9.05), the Company shall mail to
the  Holders  affected  thereby  a  notice  briefly  describing  the  amendment,
supplement  or waiver.  Any failure of the Company to mail such  notice,  or any
defect therein,  shall not, however, in any way impair or affect the validity of
any such supplemental indenture.

                  SECTION 9.03. Effect on Senior Indebtedness and Guarantor
                              Senior Indebtedness.

                  No  amendment of this  Indenture  shall  adversely  affect the
rights of any holder of Senior  Indebtedness  or Guarantor  Senior  Indebtedness
under Article Ten or Article Thirteen of this Indenture,  without the consent of
such holder.

                  SECTION 9.04. Compliance with TIA.

                  Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect; provided,  however, that this
Section 9.04 shall not of itself  require that this  Indenture or the Trustee be
qualified  under the TIA or constitute  any admission or  acknowledgment  by any
party  hereto that any such  qualification  is  required  prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.


<PAGE>




                                      -98-


                  SECTION 9.05. Revocation and Effect of Consents.

                  Until an amendment,  waiver or supplement becomes effective, a
consent  to it by a Holder  is a  continuing  consent  by the  Holder  and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following  paragraph,  any such Holder or subsequent Holder
may  revoke  the  consent  as to such  Holder's  Note or portion of such Note by
notice to the  Trustee  or the  Company  received  before  the date on which the
Trustee  receives an Officers'  Certificate  certifying  that the Holders of the
requisite  principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment,  supplement or waiver. An amendment,  supplement
or waiver  becomes  effective  upon  receipt by the  Trustee  of such  Officers'
Certificate  and evidence of consent by the Holders of the requisite  percentage
in principal amount of outstanding Notes.

                  The Company may,  but shall not be obligated  to, fix a Record
Date for the  purpose of  determining  the  Holders  entitled  to consent to any
amendment,  supplement  or waiver,  which  Record Date shall be at least 30 days
prior to the first solicitation of such consent. If a Record Date is fixed, then
notwithstanding  the second  sentence of the  immediately  preceding  paragraph,
those  Persons who were  Holders at such  Record Date (or their duly  designated
proxies),  and only those  Persons,  shall be  entitled  to revoke  any  consent
previously given,  whether or not such Persons continue to be Holders after such
Record Date.  No such consent  shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite  percentage
in  principal   amount  of  outstanding   Notes   required   hereunder  for  the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.

                  SECTION 9.06. Notation on or Exchange of Notes.

                  If an amendment,  supplement or waiver  changes the terms of a
Note,  the  Trustee  may  require  the  Holder of such Note to deliver it to the
Trustee.  The  Trustee may place an  appropriate  notation on the Note about the
changed terms and return it to the Holder. Alternatively,  if the Company or the
Trustee so  determine,  the Company in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms.


<PAGE>




                                      -99-


                  SECTION 9.07. Trustee To Sign Amendments, Etc.

                  The Trustee shall execute any amendment,  supplement or waiver
authorized pursuant to this Article Nine;  provided,  however,  that the Trustee
may, but shall not be obligated to,  execute any such  amendment,  supplement or
waiver which affects the Trustee's own rights,  duties or immunities  under this
Indenture.  In executing such supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be fully protected
in  relying  upon an  Opinion of Counsel  and an  Officers'  Certificate  of the
Company,  stating  that no  event of  default  shall  occur as a result  of such
amendment,  supplement  or  waiver  and that  the  execution  of any  amendment,
supplement or waiver  authorized  pursuant to this Article Nine is authorized or
permitted by this Indenture;  provided the legal counsel delivering such Opinion
of Counsel may rely as to matters of fact on one or more Officers'  Certificates
of the Company. Such Opinion of Counsel shall not be an expense of the Trustee.

                                   ARTICLE TEN

                                  SUBORDINATION

                  SECTION 10.01. Notes Subordinated to Senior Indebtedness Upon
                          Effectiveness of the Merger.

                  The  Company  covenants  and  agrees,  and each  Holder of the
Notes, by its acceptance thereof,  likewise covenants and agrees, that all Notes
shall be  issued  subject  to the  provisions  of this  Article  Ten,  provided,
however,  that the  subordination  provisions  of this  Article Ten shall not be
effective  until the  effectiveness  of the Merger;  and each Person holding any
Note,  whether upon  original  issue or upon  transfer,  assignment  or exchange
thereof,  accepts and agrees that the payment of all Obligations on the Notes by
the  Company  shall,  to the  extent and in the  manner  herein  set  forth,  be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash  Equivalents  of all  Obligations  on  Senior  Indebtedness,  including,
without limitation,  the Company's obligations under the Credit Agreement;  that
the  subordination is for the benefit of, and shall be enforceable  directly by,
the holders of Senior Indebtedness,  and that each holder of Senior Indebtedness
whether now outstanding or hereafter  created,  incurred,  assumed or guaranteed
shall be deemed to have acquired Senior Indebted-


<PAGE>




                                     -100-


ness in reliance upon the covenants and provisions contained in this Indenture
and the Notes.

                  SECTION 10.02. Suspension of Payment When Senior Indebtedness
                                 is in Default.

                  (a) 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 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 thereof 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.
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.
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 prov


<PAGE>




                                     -101-


isions  under  which an event of default  previously  existed or was  continuing
shall constitute a new event of default for this purpose).

                  (b) In the event  that,  notwithstanding  the  foregoing,  any
payment  shall be received  by the  Trustee or any Holder  when such  payment is
prohibited  by Section  10.02(a),  such  payment  shall be held in trust for the
benefit  of,  and shall be paid over or  delivered  to,  the  holders  of Senior
Indebtedness  (pro rata to such holders on the basis of the respective amount of
Senior  Indebtedness held by such holders) or their respective  Representatives,
as their respective  interests may appear. The Trustee shall be entitled to rely
on information  regarding amounts then due and owing on the Senior Indebtedness,
if  any,   received   from  the  holders  of  Senior   Indebtedness   (or  their
Representatives)  or, if such  information  is not received from such holders or
their  Representatives,  from the  Company  and  only  amounts  included  in the
information  provided  to the  Trustee  shall be paid to the  holders  of Senior
Indebtedness.

                  Nothing contained in this Article Ten shall limit the right of
the  Trustee  or the  Holders  of Notes to take any  action  to  accelerate  the
maturity  of the Notes  pursuant  to  Section  6.02 or to pursue  any  rights or
remedies  hereunder;  provided that all Senior  Indebtedness  thereafter  due or
declared  to be due  shall  first  be paid  in full in cash or Cash  Equivalents
before the Holders are  entitled to receive any payment of any kind or character
with respect to Obligations on the Notes.

                  SECTION 10.03. Notes Subordinated to Prior Payment of All
      Senior Indebtedness on Dissolution, Liquidation or Reorganization of
                                    Company.

                  (a) 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


<PAGE>




                                     -102-


otherwise. Upon any such dissolution,  winding-up, liquidation,  reorganization,
receivership or similar proceeding, any payment or distribution of assets of the
Company of any kind or character,  whether in cash,  property or securities,  to
which the  Holders of the Notes or the  Trustee  under this  Indenture  would be
entitled,  except for the provisions hereof,  shall be paid by the Company or by
any receiver, trustee in bankruptcy,  liquidating trustee, agent or other Person
making such payment or  distribution,  or by the Holders or by the Trustee under
this  Indenture  if  received  by  them,  directly  to  the  holders  of  Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior  Indebtedness held by such holders) or their respective  Representatives,
or to the trustee or trustees under any indenture  pursuant to which any of such
Senior  Indebtedness  may have been issued,  as their  respective  interests may
appear, for application to the payment of Senior  Indebtedness  remaining unpaid
until  all  such  Senior  Indebtedness  has  been  paid  in full in cash or Cash
Equivalents  after giving  effect to any  concurrent  payment,  distribution  or
provision therefor to or for the holders of Senior Indebtedness.

                  (b) To the extent any payment of Senior Indebtedness  (whether
by or on behalf of the Company,  as proceeds of security or  enforcement  of any
right of setoff or otherwise) is declared to be fraudulent or preferential,  set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee,  agent  or other  similar  Person  under  any  bankruptcy,  insolvency,
receivership,  fraudulent  conveyance  or similar law,  then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee,  agent or other similar Person, the Senior Indebtedness or part thereof
originally  intended  to be  satisfied  shall be  deemed  to be  reinstated  and
outstanding as if such payment has not occurred.

                  (c) In the event  that,  notwithstanding  the  foregoing,  any
payment  or  distribution  of assets of the  Company  of any kind or  character,
whether in cash, property or securities, shall be received by the Trustee or any
Holder when such payment or distribution is prohibited by Section 10.03(a), such
payment or distribution  shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior  Indebtedness (pro rata to such
holders on the basis of the  respective  amount of Senior  Indebtedness  held by
such holders) or their respective Representatives, or to the trustee or trustees
under any indenture  pursuant to which any of such Senior  Indebtedness may have
been issued,  as their respective  interests may appear,  for application to the
payment  of  Senior   Indebtedness   remaining  unpaid  until  all  such  Senior
Indebtedness


<PAGE>




                                     -103-


has been paid in full in cash or Cash  Equivalents,  after giving  effect to any
concurrent payment,  distribution or provision therefor to or for the holders of
such Senior Indebtedness.

                  (d) The  consolidation  of the Company  with, or the merger of
the Company with or into, another  corporation or the liquidation or dissolution
of the Company  following the conveyance or transfer of all or substantially all
of its assets, to another  corporation upon the terms and conditions provided in
Article  Five  hereof  and as long as  permitted  under the terms of the  Senior
Indebtedness  shall  not be deemed a  dissolution,  winding-up,  liquidation  or
reorganization  for the purposes of this Section 10.03 if such other corporation
shall, as a part of such consolidation,  merger,  conveyance or transfer, assume
the Company's obligations hereunder in accordance with Article Five hereof.

                  SECTION 10.04. Holders To Be Subrogated to Rights of Holders
                             of Senior Indebtedness.

                  Subject to the payment in full in cash or Cash  Equivalents of
all Senior  Indebtedness,  the Holders of the Notes shall be  subrogated  to the
rights  of  the  holders  of  Senior   Indebtedness   to  receive   payments  or
distributions of cash,  property or securities of the Company  applicable to the
Senior Indebtedness until the Notes shall be paid in full; and, for the purposes
of such  subrogation,  no such payments or  distributions  to the holders of the
Senior  Indebtedness  by or on behalf of the  Company  or by or on behalf of the
Holders by virtue of this  Article Ten which  otherwise  would have been made to
the Holders  shall,  as between  the  Company  and the Holders of the Notes,  be
deemed  to be a  payment  by  the  Company  to  or  on  account  of  the  Senior
Indebtedness,  it being  understood  that the provisions of this Article Ten are
and are intended  solely for the purpose of defining the relative  rights of the
Holders  of the  Notes,  on  the  one  hand,  and  the  holders  of  the  Senior
Indebtedness, on the other hand.

                  SECTION 10.05. Obligations of the Company Unconditional.

                  Nothing  contained  in this  Article Ten or  elsewhere in this
Indenture or in the Notes is intended to or shall impair, as between the Company
and  the  Holders,  the  obligation  of  the  Company,  which  is  absolute  and
unconditional,  to pay to the Holders the principal of and interest on the Notes
as and when the same shall  become  due and  payable  in  accordance  with their
terms, or is intended to or shall affect the relative rights of


<PAGE>




                                     -104-


the Holders and  creditors  of the Company  other than the holders of the Senior
Indebtedness,  nor shall anything  herein or therein  prevent the Trustee or any
Holder from exercising all remedies  otherwise  permitted by applicable law upon
default under this Indenture,  subject to the rights, if any, under this Article
Ten of the  holders  of Senior  Indebtedness  in respect  of cash,  property  or
securities of the Company  received  upon the exercise of any such remedy.  Upon
any payment or distribution  of assets or securities of the Company  referred to
in this Article Ten, the Trustee, subject to the provisions of Sections 7.01 and
7.02, and the Holders shall be entitled to rely upon any order or decree made by
any  court of  competent  jurisdiction  in which any  liquidation,  dissolution,
winding-up or  reorganization  proceedings are pending,  or a certificate of the
receiver,  trustee in bankruptcy,  liquidating  trustee or agent or other Person
making any  payment or  distribution  to the  Trustee or to the  Holders for the
purpose of ascertaining  the Persons  entitled to participate in such payment or
distribution,  the holders of Senior  Indebtedness and other Indebtedness of the
Company,  the amount thereof or payable  thereon,  the amount or amounts paid or
distributed  thereon and all other facts  pertinent  thereto or to this  Article
Ten.  Nothing in this  Article Ten shall apply to the claims of, or payments to,
the Trustee under or pursuant to Section 7.07.  The Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing  himself
or itself to be a holder of any Senior  Indebtedness (or a trustee on behalf of,
or other  representative of, such holder) to establish that such notice has been
given by a holder of such Senior  Indebtedness or a trustee or representative on
behalf of any such holder.

                  In the event that the  Trustee  determines  in good faith that
any evidence is required  with respect to the right of any Person as a holder of
Senior  Indebtedness to participate in any payment or  distribution  pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable  satisfaction of the Trustee as to the amount of Senior  Indebtedness
held by such Person,  the extent to which such person is entitled to participate
in such payment or  distribution  and any other facts pertinent to the rights of
such Person under this Article Ten, and if such evidence is not  furnished,  the
Trustee may defer any payment to such Person pending  judicial  determination as
to the right of such Person to receive such payment.


<PAGE>




                                     -105-


                  SECTION 10.06. Trustee Entitled to Assume Payments Not
                        Prohibited in Absence of Notice.

                  The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would  prohibit the making of any payment to
or by the  Trustee in respect of the Notes  pursuant to the  provisions  of this
Article Ten.  Regardless  of anything to the contrary  contained in this Article
Ten or  elsewhere  in this  Indenture,  the  Trustee  shall not be charged  with
knowledge  of the  existence  of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any  payment  to or by the  Trustee  unless  and until the  Trustee  shall  have
received  notice  in  writing  from  the  Company,  or from a holder  of  Senior
Indebtedness or a Representative  therefor,  together with proof satisfactory to
the Trustee of such holding of Senior  Indebtedness  or of the authority of such
Representative,  and,  prior to the  receipt  of any such  written  notice,  the
Trustee shall be entitled to assume that no such facts exist.

                  SECTION 10.07. Application by Trustee of Assets Deposited with
                                       It.

                  U.S. Legal Tender or U.S. Government  Obligations deposited in
trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02
shall be for the sole  benefit of the  Holders  of the Notes and,  to the extent
allocated  for the payment of Notes,  shall not be subject to the  subordination
provisions of this Article Ten.  Otherwise,  any deposit of assets or securities
by or on behalf of the Company with the Trustee or any Paying Agent  (whether or
not in trust) for the payment of  principal of or interest on any Notes shall be
subject to the provisions of this Article Ten; provided,  however, that if prior
to the  second  Business  Day  preceding  the date on which by the terms of this
Indenture any such assets may become  distributable for any purpose  (including,
without limitation,  the payment of either principal of or interest on any Note)
the Trustee or such Paying  Agent shall not have  received  with respect to such
assets the notice provided for in Section 10.06, then the Trustee or such Paying
Agent shall have full power and  authority  to receive  such assets and to apply
the same to the purpose for which they were received,  and shall not be affected
by any  notice  to the  contrary  received  by it on or  after  such  date.  The
foregoing  shall not apply to the Paying Agent if the Company or any  Subsidiary
or Affiliate of the Company is acting as Paying Agent. Nothing contained in this
Section  10.07 shall limit the right of the  holders of Senior  Indebtedness  to
recover payments as contemplated by this Article Ten.


<PAGE>




                                     -106-


                  SECTION 10.08. No Waiver of Subordination Provisions.

                  (a) No right of any  present  or future  holder of any  Senior
Indebtedness  to enforce  subordination  as herein provided shall at any time in
any way be  prejudiced  or  impaired by any act or failure to act on the part of
the  Company  or by any act or  failure  to act by any  such  holder,  or by any
non-compliance  by the Company with the terms,  provisions and covenants of this
Indenture,  regardless of any  knowledge  thereof any such holder may have or be
otherwise charged with.

                  (b) Without  limiting the generality of subsection (a) of this
Section 10.08, the holders of Senior Indebtedness may, at any time and from time
to time,  without  the consent of or notice to the Trustee or the Holders of the
Notes, without incurring  responsibility to the Holders of the Notes and without
impairing or  releasing  the  subordination  provided in this Article Ten or the
obligations  hereunder  of the  Holders  of the Notes to the  holders  of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place,
terms or time of  payment  of, or renew or  alter,  Senior  Indebtedness  or any
instrument  evidencing the same or any agreement under which Senior Indebtedness
is outstanding;  (2) sell, exchange, release or otherwise deal with any property
pledged,  mortgaged or otherwise securing Senior  Indebtedness;  (3) release any
Person   liable  in  any  manner  for  the   collection  or  payment  of  Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Company and any other Person.

                  SECTION 10.09. Holders Authorize Trustee To Effectuate
                             Subordination of Notes.

                  Each Holder of the Notes by such Holder's  acceptance  thereof
authorizes  and expressly  directs the Trustee on such  Holder's  behalf to take
such  action as may be  necessary  or  appropriate  to effect the  subordination
provisions contained in this Article Ten, and appoints the Trustee such Holder's
attorney-in-fact for such purpose,  including,  in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or  marshaling  of  assets  of  the  Company  tending  towards   liquidation  or
reorganization  of the business and assets of the Company,  the immediate filing
of a claim for the unpaid balance of such Holder's Notes in the form required in
said  proceedings  and cause said claim to be approved.  If the Trustee does not
file a proper  claim or proof of debt in the form  required  in such  proceeding
prior to 30 days before the expiration of the time to file such claim or claims,
then any of the holders of the Senior Indebtedness or


<PAGE>




                                     -107-


their  Representative  is hereby authorized to file an appropriate claim for and
on behalf of the Holders of said Notes. Nothing herein contained shall be deemed
to  authorize  the  Trustee  or the  holders  of  Senior  Indebtedness  or their
Representative  to  authorize  or consent to or accept or adopt on behalf of any
Holder  any  plan of  reorganization,  arrangement,  adjustment  or  composition
affecting  the Notes or the rights of any Holder  thereof,  or to authorize  the
Trustee or the holders of Senior Indebtedness or their Representative to vote in
respect of the claim of any Holder in any such proceeding.

                  SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.

                  The Trustee and any agent of the Company or the Trustee  shall
be entitled to all the rights set forth in this  Article Ten with respect to any
Senior Indebtedness which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture  shall deprive the Trustee or any such agent of any of
its rights as such holder.

                  With  respect  to the  holders  of  Senior  Indebtedness,  the
Trustee  undertakes  to  perform or to observe  only such of its  covenants  and
obligations  as are  specifically  set forth in this Article Ten, and no implied
covenants  or  obligations  with  respect to the holders of Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness.

                  Whenever  a  distribution  is to be made or a notice  given to
holders or owners of Senior  Indebtedness,  the distribution may be made and the
notice may be given to their representative, if any.

                  SECTION 10.11. This Article Ten Not To Prevent Events of
                                    Default.

                  The  failure to make a payment on account of  principal  of or
interest on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.

                  Nothing contained in this Article Ten shall limit the right of
the  Trustee  or the  Holders  of Notes to take any  action  to  accelerate  the
maturity  of the  Notes  pursuant  to  Article  Six or to pursue  any  rights or
remedies hereunder or under applica-


<PAGE>




                                     -108-

ble law,  subject to the rights,  if any, under this Article Ten of the holders,
from time to time, of Senior Indebtedness.

                  SECTION 10.12. No Fiduciary Duty of Trustee to Holders of
                              Senior Indebtedness.

                  The Trustee shall not be deemed to owe any  fiduciary  duty to
the holders of Senior Indebtedness, and it undertakes to perform or observe such
of its covenants and obligations as are  specifically  set forth in this Article
Ten,  and no  implied  covenants  or  obligations  with  respect  to the  Senior
Indebtedness shall be read into this Indenture against the Trustee.  The Trustee
shall not be liable to any such holders  (other than for its willful  misconduct
or gross  negligence) if it shall pay over or deliver to the Holders of Notes or
the Company or any other Person money or assets in compliance  with the terms of
this Indenture. Nothing in this Section 10.12 shall affect the obligation of any
Person  other than the  Trustee  and the  Holders to hold such  payment  for the
benefit of, and to pay such payment over to, the holders of Senior  Indebtedness
or their Representative.


                                 ARTICLE ELEVEN

                                  MISCELLANEOUS


                  SECTION 11.01. TIA Controls.

                  If any  provision  of this  Indenture  limits,  qualifies,  or
conflicts  with  another  provision  which is  required  to be  included in this
Indenture by the TIA, the required provision shall control;  provided,  however,
that this Section 11.01 shall not of itself  require that this  Indenture or the
Trustee be qualified under the TIA or constitute any admission or acknowledgment
by any party hereto that any such  qualification  is required  prior to the time
this Indenture and the Trustee are required by the TIA to be so qualified.

                  SECTION 11.02. Notices.

                  Any  notices or other  communications  required  or  permitted
hereunder shall be in writing,  and shall be sufficiently  given if made by hand
delivery,  by telecopier or overnight courier guaranteeing  next-day delivery or
registered  or  certified  mail,  postage  prepaid,  return  receipt  requested,
addressed as follows:


<PAGE>




                                     -109-


                  if to the Company or any Subsidiary Guarantor:

                           ACQUISITION CORP.
                           c/o Weiss, Peck & Greer, L.L.C.
                           One New York Plaza
                           New York, New York  10004
                           Telecopier Number:  (212) 908-0112
                           Attn:  President

                  if to the Trustee:

                           STATE STREET BANK AND TRUST COMPANY
                           Goodwin Square
                           225 Asylum Street, 23rd Floor
                           Hartford, Connecticut  06103
                           Telecopier Number:  (860) 244-1897
                           Attention:  Corporate Trust Administration

                  Each of the Company  and the Trustee by written  notice to the
other may  designate  additional  or  different  addresses  for  notices to such
Person.  Any notice or  communication  to the  Company or the  Trustee  shall be
deemed to have been given or made as of the date so delivered if hand delivered;
when receipt is acknowledged, if faxed; and five (5) calendar days after mailing
if sent by registered or certified  mail,  postage prepaid (except that a notice
of change of  address  shall not be  deemed to have been  given  until  actually
received by the addressee).

                  Any notice or communication mailed to a Holder shall be mailed
by first class mail,  certified or registered  return receipt  requested,  or by
overnight courier guaranteeing next-day delivery to its address as it appears on
the registration  books of the Registrar.  Any notice or communication  shall be
mailed to any Person as described in TIA ss. 313(c),  to the extent  required by
the TIA.

                  Failure to mail a notice or  communication  to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.  If
a notice or  communication  is mailed in the manner  provided  above, it is duly
given, whether or not the addressee receives it.

                  SECTION 11.03. Communications by Holders with Other Holders.

                  Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture


<PAGE>




                                     -110-


or the Notes. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA ss. 312(c).

                  SECTION 11.04. Certificate and Opinion as to Conditions
                                   Precedent.

                  Upon any request or  application by the Company to the Trustee
to take any action  under  this  Indenture,  the  Company  shall  furnish to the
Trustee:

                  (1)  an   Officers'   Certificate,   in  form  and   substance
         satisfactory  to the  Trustee,  stating  that,  in the  opinion  of the
         signers,  all conditions  precedent to be performed by the Company,  if
         any,  provided for in this  Indenture  relating to the proposed  action
         have been complied with; and

                  (2) an Opinion of Counsel stating that, in the opinion of such
         counsel,  all such conditions precedent to be performed by the Company,
         if any, provided for in this Indenture  relating to the proposed action
         have been complied with (which counsel, as to factual matters, may rely
         on an Officers' Certificate).

                  SECTION 11.05. Statements Required in Certificate or Opinion.

                  Each  certificate or opinion with respect to compliance with a
condition or covenant  provided for in this Indenture,  other than the Officers'
Certificate required by Section 4.06, shall include:

                  (1) a statement  that the Person  making such  certificate  or
         opinion has read such covenant or condition;

                  (2) a  brief  statement  as to the  nature  and  scope  of the
         examination  or  investigation  upon which the  statements  or opinions
         contained in such certificate or opinion are based;

                  (3) a statement  that,  in the opinion of such Person,  he has
         made such examination or  investigation  as is reasonably  necessary to
         enable  him to express  an  informed  opinion as to whether or not such
         covenant or condition has been complied with; and

                  (4) a  statement  as to whether or not, in the opinion of each
         such Person, such condition or covenant has been complied with.


<PAGE>




                                     -111-


                  SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.

                  The Trustee may make  reasonable  rules in accordance with the
Trustee's  customary  practices  for action by or at a meeting of  Holders.  The
Paying Agent or Registrar may make reasonable rules for its functions.

                  SECTION 11.07. Legal Holidays.

                  A "Legal  Holiday" used with respect to a particular  place of
payment is a Saturday,  a Sunday or a day on which banking  institutions  in New
York,  New York or at such place of payment are not  required  to be open.  If a
payment date is a Legal Holiday at such place, payment may be made at such place
on the next  succeeding day that is not a Legal  Holiday,  and no interest shall
accrue for the intervening period.

                  SECTION 11.08. Governing Law.

                  THIS  INDENTURE  AND  THE  NOTES  SHALL  BE  GOVERNED  BY  AND
CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,  AS APPLIED TO
CONTRACTS  MADE AND PERFORMED  WITHIN THE STATE OF NEW YORK,  WITHOUT  REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.  Each of the parties  hereto agrees to submit to
the  jurisdiction  of the  courts  of the  State  of New York in any  action  or
proceeding arising out of or relating to this Indenture.

                  SECTION 11.09. No Adverse Interpretation of Other Agreements.

                  This Indenture may not be used to interpret another indenture,
loan or debt  agreement  of the  Company  or any of its  Subsidiaries.  Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.

                  SECTION 11.10. No Personal Liability.

                  No director, officer, employee or stockholder, as such, of the
Company or any Subsidiary  Guarantor,  as such, shall have any liability for any
obligations of the Company or any  Subsidiary  Guarantor  under the Notes,  this
Indenture,  the Guarantees or the Registration Rights Agreement or for any claim
based on, in respect of, or by reason of, such  obligations  or their  creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release  are part of the  consideration  for the  issuance of the
Notes.


<PAGE>




                                     -112-


                  SECTION 11.11. Successors.

                  All agreements of the Company and any Subsidiary Guarantors in
this Indenture and the Notes shall bind their successors.  All agreements of the
Trustee in this Indenture shall bind its successors.

                  SECTION 11.12. Duplicate Originals.

                  All parties  may sign any number of copies of this  Indenture.
Each signed copy shall be an original,  but all of them together shall represent
the same agreement.

                  SECTION 11.13. Severability.

                  In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason,  the validity,  legality and enforceability of any such provision in
every other  respect  and of the  remaining  provisions  shall not in any way be
affected or  impaired  thereby,  it being  intended  that all of the  provisions
hereof shall be enforceable to the full extent permitted by law.


                                 ARTICLE TWELVE

                               GUARANTEE OF NOTES


                     SECTION 12.01. Unconditional Guarantee.

                  Subject  to  the  provisions  of  this  Article  Twelve,  each
Subsidiary Guarantor, if any, hereby, jointly and severally, unconditionally and
irrevocably  guarantees,  on a senior  subordinated  basis (such guarantee to be
referred to herein as a "Guarantee") to each Holder of a Note  authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,  the
Notes or the obligations of the Company  hereunder or thereunder,  that: (a) the
principal  of,  premium,  if any, and interest on the Notes (and any  Additional
Interest  payable  thereon) shall be duly and punctually  paid in full when due,
whether at maturity,  upon  redemption at the option of Holders  pursuant to the
provisions of the Notes relating  thereto,  by  acceleration  or otherwise,  and
interest on the overdue principal and (to the extent permitted by law) interest,
if any, on the Notes and all other  obligations of the Company or the Subsidiary
Guarantors to the Holders or the Trustee hereunder


<PAGE>




                                     -113-


or  thereunder  (including  amounts due the Trustee  under Section 7.07) and all
other obligations shall be promptly paid in full or performed, all in accordance
with the terms hereof and thereof;  and (b) in case of any  extension of time of
payment or renewal of any Notes or any of such other obligations, the same shall
be promptly paid in full when due or performed in  accordance  with the terms of
the extension or renewal,  whether at maturity,  by  acceleration  or otherwise.
Failing payment when due of any amount so guaranteed,  or failing performance of
any other obligation of the Company to the Holders under this Indenture or under
the Notes, for whatever reason, each Subsidiary  Guarantor shall be obligated to
pay, or to perform or cause the performance of, the same  immediately.  An Event
of Default  under  this  Indenture  or the Notes  shall  constitute  an event of
default  under  this  Guarantee,  and  shall  entitle  the  Holders  of Notes to
accelerate the  obligations of the Subsidiary  Guarantors  hereunder in the same
manner and to the same extent as the obligations of the Company.

                  Each of the  Subsidiary  Guarantors  hereby  agrees  that  its
obligations  hereunder  shall be  unconditional,  irrespective  of the validity,
regularity or enforceability of the Notes or this Indenture,  the absence of any
action to  enforce  the same,  any  waiver or consent by any Holder of the Notes
with  respect to any  provisions  hereof or  thereof,  any  release of any other
Subsidiary  Guarantor,  the  recovery of any judgment  against the Company,  any
action to  enforce  the same,  whether  or not a  Guarantee  is  affixed  to any
particular Note, or any other  circumstance  which might otherwise  constitute a
legal or equitable  discharge or defense of a guarantor.  Each of the Subsidiary
Guarantors  hereby  waives the  benefit  of  diligence,  presentment,  demand of
payment,  filing of claims with a court in the event of insolvency or bankruptcy
of the  Company,  any right to require a proceeding  first  against the Company,
protest,  notice and all demands  whatsoever  and  covenants  that its Guarantee
shall  not be  discharged  except by  complete  performance  of the  obligations
contained in the Notes,  this Indenture and this Guarantee.  This Guarantee is a
guarantee  of payment  and not of  collection.  If any Holder or the  Trustee is
required by any court or otherwise to return to the Company or to any Subsidiary
Guarantor,  or any  custodian,  trustee,  liquidator or other  similar  official
acting in relation to the Company or such Subsidiary Guarantor,  any amount paid
by the Company or such Subsidiary  Guarantor to the Trustee or such Holder, this
Guarantee,  to the extent  theretofore  discharged,  shall be reinstated in full
force and effect. Each Subsidiary  Guarantor further agrees that, as between it,
on the one hand,  and the Holders of Notes and the  Trustee,  on the other hand,
(a) subject to this


<PAGE>




                                     -114-


Article  Twelve,  the  maturity  of the  obligations  guaranteed  hereby  may be
accelerated  as  provided  in  Article  Six  hereof  for  the  purposes  of this
Guarantee,  notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations  guaranteed  hereby,  and (b) in
the event of any  acceleration  of such  obligations  as provided in Article Six
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Subsidiary Guarantors for the purpose of this Guarantee.

                  No stockholder,  officer, director,  employee or incorporator,
past,  present or future, of any Subsidiary  Guarantor,  as such, shall have any
personal  liability  under this Guarantee by reason of his, her or its status as
such stockholder, officer, director, employee or incorporator.

                  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.

                  SECTION 12.02. Limitations on Guarantees.

                  The  obligations  of  each  Subsidiary   Guarantor  under  its
Guarantee  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  this  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.

                  At and  after  consummation  of  the  Merger,  the  Subsidiary
Guarantors shall include (i) each of the Company's  Subsidiaries as of the Issue
Date  other  than  its  Foreign   Subsidiaries,   (ii)  each  of  the  Company's
Subsidiaries that in the future executes a supplemental  indenture in which such
Subsidiary agrees to be bound by the terms hereof 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 ac-


<PAGE>




                                     -115-


quired 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.

                  SECTION 12.03. Execution and Delivery of Guarantee.

                  To further  evidence the Guarantee set forth in Section 12.01,
each  Subsidiary  Guarantor  hereby  agrees that a notation  of such  Guarantee,
substantially  in the form of Exhibit F hereto,  shall be  endorsed on each Note
authenticated and delivered by the Trustee.  Such Guarantee shall be executed on
behalf of each Subsidiary  Guarantor by either manual or facsimile  signature of
two Officers of each  Subsidiary  Guarantor,  each of whom, in each case,  shall
have been duly authorized to so execute by all requisite  corporate action.  The
validity and  enforceability  of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.

                  Each of the  Subsidiary  Guarantors  hereby  agrees  that  its
Guarantee  set forth in  Section  12.01  shall  remain in full  force and effect
notwithstanding  any  failure  to  endorse  on  each  Note a  notation  of  such
Guarantee.

                  If an Officer of a Subsidiary  Guarantor whose signature is on
this  Indenture  or a  Guarantee  no longer  holds  that  office at the time the
Trustee  authenticates  the Note on which such  Guarantee  is endorsed or at any
time  thereafter,  such Subsidiary  Guarantor's  Guarantee of such Note shall be
valid nevertheless.

                  The   delivery  of  any  Note  by  the   Trustee,   after  the
authentication thereof hereunder, shall constitute due delivery of any Guarantee
set forth in this Indenture on behalf of each Subsidiary Guarantor.

                  SECTION 12.04. Release of a Subsidiary Guarantor.

                  (a) If no Default exists or would exist under this  Indenture,
upon  the  sale or  disposition  of all of the  Capital  Stock  of a  Subsidiary
Guarantor by the Company or a Subsidiary  of the Company or upon the sale of all
or substantially all of


<PAGE>




                                     -116-


the assets of such Subsidiary  Guarantor in a transaction  constituting an Asset
Sale the Net Cash Proceeds of which are applied in accordance with Section 4.16,
or upon the  consolidation or merger of a Subsidiary  Guarantor with or into any
Person in compliance with Article Five (in each case,  other than to the Company
or an Affiliate of the Company or a Subsidiary),  or if any Subsidiary Guarantor
is dissolved or liquidated in accordance  with this  Indenture,  such Subsidiary
Guarantor  and  each  Subsidiary  of such  Subsidiary  Guarantor  that is also a
Subsidiary  Guarantor shall be deemed  released from all obligations  under this
Article Twelve without any further action required on the part of the Trustee or
any Holder;  provided,  however,  that each such Subsidiary Guarantor is sold or
disposed of in accordance with this Indenture.  Any Subsidiary  Guarantor not so
released or the entity surviving such Subsidiary Guarantor, as applicable, shall
remain or be liable under its Guarantee as provided in this Article Twelve.

                  (b)  The  Trustee  shall  deliver  an  appropriate  instrument
evidencing  the release of a Subsidiary  Guarantor  upon receipt of a request by
the Company or such Subsidiary Guarantor accompanied by an Officers' Certificate
and an Opinion of Counsel  certifying  as to the  compliance  with this  Section
12.04, provided the legal counsel delivering such Opinion of Counsel may rely as
to matters of fact on one or more Officers' Certificates.

                  The Trustee shall execute any documents  reasonably  requested
by the Company or a  Subsidiary  Guarantor  in order to evidence  the release of
such Subsidiary  Guarantor from its obligations under its Guarantee  endorsed on
the Notes and under this Article Twelve.

                  Except as set forth in Articles Four and Five and this Section
12.04,  nothing contained in this Indenture or in any of the Notes shall prevent
any  consolidation or merger of a Subsidiary  Guarantor with or into the Company
or another  Subsidiary  Guarantor or shall prevent any sale or conveyance of the
property  of a  Subsidiary  Guarantor  as an  entirety  or  substantially  as an
entirety to the Company or another Subsidiary Guarantor.

                  SECTION 12.05. Waiver of Subrogation.

                  Until this  Indenture is  discharged  and all of the Notes are
discharged and paid in full, each Subsidiary Guarantor hereby irrevocably waives
and  agrees  not to  exercise  any  claim  or other  rights  which it may now or
hereafter acquire


<PAGE>




                                     -117-


against the  Company  that arise from the  existence,  payment,  performance  or
enforcement of the Company's  obligations  under the Notes or this Indenture and
such Subsidiary Guarantor's obligations under this Guarantee and this Indenture,
in any such instance including,  without  limitation,  any right of subrogation,
reimbursement,  exoneration,  contribution,  indemnification,  and any  right to
participate in any claim or remedy of the Holders  against the Company,  whether
or not such claim, remedy or right arises in equity, or under contract,  statute
or common law, including,  without limitation, the right to take or receive from
the Company,  directly or indirectly, in cash or other property or by set-off or
in any other  manner,  payment  or  security  on  account of such claim or other
rights. If any amount shall be paid to any Subsidiary  Guarantor in violation of
the  preceding  sentence and any amounts  owing to the Trustee or the Holders of
Notes under the Notes,  this  Indenture,  or any other  document  or  instrument
delivered under or in connection with such agreements or instruments,  shall not
have been paid in full,  such amount shall have been deemed to have been paid to
such Subsidiary  Guarantor for the benefit of, and held in trust for the benefit
of, the Trustee or the Holders  and shall  forthwith  be paid to the Trustee for
the  benefit  of  itself or such  Holders  to be  credited  and  applied  to the
obligations in favor of the Trustee or the Holders,  as the case may be, whether
matured or  unmatured,  in  accordance  with the terms of this  Indenture.  Each
Subsidiary  Guarantor  acknowledges  that it will  receive  direct and  indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 12.05 is knowingly made in contemplation of
such benefits.

                  SECTION 12.06. No Set-Off.

                  Each payment to be made by a Subsidiary Guarantor hereunder in
respect of the  Obligations  shall be payable in the currency or  currencies  in
which such  Obligations  are  denominated,  and shall be made  without  set-off,
counterclaim, reduction or diminution of any kind or nature.

                  SECTION 12.07. Obligations Absolute.

                  The obligations of each Subsidiary Guarantor hereunder are and
shall be absolute and  unconditional  and any monies or amounts  expressed to be
owing  or  payable  by each  Subsidiary  Guarantor  hereunder  which  may not be
recoverable from such Subsidiary  Guarantor on the basis of a Guarantee shall be
recoverable  from such  Subsidiary  Guarantor as a primary obligor and principal
debtor in respect thereof.


<PAGE>




                                     -118-


                  SECTION 12.08. Obligations Continuing.

                  The obligations of each Subsidiary  Guarantor  hereunder shall
be  continuing  and  shall  remain  in  full  force  and  effect  until  all the
obligations  have been paid and  satisfied in full.  Each  Subsidiary  Guarantor
agrees  with the Trustee  that it will from time to time  deliver to the Trustee
suitable  acknowledgments  of this continued  liability  hereunder and under any
other  instrument  or  instruments  in such form as counsel to the  Trustee  may
advise  and as will  prevent  any  action  brought  against it in respect of any
default hereunder being barred by any statute of limitations now or hereafter in
force and, in the event of the failure of a  Subsidiary  Guarantor  so to do, it
hereby  irrevocably  appoints  the  Trustee  the  attorney  and  agent  of  such
Subsidiary Guarantor to make, execute and deliver such written acknowledgment or
acknowledgments  or other  instruments as may from time to time become necessary
or advisable,  in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Subsidiary Guarantor hereunder.

                     SECTION 12.09. Obligations Not Reduced.

                  The obligations of each Subsidiary  Guarantor  hereunder shall
not be satisfied, reduced or discharged solely by the payment of such principal,
premium,  if any, interest,  fees and other monies or amounts as may at any time
prior to discharge of this Indenture pursuant to Article 8 be or become owing or
payable under or by virtue of or otherwise in connection  with the Notes or this
Indenture.

                  SECTION 12.10. Obligations Reinstated.

                  The obligations of each Subsidiary  Guarantor  hereunder shall
continue to be effective or shall be  reinstated,  as the case may be, if at any
time any payment  which would  otherwise  have  reduced the  obligations  of any
Subsidiary  Guarantor hereunder (whether such payment shall have been made by or
on  behalf of the  Company  or by or on behalf  of a  Subsidiary  Guarantor)  is
rescinded or reclaimed from any of the Holders upon the insolvency,  bankruptcy,
liquidation  or  reorganization  of the Company or any  Subsidiary  Guarantor or
otherwise,  all as though  such  payment  had not been made.  If demand  for, or
acceleration  of the  time  for,  payment  by the  Company  is  stayed  upon the
insolvency,  bankruptcy,  liquidation or reorganization of the Company, all such
Indebtedness  otherwise  subject to demand for  payment  or  acceleration  shall
nonetheless be payable by each Subsidiary Guarantor as provided herein.


<PAGE>




                                     -119-


                  SECTION 12.11. Obligations Not Affected.

                  The obligations of each Subsidiary  Guarantor  hereunder shall
not be affected,  impaired or diminished in any way by any act, omission, matter
or thing  whatsoever,  occurring  before,  upon or after any demand for  payment
hereunder (and whether or not known or consented to by any Subsidiary  Guarantor
or any of the Holders) which,  but for this provision,  might constitute a whole
or partial  defense to a claim  against any  Subsidiary  Guarantor  hereunder or
might operate to release or otherwise  exonerate any  Subsidiary  Guarantor from
any of its obligations  hereunder or otherwise affect such obligations,  whether
occasioned  by default of any of the Holders or  otherwise,  including,  without
limitation:

                  (a) any limitation of status or power, disability,  incapacity
         or other  circumstance  relating  to the  Company or any other  person,
         including  any  insolvency,  bankruptcy,  liquidation,  reorganization,
         readjustment,  composition, dissolution, winding up or other proceeding
         involving or affecting the Company or any other person;

                  (b) any irregularity,  defect,  unenforceability or invalidity
         in respect of any  indebtedness  or other  obligation of the Company or
         any other person under this Indenture,  the Notes or any other document
         or instrument;

                  (c) any failure of the Company,  whether or not without  fault
         on its part,  to perform or comply with any of the  provisions  of this
         Indenture  or the Notes,  or to give  notice  thereof  to a  Subsidiary
         Guarantor;

                  (d) the taking or  enforcing or  exercising  or the refusal or
         neglect  to take or  enforce or  exercise  any right or remedy  from or
         against the Company or any other Person or their  respective  assets or
         the release or discharge of any such right or remedy;

                  (e) the granting of time, renewals,  extensions,  compromises,
         concessions, waivers, releases, discharges and other indulgences to the
         Company or any other Person;

                  (f) any change in the time,  manner or place of payment of, or
         in any  other  term  of,  any of the  Notes,  or any  other  amendment,
         variation,  supplement,  replacement  or waiver  of, or any  consent to
         departure from, any of the Notes or this Indenture,  including, without
         limitation,


<PAGE>




                                     -120-


         any increase or decrease in the principal amount of or premium, if
         any, or interest on any of the Notes;

                  (g) any  change  in the  ownership,  control,  name,  objects,
         businesses, assets, capital structure or constitution of the Company or
         a Subsidiary Guarantor;

                  (h) any merger or  amalgamation of the Company or a Subsidiary
         Guarantor with any Person or Persons;

                  (i)  the  occurrence  of  any  change  in  the  laws,   rules,
         regulations or ordinances of any  jurisdiction by any present or future
         action  of any  governmental  authority  or  court  amending,  varying,
         reducing or otherwise  affecting,  or purporting to amend, vary, reduce
         or otherwise  affect,  any of the  Obligations or the  obligations of a
         Subsidiary Guarantor under its Guarantee; and

                  (j)  any  other   circumstance,   including   release  of  the
         Subsidiary Guarantor pursuant to Section 12.04 (other than by complete,
         irrevocable  payment)  that  might  otherwise  constitute  a  legal  or
         equitable  discharge or defense of the Company under this  Indenture or
         the Notes or of a  Subsidiary  Guarantor  in respect  of its  Guarantee
         hereunder.

                  SECTION 12.12. Waiver.

                  Without in any way limiting the  provisions  of Section  12.01
hereof,  each Subsidiary  Guarantor  hereby waives notice of acceptance  hereof,
notice of any liability of any Subsidiary Guarantor  hereunder,  notice or proof
of reliance by the Holders  upon the  obligations  of any  Subsidiary  Guarantor
hereunder,  and  diligence,  presentment,  demand for  payment  on the  Company,
protest,  notice of dishonor or non-payment of any of the Obligations,  or other
notice or  formalities  to the Company or any  Subsidiary  Guarantor of any kind
whatsoever.

                  SECTION 12.13. No Obligation To Take Action Against the
                                    Company.

                  Neither  the  Trustee  nor any  other  Person  shall  have any
obligation  to enforce or exhaust  any rights or  remedies  or to take any other
steps under any security for the Obligations or against the Company or any other
Person or any Property of the Company or any other Person  before the Trustee is
entitled to demand payment and  performance by any or all Subsidiary  Guarantors
of their  liabilities  and  obligations  under  their  Guarantees  or under this
Indenture.


<PAGE>




                                     -121-


                  SECTION 12.14. Dealing with the Company and Others.

                  The  Holders,  without  releasing,  discharging,  limiting  or
otherwise  affecting in whole or in part the  obligations and liabilities of any
Subsidiary  Guarantor  hereunder  and  without  the  consent of or notice to any
Subsidiary Guarantor, may

                  (a)   grant   time,   renewals,    extensions,    compromises,
         concessions, waivers, releases, discharges and other indulgences to the
         Company or any other Person;

                  (b) take or abstain from taking  security or  collateral  from
         the Company or from perfecting security or collateral of the Company;

                  (c)  release,  discharge,   compromise,  realize,  enforce  or
         otherwise  deal  with or do any act or  thing  in  respect  of (with or
         without  consideration)  any and all  collateral,  mortgages  or  other
         security  given by the Company or any third  party with  respect to the
         obligations or matters contemplated by this Indenture or the Notes;

                  (d) accept compromises or arrangements from the Company;

                  (e) apply all monies at any time  received from the Company or
         from any security upon such part of the  Obligations as the Holders may
         see fit or change any such application in whole or in part from time to
         time as the Holders may see fit; and

                  (f)  otherwise  deal with,  or waive or modify  their right to
         deal with,  the Company and all other  Persons and any  security as the
         Holders or the Trustee may see fit.

                     SECTION 12.15. Default and Enforcement.

                  If any Subsidiary  Guarantor  fails to pay in accordance  with
Section 12.01 hereof,  the Trustee may proceed in its name as trustee  hereunder
in the  enforcement of the Guarantee of any such  Subsidiary  Guarantor and such
Subsidiary  Guarantor's  obligations  thereunder  and  hereunder  by any  remedy
provided by law, whether by legal proceedings or otherwise,  and to recover from
such Subsidiary Guarantor the obligations.


<PAGE>




                                     -122-


                  SECTION 12.16. Amendment, Etc.

                  No amendment,  modification or waiver of any provision of this
Indenture  relating to any  Subsidiary  Guarantor or consent to any departure by
any Subsidiary Guarantor or any other Person from any such provision will in any
event be  effective  unless it is signed by such  Subsidiary  Guarantor  and the
Trustee.

                  SECTION 12.17. Acknowledgment.

                  Each Subsidiary Guarantor hereby acknowledges communication of
the terms of this  Indenture  and the Notes and  consents to and approves of the
same.

                  SECTION 12.18. Costs and Expenses.

                  Each  Subsidiary  Guarantor shall pay on demand by the Trustee
any and all costs, fees and expenses (including,  without limitation, legal fees
on a solicitor and client basis) incurred by the Trustee,  its agents,  advisors
and counsel or any of the Holders in  enforcing  any of their  rights  under any
Guarantee.

                  SECTION 12.19. No Merger or Waiver; Cumulative Remedies.

                  No  Guarantee  shall  operate  by way of  merger of any of the
obligations  of a Subsidiary  Guarantor  under any other  agreement,  including,
without  limitation,  this  Indenture.  No failure to  exercise  and no delay in
exercising,  on the part of the Trustee or the Holders, any right, remedy, power
or  privilege  in the  Guarantee  or under this  Indenture  or the Notes,  shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right,  remedy,  power or privilege in the Guarantee or under this  Indenture or
the Notes preclude any other or further  exercise thereof or the exercise of any
other  right,  remedy,  power or  privilege.  The rights,  remedies,  powers and
privileges in the Guarantee  and under this  Indenture,  the Notes and any other
document or instrument between a Subsidiary Guarantor and/or the Company and the
Trustee are  cumulative  and not exclusive of any rights,  remedies,  powers and
privileges provided by law.

                     SECTION 12.20. [Intentionally Omitted].


<PAGE>




                                     -123-


                  SECTION 12.21. Guarantee in Addition to Other Obligations.

                  The  obligations  of  each  Subsidiary   Guarantor  under  its
Guarantee and this Indenture are in addition to and not in substitution  for any
other  obligations  to the  Trustee or to any of the Holders in relation to this
Indenture or the Notes and any guarantees or security at any time held by or for
the benefit of any of them.

                  SECTION 12.22. Severability.

                  Any  provision of this Article  Twelve which is  prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining  provisions
and any such  prohibition  or  unenforceability  in any  jurisdiction  shall not
invalidate  or render  unenforceable  such  provision in any other  jurisdiction
unless its  removal  would  substantially  defeat the basic  intent,  spirit and
purpose of this Indenture and this Article Twelve.

                  SECTION 12.23. Successors and Assigns.

                  Each Guarantee  shall be binding upon and inure to the benefit
of each  Subsidiary  Guarantor  and the Trustee and the other  Holders and their
respective successors and permitted assigns, except that no Subsidiary Guarantor
may assign any of its obligations hereunder or thereunder.


                                ARTICLE THIRTEEN

                           SUBORDINATION OF GUARANTEE


                  SECTION 13.01. Obligations of Guarantors Subordinated to
                         Guarantor Senior Indebtedness.

                  Anything herein to the contrary  notwithstanding,  each of the
Subsidiary  Guarantors,  for itself and its successors,  and each Holder, by its
acceptance of Guarantees,  agrees that the payment of all  Obligations  owing to
the  Holders in respect of its  Guarantee  (collectively,  as to any  Subsidiary
Guarantor,  its "Guarantee  Obligations") is subordinated,  to the extent and in
the manner  provided in this Article  Thirteen,  to the prior payment in full in
cash or Cash Equivalents of all Obligations on Guarantor Senior  Indebtedness of
such Subsidiary Guarantor,


<PAGE>




                                     -124-


including without limitation, the Subsidiary Guarantors' obligations under the
Credit Agreement.

                  This Article  Thirteen shall  constitute a continuing offer to
all  Persons  who become  holders  of, or  continue  to hold,  Guarantor  Senior
Indebtedness,  and such  provisions  are made for the  benefit of the holders of
Guarantor Senior  Indebtedness and such holders are made obligees  hereunder and
any one or more of them may enforce such provisions.

                  SECTION 13.02. Suspension of Guarantee Obligations When
                  Guarantor Senior Indebtedness is in Default.

                  (a) 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 Designated Senior
Indebtedness of a Subsidiary  Guarantor or guaranteed by a Subsidiary  Guarantor
(which  Designated  Senior  Indebtedness  or  guarantee,  as the  case  may  be,
constitutes  Guarantor  Senior  Indebtedness of such Subsidiary  Guarantor),  no
payment  of any  kind  or  character  shall  be  made  by or on  behalf  of such
Subsidiary  Guarantor or any other Person on its or their behalf with respect to
any Guarantee  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  Guarantor  Senior  Indebtedness  which is
Designated  Senior  Indebtedness,  as such  event of  default  is defined in the
instrument creating or evidencing such Guarantor Senior Indebtedness, permitting
the holders of such Guarantor Senior Indebtedness then outstanding to accelerate
the  maturity  thereof and if the  Representative  for the  respective  issue of
Guarantor Senior Indebtedness gives 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
Guarantor  Senior  Indebtedness  terminating  the  Blockage  Period,  during the
Blockage  Period,  neither any Subsidiary  Guarantor nor any other Person on its
behalf shall (x) make any payment of any kind or  character  with respect to any
Guarantee  Obligations  on the Notes or (y) acquire any of the Notes for cash or
property or otherwise.  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. No event of default which existed or was continuing on the
date of the com-



<PAGE>




                                     -125-

mencement  of  any  Blockage  Period  with  respect  to  the  Guarantor   Senior
Indebtedness  shall be,  or be made,  the  basis  for  commencement  of a second
Blockage  Period by the  Representative  of such Guarantor  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).

                  (b) In the event  that,  notwithstanding  the  foregoing,  any
payment  shall be received  by the  Trustee or any Holder  when such  payment is
prohibited  by Section  13.02(a),  such  payment  shall be held in trust for the
benefit of, and shall be paid over or  delivered  to, the  holders of  Guarantor
Senior  Indebtedness  (pro rata to such  holders on the basis of the  respective
amount  of  Guarantor  Senior  Indebtedness  held  by  such  holders)  or  their
respective  Representatives,  as their  respective  interests  may  appear.  The
Trustee shall be entitled to rely on information  regarding amounts then due and
owing on the Guarantor Senior Indebtedness, if any, received from the holders of
Guarantor Senior Indebtedness (or their Representatives) or, if such information
is not received from such holders or their Representatives, from the Company and
only amounts  included in the information  provided to the Trustee shall be paid
to the holders of Guarantor Senior Indebtedness.

                  Nothing  contained  in this Article  Thirteen  shall limit the
right of the  Trustee or the  Holders of Notes to take any action to  accelerate
the  maturity of the Notes  pursuant to Section  6.02 or to pursue any rights or
remedies hereunder;  provided that all Guarantor Senior Indebtedness  thereafter
due or  declared  to be due  shall  first  be  paid  in  full  in  cash  or Cash
Equivalents  before the Holders are  entitled to receive any payment of any kind
or character with respect to Obligations on the Notes.


<PAGE>




                                     -126-


                  SECTION 13.03. Guarantee Obligations Subordinated to Prior
          Payment of All Guarantor Senior Indebtedness on Dissolution,
           Liquidation or Reorganization of Such Subsidiary Guarantor.

                  Upon any payment or  distribution  of assets of any Subsidiary
Guarantor 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  such  Subsidiary  Guarantor,  whether  voluntary  or  involuntary,  or  in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to any  Subsidiary  Guarantor  or its  property,  whether  voluntary or
involuntary,  but  excluding  any  liquidation  or  dissolution  of a Subsidiary
Guarantor into the Company or into another Subsidiary Guarantor:

                  (a) the holders of all Guarantor  Senior  Indebtedness of such
         Subsidiary  Guarantor  shall first be  entitled to receive  payments in
         full in cash or Cash Equivalents,  or such payment duly provided for to
         the  satisfaction of the holders of Guarantor Senior  Indebtedness,  of
         all amounts  payable under  Guarantor  Senior  Indebtedness  before the
         Holders will be entitled to receive any payment or  distribution of any
         kind or  character  on  account  of the  Guarantee  of such  Subsidiary
         Guarantor,  and until all  Obligations  with  respect to the  Guarantor
         Senior  Indebtedness are paid in full in cash or Cash  Equivalents,  or
         such payment duly  provided for to the  satisfaction  of the holders of
         Guarantor  Senior  Indebtedness,  any distribution to which the Holders
         would be  entitled  shall be made to the  holders of  Guarantor  Senior
         Indebtedness of such Subsidiary Guarantor;

                  (b) any payment or  distribution  of assets of such Subsidiary
         Guarantor  of any  kind or  character,  whether  in cash,  property  or
         securities,  to which  the  Holders  or the  Trustee  on  behalf of the
         Holders  would be entitled  except for the  provisions  of this Article
         Thirteen  shall be paid by the  liquidating  trustee  or agent or other
         Person making such a payment or  distribution,  directly to the holders
         of Guarantor Senior Indebtedness of such Subsidiary  Guarantor or their
         representatives,  ratably  according to the respective  amounts of such
         Guarantor Senior  Indebtedness  remaining unpaid held or represented by
         each,  until all such Guarantor  Senior  Indebtedness  remaining unpaid
         shall have been paid in full in cash or Cash Equivalents, or such


<PAGE>




                                     -127-


         payment  duly  provided  for to the  satisfaction  of  the  holders  of
         Guarantor  Senior  Indebtedness,  after giving effect to any concurrent
         payment  or  distribution  to the  holders  of  such  Guarantor  Senior
         Indebtedness; and

                  (c) in the event  that,  notwithstanding  the  foregoing,  any
         payment or distribution  of assets of such Subsidiary  Guarantor of any
         kind or character,  whether such payment shall be in cash,  property or
         securities,  and such  Subsidiary  Guarantor shall have made payment to
         the Trustee or  directly to the Holders or any Paying  Agent in respect
         of payment of the Guarantees  before all Guarantor Senior  Indebtedness
         of  such  Subsidiary  Guarantor  is  paid  in  full  in  cash  or  Cash
         Equivalents,  or such payment duly provided for to the  satisfaction of
         the  holders  of  Guarantor  Senior   Indebtedness,   such  payment  or
         distribution  shall be received,  segregated from other funds, and held
         in trust by the Trustee or such Holder or Paying  Agent for the benefit
         of, and shall  immediately be paid over by the Trustee or by the Holder
         to,  the  holders  of  such  Guarantor  Senior  Indebtedness  or  their
         representatives,  ratably  according to the respective  amounts of such
         Guarantor  Senior  Indebtedness  held or represented by each, until all
         such Guarantor  Senior  Indebtedness  remaining  unpaid shall have been
         paid in full in cash or Cash Equivalents, or such payment duly provided
         for  to  the   satisfaction   of  the  holders  of   Guarantor   Senior
         Indebtedness,   after  giving  effect  to  any  concurrent  payment  or
         distribution to the holders of Guarantor Senior Indebtedness.

                  Each  Subsidiary  Guarantor  shall give  prompt  notice to the
Trustee prior to any dissolution,  winding-up,  total or partial  liquidation or
reorganization  (including,  without limitation,  in bankruptcy,  insolvency, or
receivership  proceedings or upon any assignment for the benefit of creditors or
any other marshaling of such Subsidiary Guarantor's assets and liabilities).

                  SECTION 13.04. Holders of Guarantee Obligations To Be
        Subrogated to Rights of Holders of Guarantor Senior Indebtedness.

                  Subject to the payment in full in cash or Cash  Equivalents of
all Guarantor  Senior  Indebtedness,  the Holders of Guarantee  Obligations of a
Subsidiary  Guarantor  shall be  subrogated  to the  rights  of the  holders  of
Guarantor Senior  Indebtedness of such Subsidiary  Guarantor to receive payments
or distributions of assets of such Subsidiary Guarantor applicable


<PAGE>




                                     -128-


to such Guarantor Senior  Indebtedness  until all amounts owing on or in respect
of the Guarantee  Obligations shall be paid in full in cash or Cash Equivalents,
and for the purpose of such  subrogation  no payments  or  distributions  to the
holders of such Guarantor Senior Indebtedness by or on behalf of such Subsidiary
Guarantor, or by or on behalf of the Holders by virtue of this Article Thirteen,
which  otherwise  would have been made to the  Holders  shall,  as between  such
Subsidiary Guarantor and the Holders, be deemed to be payment by such Subsidiary
Guarantor  to or on  account of such  Guarantor  Senior  Indebtedness,  it being
understood  that the  provisions  of this Article  Thirteen are and are intended
solely for the purpose of defining  the relative  rights of the Holders,  on the
one hand, and the holders of such Guarantor  Senior  Indebtedness,  on the other
hand.

                  If any  payment or  distribution  to which the  Holders  would
otherwise  have been entitled but for the  provisions  of this Article  Thirteen
shall have been applied, pursuant to the provisions of this Article Thirteen, to
the payment of all amounts  payable under such  Guarantor  Senior  Indebtedness,
then the Holders shall be entitled to receive from the holders of such Guarantor
Senior Indebtedness any such payments or distributions  received by such holders
of such Guarantor Senior  Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of such Guarantor Senior Indebtedness in
full in cash or Cash Equivalents.

                  Each Holder by  purchasing  or accepting a Note waives any and
all notice of the creation,  modification,  renewal, extension or accrual of any
Guarantor  Senior  Indebtedness  of the  Subsidiary  Guarantors and notice of or
proof of reliance by any holder or owner of Guarantor Senior Indebtedness of the
Subsidiary  Guarantors  upon this  Article  Thirteen  and the  Guarantor  Senior
Indebtedness of the Subsidiary  Guarantors shall  conclusively be deemed to have
been created, contracted or incurred in reliance upon this Article Thirteen, and
all dealings between the Subsidiary Guarantors and the holders and owners of the
Guarantor  Senior  Indebtedness of the Subsidiary  Guarantors shall be deemed to
have been consummated in reliance upon this Article Thirteen.

                  SECTION 13.05. Obligations of the Subsidiary Guarantors'
                                 Unconditional.

                  Nothing  contained  in this  Article  Thirteen or elsewhere in
this Indenture or in the  Guarantees is intended to or shall impair,  as between
the  Subsidiary  Guarantors  and the Holders,  the  obligation of the Subsidiary
Guarantors, which is


<PAGE>




                                     -129-


absolute  and  unconditional,  to pay to the Holders all amounts due and payable
under the  Guarantees  as and when the same  shall  become  due and  payable  in
accordance  with their  terms,  or is intended to or shall  affect the  relative
rights of the Holders and creditors of the Subsidiary  Guarantors other than the
holders of the  Guarantor  Senior  Indebtedness,  nor shall  anything  herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable  law upon default under this  Indenture,  subject to the
rights, if any, under this Article Thirteen,  of the holders of Guarantor Senior
Indebtedness  in respect  of cash,  property  or  securities  of the  Subsidiary
Guarantors  received  upon the exercise of any such remedy.  Upon any payment or
distribution of assets of any Subsidiary  Guarantor  referred to in this Article
Thirteen, the Trustee,  subject to the provisions of Sections 7.01 and 7.02, and
the Holders shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which any liquidation,  dissolution,  winding-up or
reorganization  proceedings  are  pending,  or a  certificate  of the  receiver,
trustee in bankruptcy,  liquidating  trustee or agent or other Person making any
payment or  distribution  to the  Trustee or to the  Holders  for the purpose of
ascertaining   the  Persons   entitled  to   participate   in  such  payment  or
distribution,   the  holders  of  Guarantor   Senior   Indebtedness   and  other
Indebtedness of any Subsidiary Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed  thereon and all other facts pertinent
thereto or to this  Article  Thirteen.  Nothing in this Article  Thirteen  shall
apply to the claims of, or payments to, the Trustee under or pursuant to Section
7.07.  The Trustee  shall be entitled to rely on the delivery to it of a written
notice  by a  Person  representing  himself  or  itself  to be a  holder  of any
Guarantor   Senior   Indebtedness   (or  a  trustee   on  behalf  of,  or  other
representative  of, such holder) to establish that such notice has been given by
a holder of such Guarantor Senior Indebtedness or a trustee or representative on
behalf of any such holder.

                  In the event that the  Trustee  determines  in good faith that
any evidence is required  with respect to the right of any Person as a holder of
Guarantor  Senior  Indebtedness  to participate  in any payment or  distribution
pursuant to this  Article  Thirteen,  the  Trustee  may  request  such Person to
furnish evidence to the reasonable  satisfaction of the Trustee as to the amount
of Guarantor Senior  Indebtedness held by such Person,  the extent to which such
Person is entitled to participate in such payment or distribution  and any other
facts pertinent to the rights of such Person under this Article Thirteen, and if
such evidence is not furnished, the Trustee may defer any


<PAGE>




                                     -130-


payment to such Person pending  judicial  determination  as to the right of such
Person to receive such payment.

                  SECTION 13.06. Trustee Entitled To Assume Payments Not
                        Prohibited in Absence of Notice.

                  The Trustee shall not at any time be charged with knowledge of
the  existence of any facts that would  prohibit the making of any payment to or
by the  Trustee  unless and until the  Trustee or any  Paying  Agent  shall have
received notice thereof from the Company or any Subsidiary Guarantor or from one
or more  holders of Guarantor  Senior  Indebtedness  or from any  Representative
therefor and, prior to the receipt of any such notice,  the Trustee,  subject to
the  provisions  of Sections  7.01 and 7.02,  shall be entitled in all  respects
conclusively to assume that no such fact exists.

                  SECTION 13.07. Application by Trustee of Assets Deposited with
                                       It.

                  U.S. Legal Tender or U.S. Government  Obligations deposited in
trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02
shall be for the sole  benefit  of  Holders  of the  Notes  and,  to the  extent
allocated  for the payment of Notes,  shall not be subject to the  subordination
provisions  of this  Article  Thirteen.  Otherwise,  any  deposit  of  assets or
securities  by or on behalf of a  Subsidiary  Guarantor  with the Trustee or any
Paying Agent  (whether or not in trust) for payment of the  Guarantees  shall be
subject to the provisions of this Article Thirteen;  provided,  however, that if
prior to the second  Business  Day  preceding  the date on which by the terms of
this  Indenture  any  such  assets  may  become  distributable  for any  purpose
(including,  without limitation,  the payment of either principal of or interest
on any Note) the  Trustee or such  Paying  Agent  shall not have  received  with
respect to such  assets  the notice  provided  for in  Section  13.06,  then the
Trustee or such Paying Agent shall have full power and authority to receive such
assets and to apply the same to the  purpose for which they were  received,  and
shall not be affected by any notice to the  contrary  received by it on or after
such date.  The foregoing  shall not apply to the Paying Agent if the Company or
any  Subsidiary or Affiliate of the Company is acting as Paying  Agent.  Nothing
contained  in this  Section  13.07  shall  limit  the  right of the  holders  of
Guarantor  Senior  Indebtedness  to recover  payments  as  contemplated  by this
Article Thirteen.


<PAGE>




                                     -131-


                  SECTION 13.08. No Waiver of Subordination Provisions.

                  (a) No right of any present or future  holder of any Guarantor
Senior  Indebtedness  to enforce  subordination  as herein provided shall at any
time in any way be  prejudiced  or  impaired by any act or failure to act on the
part of any  Subsidiary  Guarantor  or by any act or failure to act, by any such
holder,  or by any  non-compliance  by any Subsidiary  Guarantor with the terms,
provisions and covenants of this Indenture,  regardless of any knowledge thereof
any such holder may have or be otherwise charged with.

                  (b) Without  limiting the generality of subsection (a) of this
Section 13.08, the holders of Guarantor Senior Indebtedness may, at any time and
from time to time,  without  the  consent  of or notice  to the  Trustee  or the
Holders of the Notes,  without  incurring  responsibility  to the Holders of the
Notes and without  impairing or  releasing  the  subordination  provided in this
Article Thirteen or the obligations hereunder of the Holders of the Notes to the
holders of Guarantor Senior  Indebtedness,  do any one or more of the following:
(1) change the  manner,  place,  terms or time of payment of, or renew or alter,
Guarantor  Senior  Indebtedness  or any  instrument  evidencing  the same or any
agreement under which Guarantor  Senior  Indebtedness is outstanding;  (2) sell,
exchange,  release or  otherwise  deal with any property  pledged,  mortgaged or
otherwise securing Guarantor Senior Indebtedness;  (3) release any Person liable
in any manner for the  collection or payment of Guarantor  Senior  Indebtedness;
and (4) exercise or refrain from  exercising  any rights  against the Subsidiary
Guarantors and any other Person.

                  SECTION 13.09. Holders Authorize Trustee To Effectuate
                     Subordination of Guarantee Obligations.

                  Each Holder of the  Guarantee  Obligations  by its  acceptance
thereof  authorizes and expressly directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effect the subordination provisions
contained   in  this   Article   Thirteen,   and   appoints   the   Trustee  its
attorney-in-fact for such purpose,  including,  in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of any Subsidiary  Guarantor tending towards liquidation
or  reorganization of the business and assets of any Subsidiary  Guarantor,  the
immediate  filing of a claim for the unpaid  balance  under its or his Guarantee
Obligations in the form required in said proceedings and


<PAGE>




                                     -132-


cause said claim to be approved.  If the Trustee does not file a proper claim or
proof of debt in the form  required in such  proceeding  prior to 30 days before
the expiration of the time to file such claim or claims, then any of the holders
of  the  Guarantor  Senior  Indebtedness  or  their   Representative  is  hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Guarantee Obligations. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Guarantor Senior Indebtedness or their  Representative
to  authorize  or  consent  to or accept  or adopt on  behalf  of any  holder of
Guarantee  Obligations any plan of  reorganization,  arrangement,  adjustment or
composition  affecting  the  Guarantee  Obligations  or the rights of any Holder
thereof,  or to  authorize  the  Trustee  or the  holders  of  Guarantor  Senior
Indebtedness  or their  Representative  to vote in  respect  of the claim of any
holder of Guarantee Obligations in any such proceeding.

                  SECTION 13.10. Right of Trustee to Hold Guarantor Senior
                                  Indebtedness.

                  The  Trustee  shall be entitled to all of the rights set forth
in this Article Thirteen in respect of any Guarantor Senior  Indebtedness at any
time  held by it to the same  extent as any other  holder  of  Guarantor  Senior
Indebtedness,  and nothing in this  Indenture  shall be construed to deprive the
Trustee of any of its rights as such holder.

                  With respect to the holders of Guarantor Senior  Indebtedness,
the Trustee  undertakes  to perform or to observe only such of its covenants and
obligations  as are  specifically  set forth in this  Article  Thirteen,  and no
implied covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Indenture against the Trustee.  The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Indebtedness.

                  Whenever  a  distribution  is to be made or a notice  given to
holders or owners of Guarantor Senior Indebtedness, the distribution may be made
and the notice may be given to their agent or other representative, if any.

                  SECTION 13.11. No Suspension of Remedies.

                  The failure to make a payment in respect of the  Guarantees by
reason of any  provision  of this  Article  Thirteen  shall not be  construed as
preventing  the  occurrence  of a Default or an Event of Default  under  Section
6.01.


<PAGE>




                                     -133-


                  Nothing  contained  in this Article  Thirteen  shall limit the
right of the  Trustee or the  Holders of Notes to take any action to  accelerate
the  maturity  of the Notes  pursuant  to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article  Thirteen of the holders,  from time to time,  of Guarantor  Senior
Indebtedness.

                  SECTION 13.12. No Fiduciary Duty of Trustee to Holders of
                         Guarantor Senior Indebtedness.

                  The Trustee shall not be deemed to owe any  fiduciary  duty to
the holders of Guarantor  Senior  Indebtedness,  and it undertakes to perform or
observe such of its covenants and obligations as are  specifically  set forth in
this Article  Thirteen,  and no implied covenants or obligations with respect to
the Guarantor Senior  Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be liable to any such holders (other than for its
willful  misconduct or gross  negligence) if it shall pay over or deliver to the
holders of Guarantee Obligations or the Guarantors or any other Person, money or
assets in compliance with the terms of this  Indenture.  Nothing in this Section
13.12 shall affect the  obligation  of any Person other than the Trustee and the
Holders to hold such  payment for the benefit of, and to pay such  payment  over
to, the holders of Guarantor Senior Indebtedness or their Representative.


<PAGE>




                                       S-1

                                   SIGNATURES

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Indenture to be duly executed, all as of the date first written above.

                                                     ACQUISITION CORP.


                                                     By:   /s/ Wesley W. Lang
                                                        -----------------------
                                                        Name:  Wesley W. Lang
                                                        Title: President


                                                     STATE STREET BANK AND
                                                      TRUST COMPANY, as Trustee


                                                     By:   /s/ P. G. Kane, Jr.
                                                        -----------------------
                                                        Name:  P. G. Kane, Jr.
                                                        Title: Vice President


<PAGE>




                                                                       EXHIBIT A

                             [FORM OF SERIES A NOTE]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.  SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED  STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.  PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION  HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED  INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES  ACT) OR (B) IT IS AN  "ACCREDITED  INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S.  PERSON AND IS  ACQUIRING  THIS  SECURITY IN AN OFFSHORE
TRANSACTION  IN COMPLIANCE  WITH RULE 904 UNDER THE  SECURITIES  ACT, (2) AGREES
THAT IT WILL NOT,  PRIOR TO THE DATE  THAT IS TWO  YEARS  AFTER THE LATER OF THE
ORIGINAL  ISSUE DATE OF THIS  SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATED  PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY,  RESELL OR
OTHERWISE  TRANSFER  THIS SECURITY  EXCEPT (A) TO THE COMPANY OR ANY  SUBSIDIARY
THEREOF,  (B) INSIDE THE UNITED  STATES TO A  QUALIFIED  INSTITUTIONAL  BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN  ACCREDITED  INVESTOR  THAT,  PRIOR TO SUCH  TRANSFER,  FURNISHES  (OR HAS
FURNISHED ON ITS BEHALF BY A U.S.  BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN  REPRESENTATIONS  AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS  SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE  FOR THIS  SECURITY),  (D)  OUTSIDE  THE  UNITED  STATES IN AN  OFFSHORE
TRANSACTION IN COMPLIANCE  WITH RULE 904 UNDER THE SECURITIES  ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES  ACT AND (3)  AGREES  THAT IT WILL  GIVE TO EACH  PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE  SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION  WITH ANY  TRANSFER  OF THIS  SECURITY  WITHIN  TWO  YEARS  AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY,  IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR,  THE HOLDER MUST,  PRIOR TO SUCH TRANSFER,  FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH  CERTIFICATIONS,  LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY  REASONABLY  REQUIRE TO  CONFIRM  THAT SUCH  TRANSFER  IS BEING MADE
PURSUANT  TO AN  EXEMPTION  FROM,  OR  IN A  TRANSACTION  NOT  SUBJECT  TO,  THE
REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT. AS USED  HEREIN,  THE TERMS
"OFFSHORE  TRANSACTION,"  "UNITED  STATES" AND "U.S.  PERSON"  HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.


                                       A-1


<PAGE>




                                                                 CUSIP No.:_____

                                ACQUISITION CORP.
                 12% SENIOR SUBORDINATED NOTE DUE 2008, SERIES A

No._______                                                         $___________

                  ACQUISITION  CORP.,  a Delaware  corporation  (the  "Company,"
which term includes any successor entities),  for value received promises to pay
to or registered assigns the principal sum of
        Dollars on January 15, 2008.

                  Interest Payment Dates: July 15 and January 15, commencing
July 15, 1998

                  Record Dates:  July 1 and January 1

                  Reference  is  made to the  further  provisions  of this  Note
contained  herein,  which will for all  purposes  have the same effect as if set
forth at this place.

                  IN WITNESS  WHEREOF,  the  Company  has caused this Note to be
signed manually or by facsimile by its duly authorized officers.

                                                     ACQUISITION CORP.


                                                     By:
                                                        -------------------
                                                        Name:
                                                        Title:


                                                     By:
                                                        -------------------
                                                        Name:
                                                        Title:
Dated:  [month date], [year]


                                       A-2


<PAGE>




Certificate of Authentication

                  This is one of the 12 % Senior  Subordinated  Notes  due 2008,
Series A, referred to in the within-mentioned Indenture.

                                                 STATE STREET BANK AND TRUST
                                                   COMPANY, as Trustee

                                                 By:
                                                    ------------------------
                                                      Authorized Signatory

Date of Authentication:  [month date], [year]


                                       A-3


<PAGE>




                              (REVERSE OF SECURITY)

                 12% Senior Subordinated Note due 2008, Series A


                  Capitalized  terms used and not otherwise defined herein shall
have the  meanings  ascribed to them in the  Indenture,  dated as of January 29,
1998  (the  "Indenture"),  and as  amended  from  time  to  time,  by and  among
Acquisition  corp.,  a Delaware  corporation  (the  "Company"),  the  Subsidiary
Guarantors  named  therein and State Street Bank and Trust  Company,  as trustee
(the "Trustee").

                  (1)  Interest.  The Company  promises  to pay  interest on the
principal amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which  interest has been paid or,
if no interest  has been paid,  from  January  29,  1998.  The Company  will pay
interest semi-annually in arrears on each Interest Payment Date, commencing July
15,  1998.  Interest  will be computed on the basis of a 360-day  year of twelve
30-day  months and, in the case of a partial  month,  the actual  number of days
elapsed.

                  The Company  shall pay  interest on overdue  principal  and on
overdue  installments  of interest from time to time on demand at the rate borne
by the Notes and on overdue  installments  of  interest  (without  regard to any
applicable grace periods) to the extent lawful.

                  (2) Method of Payment.  The Company  shall pay interest on the
Notes (except defaulted  interest) to the Persons who are the registered Holders
at the close of business on the Record Date  immediately  preceding the Interest
Payment  Date even if the Notes are  cancelled  on  registration  of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the  Registration  Rights  Agreement))  after such  Record  Date.  Holders  must
surrender  Notes to a Paying Agent to collect  principal  payments.  The Company
shall pay  principal  and  premium,  if any, and interest in money of the United
States  that at the time of  payment is legal  tender for  payment of public and
private debts ("U.S. Legal Tender").  However, the Company may pay principal and
premium,  if any, and interest by check payable in such U.S.  Legal Tender.  The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.

                  (3) Paying Agent and  Registrar.  Initially,  the Trustee will
act as Paying  Agent and  Registrar.  The Company  may change any Paying  Agent,
Registrar or co-Registrar without notice to the Holders.


                                       A-4


<PAGE>




                  (4)  Indenture.   The  Company  issued  the  Notes  under  the
Indenture.  This Note is one of a duly authorized  issue of Notes of the Company
designated as its 12% Senior Subordinated Notes due 2008, Series A (the "Initial
Notes"),  limited  (except as otherwise  provided in the Indenture) in aggregate
principal  amount to $150,000,000  which may be issued under the Indenture.  The
Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted
Notes,  as defined  below,  issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes, the Private Exchange Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture.  The terms of the Notes  include  those stated in the  Indenture  and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss.  77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture.  Notwithstanding  anything  to the  contrary  herein,  the  Notes are
subject to all such terms,  and Holders of Notes are  referred to the  Indenture
and the TIA for a  statement  of such  terms.  The Notes are  general  unsecured
obligations of the Company. Payment on each Note is guaranteed on a senior basis
by the  Subsidiary  Guarantors  pursuant  to Article 12 of the  Indenture.  Each
Holder,  by  accepting  a Note,  agrees  to be  bound  by all of the  terms  and
provisions  of the  Indenture,  as the same may be amended  from time to time in
accordance with its terms.

                  (5) Redemption. (a) The Notes are 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 years
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%

                  (b) 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, up to
35% 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; pro-


                                       A-5


<PAGE>




vided,  that  at  least  65% 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.

                  (c) Optional  Redemption  Prior to Consummation of the Merger.
Upon  termination  of the Merger  Agreement,  or upon the  Company's  reasonable
determination  that the Merger cannot or will not be  consummated by October 29,
1998,  the  Company,  at its  option,  may redeem the Notes in whole at any time
prior to October 29,  1998,  upon not less than 10 nor more than 60 days' notice
(but in no event after October 29, 1998), at a redemption price of 102.5% of the
principal  amount  thereof,  plus  accrued  and unpaid  interest  to the date of
redemption.

                  (d)  Mandatory  Redemption if Merger not  Consummated.  In the
event that the Merger is not  consummated  on or before  October 29,  1998,  the
Company shall immediately  redeem the Notes in whole at a Redemption Price equal
to 102.5% of the principal amount of the Notes, plus accrued and unpaid interest
to the Redemption Date.

                  (6) Notice of Redemption.  Notice of redemption will be mailed
at least 30 days (or, prior to consummation of the Merger, at least 10 days) but
not more than 60 days before the  Redemption  Date to each Holder of Notes to be
redeemed at its registered  address.  Notes in denominations  larger than $1,000
may be redeemed in part.

                  Except  as set  forth  in the  Indenture,  if  monies  for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption  Date,  then,  unless the Company
defaults in the payment of such Redemption Price plus accrued interest,  if any,
the Notes called for redemption  will cease to bear interest from and after such
Redemption  Date and the only  right of the  Holders  of such  Notes  will be to
receive payment of the Redemption Price plus accrued interest, if any.

                  (7)  Offers  to  Purchase.  Sections  4.15  and  4.16  of  the
Indenture  provide that,  after certain Asset Sales and upon the occurrence of a
Change of Control,  and subject to further  limitations  contained therein,  the
Company  will  make an  offer  to  purchase  certain  amounts  of the  Notes  in
accordance with the procedures set forth in the Indenture.

                  (8) Registration Rights. Pursuant to the Registration Rights
Agreement among the Company, the Subsidiary Guarantors and the Initial
Purchasers, the Company and the Sub-


                                       A-6


<PAGE>




sidiary Guarantors will be obligated to consummate an exchange offer pursuant to
which the Holder of this Note shall have the right to exchange this Note for the
Company's 12% Senior  Subordinated  Notes due 2008, Series B (the  "Unrestricted
Notes"),  which will be registered  under the Securities  Act, in like principal
amount and having terms identical in all material respects as the Initial Notes.
The Holders of the Initial Notes shall be entitled to receive certain additional
interest  payments in the event such exchange offer is not  consummated and upon
certain other  conditions,  all pursuant to and in accordance  with the terms of
the Registration Rights Agreement.

                  (9)  Denominations;  Transfer;  Exchange.  The  Notes  are  in
registered  form,  without  coupons,  and  (except  Notes  issued as  payment of
Interest) in denominations of $1,000 and integral  multiples of $1,000. A Holder
shall  register  the  transfer of or exchange  of Notes in  accordance  with the
Indenture.  The Registrar may require a Holder,  among other things,  to furnish
appropriate  endorsements  and transfer  documents  and to pay certain  transfer
taxes or  similar  governmental  charges  payable  in  connection  therewith  as
required  by law or as  permitted  by the  Indenture.  The  Registrar  need  not
register the transfer of or exchange of any Notes or portions  thereof  selected
for redemption  except for the unredeemed  portion of any Note being redeemed in
part.

                  (10) Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.

                  (11) Unclaimed Money. If money for the payment of principal or
interest  remains  unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company.  After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.

                  (12) Discharge Prior to Redemption or Maturity. If the Company
at any time  deposits  with the Trustee  U.S.  Legal  Tender or U.S.  Government
Obligations  sufficient  to pay the  principal  of and  interest on the Notes to
redemption or maturity and complies  with the other  provisions of the Indenture
relating thereto,  the Company will be discharged from certain provisions of the
Indenture and the Notes  (including  certain  covenants,  but  including,  under
certain circumstances,  their obligation to pay the principal of and interest on
the Notes but  without  affecting  the rights of the  Holders  to  receive  such
amounts from such deposits).

                  (13) Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written con-


                                       A-7


<PAGE>




sent of the Holders of not less than a majority in aggregate principal amount of
the  Notes  then  outstanding,  and any past  Default  or Event  of  Default  or
noncompliance  with any provision may be waived with the written  consent of the
Holders of not less than a majority in aggregate  principal  amount of the Notes
then  outstanding.  Without  notice to or consent  of any  Holder,  the  parties
thereto  may amend or  supplement  the  Indenture  or the Notes to,  among other
things, cure any ambiguity, defect or inconsistency,  provide for uncertificated
Notes  in  addition  to or in  place  of  certificated  Notes,  comply  with any
requirements of the Commission in order to effect or maintain the  qualification
of the  Indenture  under the TIA or comply with Section 5.01 of the Indenture or
make any other change that does not adversely affect the rights of any Holder of
a Note in any material respect.

                  (14)  Restrictive  Covenants.  The Indenture  imposes  certain
limitations on the ability of the Company and the  Subsidiaries  to, among other
things, incur additional  Indebtedness,  make payments in respect of its Capital
Stock or certain Indebtedness,  make certain Investments, create or incur liens,
enter into  transactions  with  Affiliates,  create  dividend  or other  payment
restrictions  affecting  Restricted  Subsidiaries,  issue Preferred Stock of its
Subsidiaries, and on the ability of the Company to merge or consolidate with any
other Person or sell, assign,  transfer,  lease,  convey or otherwise dispose of
all or substantially all of the Company's and its Subsidiaries'  assets or adopt
a plan of  liquidation.  Such  limitations  are subject to a number of important
qualifications  and exceptions.  Pursuant to Section 4.06 of the Indenture,  the
Company must annually report to the Trustee on compliance with such limitations.

                  (15)  Subordination.  Upon  effectiveness  of the  Merger  (as
defined in the Indenture),  the Notes are  subordinated in right of payment,  in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash  Equivalents of all  Obligations on Senior  Indebtedness of
the Company,  whether  outstanding  on the date of the  Indenture or  thereafter
created, incurred,  assumed or guaranteed.  Each Holder by its acceptance hereof
agrees to be bound by such  provisions and authorizes and expressly  directs the
Trustee,  on its behalf,  to take such action as may be necessary or appropriate
to effectuate the  subordination  provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.

                  (16) Successors.  When a successor assumes, in accordance with
the Indenture,  all the obligations of its  predecessor  under the Notes and the
Indenture, the predecessor,


                                       A-8


<PAGE>




subject to certain exceptions, will be released from those obligations.

                  (17)  Defaults  and  Remedies.  Except  as  set  forth  in the
Indenture,  if an Event of Default occurs and is continuing,  the Trustee or the
Holders of not less than 25% in principal  amount of Notes then  outstanding may
declare all the Notes to be due and payable in the manner,  at the time and with
the effect  provided  in the  Indenture.  Holders of Notes may not  enforce  the
Indenture or the Notes except as provided in the  Indenture.  The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
reasonably  satisfactory  to it.  The  Indenture  permits,  subject  to  certain
limitations  therein  provided,  Holders of a majority  in  aggregate  principal
amount of the Notes then  outstanding  to direct the Trustee in its  exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of principal
or interest  when due,  for any reason or a Default in  compliance  with Article
Five of the  Indenture) if it  determines  that  withholding  notice is in their
interest.

                  (18) Trustee  Dealings  with  Company.  The Trustee  under the
Indenture,  in its  individual  or any other  capacity,  may become the owner or
pledgee of Notes and may otherwise deal with the Company,  its  Subsidiaries  or
their respective Affiliates as if it were not the Trustee.

                  (19)  No  Recourse  Against  Others.  No  partner,   director,
officer,  employee or  stockholder,  as such,  of the Company or any  Subsidiary
Guarantor,  as such, shall have any liability for any obligations of the Company
or any Subsidiary  Guarantor under the Notes,  the Indenture,  the Guarantees or
the  Registration  Rights Agreement or for any claim based on, in respect of, or
by reason  of,  such  obligations  or their  creation.  Each  Holder of Notes by
accepting a Note waives and releases all such liability.  The waiver and release
are part of the consideration for the issuance of the Notes.

                  (20) Guarantees. This Note will be entitled to the benefits of
certain  Guarantees,  if any, made for the benefit of the Holders.  Reference is
hereby  made  to  the  Indenture  for a  statement  of  the  respective  rights,
limitations  of rights,  duties and  obligations  thereunder  of the  Subsidiary
Guarantors, the Trustee and the Holders.

                  (21)  Authentication.  This Note shall not be valid  until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.


                                       A-9


<PAGE>




                  (22)  Governing  Law.  This  Note and the  Indenture  shall be
governed by and construed in accordance  with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to  principles  of conflict of laws.  Each of the parties  hereto and the
Holders  agree to submit to the  jurisdiction  of the courts of the State of New
York in any action or proceeding arising out of or relating to this Note.

                  (23) Abbreviations and Defined Terms. Customary  abbreviations
may be used in the name of a Holder of a Note or an  assignee,  such as: TEN COM
(= tenants in common),  TEN ENT (= tenants by the  entireties),  JT TEN (= joint
tenants  with  right of  survivorship  and not as tenants  in  common),  CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

                  (24) CUSIP Numbers.  Pursuant to a recommendation  promulgated
by the Committee on Uniform Security Identification  Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience  to the Holders
of the Notes.  No  representation  is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.

                  The Company  will furnish to any Holder of a Note upon written
request and without charge a copy of the  Indenture,  which has the text of this
Note.  Requests  may be made to:  ACQUISITION  CORP.,  c/o Weiss,  Peck & Greer,
L.L.C., One New York Plaza, New York, New York 10004.


                                      A-10


<PAGE>




                                 ASSIGNMENT FORM


                  If you the Holder want to assign  this Note,  fill in the form
below and have your signature guaranteed:

I or we assign and transfer this Note to:

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

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

-----------------------------
                  (Print or type name, address and zip code and
                  social security or tax ID number of assignee)

and  irrevocably  appoint   _______________________________________,   agent  to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.


Dated: _____________________  Signed:___________________________
                                (Sign exactly as your name appears
                                 on the other side of this Note)

Signature Guarantee:____________________________________________

                  Signature  must  be  guaranteed  by  an  "eligible   guarantor
institution,"  that is, a bank,  stockbroker,  savings and loan  association  or
credit union  meeting the  requirements  of the  Registrar,  which  requirements
include membership or participation in the Securities  Transfer Agents Medallion
Program  ("STAMP")  or  such  other  "signature  guarantee  program"  as  may be
determined by the Registrar in addition to, or in substitution  for, STAMP,  all
in accordance with the Securities Exchange Act of 1934, as amended.

                  In connection  with any transfer of this Note occurring  prior
to the date  which is the  earlier  of (i) the  date of the  declaration  by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the  "Securities  Act")  covering  resales of this Note
(which  effectiveness shall not have been suspended or terminated at the date of
the  transfer)  and (ii) the second  anniversary  of the Issue  Date  (provided,
however,  that neither the Company nor any affiliate of the Company has held any
beneficial interest in such Note, or portion thereof, at any time on or prior to
the second anniversary of the Issue Date), the undersigned  confirms that it has
not utilized any general  solicitation or general advertising in connection with
the transfer:


                                      A-11


<PAGE>




                               [Check One]

(1)        __     to the Company or a Subsidiary thereof; or

(2)        __     pursuant to and in compliance with Rule 144A under the
                  Securities Act of 1933, as amended; or

(3)        __     to an institutional "accredited investor" (as defined in Rule
                  501(a)(1), (2), (3) or (7) under the Securities Act of 1933,
                  as amended) that has furnished to the Trustee a signed letter
                  containing certain representations and agreements (the form
                  of which letter can be obtained from the Trustee); or

(4)        __     outside the United states to a "foreign person" in compliance
                  with Rule 904 of Regulation S under the Securities Act of
                  1933, as amended; or

(5)        __     pursuant to the exemption from registration provided by Rule
                  144 under the Securities Act of 1933, as amended; or

(6)        __     pursuant to an effective registration statement under the
                  Securities Act of 1933, as amended; or

(7)               __  pursuant   to  another   available   exemption   from  the
                  registration  requirements  of the  Securities Act of 1933, as
                  amended.

and unless the box below is checked,  the undersigned confirms that such Note is
not being  transferred  to an  "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):

         |_|  The transferee is an Affiliate of the Company.

Unless one of the items is checked,  the Trustee  will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided,  however, that if item (3), (4), (5) or (7)
is checked,  the Company or the Trustee may require,  prior to  registering  any
such  transfer  of the  Notes,  in their sole  discretion,  such  written  legal
opinions,  certifications (including an investment letter in the case of box (3)
or (4)) and other  information  as the  Trustee or the Company  have  reasonably
requested to confirm that such  transfer is being made  pursuant to an exemption
from, or in a transaction not subject to, the  registration  requirements of the
Securities Act of 1933, as amended.


                                      A-12


<PAGE>




                  If none of the  foregoing  items are  checked,  the Trustee or
Registrar shall not be obligated to register this Note in the name of any person
other  than the  Holder  hereof  unless  and  until the  conditions  to any such
transfer of  registration  set forth herein and in Section 2.17 of the Indenture
shall have been satisfied.

Dated:_____________________       Signed:__________________________________
                                        (Sign exactly as your name appears
                                         on the other side of this Note)

Signature Guarantee:


              TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

                  The undersigned  represents and warrants that it is purchasing
this Note for its own account or an account  with  respect to which it exercises
sole  investment  discretion  and that it and any such  account is a  "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933,  as amended  and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges  that it has received such information  regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request  such  information  and that it is aware that the  transferor  is
relying upon the undersigned's  foregoing  representations in order to claim the
exemption from registration provided by Rule 144A.

Dated: __________________                    ________________________________
                                              NOTICE: To be executed by
                                                      an executive officer




                                      A-13


<PAGE>




                      [OPTION OF HOLDER TO ELECT PURCHASE]


                  If you  want to  elect  to have  this  Note  purchased  by the
Company  pursuant to Section  4.15 or Section 4.16 of the  Indenture,  check the
appropriate box:

                  Section 4.15 [     ]
                  Section 4.16 [     ]

                  If you want to elect to have only part of this Note  purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture,  state
the amount you elect to have purchased:


$-------------------


Dated: _________________                     _________________________________
                                               NOTICE: The signature on this
                                               assignment must correspond with
                                               the name as it appears upon the
                                               face of the within Note in every
                                               particular without alteration or
                                               enlargement or any change
                                               whatsoever and be guaranteed.


Signature Guarantee:_______________________________



                                      A-14


<PAGE>




                                                                       EXHIBIT B

                                                         CUSIP No.:___________

                                ACQUISITION CORP.
                 12% SENIOR SUBORDINATED NOTE DUE 2008, SERIES B

No._________________                                                $_________

                  ACQUISITION  CORP.,  a Delaware  corporation  (the  "Company,"
which term includes any successor entities),  for value received promises to pay
to or registered assigns the principal sum of
        Dollars on January 15, 2008.

                  Interest Payment Dates: July 15 and January 15, commencing
July 15, 1998

                  Record Dates: July 1 and January 1

                  Reference  is  made to the  further  provisions  of this  Note
contained  herein,  which will for all  purposes  have the same effect as if set
forth at this place.

                  IN WITNESS  WHEREOF,  the  Company  has caused this Note to be
signed manually or by facsimile by its duly authorized officers.

                                                     ACQUISITION CORP.



                                                     By:
                                                        ----------------------
                                                        Name:
                                                        Title:


                                                     By:
                                                        ----------------------
                                                        Name:
                                                        Title:

Dated:


                                       B-1


<PAGE>




Certificate of Authentication

                  This is one of the 12%  Senior  Subordinated  Notes  due 2008,
Series B, referred to in the within-mentioned Indenture.


                                                STATE STREET BANK AND TRUST
                                                   COMPANY, as Trustee

                                                By:
                                                   ---------------------------
                                                       Authorized Signatory

Date of Authentication:


                                       B-2


<PAGE>




                              (REVERSE OF SECURITY)

                 12% Senior Subordinated Note due 2008, Series B


                  Capitalized  terms used and not otherwise defined herein shall
have the  meanings  ascribed to them in the  Indenture,  dated as of January 29,
1998 (the  "Indenture"),  and as amended from time to time,  by and among Safety
Components  International,  Inc., a Delaware  corporation (the  "Company"),  the
Subsidiary  Guarantors named therein and State Street Bank and Trust Company, as
trustee (the "Trustee").

                  (1)  Interest.  The Company  promises  to pay  interest on the
principal amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which  interest has been paid or,
if no interest  has been paid,  from  January  29,  1998.  The Company  will pay
interest semi-annually in arrears on each Interest Payment Date, commencing July
15,  1998.  Interest  will be computed on the basis of a 360-day  year of twelve
30-day  months and, in the case of a partial  month,  the actual  number of days
elapsed.

                  The Company  shall pay  interest on overdue  principal  and on
overdue  installments  of interest from time to time on demand at the rate borne
by the Notes and on overdue  installments  of  interest  (without  regard to any
applicable grace periods) to the extent lawful.

                  (2) Method of Payment.  The Company  shall pay interest on the
Notes (except defaulted  interest) to the Persons who are the registered Holders
at the close of business on the Record Date  immediately  preceding the Interest
Payment  Date even if the Notes are  cancelled  on  registration  of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect  principal  payments.  The Company shall pay principal
and premium, if any, and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S.  Legal
Tender").  However,  the Company may pay  principal  and  premium,  if any,  and
interest by check payable in such U.S. Legal Tender. The Company may deliver any
such  interest  payment  to the  Paying  Agent  or to a Holder  at the  Holder's
registered address.

                  (3) Paying Agent and  Registrar.  Initially,  the Trustee will
act as Paying  Agent and  Registrar.  The Company  may change any Paying  Agent,
Registrar or co-Registrar without notice to the Holders.

                  (4)  Indenture.   The  Company  issued  the  Notes  under  the
Indenture.  This Note is one of a duly authorized issue of Exchange Notes of the
Company designated as its 12% Senior  Subordinated Notes due 2008, Series B (the
"Unrestricted Notes"), limited (except as otherwise provided in the Inden-


                                       B-3


<PAGE>




ture) in aggregate  principal amount to $150,000,000,  which may be issued under
the  Indenture.  The Notes include the 12% Senior  Subordinated  Notes due 2008,
Series A (the "Initial Notes"), the Private Exchange Notes, and the Unrestricted
Notes,  issued in exchange for the Initial  Notes  pursuant to the  Registration
Rights  Agreement.  The  Initial  Notes,  the  Private  Exchange  Notes  and the
Unrestricted  Notes  are  treated  as a single  class of  securities  under  the
Indenture.  The terms of the Notes  include  those stated in the  Indenture  and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss.  77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture.  Notwithstanding  anything  to the  contrary  herein,  the  Notes are
subject to all such terms,  and Holders of Notes are  referred to the  Indenture
and the TIA for a  statement  of such  terms.  The Notes are  general  unsecured
obligations of the Company. Payment on each Note is guaranteed on a senior basis
by the  Subsidiary  Guarantors  pursuant  to Article 12 of the  Indenture.  Each
Holder,  by  accepting  a Note,  agrees  to be  bound  by all of the  terms  and
provisions  of the  Indenture,  as the same may be amended  from time to time in
accordance with its terms.

                  (5) Redemption. (a) The Notes are 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 years
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%

                  (b) 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, up to
35% 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%
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.


                                       B-4


<PAGE>




                  (c) Optional  Redemption  Prior to Consummation of the Merger.
Upon  termination  of the Merger  Agreement,  or upon the  Company's  reasonable
determination  that the Merger cannot or will not be  consummated by October 29,
1998,  the  Company,  at its  option,  may redeem the Notes in whole at any time
prior to October 29,  1998,  upon not less than 10 nor more than 60 days' notice
(but in no event after October 29, 1998), at a redemption price of 102.5% of the
principal  amount  thereof,  plus  accrued  and unpaid  interest  to the date of
redemption.

                  (d)  Mandatory  Redemption if Merger not  Consummated.  In the
event that the merger is not  consummated  on or before  October 29,  1998,  the
Company shall immediately  redeem the Notes in whole at a Redemption Price equal
to 102.5% of the principal amount of the Notes, plus accrued and unpaid interest
to the Redemption Date.

                  (6) Notice of Redemption.  Notice of redemption will be mailed
at least 30 days (or, prior to consummation of the Merger, at least 10 days) but
not more than 60 days before the  Redemption  Date to each Holder of Notes to be
redeemed at its registered  address.  Notes in denominations  larger than $1,000
may be redeemed in part.

                  Except  as set  forth  in the  Indenture,  if  monies  for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption  Date,  then,  unless the Company
defaults in the payment of such Redemption Price plus accrued interest,  if any,
the Notes called for redemption  will cease to bear interest from and after such
Redemption  Date and the only  right of the  Holders  of such  Notes  will be to
receive payment of the Redemption Price plus accrued interest, if any.

                  (7)  Offers  to  Purchase.  Sections  4.15  and  4.16  of  the
Indenture  provide that,  after certain Asset Sales and upon the occurrence of a
Change of Control,  and subject to further  limitations  contained therein,  the
Company  will  make an  offer  to  purchase  certain  amounts  of the  Notes  in
accordance with the procedures set forth in the Indenture.

                  (8)  Denominations;  Transfer;  Exchange.  The  Notes  are  in
registered  form,  without  coupons,  and  (except  Notes  issued as  payment of
Interest) in denominations of $1,000 and integral  multiples of $1,000. A Holder
shall  register  the  transfer of or exchange  of Notes in  accordance  with the
Indenture.  The Registrar may require a Holder,  among other things,  to furnish
appropriate  endorsements  and transfer  documents  and to pay certain  transfer
taxes or similar  governmental  charges payable in connection therewith required
by law or as permitted by the  Indenture.  The  Registrar  need not register the
transfer  of  or  exchange  of  any  Notes  or  portions  thereof  selected  for
redemption,  except for the  unredeemed  portion of any Note being  redeemed  in
part.


                                       B-5


<PAGE>




                  (9) Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.

                  (10) Unclaimed Money. If money for the payment of principal or
interest  remains  unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company.  After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.

                  (11) Discharge Prior to Redemption or Maturity. If the Company
at any time  deposits  with the Trustee  U.S.  Legal  Tender or U.S.  Government
Obligations  sufficient  to pay the  principal  of and  interest on the Notes to
redemption or maturity and complies  with the other  provisions of the Indenture
relating thereto,  the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants,  including,  under certain
circumstances,  their  obligation  to pay the  principal  of and interest on the
Notes but without  affecting  the rights of the Holders to receive  such amounts
from such deposit).

                  (12)  Amendment;   Supplement;   Waiver.  Subject  to  certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or  supplemented  with the  written  consent  of the  Holders of not less than a
majority in aggregate  principal amount of the Notes then  outstanding,  and any
past  Default or Event of Default or  noncompliance  with any  provision  may be
waived  with the  written  consent of the Holders of not less than a majority in
aggregate  principal amount of the Notes then outstanding.  Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or  the  Notes  to,  among  other  things,   cure  any   ambiguity,   defect  or
inconsistency,  provide for  uncertificated  Notes in addition to or in place of
certificated  Notes,  comply with any requirements of the Commission in order to
effect or maintain the  qualification  of the Indenture  under the TIA or comply
with  Section  5.01 of the  Indenture  or make any  other  change  that does not
adversely affect the rights of any Holder of a Note in any material respect.

                  (13)  Restrictive  Covenants.  The Indenture  imposes  certain
limitations on the ability of the Company and the  Subsidiaries  to, among other
things, incur additional  Indebtedness,  make payments in respect of its Capital
Stock or certain Indebtedness,  make certain Investments, create or incur liens,
enter into  transactions  with  Affiliates,  create  dividend  or other  payment
restrictions  affecting  Restricted  Subsidiaries,  issue Preferred Stock of its
Subsidiaries, and on the ability of the Company to merge or consolidate with any
other Person or sell, assign,  transfer,  lease,  convey or otherwise dispose of
all or substantially all of the Company's and its Subsidiaries'  assets or adopt
a plan of  liquidation.  Such  limitations  are subject to a number of important
qualifications  and exceptions.  Pursuant to Section 4.06 of the Indenture,  the
Company must an-


                                       B-6


<PAGE>




nually report to the Trustee on compliance with such limitations.

                  (14)  Subordination.  Upon  effectiveness  of the  Merger  (as
defined in the Indenture),  the Notes are  subordinated in right of payment,  in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash  Equivalents of all  Obligations on Senior  Indebtedness of
the Company,  whether  outstanding  on the date of the  Indenture or  thereafter
created, incurred,  assumed or guaranteed.  Each Holder by its acceptance hereof
agrees to be bound by such  provisions and authorizes and expressly  directs the
Trustee,  on its behalf,  to take such action as may be necessary or appropriate
to effectuate the  subordination  provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.

                  (15) Successors.  When a successor assumes, in accordance with
the Indenture,  all the obligations of its  predecessor  under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.

                  (16)  Defaults  and  Remedies.  Except  as  set  forth  in the
Indenture,  if an Event of Default occurs and is continuing,  the Trustee or the
Holders of not less than 25% in principal  amount of Notes then  outstanding may
declare all the Notes to be due and payable in the manner,  at the time and with
the effect  provided  in the  Indenture.  Holders of Notes may not  enforce  the
Indenture or the Notes except as provided in the  Indenture.  The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
reasonably  satisfactory  to it.  The  Indenture  permits,  subject  to  certain
limitations  therein  provided,  Holders of a majority  in  aggregate  principal
amount of the Notes then  outstanding  to direct the Trustee in its  exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of principal
or interest  when due,  for any reason or a Default in  compliance  with Article
Five of the  Indenture) if it  determines  that  withholding  notice is in their
interest.

                  (17) Trustee Dealings with the Company.  The Trustee under the
Indenture,  in its  individual  or any other  capacity,  may become the owner or
pledgee of Notes and may otherwise deal with the Company,  its  Subsidiaries  or
their respective Affiliates as if it were not the Trustee.

                  (18)  No  Recourse  Against  Others.  No  partner,   director,
officer,  employee or  stockholder,  as such,  of the Company or any  Subsidiary
Guarantor,  as such, shall have any liability for any obligations of the Company
or any Subsidiary  Guarantor under the Notes,  the Indenture,  the Guarantees or
the  Registration  Rights Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation.


                                       B-7


<PAGE>




Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release  are part of the  consideration  for the  issuance of the
Notes.

                  (19) Guarantees. This Note will be entitled to the benefits of
certain  Guarantees,  if any, made for the benefit of the Holders.  Reference is
hereby  made  to  the  Indenture  for a  statement  of  the  respective  rights,
limitations  of rights,  duties and  obligations  thereunder  of the  Subsidiary
Guarantors, the Trustee and the Holders.

                  (20)  Authentication.  This Note shall not be valid  until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.

                  (21)  Governing  Law.  This  Note and the  Indenture  shall be
governed by and construed in accordance  with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to  principles  of conflict of laws.  Each of the parties  hereto and the
Holders  agree to submit to the  jurisdiction  of the courts of the State of New
York in any action or proceeding arising out of or relating to this Note.

                  (22) Abbreviations and Defined Terms. Customary  abbreviations
may be used in the name of a Holder of a Note or an  assignee,  such as: TEN COM
(= tenants in common),  TEN ENT (= tenants by the  entireties),  JT TEN (= joint
tenants  with  right of  survivorship  and not as tenants  in  common),  CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

                  (23) CUSIP Numbers.  Pursuant to a recommendation  promulgated
by the Committee on Uniform Security Identification  Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience  to the Holders
of the Notes.  No  representation  is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.

                  The Company  will furnish to any Holder of a Note upon written
request and without charge a copy of the  Indenture,  which has the text of this
Note.  Requests  may be made to:  ACQUISITION  CORP.,  c/o Weiss,  Peck & Greer,
L.L.C., One New York Plaza, New York, New York 10004.


                                       B-8


<PAGE>




                                 ASSIGNMENT FORM


                  If you the Holder want to assign  this Note,  fill in the form
below and have your signature guaranteed:

I or we assign and transfer this Note to:

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

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

--------------------------------------
                  (Print or type name, address and zip code and
                  social security or tax ID number of assignee)

and  irrevocably  appoint   _______________________________________,   agent  to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.


Dated:______________________       Signed:__________________________________
                                          (Sign exactly as your name appears
                                           on the other side of this Note)

Signature Guarantee:___________________________________

                  Signature  must  be  guaranteed  by  an  "eligible   guarantor
institution,"  that is, a bank,  stockbroker,  savings and loan  association  or
credit union  meeting the  requirements  of the  Registrar,  which  requirements
include  membership or participation in the Securities  Transfer Agent Medallion
Program  ("STAMP")  or  such  other  "signature  guarantee  program"  as  may be
determined by the Registrar in addition to, or in substitution  for, STAMP,  all
in accordance with the Securities Exchange Act of 1934, as amended.


                                       B-9


<PAGE>




                      [OPTION OF HOLDER TO ELECT PURCHASE]

                  If you  want to  elect  to have  this  Note  purchased  by the
Company  pursuant to Section  4.15 or Section 4.16 of the  Indenture,  check the
appropriate box:

                  Section 4.15 [     ]
                  Section 4.16 [     ]

                  If you want to elect to have only part of this Note  purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture,  state
the amount you elect to have purchased:


$-----------------------


Dated: _________________                     _________________________________
                                               NOTICE: The signature on this
                                               assignment must correspond with
                                               the name as it appears upon the
                                               face of the within Note in every
                                               particular without alteration or
                                               enlargement or any change
                                               whatsoever and be guaranteed.


Signature Guarantee:__________________________________


                                      B-10


<PAGE>




                                                                       EXHIBIT C


UNLESS  AND  UNTIL  IT IS  EXCHANGED  IN  WHOLE  OR IN PART  FOR  SECURITIES  IN
DEFINITIVE  FORM, THIS SECURITY MAY NOT BE TRANSFERRED  EXCEPT AS A WHOLE BY THE
DEPOSITORY  TO A  NOMINEE  OF THE  DEPOSITORY,  OR BY ANY  SUCH  NOMINEE  OF THE
DEPOSITORY,  OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY
SUCH  NOMINEE  TO  A  SUCCESSOR  DEPOSITORY  OR  A  NOMINEE  OF  SUCH  SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE COMPANY
OR ITS  AGENT  FOR  REGISTRATION  OF  TRANSFER,  EXCHANGE  OR  PAYMENT,  AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH  OTHER  ENTITY AS IS  REQUESTED  BY AN  AUTHORIZED
REPRESENTATIVE  OF DTC),  ANY TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO TRANSFERS IN WHOLE,  BUT
NOT IN  PART,  TO  NOMINEES  OF CEDE & CO.  OR TO A  SUCCESSOR  THEREOF  OR SUCH
SUCCESSOR'S  NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL  SECURITY SHALL BE
LIMITED TO  TRANSFERS  MADE IN  ACCORDANCE  WITH THE  RESTRICTIONS  SET FORTH IN
SECTION 2.17 OF THE INDENTURE.


                                       C-1


<PAGE>




                                                                       EXHIBIT D


                            Form of Certificate To Be
                          Delivered in Connection with
                    Transfers to Non-QIB Accredited Investors

                                                          ---------- --, ----

New York, New York

Ladies and Gentlemen:

                  In  connection  with  our  proposed  purchase  of  12%  Senior
Subordinated  Notes due 2008 (the "Notes") of ACQUISITION CORP. (the "Company"),
we confirm that:

                  1. We understand that any subsequent  transfer of the Notes is
         subject  to  certain  restrictions  and  conditions  set  forth  in the
         indenture  relating to the Notes (the  "Indenture") and the undersigned
         agrees to be bound by, and not to resell,  pledge or otherwise transfer
         the Notes except in compliance  with, such  restrictions and conditions
         and the Securities Act of 1933, as amended (the "Securities  Act"), and
         all applicable State securities laws.

                  2. We understand that the offer and sale of the Notes have not
         been  registered  under  the  Securities  Act or any  other  applicable
         securities  law,  and that the Notes may not be offered or sold  within
         the United States or to, or for the account or benefit of, U.S. persons
         except as permitted in the  following  sentence.  We agree,  on our own
         behalf  and on  behalf  of any  accounts  for  which we are  acting  as
         hereinafter  stated,  that if we should  sell any Notes,  we will do so
         only (i) to the  Company or any  subsidiary  thereof,  (ii)  inside the
         United States in accordance  with Rule 144A under the Securities Act to
         a person who we reasonably believe is a "qualified institutional buyer"
         (as defined in Rule 144A  promulgated  under the Securities Act), (iii)
         inside the United States to an institutional  "accredited investor" (as
         defined  below)  that,  prior  to  such  transfer,  furnishes  (or  has
         furnished  on its behalf by a U.S.  broker-dealer)  to the  Trustee (as
         defined  in  the   Indenture)  a  signed  letter   containing   certain
         representations and agreements relating to the restrictions on transfer
         of the Notes (the form of which letter can be


                                       D-1


<PAGE>




         obtained  from  the  Trustee),   (iv)  outside  the  United  States  in
         accordance  with  Rule  904  of  Regulation  S  promulgated  under  the
         Securities  Act,  (v)  pursuant  to  the  exemption  from  registration
         provided by Rule 144 under the Securities Act (if  available),  or (vi)
         pursuant to an effective  registration  statement  under the Securities
         Act, and we further  agree to provide to any person  purchasing  any of
         the Notes from us a notice  advising such purchaser that resales of the
         Notes are restricted as stated herein.

                  3. We understand that, on any proposed resale of any Notes, we
         will  be  required  to  furnish  to  the  Trustee,   the  Company  such
         certification,  legal opinions and other information as the Trustee and
         the Company may  reasonably  require to confirm that the proposed  sale
         complies with the foregoing  restrictions.  We further  understand that
         the Notes purchased by us will bear a legend to the foregoing effect.

                  4. We are an institutional  "accredited  investor" (as defined
         in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
         Act) and have such  knowledge and  experience in financial and business
         matters  as to be  capable  of  evaluating  the merits and risks of our
         investment  in the  Notes,  and we and any  accounts  for  which we are
         acting  are  each  able  to bear  the  economic  risk  of our or  their
         investment, as the case may be.

                  5. We are acquiring the Notes  purchased by us for our account
         or for  one  or  more  accounts  (each  of  which  is an  institutional
         "accredited  investor") as to each of which we exercise sole investment
         discretion.

                  6.  We  have  received  a  copy  of  the  Company's   Offering
         Memorandum  dated  January  22, 1998 and  acknowledge  that we have had
         access to such financial and other information,  and have been afforded
         the opportunity to ask such questions of representatives of the Company
         and receive  answers  thereto,  as we deem necessary in connection with
         our decision to purchase the Notes.


                                       D-2


<PAGE>




                  You,  the  Company,  the Trustee,  the Initial  Purchaser  and
others are entitled to rely upon this letter and are  irrevocably  authorized to
produce  this  letter  or  a  copy  hereof  to  any  interested   party  in  any
administrative  or legal  proceeding  or official  inquiry  with  respect to the
matters covered hereby.

                                                     Very truly yours,

                                                     [Name of Transferee]


                                                      By:
                                                         ---------------------
                                                         Name:
                                                         Title:


                                       D-3


<PAGE>




                                                                       EXHIBIT E

                       Form of Certificate To Be Delivered
                          in Connection with Transfers
                            Pursuant to Regulation S

                                                         ---------- --, ----


New York, New York

         Re:      ACQUISITION CORP. (the "Company")
                  12% Senior Subordinated Notes due 2008
                  (the "Notes")

Ladies and Gentlemen:

                  In connection with our proposed sale of $__________  aggregate
principal  amount of the  Notes,  we  confirm  that such sale has been  effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:

                  (1) the offer of the Notes was not made to a person in the
         United States;

                  (2) either (a) at the time the buy offer was  originated,  the
         transferee was outside the United States or we and any person acting on
         our behalf  reasonably  believed  that the  transferee  was outside the
         United States,  or (b) the  transaction  was executed in, on or through
         the facilities of a designated  offshore  securities market and neither
         we nor any person acting on our behalf knows that the  transaction  has
         been prearranged with a buyer in the United States;

                  (3) no directed  selling  efforts have been made in the United
         States in  contravention  of the  requirements  of Rule  903(b) or Rule
         904(b) of Regulation S, as applicable;

                  (4) the  transaction  is not part of a plan or scheme to evade
         the registration requirements of the Securities Act; and

                  (5)  we  have   advised  the   transferee   of  the   transfer
         restrictions applicable to the Notes.


                                       E-1


<PAGE>




                  You,  the Company and counsel for the Company are  entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any  administrative  or legal proceedings
or official  inquiry with respect to the matters covered  hereby.  Terms used in
this certificate have the meanings set forth in Regulation S.

                                                     Very truly yours,

                                                     [Name of Transferee]


                                                      By:
                                                         ---------------------
                                                          Authorized Signature





                                       E-2


<PAGE>




                                                                       EXHIBIT F

                                    GUARANTEE

                  For value  received,  the undersigned  hereby  unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States  dollars of principal  of,  premium,  if
any,  and  interest  on this Note (and  including  Additional  Interest  payable
thereon) in the  amounts  and at the times when due and  interest on the overdue
principal,  premium, if any, and interest,  if any, of this Note, if lawful, and
the payment or  performance  of all other  obligations  of the Company under the
Indenture  or the  Notes,  to the  Holder of this Note and the  Trustee,  all in
accordance with and subject to the terms and  limitations of this Note,  Article
Twelve of the Indenture and this Guarantee. This Guarantee will become effective
in  accordance  with  Article  Twelve of the  Indenture  and its terms  shall be
evidenced  therein.  This Guarantee  will be  subordinated  to Guarantor  Senior
Indebtedness,  as defined  in the  Indenture,  and in  accordance  with  Article
Thirteen thereof.  The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note.

                  Capitalized  terms used but not defined  herein shall have the
meanings  ascribed to them in the Indenture dated as of January 29, 1998,  among
Acquisition  corp.,  a Delaware  corporation,  the Subsidiary  Guarantors  named
therein and State Street Bank and Trust Company, as trustee (the "Trustee"),  as
amended or supplemented (the "Indenture").

                  The obligations of the undersigned to the Holders of Notes and
to the Trustee  pursuant to this  Guarantee  and the Indenture are expressly set
forth in Article  Twelve of the  Indenture  and  reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates.

                  THIS  GUARANTEE   SHALL  BE  GOVERNED  BY,  AND  CONSTRUED  IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  WITHOUT  GIVING  EFFECT TO
PRINCIPLES  OF CONFLICTS OF LAW.  Each  Subsidiary  Guarantor  hereby  agrees to
submit to the  jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Guarantee.

                  This  Guarantee is subject to release upon the terms set forth
in the Indenture.


                                       F-1


<PAGE>




                  IN WITNESS WHEREOF,  each Subsidiary  Guarantor has caused its
Guarantee to be duly executed.


Date:  ____________________


                                              [NAME OF SUBSIDIARY GUARANTOR],
                                                     as Guarantor


                                                By:
                                                   ---------------------------
                                                   Name:
                                                   Title:




                                       F-2


<PAGE>
<PAGE>




                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT


                  EMPLOYMENT AGREEMENT (this "Agreement"),  dated as of February
16, 1998, between ATC Group Services Inc., a Delaware Corporation ("Employer" or
"Company"),  Acquisition Holdings, Inc., a Delaware corporation ("Holdings") and
Nicholas J. Malino ("Executive").

                  WHEREAS, Acquisition Corp. has entered into an Agreement and
Plan of Merger dated November 26, 1997 (the "Merger Agreement") to, among other
things, acquire all of outstanding shares of common stock of the Company;

                  WHEREAS,  in connection  with the  acquisition,  Executive has
agreed to enter into an employment  contract with the Company upon the terms and
conditions set forth herein;

                  WHEREAS,  Holdings  has agreed to grant  certain  options  and
restricted  stock to the Executive in connection  with his  employment  with the
Company upon the terms and conditions set forth herein;


<PAGE>




                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
mutual covenants herein contained, the parties hereto agree as follows:

                  1. Employment  Term. The term of Executive's  employment under
this Agreement shall commence on the date hereof and expire on February 28, 2001
(the  "Employment  Term");  it being  understood,  however,  that to the  extent
Executive's  employment is terminated pursuant to Section 6, the Employment Term
shall cease. This Agreement shall  automatically  extend for successive one year
periods unless either party  provides  written notice of its intent not to renew
no later than ninety days prior to the expiration of the then current term.

                  2. Position, Duties, Responsibilities.

                     (a) Position.  Executive hereby accepts employment with
the Company as its President and Chief Executive  Officer in accordance with the
terms and  conditions  herein.  Executive  shall devote his best efforts and his
full professional time and attention (except for vacation,  sick leave and other
excused  leaves of  absence)  to the  performance  of the  services  customarily
incident to such office and  consistent  with past  practices and customs at the
Company and of such other duties as may be reasonably  assigned to the Executive
from  time to time by the  Board of  Directors  of the  Company  (the  "Board").
Company will provide office


                                        2


<PAGE>




facilities,  secretarial and clerical support consistent with past practices and
customs of the Company.

                           (b) Other Activities.  Except upon the prior written
consent of the Board, during the Employment Term,  Executive will not (i) accept
any other  employment,  or (ii)  engage,  directly or  indirectly,  in any other
business  activity  (whether  or not pursued for  pecuniary  advantage)  that is
competitive with, or that places him in a competing position to that of Company.
This clause shall not prohibit Executive from investing his assets in a publicly
traded  company,  so long as such investment does not include the performance of
services by Executive in the operation or affairs of the companies in which such
investments  are made,  or teaching,  writing or publicly  speaking,  so long as
these activities do not interfere or conflict with Executive's duties hereunder.

                  3. Compensation, Benefits, Expenses.

                     (a) Compensation.  In consideration of the services to be
rendered hereunder, Executive shall be paid a salary at the rate of $200,000 per
year  until  March 1, 1998,  and  thereafter  an annual  salary of not less than
$250,000,  payable in accordance with the Company's  payroll practices in effect
during the course of this Agreement.  Each year (commencing in 1999),  effective
March 1, Executive's annual salary shall increase by the percentage  increase of
the


                                       3


<PAGE>




Consumer  Price Index (All items)  ("CPI") for the area during the twelve  month
period prior to such date.

                     (b) Bonus.  As further compensation for the services of
Executive,  the Company  shall pay Executive  annual cash bonuses  determined as
follows and payable  within  ninety (90) days of the end of the relevant  fiscal
year:
                     (i) Executive shall be eligible to receive with respect to
each  fiscal year  during the term  hereof a cash bonus in an  aggregate  amount
equal to the Target  Bonus  Amount.  For any fiscal year the Target Bonus Amount
shall be equal to  $100,000 if the Company  achieves  EBITDA  equal to the Lower
EBITDA Target for such fiscal year and $250,000 if the Company  achieves  EBITDA
equal to or in excess of the Higher  EBITDA  Target for such fiscal year. If the
Company  achieves EBITDA for any fiscal year between the Lower EBITDA Target and
Higher  EBITDA  Target,  the Target Bonus Amount  shall equal  $150,000  times a
fraction, the numerator of which is the amount of EBITDA achieved by the Company
during  such fiscal  year in excess of the Lower  EBITDA  Target for such fiscal
year and the  denominator  of which is the Higher  EBITDA Target for such fiscal
year minus the Lower EBITDA Target for such fiscal year. If the Company achieves
EBITDA of less than the Lower EBITDA Target in any fiscal year, the Target Bonus
Amount for such fiscal year shall equal zero.  For fiscal 1999, the Lower EBITDA
Target  and  Higher  EBITDA  Target  shall  be  $27  million  and  $30  million,
respectively; and for each


                                       4


<PAGE>




fiscal year  thereafter  the Lower EBITDA  Target and Higher EBITDA Target shall
equal 115% of the Lower EBITDA  Target and Higher EBITDA  Target,  respectively,
for the prior  fiscal  year;  provided  that if  revenues  for any  fiscal  year
increase by more than 20% from the prior  fiscal year as a result of one or more
acquisitions  or mergers,  then the Lower EBITDA Target and Higher EBITDA Target
for  such  fiscal  year  shall  be  determined  in good  faith  by the  Board in
consultation  with Executive.  The EBITDA between and including the Lower EBITDA
Target  and Higher  EBITDA  Target is  hereinafter  referred  to as the  "EBITDA
Target".
                     (ii) For all purposes of this Agreement, EBITDA shall mean
income before  income taxes,  depreciation,  amortization  and interest  expense
computed from the audited  annual  financial  statements  of the Company.  Other
operating  target results for the 1999 fiscal year and future fiscal years shall
be determined in good faith by the Board in consultation  with Executive and may
include,  for example,  among other things,  maintaining the Company's technical
capacity and high quality  customer  service,  installation of a new MIS system,
hiring a chief financial officer and, if appropriate,  completing  acquisitions.
The parties will use their best efforts to establish other operating targets for
fiscal 1999 within 30 days after the date hereof.
                    (iii)  For  purposes  of  calculating  actual  annual  bonus
amounts to be paid hereunder for any fiscal


                                       5


<PAGE>




year,  66 2/3% of the Target  Bonus Amount for such fiscal year shall be paid to
Executive  based upon  achievement of the EBITDA Target for such fiscal year and
33 1/3% of the  Target  Bonus  Amount  for  such  fiscal  year  shall be paid to
Executive  based upon  achievement of both the EBITDA Target and other operating
targets for such fiscal year.

                     (c) Benefits.  As he becomes eligible therefor, the
Company shall provide  Executive with the right to participate in and to receive
benefits  from all  present and future  life,  vacation,  accident,  disability,
medical,  pension,  and savings plans and all similar  benefits  made  available
generally to  executives  of the  Company.  The amount and extent of benefits to
which Executive is entitled shall be governed by any applicable benefit plan, as
it may be amended from time to time.

                     (d) Leased Automobile.  The Company shall provide
Executive  during the Employment  Term with a leased  automobile  similar to the
vehicle provided to Employee at the commencement of this Agreement.

                     (e) Relocation Expenses.  The Company shall pay the
reasonable  expenses  incurred  by  Executive  in  connection  with  Executive's
relocation to New York City,  up to a maximum  dollar amount equal to the lowest
of three  bids  provided  by a moving  company  to  Executive  in  writing,  and
forwarded to the Company prior to Executive's relocation.


                                       6


<PAGE>




                     (f) Other Expenses.  The Company shall reimburse Executive
for reasonable  travel and other business  expenses incurred by Executive in the
performance  of his  duties  hereunder  in  accordance  with  Company's  general
policies,  as they may be  amended  from time to time  during the course of this
Agreement.

                     (g) Options. Holdings shall grant to Executive, on or
before March 31, 1998,  options  ("New  Options")  to purchase  Holdings  common
stock,  par value $0.01 per share  ("Holdings  Common  Stock"),  representing  a
maximum of 3.41% of the then common equity of Holdings on a fully diluted basis.
The New Options shall have an initial  exercise price of $12 per share and shall
be subject to adjustment upon any stock split, subdivision, combination or other
similar  event.  The New Options,  Holdings  Common  Stock issued upon  exercise
thereof and the Holdings  Restricted Common Stock referred to in Section 4 shall
be subject to restrictions on transfer and subject to the right of repurchase by
Holdings  on the  same  terms as  those  applicable  to  Holdings  Common  Stock
contained in the Employee Subscription Agreements dated January 20, 1998 (except
to the extent otherwise  provided herein with respect to the price to be paid to
Executive upon any such repurchase as set forth herein).
                     (i) One half of the New Options, exercisable for 1.7% of
the then common equity of Holdings on a fully


                                       7


<PAGE>




diluted basis (the "Time Vested  Options"),  shall vest in equal 25%  increments
over a four  year  period,  such  vesting  to  occur on each of the  first  four
anniversary  dates of the  commencement of the term of this Agreement;  provided
that all of such Time  Vested  Options  shall vest upon a Change of Control  and
provided  further that to the extent this  Agreement is  terminated  pursuant to
Section  6(e)  and a  Change  of  Control  occurs  within  six  months  of  such
termination  (x) any of such Time  Vested  Options as well as any other  options
that vest based on time that had been forfeited upon such  termination  shall be
reinstated  and  immediately  vest and (y)  Executive  shall  have the  right to
receive  for each  share of  Holdings  Common  Stock  theretofore  purchased  by
Holdings  upon such  termination  the  difference  between the amount  Executive
received from Holdings  pursuant to such purchase and the amount,  if any, to be
paid for one share of  Holdings  Common  Stock in such  Change of  Control.  For
purposes of this  Agreement,  Change of Control shall have the meaning set forth
in the Indenture,  dated January 29, 1998,  between  Acquisition Corp. and State
Street Bank and Trust Company, as trustee.
                     (ii) With respect to the other half of the New Options,
exercisable  for the other 1.7% of the then common equity of Holdings on a fully
diluted basis (the "Performance Based Options"),  such Performance Based Options
shall  vest  effective  as of each of the first  four  anniversary  dates of the
commencement of the term of this Agreement, if


                                       8


<PAGE>




the Company has achieved EBITDA for the immediately  preceding fiscal year equal
to at least the mid point of the Lower EBITDA  Target and Higher  EBITDA  Target
for such  fiscal  year.  If the Company  does not  achieve  such EBITDA for such
immediately  preceding  fiscal year, the Performance  Based Options  eligible to
vest for the fiscal year in question shall be forfeited.
                     (iii) Executive shall have the right to exercise any vested
New Option within ten (10) business days of a termination of employment pursuant
to Section 6, but not thereafter. Notwithstanding the provisions of the Employee
Subscription  Agreement  dated  January 20,  1998,  in the event of  termination
pursuant to Section  (6)(d) or (e), the purchase price to be paid by Holdings to
Executive  for any Holdings  Common Stock whether or not issued upon exercise of
any options  (including  the New  Options)  shall be the greater of the purchase
price of such Holdings Common Stock or the Fair Market Value thereof.
                     "Fair Market Value" shall mean, at any time, per share of
Holdings  Common Stock (a) the arithmetic  average of the daily last sale prices
of the  Holdings  Common  Stock  for  twenty  consecutive  trading  days  ending
immediately  prior to such time or, if no such sale takes  place on such  dates,
the average of the closing bid and asked  prices on such dates,  in each case as
officially  reported on the principal national  securities exchange on which the
Holdings Common


                                       9


<PAGE>




Stock is then listed or admitted to trading,  (b) if such Holdings  Common Stock
is not then listed or admitted to trading on any national  securities  exchange,
but is  designated  as a  national  market  system  security  by the  NASD,  the
arithmetic average of the daily last trading prices of the Holdings Common Stock
for twenty consecutive trading days ending immediately prior to such time, or if
there  shall  have been no trading on such  date,  the  average of the  reported
closing bid and asked  prices on such dates as shown by the  NASDAQ,  (c) if the
Holdings  Common  Stock is being  offered in an initial  public  offering  at or
within 20 days prior to such time,  the average  price of such  Holdings  Common
Stock per  share,  net of  underwriter's  discount  and  expenses,  sold in such
initial public offering, and (d) if the Holdings Common Stock is not then listed
or   admitted   to  trading  on  any   national   exchange   or  quoted  in  the
over-the-counter  market  and not  then  being  offered  in the  initial  public
offering,  the fair market value of the Holdings  Common Stock as  determined in
good faith by Holdings Board of Directors;  provided that  Executive  shall have
the  right,  within 7 days of  receiving  the Fair  Market  Value,  to  select a
nationally  recognized  investment  bank  reasonably  acceptable  to Holdings to
determine  the Fair  Market  Value.  To the extent that  Executive  elects to so
retain  such an  investment  bank,  then Fair  Market  Value shall mean the fair
market value chosen by such investment bank,  provided that the cost and expense
of


                                       10


<PAGE>




such  investment  bank  shall be borne by  Executive  if the fair  market  value
determined by such investment bank shall be 5% or more greater than or less than
the fair market value  previously  determined in good faith by Holdings Board of
Directors.

                     4. Grant of Holdings Restricted Common Stock. On February
5, 1998, the effective date of the merger of Acquisition Corp. with and into the
Company,  Holdings  issued to  Executive  33,896  shares of Holdings  Restricted
Common  Stock which shall vest on the dates set forth  below;  provided  that on
such date  Executive  shall then be  employed  by the  Company and to the extent
Executive's  employment  is  terminated  prior to any such  date,  the  Holdings
Restricted Common Stock scheduled to vest on such date shall be forfeited.

                               Number of Shares of
                               Holdings Restricted
                                  Common Stock
                       8,474. . . . . . . . .March 1, 1999
                       8,474. . . . . . . . .March 1, 2000
                       8,474. . . . . . . . .March 1, 2001
                       8,474. . . . . . . . .March 1, 2002

                     For purposes of Holding's repurchase right with respect to
such Holdings Restricted Common Stock, the original per share purchase price for
purposes of calculating Adjusted Purchase Price, as set forth in the Employee


                                       11


<PAGE>




Subscription  Agreement dated as of January 20, 1998,  shall be deemed to be $12
per share.

                     5. Special Bonus.

                     (a) Payment of Fiscal Year 1997 Bonus. The Company shall
pay to the Executive a special bonus (the "Fiscal Year 1997 Bonus") (x) no later
than June 1, 1998 or (y) to the extent the Company meets its budget for the
first fiscal quarter of 1999, during the first fiscal quarter of 1999. The
Fiscal Year 1997 Bonus shall equal $168,000.

                     (b) Release. Upon receipt of the Fiscal Year 1997 Bonus and
Holdings  Restricted  Common  Stock  specified  in Section 4 (whether or not any
Holdings  Restricted  Common  Stock  ultimately  vests),  Executive on behalf of
himself and his heirs,  successors  and  assigns,  hereby  releases  and forever
discharges  the  Company,  its  affiliates,  and its former,  present and future
shareholders,  officers,  directors,  successors,  assigns and predecessors (the
"Released Parties") of any and all claims,  actions,  causes of action, demands,
rights, damages, debts, compensation, costs or other expenses, including without
limitation  attorneys' fees, of any nature whatsoever,  known or unknown,  which
Executive  ever had or has  against  the  Released  Parties  arising  out of any
payments  (including  bonuses) for services rendered to the Released Parties for
all prior periods.

                     6. Termination of Employment.


                                       12


<PAGE>




                     (a) By Death. If Executive dies prior to the expiration of
the Employment Term, his base salary, bonus pursuant to Section 3(b) (if any)
and accrued but unused vacation will be prorated through the day of his death,
and paid to his beneficiaries or estate. Thereafter, Company's obligations
hereunder shall terminate.

                     (b) By Disability. If Executive becomes "Permanently
Disabled" (as defined  below) prior to the  expiration of the  Employment  Term,
Company  shall  be  entitled  to  terminate  his  employment,   subject  to  the
requirements  of  applicable  law,  and  Executive  shall be entitled to receive
disability  benefits  in  accordance  with  any  applicable   disability  policy
maintained  by Company as of the date of such  disability.  In the event of such
termination, Executive's base salary and bonus pursuant to Section 3(b) (if any)
will be prorated  through the date of termination and paid to him, and Executive
shall  receive a cash lump sum payment for accrued but unused  vacation  for the
year of  termination.  Upon such  termination,  Company  shall  have no  further
obligations to the Executive  hereunder other than to provide the Executive with
the  benefits  as set  forth  in this  subparagraph.  For the  purposes  of this
subparagraph,  Executive shall be deemed  "Permanently  Disabled" when, and only
when the Company determines, after consultation with Executive's physician, that
Executive suffers a physical or mental  disability that prevents  Executive from
performing the


                                       13


<PAGE>




essential  duties  of his  position  with  reasonable  accommodations  as may be
required by law (i) for a period of one hundred twenty (120)  consecutive  days;
or (ii) for an aggregate of one hundred fifty (150)  business days in any twelve
(12) month period.

                     (c) By Company For Cause. If the Company terminates the
Executive  for "Cause" (as defined  below),  Company  shall  thereafter  have no
obligations  to the  Executive  hereunder.  "Cause"  shall mean  termination  by
Company  of  Executive's  employment  because  of (i) any act or  omission  that
constitutes a material breach by Executive of any of his obligations  under this
Agreement,  or under any other  material  agreement  with,  or material  written
policy of Company,  which act or omission is not cured within thirty days of the
Company  providing  Executive with notice of the act, omission or failure deemed
to  constitute  Cause;  (ii) the failure or refusal by  Executive  to follow any
lawful reasonable  written  direction of the Board,  which failure or refusal is
not cured within thirty days of the Company providing  Executive with reasonably
detailed  written notice of the failure or refusal  deemed to constitute  Cause;
(iii) the conviction by Executive of a felony, a crime involving moral turpitude
or the  perpetration  by  Executive  of a common  law  fraud;  or (iv) any other
willful act or omission by Executive,  which is or will be materially  injurious
to the financial condition or business reputation of, or is otherwise materially
injurious


                                       14


<PAGE>




to the  Company,  which act or omission is not cured  within  thirty days of the
Company providing  Executive with reasonably  detailed written notice of the act
or omission  deemed to constitute  Cause.  The parties  hereto hereby agree that
notwithstanding  the provisions in the Employee  Subscription  Agreement between
Executive and Holdings,  dated as of January 20, 1998,  the term "Cause" in such
Employee Subscription Agreement shall be interpreted to mean Cause as defined in
this Agreement.

                     (d) By Executive For Good Reason. Executive may terminate,
without liability, the Employment Term for "Good Reason" (as defined below) upon
thirty (30) business days' advance written notice to Company.  Company shall pay
Executive the annual salary to which he is entitled pursuant to Section 3(a) for
1 year  from  the  date of  such  termination  (the  "Section  6(d)  Termination
Period"), less the amount of compensation,  income or benefits earned or paid to
Executive  as an employee or  consultant  from any entity other than the Company
during the Section  6(d)  Termination  Period;  provided  that in no event shall
Executive be entitled to receive less than  $125,000.  In addition,  the Company
shall  pay to  Executive  (x) all  amounts  due to  Executive  up to the date of
termination  under Sections 3(c) and 3(f) of this Agreement and (y)  Executive's
bonus  pursuant  to  Section  3(b) (if any)  prorated  through  the date of such
termination. The Company shall have no obligations to Executive other than those
set


                                       15


<PAGE>




forth  herein.  Good Reason  shall exist if: (i) there is an  assignment  to the
Executive  of any duties  materially  inconsistent  with or which  constitute  a
material   adverse   diminution   in   the   Executive's    position,    duties,
responsibilities,  or status with Company,  or a material adverse  diminution in
the Employee's reporting responsibilities, title, or offices; or (ii) there is a
material  breach by Company of this  Agreement or any other  material  agreement
between  the Company and  Executive.  If  Executive  terminates  his  employment
without Good Reason,  Company shall  thereafter have no obligations to Executive
hereunder, except as otherwise required by law. Upon termination by Executive of
his employment  under this Section 6(d),  Executive  shall in good faith seek to
obtain  alternative  employment in a comparable senior executive position and to
otherwise  mitigate  the amount  payable to  Executive  pursuant to this Section
6(d).

                     (e) Termination By the Company Other Than By Reason of
Death, Disability or Cause. If the Company terminates Executive's employment for
any reason other than death, disability or Cause, Company shall pay to Executive
the  compensation he is entitled to pursuant to Section 3(a) for 1 year from the
date of such  termination  (the "Section  6(e)  Termination  Period"),  less the
amount of  compensation,  income or benefits  earned or paid to  Executive as an
employee or consultant from any entity other than the Company during


                                       16


<PAGE>




the Section 6(e) Termination  Period;  provided that in no event shall Executive
be entitled to receive less than $125,000. In addition, the Company shall pay to
Executive  all  amounts due to  Executive  up to the date of  termination  under
Sections 3(c) and 3(f) of this Agreement. The payments and benefits provided for
in this Section 6(e) are contingent on Executive  executing a general release on
behalf of the Company in the form attached hereto as Exhibit A. Upon termination
of Executive  under this  Section  6(e),  Executive  shall in good faith seek to
obtain  alternative  employment in a comparable senior executive position and to
otherwise  mitigate  the amount  payable to  Executive  pursuant to this Section
6(e).

                     (f) Bonus Calculation. The pro rata bonus pursuant to
Section 3(b) (if any) payable to Executive  pursuant to Section 6(a), (b) or (d)
shall be  calculated at the end of the fiscal year in question and be determined
based on the  portion of such  fiscal  year  Executive  was  employed by Company
pursuant to this  Agreement  and whether or not the Company  obtained its EBITDA
Target and other operating targets for such fiscal year.

                     7. Proprietary Information.

                     (a) Defined. "Proprietary Information" is all proprietary,
secret or confidential information pertaining to the business of the Company.


                                       17


<PAGE>




                     (b) General Restrictions on Use. Executive agrees to hold
all Proprietary  Information in strict confidence and trust for the sole benefit
of Company and not directly or  indirectly,  to disclose,  use,  copy,  publish,
summarize,  or remove from Company's  premises any Propriety  Information except
(i) during the Employment Term to the extent  necessary to carry out Executive's
responsibilities  under  this  Agreement,  and  (ii)  after  termination  of the
Employment Term as specifically authorized in writing by the Board.

                     (c) Interference with Business; Competitive Activities. In
consideration of his employment under this Agreement,  Executive agrees that for
a period  of one (1)  year  after  termination  of the  Employment  Term (or any
renewal term, if applicable),  he shall not, for himself or for any third party,
directly or indirectly (i) divert or attempt to divert from Company any business
of  any  kind  in  which  it is  engaged,  including,  without  limitation,  the
solicitation  or  interference  with any of its  suppliers  or  customers;  (ii)
employ, solicit for employment,  or recommend for employment any person employed
by Company during the period of such person's employment and for a period of one
(1) year thereafter,  or (iii) engage in any business activity that is or may be
competitive with the Company;  provided that  notwithstanding the foregoing,  if
Executive is  terminated  pursuant to Section 6(d) or 6(e),  Executive  shall be
required


                                       18


<PAGE>




to  comply  with the  provisions  of this  Section  7(c)  only for such  time as
Executive  is  receiving  amounts he is entitled to pursuant to Section  3(a) in
accordance  with such Section 6(d) or 6(e),  as the case may be. If the scope of
any of the  restrictions  set forth above is too broad to permit  enforcement of
such restriction to its full extent,  then such restriction shall be enforced to
the maximum extent  permitted by law, and Executive  hereby  consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.

                     8. No Assignment.

                     (a) Neither this Agreement nor any right or interest
hereunder  shall  be  assignable  by  Executive,   his  beneficiaries  or  legal
representatives,  without  Company's prior written consent;  provided,  however,
that nothing in this subsection 8(a) shall preclude Executive from designating a
beneficiary  to receive  upon his death any benefit  payable  hereunder,  or the
executors,  administrators or other legal  representatives of Executive's estate
from assigning any rights hereunder to the person or persons entitled thereto.

                     (b) Except as otherwise required by law, without Company's
prior written  consent,  no right to receive payments under this Agreement shall
be  subject  to  anticipation,   commutation,   alienation,   sale,  assignment,
encumbrance, charge, pledge, or hypothecation, or to


                                       19


<PAGE>




exclusion,  attachment,  levy or similar  process or  assignment by operation of
law, and any attempt, voluntary or involuntary,  to effect any such action shall
be null, void and of no effect.

                     9. Registration Rights.

                     (a) "Piggy-Back" Registrations. If Holdings proposes to
register any shares of Holdings  Common Stock under the  Securities Act of 1933,
as amended  (the  "Securities  Act"),  in  connection  with any  offering of its
securities,  whether or not for its own account,  Holdings  shall furnish prompt
written notice to Executive of its intention to effect such registration and the
intended  method of  distribution  in  connection  therewith.  Upon the  written
request of Executive  made to Holdings  within 30 days after the receipt of such
notice by Holdings,  Holdings shall include in such  registration  in accordance
with the other provisions of this Section 9, the requested number of Executive's
Registrable Securities (a "Piggy-Back Registration").

                     (b) Underwriting Requirements. In connection with any
offering involving an underwriting of Holdings Common Stock,  Holdings shall not
be required  under Section 9(a) to include any of the securities of Executive in
the  registration of the securities to be included in such  underwriting,  or in
such underwriting itself, unless Executive accepts the terms of the underwriting
as agreed upon between Holdings and the underwriters selected by it,


                                       20


<PAGE>




and then only in such  quantity  as the  underwriters  determine  in their  sole
discretion  will not jeopardize the success of the offering by Holdings.  If the
total  amount of  securities,  including  Registrable  Securities,  requested by
Executive and any other stockholder of Holdings to be included in such offering,
exceeds the number of securities that the  underwriters  determine in their sole
discretion is compatible  with the success of the offering,  then Holdings shall
be  required  to  include  in the  offering  only  such  number  of  Registrable
Securities  as the  underwriters  determine  in their sole  discretion  will not
jeopardize  the success of the offering.  In connection  with any such offering,
Holdings shall include in such  registration  (to the extent of the number which
Holdings is so advised can be sold), first the securities, if any, being sold by
Holdings,  and second the securities  proposed to be registered by WPG Corporate
Development  Associates  V,  L.P.  or  its  affiliates,  Jackson  National  Life
Insurance  Company or its  affiliates  and any  similar  third  party  investors
granted  piggy-back  registration  rights,  and third,  Executive  and any other
stockholders (including other employees of the Company) of Holdings not included
in the foregoing second priority.  The Registrable  Securities so included shall
be apportioned  among Executive and any other  stockholders of Holdings pro rata
in  proportion  to the total  number of  Registrable  Securities  and  shares of
Holdings Common Stock owned by them, respectively.


                                       21


<PAGE>




Notwithstanding  anything herein to the contrary, to the extent the underwriters
in any such Piggyback Registration determine that Executive must sell lesser pro
rata shares than any other  stockholder or no shares,  Executive shall sell such
lesser amount of shares or no shares as determined by such  underwriters and the
fact that  Executive  was  required to sell such  lesser  amount of shares or no
shares shall not affect the right of any other  stockholders to include Holdings
Common Stock in such registration.

                     (c) Expenses of Registration. With respect to a Piggy-back
Registration,  Holdings  shall bear and pay all expenses  incurred in connection
with any  registration,  filing or qualification of Registrable  Securities with
respect to the registrations  made pursuant to Section 9(a),  including (without
limitation) all  registration,  filing,  and qualification  fees,  printers' and
accounting fees, fees and  disbursements of counsel for Holdings,  but excluding
fees and  disbursements  of counsel to holders  of  Registrable  Securities  and
underwriting discounts and commissions relating to Registrable Securities.
                     As used in Section 9, the following shall have the
following meaning:
                     "register", "registered" and "registration" shall refer to
a  registration  effected by preparing  and filing a  registration  statement in
compliance with the Securities Act


                                       22


<PAGE>




and the declaration or ordering of effectiveness of such registration statement.
                  "Registrable Securities" shall mean any and all shares of
Holdings  Common  Stock  whenever  acquired.  As to any  particular  Registrable
Securities,  such securities shall cease to be Registrable Securities when (i) a
registration  statement with respect to the sale of such  securities  shall have
become  effective under the Securities Act and such  securities  shall have been
disposed of by Executive in accordance with such registration  statement or (ii)
such securities may be sold pursuant to Rule 144 of the Securities Act.

                     10. Notices. All notices, requests, claims, demands and
other  communications  under this  agreement  shall be in  writing  and shall be
deemed given if delivered  personally  or sent by overnight  courier  (providing
proof of delivery) to the parties at the following addresses (or at such address
for a party as shall be specified  by like  notice):  (i) if to Company,  to the
addresses therefor  specified in Section 10.02 of the Merger Agreement,  (ii) if
to Executive, 104 East 25th Street, New York, New York 10010.

                     11. Entire Agreement. The terms of this Agreement are
intended  by the  parties to be the final  expression  of their  agreement  with
respect to the employment of Executive by Company and may not be contradicted by
evidence of any prior or contemporaneous agreement.


                                       23


<PAGE>




The parties further intend that this Agreement shall constitute the complete and
exclusive  statement of its terms and that no extrinsic evidence  whatsoever may
be  introduced  in any  judicial,  administrative,  or  other  legal  proceeding
involving this Agreement.

                     12. Amendments; Waivers. This Agreement may not be
modified,  amended, or terminated except by an instrument in writing,  signed by
the  Executive  and by a duly  authorized  representative  of Company other than
Executive.  By an instrument  in writing  similarly  executed,  either party may
waive  compliance by the other party with any provision of this  Agreement  that
such  other  party was or is  obligated  to comply  with or  perform;  provided,
however,  that such waiver  shall not  operate as a waiver of, or estoppel  with
respect to, any other or subsequent failure. No failure to exercise and no delay
in exercising any right,  remedy,  or power  hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder  preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity.

                     13. Confidentiality. Executive agrees that the terms and
conditions  of this  Agreement  are  confidential  and shall not be disclosed by
Executive  to any  third  parties,  other  than  Executive's  lawyers  and other
professional advisors, unless such disclosure is required by law.


                                       24


<PAGE>




                     14. Governing Law. The validity, interpretation,
enforceability,  and  performance  of this  Agreement  shall be  governed by and
construed in accordance with the law of the State of New York.

                     15. Employee Acknowledgment. Executive acknowledges (i)
that  he  has  consulted  with  or has  had  the  opportunity  to  consult  with
independent  counsel of his own choice  concerning  this  Agreement and has been
advised  to do so by  Company,  and (ii)  that he has read and  understands  the
Agreement,  is fully aware of its legal  effect,  and has entered into it freely
based on his own judgment.

                     16. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Corporation and its respective  successors
and assigns, but the rights and obligation of Executive are personal and may not
be assigned or delegated without the Company's prior written consent.

                     17. Arbitration. Any dispute between the parties arising
under  this  Agreement  or  Executive's  employment  with  the  Company  (or the
termination  thereof)  shall not be  decided  in  court,  but  instead  shall be
submitted  to  final,   binding  arbitration  before  the  American  Arbitration
Association in New York City.


                                       25


<PAGE>




                     The parties have duly executed this Agreement as of the
date first written above.


                                                   ATC GROUP SERVICES INC.


                                               By:  /s/  Christopher P. Vincze
                                                  ---------------------------
                                                  Name:  Christopher P. Vincze
                                                  Title: Chief Operating Officer


                                                   ACQUISITION HOLDINGS, INC.


                                               By:  /s/  Wesley W. Lang, Jr.
                                                  -----------------------------
                                                  Name:  Wesley W. Lang, Jr.
                                                  Title: President


                                                   EXECUTIVE


                                                    /s/  Nicholas J. Malino
                                                   ----------------------------
                                                         Nicholas J. Malino


                                       26


<PAGE>




                                                                       Exhibit A

                                 GENERAL RELEASE

                     In consideration of the payment of _____________________
received  from  ATC  Group  Services  Inc.  ("Employer"),  _____________________
("Employee")  and except for all accrued but unpaid  compensation,  benefits and
rights of  Employee  provided  under  Section  6(e) of that  certain  Employment
Agreement between Employee, Employer and Acquisition Holdings, Inc., dated as of
February 16, 1998 and all amendments  and  extensions  thereto which the parties
may  adopt,   Employee,   on  behalf  of  himself  and  his  heirs,   executors,
administrators,  successors and assigns,  hereby releases,  relieves and forever
discharges Employer, its former and present subsidiaries,  affiliates, branches,
successors  and  assigns,  and their  former and  present  officers,  directors,
trustees,  employees,  agents  and  attorneys,   (collectively,   the  "Released
Parties"),  from any and all claims, actions, causes of action, demands, rights,
damages,  debts,  compensation,  costs  or  other  expenses,  including  without
limitation attorneys' fees, of any nature whatsoever,  whether known or unknown,
which  Employee  ever  had,  now  has,  or  which  he,  his  heirs,   executors,
administrators,  successors  and  assigns  hereinafter  can,  shall  or may have
against the Released Parties arising out of any matter,  cause,  acts,  conduct,
claim or event,  including without limitation all matters relating to Employee's
employment with the Employer, including without limitation


<PAGE>




contract claims, tort claims, claims for compensation or benefits, personal
injury claims and claims for attorneys' fees, and further includes all claims
arising under the Age Discrimination in Employment of 1967, as amended, 29
U.S.C. ss. 621 et seq., National Labor Relations Act, as amended, 29 U.S.C. ss.
151 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
ss. 2000e et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. ss.
12191 et seq., the Civil Rights Act of 1866, 42 U.S.C. ss. 1981, the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. ss. 1001 et seq.,
or any other federal, state and local law or principal of contract law or common
law; provided, however, that this General Release shall not operate to prohibit
Employee from commencing an action to enforce the terms of his Employment
Agreement.
                     Employee represents that he has not and will not file any
complaints, grievances, or charges relating to his employment against any of the
Released Parties.
                     Employee warrants that he is signing this General Release
voluntarily,  and that no promises or inducements  for this General Release have
been made,  and he enters into this General  Release  without  reliance upon any
statement or  representation by any of the Released Parties or any other person,
concerning any fact material to this General Release. Employee acknowledges that
he is not otherwise entitled to receive the consideration set forth above.


                                       2


<PAGE>




                     The Employer hereby advises the Employee to consult with
legal counsel concerning this General Release. The Employee acknowledges that he
has had at least  twenty-one  days in which to consider this General Release and
has had the opportunity to obtain legal counsel concerning this General Release.
Employee  represents  and warrants that he fully  understands  the terms of this
General  Release,  and that he knowingly and  voluntarily,  of his own free will
without any duress, being fully informed and after due deliberation, accepts its
terms  and  signs the same as his own free act for the  purpose  of making  full
withdrawal, compromise and settlement of all claims.
                     This General Release contains the entire agreement among
the parties hereto and the terms of this General Release are contractual and not
a mere recital.
                     The Employee understands that he has seven (7) days to
revoke this General Release after signing.  Employee agrees that in the event he
elects to revoke this  General  Release,  he will  provide the  Employer  with a
written  revocation  by the close of business on the seventh day  following  his
execution of this General Release.
                     PLEASE READ CAREFULLY BEFORE SIGNING. THIS DOCUMENT
INCLUDES  A RELEASE  OF ALL KNOWN AND  UNKNOWN  CLAIMS,  EXCEPT AS  SPECIFICALLY
PROVIDED HEREIN.


                                                    ---------------------
                                                          EMPLOYEE


                                       3


<PAGE>




STATE OF NEW YORK   )
                    : ss.:
COUNTY OF NEW YORK  )



                     On _________ , 1997 before me personally came _________ ,
to me known,  and known to me to be the  individual  described  herein,  and who
executed the foregoing  General  Release,  and duly  acknowledged  to me that he
executed the same of his own free will without any duress.


                                                       -----------------
                                                         NOTARY PUBLIC


<PAGE>




                                                                    EXHIBIT 10.2

                              EMPLOYMENT AGREEMENT


                   EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February
16, 1998, between ATC Group Services Inc., a Delaware Corporation ("Employer" or
"Company"),  Acquisition Holdings, Inc., a Delaware corporation ("Holdings") and
Christopher P. Vincze ("Executive").

                   WHEREAS, Acquisition Corp. has entered into an Agreement and
Plan of Merger dated November 26, 1997 (the "Merger Agreement") to, among other
things, acquire all of outstanding shares of common stock of the Company;

                   WHEREAS,  in connection with the  acquisition,  Executive has
agreed to enter into an employment  contract with the Company upon the terms and
conditions set forth herein;

                   WHEREAS,  Holdings  has agreed to grant  certain  options and
restricted  stock to the Executive in connection  with his  employment  with the
Company upon the terms and conditions set forth herein;


<PAGE>




                   NOW,  THEREFORE,  in  consideration  of the  premises and the
mutual covenants herein contained, the parties hereto agree as follows:

                   1. Employment Term. The term of Executive's  employment under
this Agreement shall commence on the date hereof and expire on February 28, 2001
(the  "Employment  Term");  it being  understood,  however,  that to the  extent
Executive's  employment is terminated pursuant to Section 6, the Employment Term
shall cease. This Agreement shall  automatically  extend for successive one year
periods unless either party  provides  written notice of its intent not to renew
no later than ninety days prior to the expiration of the then current term.

                     2. Position, Duties, Responsibilities.

                   (a) Position.  Executive  hereby accepts  employment with the
Company  as its  Chief  Operating  Officer  in  accordance  with the  terms  and
conditions  herein.  Executive  shall  devote  his  best  efforts  and his  full
professional  time and  attention  (except  for  vacation,  sick leave and other
excused  leaves of  absence)  to the  performance  of the  services  customarily
incident to such office and  consistent  with past  practices and customs at the
Company and of such other duties as may be reasonably  assigned to the Executive
from  time to time by the  Board of  Directors  of the  Company  (the  "Board").
Company will provide office facilities, secretarial and


                                       2


<PAGE>




clerical support consistent with past practices and customs of the Company.

                   (b) Other  Activities.  Except upon the prior written consent
of the Board,  during the  Employment  Term,  Executive  will not (i) accept any
other employment,  or (ii) engage, directly or indirectly, in any other business
activity  (whether or not pursued for pecuniary  advantage)  that is competitive
with, or that places him in a competing position to that of Company. This clause
shall not prohibit  Executive  from  investing  his assets in a publicly  traded
company, so long as such investment does not include the performance of services
by  Executive  in the  operation  or  affairs  of the  companies  in which  such
investments  are made,  or teaching,  writing or publicly  speaking,  so long as
these activities do not interfere or conflict with Executive's duties hereunder.

                   3. Compensation, Benefits, Expenses.

                           (a) Compensation.  In consideration of the services
to be  rendered  hereunder,  Executive  shall  be paid a  salary  at the rate of
$200,000 per year until March 1, 1998,  and  thereafter  an annual salary of not
less than $250,000,  payable in accordance with the Company's  payroll practices
in effect during the course of this Agreement.  Each year  (commencing in 1999),
effective  March 1,  Executive's  annual salary shall increase by the percentage
increase of the


                                       3


<PAGE>




Consumer  Price Index (All items)  ("CPI") for the area during the twelve  month
period prior to such date.

                   (b)  Bonus.  As  further  compensation  for the  services  of
Executive,  the Company  shall pay Executive  annual cash bonuses  determined as
follows and payable  within  ninety (90) days of the end of the relevant  fiscal
year:
                   (i)  Executive  shall be eligible to receive  with respect to
each  fiscal year  during the term  hereof a cash bonus in an  aggregate  amount
equal to the Target  Bonus  Amount.  For any fiscal year the Target Bonus Amount
shall be equal to  $100,000 if the Company  achieves  EBITDA  equal to the Lower
EBITDA Target for such fiscal year and $250,000 if the Company  achieves  EBITDA
equal to or in excess of the Higher  EBITDA  Target for such fiscal year. If the
Company  achieves EBITDA for any fiscal year between the Lower EBITDA Target and
Higher  EBITDA  Target,  the Target Bonus Amount  shall equal  $150,000  times a
fraction, the numerator of which is the amount of EBITDA achieved by the Company
during  such fiscal  year in excess of the Lower  EBITDA  Target for such fiscal
year and the  denominator  of which is the Higher  EBITDA Target for such fiscal
year minus the Lower EBITDA Target for such fiscal year. If the Company achieves
EBITDA of less than the Lower EBITDA Target in any fiscal year, the Target Bonus
Amount for such fiscal year shall equal zero.  For fiscal 1999, the Lower EBITDA
Target  and  Higher  EBITDA  Target  shall  be  $27  million  and  $30  million,
respectively; and for each


                                       4


<PAGE>




fiscal year  thereafter  the Lower EBITDA  Target and Higher EBITDA Target shall
equal 115% of the Lower EBITDA  Target and Higher EBITDA  Target,  respectively,
for the prior  fiscal  year;  provided  that if  revenues  for any  fiscal  year
increase by more than 20% from the prior  fiscal year as a result of one or more
acquisitions  or mergers,  then the Lower EBITDA Target and Higher EBITDA Target
for  such  fiscal  year  shall  be  determined  in good  faith  by the  Board in
consultation  with Executive.  The EBITDA between and including the Lower EBITDA
Target  and Higher  EBITDA  Target is  hereinafter  referred  to as the  "EBITDA
Target".
                   (ii) For all  purposes of this  Agreement,  EBITDA shall mean
income before  income taxes,  depreciation,  amortization  and interest  expense
computed from the audited  annual  financial  statements  of the Company.  Other
operating  target results for the 1999 fiscal year and future fiscal years shall
be determined in good faith by the Board in consultation  with Executive and may
include,  for example,  among other things,  maintaining the Company's technical
capacity and high quality  customer  service,  installation of a new MIS system,
hiring a chief financial officer and, if appropriate,  completing  acquisitions.
The parties will use their best efforts to establish other operating targets for
fiscal 1999 within 30 days after the date hereof.
                   (iii) For purposes of calculating actual annual bonus amounts
to be paid hereunder for any fiscal


                                       5


<PAGE>




year,  66 2/3% of the Target  Bonus Amount for such fiscal year shall be paid to
Executive based upon achievement of the Lower EBITDA Target for such fiscal year
and 33 1/3% of the Target  Bonus  Amount for such  fiscal  year shall be paid to
Executive  based upon  achievement of both the EBITDA Target and other operating
targets for such fiscal year.

                   (c) Benefits.  As he becomes eligible  therefor,  the Company
shall provide Executive with the right to participate in and to receive benefits
from all present  and future  life,  vacation,  accident,  disability,  medical,
pension,  and savings plans and all similar benefits made available generally to
executives of the Company.  The amount and extent of benefits to which Executive
is entitled  shall be  governed by any  applicable  benefit  plan,  as it may be
amended from time to time.

                   (d) Automobile Allowance. The Company shall provide Executive
during the Employment Term with an automobile allowance of $750 per month.

                   (e)  Expenses.  The Company  shall  reimburse  Executive  for
reasonable  travel and other  business  expenses  incurred by  Executive  in the
performance  of his  duties  hereunder  in  accordance  with  Company's  general
policies,  as they may be  amended  from time to time  during the course of this
Agreement.

                   (f)  Repayment  of Loan.  This  Agreement  shall  not  impact
Executive's obligation to repay the Company an


                                       6


<PAGE>




outstanding  loan in the  amount  of  $7,657.50,  which  loan  was  extended  to
Executive by the Company pursuant to a loan agreement.

                   (g) Options.  Holdings shall grant to Executive, on or before
March 31, 1998,  options ("New Options") to purchase  Holdings common stock, par
value $0.01 per share ("Holdings Common Stock"), representing a maximum of 3.41%
of the then common equity of Holdings on a fully diluted basis.  The New Options
shall  have an initial  exercise  price of $12 per share and shall be subject to
adjustment  upon any stock  split,  subdivision,  combination  or other  similar
event.  The New Options,  Holdings Common Stock issued upon exercise thereof and
the Holdings  Restricted  Common Stock referred to in Section 4 shall be subject
to  restrictions  on transfer and subject to the right of repurchase by Holdings
on the same terms as those  applicable to Holdings Common Stock contained in the
Employee  Subscription  Agreements  dated January 20, 1998 (except to the extent
otherwise provided herein with respect to the price to be paid to Executive upon
any such repurchase as set forth herein).
                   (i) One half of the New Options,  exercisable for 1.7% of the
then  common  equity of  Holdings  on a fully  diluted  basis (the "Time  Vested
Options"),  shall vest in equal 25%  increments  over a four year  period,  such
vesting to occur on each of the first four anniversary dates of the


                                       7


<PAGE>




commencement  of the term of this  Agreement;  provided  that  all of such  Time
Vested Options shall vest upon a Change of Control and provided  further that to
the extent this Agreement is terminated pursuant to Section 6(e) and a Change of
Control occurs within six months of such termination (x) any of such Time Vested
Options  as well as any  other  options  that  vest  based on time that had been
forfeited upon such termination shall be reinstated and immediately vest and (y)
Executive  shall have the right to receive  for each  share of  Holdings  Common
Stock  theretofore  purchased by Holdings upon such  termination  the difference
between the amount  Executive  received from Holdings  pursuant to such purchase
and the amount,  if any, to be paid for one share of  Holdings  Common  Stock in
such Change of Control. For purposes of this Agreement,  Change of Control shall
have the meaning set forth in the  Indenture,  dated  January 29, 1998,  between
Acquisition Corp. and State Street Bank and Trust Company, as trustee.
                   (ii)  With  respect  to the  other  half of the New  Options,
exercisable  for the other 1.7% of the then common equity of Holdings on a fully
diluted basis (the "Performance Based Options"),  such Performance Based Options
shall  vest  effective  as of each of the first  four  anniversary  dates of the
commencement of the term of this  Agreement,  if the Company has achieved EBITDA
for the immediately preceding fiscal year equal to at least the mid-point of the
Lower EBITDA Target and Higher EBITDA Target for such fiscal year.


                                       8


<PAGE>




If the Company  does not  achieve  such  EBITDA for such  immediately  preceding
fiscal year, the Performance  Based Options eligible to vest for the fiscal year
in question shall be forfeited.
                   (iii)  Executive  shall have the right to exercise any vested
New Option within ten (10) business days of a termination of employment pursuant
to Section 6, but not thereafter. Notwithstanding the provisions of the Employee
Subscription  Agreement  dated  January 20,  1998,  in the event of  termination
pursuant to Section  (6)(d) or (e), the purchase price to be paid by Holdings to
Executive  for any Holdings  Common Stock whether or not issued upon exercise of
any options  (including  the New  Options)  shall be the greater of the purchase
price of such Holdings Common Stock or the Fair Market Value thereof.
                   "Fair  Market  Value" shall mean,  at any time,  per share of
Holdings  Common Stock (a) the arithmetic  average of the daily last sale prices
of the  Holdings  Common  Stock  for  twenty  consecutive  trading  days  ending
immediately  prior to such time or, if no such sale takes  place on such  dates,
the average of the closing bid and asked  prices on such dates,  in each case as
officially  reported on the principal national  securities exchange on which the
Holdings  Common  Stock is then  listed  or  admitted  to  trading,  (b) if such
Holdings  Common Stock is not then listed or admitted to trading on any national
securities exchange, but is


                                       9


<PAGE>




designated as a national  market  system  security by the NASD,  the  arithmetic
average of the daily last trading prices of the Holdings Common Stock for twenty
consecutive  trading  days ending  immediately  prior to such time,  or if there
shall have been no trading on such date, the average of the reported closing bid
and  asked  prices on such  dates as shown by the  NASDAQ,  (c) if the  Holdings
Common Stock is being offered in an initial public offering at or within 20 days
prior to such time,  the average price of such Holdings  Common Stock per share,
net of  underwriter's  discount  and  expenses,  sold  in  such  initial  public
offering, and (d) if the Holdings Common Stock is not then listed or admitted to
trading on any national  exchange or quoted in the  over-the-counter  market and
not then being offered in the initial public offering,  the fair market value of
the  Holdings  Common  Stock as  determined  in good faith by Holdings  Board of
Directors;  provided  that  Executive  shall  have the  right,  within 7 days of
receiving the Fair Market Value,  to select a nationally  recognized  investment
bank  reasonably  acceptable to Holdings to determine the Fair Market Value.  To
the extent that Executive elects to so retain such an investment bank, then Fair
Market Value shall mean the fair market value  chosen by such  investment  bank,
provided  that the cost and  expense of such  investment  bank shall be borne by
Executive if the fair market value  determined by such  investment bank shall be
5% or more greater than or less than the fair market value


                                       10


<PAGE>




previously determined in good faith by Holdings Board of Directors.

                   4. Grant of Holdings  Restricted Common Stock. On February 5,
1998, the effective date of the merger of  Acquisition  Corp.  with and into the
Company,  Holdings  issued to  Executive  33,896  shares of Holdings  Restricted
Common Stock which shall vest on the dates set forth below; provided that on any
such date  Executive  shall then be  employed  by the  Company and to the extent
Executive's  employment  is  terminated  prior to any such  date,  the  Holdings
Restricted Common Stock scheduled to vest on such date shall be forfeited.

                                Number of Shares
                             of Holdings Restricted
                                  Common Stock

                       8,474. . . . . . . . .March 1, 1999
                       8,474. . . . . . . . .March 1, 2000
                       8,474. . . . . . . . .March 1, 2001
                       8,474. . . . . . . . .March 1, 2002

                   For  purposes of Holding's  repurchase  right with respect to
such Holdings Restricted Common Stock, the original per share purchase price for
purposes of calculating  Adjusted  Purchase  Price, as set forth in the Employee
Subscription  Agreement dated as of January 20, 1998,  shall be deemed to be $12
per share.


                                       11


<PAGE>




                   5. Special Bonus.

                   (a) Payment of Fiscal Year 1997 Bonus.  The Company shall pay
to the  Executive a special  bonus (the  "Fiscal  Year 1997 Bonus") (x) no later
than June 1, 1998 or (y) to the  extent  the  Company  meets its  budget for the
first  fiscal  quarter of 1999,  during the first  fiscal  quarter of 1999.  The
Fiscal Year 1997 Bonus shall equal $168,000.

                   (b)  Release.  Upon receipt of the Fiscal Year 1997 Bonus and
Holdings  Restricted  Common  Stock  specified  in Section 4 (whether or not any
Holdings  Restricted  Common  Stock  ultimately  vests),  Executive on behalf of
himself and his heirs,  successors  and  assigns,  hereby  releases  and forever
discharges  the  Company,  its  affiliates,  and its former,  present and future
shareholders,  officers,  directors,  successors,  assigns and predecessors (the
"Released Parties") of any and all claims,  actions,  causes of action, demands,
rights, damages, debts, compensation, costs or other expenses, including without
limitation  attorneys' fees, of any nature whatsoever,  known or unknown,  which
Executive  ever had or has  against  the  Released  Parties  arising  out of any
payments  (including  bonuses) for services rendered to the Released Parties for
all prior periods.

                   6. Termination of Employment.

                   (a) By Death. If Executive dies prior to the expiration of
the Employment Term, his base salary, bonus pursuant to Section 3(b) (if any)
and accrued but unused


                                       12


<PAGE>




vacation  will  be  prorated  through  the  day of his  death,  and  paid to his
beneficiaries  or estate.  Thereafter,  Company's  obligations  hereunder  shall
terminate.

                   (b)  By  Disability.   If  Executive   becomes   "Permanently
Disabled" (as defined  below) prior to the  expiration of the  Employment  Term,
Company  shall  be  entitled  to  terminate  his  employment,   subject  to  the
requirements  of  applicable  law,  and  Executive  shall be entitled to receive
disability  benefits  in  accordance  with  any  applicable   disability  policy
maintained  by Company as of the date of such  disability.  In the event of such
termination,  Executive's base salary and bonus pursuant to Section 3(b)(if any)
will be prorated  through the date of termination and paid to him, and Executive
shall  receive a cash lump sum payment for accrued but unused  vacation  for the
year of  termination.  Upon such  termination,  Company  shall  have no  further
obligations to the Executive  hereunder other than to provide the Executive with
the  benefits  as set  forth  in this  subparagraph.  For the  purposes  of this
subparagraph,  Executive shall be deemed  "Permanently  Disabled" when, and only
when the Company determines, after consultation with Executive's physician, that
Executive suffers a physical or mental  disability that prevents  Executive from
performing the essential  duties of his position with reasonable  accommodations
as may be  required  by law  (i)  for a  period  of  one  hundred  twenty  (120)
consecutive days; or (ii) for an


                                       13


<PAGE>




aggregate  of one  hundred  fifty (150)  business  days in any twelve (12) month
period.

                   (c) By  Company  For Cause.  If the  Company  terminates  the
Executive  for "Cause" (as defined  below),  Company  shall  thereafter  have no
obligations  to the  Executive  hereunder.  "Cause"  shall mean  termination  by
Company  of  Executive's  employment  because  of (i) any act or  omission  that
constitutes a material breach by Executive of any of his obligations  under this
Agreement,  or under any other  material  agreement  with,  or material  written
policy of Company,  which act or omission is not cured within thirty days of the
Company  providing  Executive with notice of the act, omission or failure deemed
to  constitute  Cause;  (ii) the failure or refusal by  Executive  to follow any
lawful reasonable  written  direction of the Board,  which failure or refusal is
not cured within thirty days of the Company providing  Executive with reasonably
detailed  written notice of the failure or refusal  deemed to constitute  Cause;
(iii) the conviction by Executive of a felony, a crime involving moral turpitude
or the  perpetration  by  Executive  of a common  law  fraud;  or (iv) any other
willful act or omission by Executive,  which is or will be materially  injurious
to the financial condition or business reputation of, or is otherwise materially
injurious to Company,  which act or omission is not cured within  thirty days of
the Company providing  Executive with reasonably  detailed written notice of the
act or omission deemed to


                                       14


<PAGE>




constitute  Cause.  The parties  hereto  hereby agree that  notwithstanding  the
provisions  in  the  Employee  Subscription   Agreement  between  Executive  and
Holdings,  dated as of January  20,  1998,  the term  "Cause"  in such  Employee
Subscription  Agreement  shall be  interpreted  to mean Cause as defined in this
Agreement.

                   (d) By Executive For Good Reason.  Executive  may  terminate,
without liability, the Employment Term for "Good Reason" (as defined below) upon
thirty (30) business days' advance written notice to Company.  Company shall pay
Executive the annual salary to which he is entitled pursuant to Section 3(a) for
1 year  from  the  date of  such  termination  (the  "Section  6(d)  Termination
Period"), less the amount of compensation,  income or benefits earned or paid to
Executive  as an employee or  consultant  from any entity other than the Company
during the Section  6(d)  Termination  Period;  provided  that in no event shall
Executive be entitled to receive less than  $125,000.  In addition,  the Company
shall  pay to  Executive  (x) all  amounts  due to  Executive  up to the date of
termination  under Sections 3(c) and 3(f) of this Agreement and (y)  Executive's
bonus  pursuant  to  Section  3(b)(if  any)  prorated  through  the date of such
termination. The Company shall have no obligations to Executive other than those
set forth herein.  Good Reason shall exist if: (i) there is an assignment to the
Executive  of any duties  materially  inconsistent  with or which  constitute  a
material adverse


                                       15


<PAGE>




diminution in the Executive's position, duties, responsibilities, or status with
Company,   or  a  material  adverse  diminution  in  the  Employee's   reporting
responsibilities,  title,  or  offices;  or (ii) there is a  material  breach by
Company of this  Agreement or any other material  agreement  between the Company
and  Executive.  If Executive  terminates  his  employment  without Good Reason,
Company shall thereafter have no obligations to Executive  hereunder,  except as
otherwise required by law. Upon termination by Executive of his employment under
this  Section  6(d),  Executive  shall in good faith seek to obtain  alternative
employment in a comparable senior executive  position and to otherwise  mitigate
the amount payable to Executive pursuant to this Section 6(d).

                   (e) Termination By the Company Other Than By Reason of Death,
Disability or Cause. If the Company  terminates  Executive's  employment for any
reason other than death, disability or Cause, Company shall pay to Executive the
compensation he is entitled to pursuant to Section 3(a) for 1 year from the date
of such termination (the "Section 6(e) Termination Period"),  less the amount of
compensation,  income or benefits  earned or paid to Executive as an employee or
consultant  from any entity  other than the  Company  during  the  Section  6(e)
Termination  Period;  provided  that in no event shall  Executive be entitled to
receive less than $125,000. In addition, the Company shall pay to Executive


                                       16


<PAGE>




all amounts due to Executive up to the date of  termination  under Sections 3(c)
and 3(f) of this  Agreement.  The  payments  and  benefits  provided for in this
Section 6(e) are contingent on Executive  executing a general  release on behalf
of the Company in the form  attached  hereto as Exhibit A. Upon  termination  of
Executive under this Section 6(e),  Executive shall in good faith seek to obtain
alternative  employment  in  a  comparable  senior  executive  position  and  to
otherwise  mitigate  the amount  payable to  Executive  pursuant to this Section
6(e).

                   (f) Bonus Calculation. The pro rata bonus pursuant to Section
3(b) (if any) payable to Executive pursuant to Section 6(a), (b) or (d) shall be
calculated at the end of the fiscal year in question and be determined  based on
the portion of such fiscal year  Executive  was employed by Company  pursuant to
this  Agreement  and whether or not the Company  obtained its EBITDA  Target and
other operating targets for such fiscal year.

                   7. Proprietary Information.

                   (a) Defined. "Proprietary Information" is all proprietary,
secret or confidential information pertaining to the business of the Company.

                   (b) General Restrictions on Use. Executive agrees to hold all
Proprietary  Information in strict  confidence and trust for the sole benefit of
Company and not directly or indirectly, to disclose, use, copy, publish,


                                       17


<PAGE>




summarize,  or remove from Company's  premises any Propriety  Information except
(i) during the Employment Term to the extent  necessary to carry out Executive's
responsibilities  under  this  Agreement,  and  (ii)  after  termination  of the
Employment Term as specifically authorized in writing by the Board.

                   (c) Interference with Business:  Competitive  Activities.  In
consideration of his employment under this Agreement,  Executive agrees that for
a period  of one (1)  year  after  termination  of the  Employment  Term (or any
renewal term, if applicable),  he shall not, for himself or for any third party,
directly or indirectly (i) divert or attempt to divert from Company any business
of  any  kind  in  which  it is  engaged,  including,  without  limitation,  the
solicitation  or  interference  with any of its  suppliers  or  customers;  (ii)
employ, solicit for employment,  or recommend for employment any person employed
by Company during the period of such person's employment and for a period of one
(1) year thereafter,  or (iii) engage in any business activity that is or may be
competitive with the Company;  provided that  notwithstanding the foregoing,  if
Executive is  terminated  pursuant to Section 6(d) or 6(e),  Executive  shall be
required to comply with the  provisions  of this Section 7(c) only for such time
as Executive is receiving  amounts he is entitled to pursuant to Section 3(a) in
accordance  with such Section 6(d) or 6(e),  as the case may be. If the scope of
any of the


                                       18


<PAGE>




restrictions  set  forth  above  is too  broad  to  permit  enforcement  of such
restriction to its full extent,  then such restriction  shall be enforced to the
maximum extent  permitted by law, and Executive  hereby consents and agrees that
such scope may be judicially  modified  accordingly in any proceeding brought to
enforce such restriction.

                   8. No Assignment.

                   (a)  Neither  this   Agreement  nor  any  right  or  interest
hereunder  shall  be  assignable  by  Executive,   his  beneficiaries  or  legal
representatives,  without  Company's prior written consent;  provided,  however,
that nothing in this subsection 8(a) shall preclude Executive from designating a
beneficiary  to receive  upon his death any benefit  payable  hereunder,  or the
executors,  administrators or other legal  representatives of Executive's estate
from assigning any rights hereunder to the person or persons entitled thereto.

                   (b) Except as otherwise  required by law,  without  Company's
prior written  consent,  no right to receive payments under this Agreement shall
be  subject  to  anticipation,   commutation,   alienation,   sale,  assignment,
encumbrance, charge, pledge, or hypothecation, or to exclusion, attachment, levy
or similar process or assignment by operation of law, and any attempt, voluntary
or involuntary, to effect any such action shall be null, void and of no effect.


                                       19


<PAGE>




                   9. Registration Rights.

                   (a)  "Piggy-Back"  Registrations.  If  Holdings  proposes  to
register any shares of Holdings  Common Stock under the  Securities Act of 1933,
as amended  (the  "Securities  Act"),  in  connection  with any  offering of its
securities,  whether or not for its own account,  Holdings  shall furnish prompt
written notice to Executive of its intention to effect such registration and the
intended  method of  distribution  in  connection  therewith.  Upon the  written
request of Executive  made to Holdings  within 30 days after the receipt of such
notice by Holdings,  Holdings shall include in such  registration  in accordance
with the other provisions of this Section 9, the requested number of Executive's
Registrable Securities (a "Piggy-Back Registration").

                   (b)  Underwriting   Requirements.   In  connection  with  any
offering involving an underwriting of Holdings Common Stock,  Holdings shall not
be required  under Section 9(a) to include any of the securities of Executive in
the  registration of the securities to be included in such  underwriting,  or in
such underwriting itself, unless Executive accepts the terms of the underwriting
as agreed upon between  Holdings and the  underwriters  selected by it, and then
only in such  quantity as the  underwriters  determine in their sole  discretion
will not jeopardize the success of the offering by Holdings. If the total amount
of securities, including Registrable Securities, requested by Executive and


                                       20


<PAGE>




any other  stockholder of Holdings to be included in such offering,  exceeds the
number of securities that the underwriters determine in their sole discretion is
compatible with the success of the offering,  then Holdings shall be required to
include  in the  offering  only such  number of  Registrable  Securities  as the
underwriters  determine in their sole discretion will not jeopardize the success
of the offering. In connection with any such offering, Holdings shall include in
such  registration (to the extent of the number which Holdings is so advised can
be sold), first the securities,  if any, being sold by Holdings,  and second the
securities proposed to be registered by WPG Corporate Development  Associates V,
L.P.  or  its  affiliates,  Jackson  National  Life  Insurance  Company  or  its
affiliates and any similar third party investors granted piggy-back registration
rights,  and  third,  Executive  and any  other  stockholders  (including  other
employees  of the  Company) of Holdings  not  included in the  foregoing  second
priority.  The  Registrable  Securities so included shall be  apportioned  among
Executive and any other  stockholders  of Holdings pro rata in proportion to the
total number of Registrable Securities and shares of Holdings Common Stock owned
by them,  respectively.  Notwithstanding anything herein to the contrary, to the
extent  the  underwriters  in any such  Piggyback  Registration  determine  that
Executive  must sell  lesser pro rata shares  than any other  stockholder  or no
shares, Executive shall sell


                                       21


<PAGE>




such lesser amount of shares or no shares as determined by such underwriters and
the fact that  Executive was required to sell such lesser amount of shares or no
shares shall not affect the right of any other  stockholders to include Holdings
Common Stock in such registration.

                   (c)  Expenses of  Registration.  With respect to a Piggy-back
Registration,  Holdings  shall bear and pay all expenses  incurred in connection
with any  registration,  filing or qualification of Registrable  Securities with
respect to the registrations  made pursuant to Section 9(a),  including (without
limitation) all  registration,  filing,  and qualification  fees,  printers' and
accounting fees, fees and  disbursements of counsel for Holdings,  but excluding
fees and  disbursements  of counsel to holders  of  Registrable  Securities  and
underwriting discounts and commissions relating to Registrable Securities.
                   As used in Section 9, the following  shall have the following
meaning:   "register",   "registered"  and  "registration"   shall  refer  to  a
registration  effected  by  preparing  and filing a  registration  statement  in
compliance   with  the  Securities  Act  and  the  declaration  or  ordering  of
effectiveness of such registration statement.
                   "Registrable Securities" shall mean any and all shares of
Holdings Common Stock whenever acquired. As to any particular Registrable
Securities, such securities shall


                                       22


<PAGE>




cease to be  Registrable  Securities  when  (i) a  registration  statement  with
respect to the sale of such  securities  shall have become  effective  under the
Securities Act and such  securities  shall have been disposed of by Executive in
accordance with such registration  statement or (ii) such securities may be sold
pursuant to Rule 144 of the Securities Act.

                   10. Notices. All notices, requests, claims, demands and other
communications  under this  agreement  shall be in  writing  and shall be deemed
given if delivered  personally or sent by overnight courier  (providing proof of
delivery) to the parties at the  following  addresses  (or at such address for a
party as shall be specified by like notice): (i) if to Company, to the addresses
therefor  specified  in  Section  10.02  of the  Merger  Agreement,  (ii)  if to
Executive, 1 Eisenhaure Lane, North Reading, MA 01864.

                   11.  Entire  Agreement.  The  terms  of  this  Agreement  are
intended  by the  parties to be the final  expression  of their  agreement  with
respect to the employment of Executive by Company and may not be contradicted by
evidence of any prior or contemporaneous  agreement.  The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms  and  that no  extrinsic  evidence  whatsoever  may be  introduced  in any
judicial, administrative, or other legal proceeding involving this Agreement.


                                       23


<PAGE>




                   12. Amendments;  Waivers. This Agreement may not be modified,
amended,  or  terminated  except  by an  instrument  in  writing,  signed by the
Executive  and  by a  duly  authorized  representative  of  Company  other  than
Executive.  By an instrument  in writing  similarly  executed,  either party may
waive  compliance by the other party with any provision of this  Agreement  that
such  other  party was or is  obligated  to comply  with or  perform;  provided,
however,  that such waiver  shall not  operate as a waiver of, or estoppel  with
respect to, any other or subsequent failure. No failure to exercise and no delay
in exercising any right,  remedy,  or power  hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder  preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity.

                   13.  Confidentiality.  Executive  agrees  that the  terms and
conditions  of this  Agreement  are  confidential  and shall not be disclosed by
Executive  to any  third  parties,  other  than  Executive's  lawyers  and other
professional advisors, unless such disclosure is required by law.

                   14.    Governing    Law.   The   validity,    interpretation,
enforceability,  and  performance  of this  Agreement  shall be  governed by and
construed in accordance with the law of the State of New York.


                                       24


<PAGE>




                   15. Employee Acknowledgment.  Executive acknowledges (i) that
he has consulted  with or has had the  opportunity  to consult with  independent
counsel of his own choice  concerning  this Agreement and has been advised to do
so by Company, and (ii) that he has read and understands the Agreement, is fully
aware of its legal  effect,  and has  entered  into it  freely  based on his own
judgment.
                   16. Binding Effect.  This Agreement shall be binding upon and
shall inure to the benefit of the Corporation and its respective  successors and
assigns,  but the rights and obligation of Executive are personal and may not be
assigned or delegated without the Company's prior written consent.

                   17.  Arbitration.  Any dispute  between  the parties  arising
under  this  Agreement  or  Executive's  employment  with  the  Company  (or the
termination  thereof)  shall not be  decided  in  court,  but  instead  shall be
submitted  to  final,   binding  arbitration  before  the  American  Arbitration
Association in New York City.


                                       25


<PAGE>




                   The parties have duly executed this  Agreement as of the date
first written above.
                                                   ATC GROUP SERVICES INC.


                                               By:  /s/  Nicholas J. Malino
                                                  ---------------------------
                                                  Name:  Nicholas J. Malino
                                                  Title: Chief Executive Officer


                                                   ACQUISITION HOLDINGS, INC.


                                               By:  /s/  Wesley W. Lang, Jr.
                                                  -----------------------------
                                                  Name:  Wesley W. Lang, Jr.
                                                  Title: President


                                                   EXECUTIVE


                                                    /s/  Christopher P. Vincze
                                                   ----------------------------
                                                         Christopher P. Vincze



                                       26


<PAGE>




                                                                       Exhibit A

                                 GENERAL RELEASE

                     In consideration of the payment of _____________________
received  from  ATC  Group  Services  Inc.  ("Employer"),  _____________________
("Employee")  and except for all accrued but unpaid  compensation,  benefits and
rights of  Employee  provided  under  Section  6(e) of that  certain  Employment
Agreement between Employee, Employer and Acquisition Holdings, Inc., dated as of
February 16, 1998 and all amendments  and  extensions  thereto which the parties
may  adopt,   Employee,   on  behalf  of  himself  and  his  heirs,   executors,
administrators,  successors and assigns,  hereby releases,  relieves and forever
discharges Employer, its former and present subsidiaries,  affiliates, branches,
successors  and  assigns,  and their  former and  present  officers,  directors,
trustees,  employees,  agents  and  attorneys,   (collectively,   the  "Released
Parties"),  from any and all claims, actions, causes of action, demands, rights,
damages,  debts,  compensation,  costs  or  other  expenses,  including  without
limitation attorneys' fees, of any nature whatsoever,  whether known or unknown,
which  Employee  ever  had,  now  has,  or  which  he,  his  heirs,   executors,
administrators,  successors  and  assigns  hereinafter  can,  shall  or may have
against the Released Parties arising out of any matter,  cause,  acts,  conduct,
claim or event,  including without limitation all matters relating to Employee's
employment with the Employer, including without limitation


<PAGE>




contract claims, tort claims, claims for compensation or benefits, personal
injury claims and claims for attorneys' fees, and further includes all claims
arising under the Age Discrimination in Employment of 1967, as amended, 29
U.S.C. ss. 621 et seq., National Labor Relations Act, as amended, 29 U.S.C. ss.
151 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
ss. 2000e et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. ss.
12191 et seq., the Civil Rights Act of 1866, 42 U.S.C. ss. 1981, the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. ss. 1001 et seq.,
or any other federal, state and local law or principal of contract law or common
law; provided, however, that this General Release shall not operate to prohibit
Employee from commencing an action to enforce the terms of his Employment
Agreement.
                     Employee represents that he has not and will not file any
complaints, grievances, or charges relating to his employment against any of the
Released Parties.
                     Employee warrants that he is signing this General Release
voluntarily,  and that no promises or inducements  for this General Release have
been made,  and he enters into this General  Release  without  reliance upon any
statement or  representation by any of the Released Parties or any other person,
concerning any fact material to this General Release. Employee acknowledges that
he is not otherwise entitled to receive the consideration set forth above.


                                       2


<PAGE>




                     The Employer hereby advises the Employee to consult with
legal counsel concerning this General Release. The Employee acknowledges that he
has had at least  twenty-one  days in which to consider this General Release and
has had the opportunity to obtain legal counsel concerning this General Release.
Employee  represents  and warrants that he fully  understands  the terms of this
General  Release,  and that he knowingly and  voluntarily,  of his own free will
without any duress, being fully informed and after due deliberation, accepts its
terms  and  signs the same as his own free act for the  purpose  of making  full
withdrawal, compromise and settlement of all claims.
                     This General Release contains the entire agreement among
the parties hereto and the terms of this General Release are contractual and not
a mere recital.
                     The Employee understands that he has seven (7) days to
revoke this General Release after signing.  Employee agrees that in the event he
elects to revoke this  General  Release,  he will  provide the  Employer  with a
written  revocation  by the close of business on the seventh day  following  his
execution of this General Release.
                     PLEASE READ CAREFULLY BEFORE SIGNING. THIS DOCUMENT
INCLUDES  A RELEASE  OF ALL KNOWN AND  UNKNOWN  CLAIMS,  EXCEPT AS  SPECIFICALLY
PROVIDED HEREIN.


                                                    ---------------------
                                                          EMPLOYEE


                                       3


<PAGE>




STATE OF NEW YORK   )
                    : ss.:
COUNTY OF NEW YORK  )



                     On _________ , 1997 before me personally came _________ ,
to me known,  and known to me to be the  individual  described  herein,  and who
executed the foregoing  General  Release,  and duly  acknowledged  to me that he
executed the same of his own free will without any duress.


                                                       -----------------
                                                         NOTARY PUBLIC