ESCROW AGREEMENT
THIS
ESCROW AGREEMENT
(this "Agreement") is made and entered
into as of
April 19, 2004 by ATC HEALTHCARE,
INC., a Delaware
corporation (the "Company");
CORNELL CAPITAL PARTNERS, LP, a Delaware limited
partnership (the
"Investor");
and BUTLER GONZALEZ LLP (the "Escrow
Agent").
BACKGROUND
WHEREAS,
the Company and the
Investor have entered into an Standby Equity
Distribution Agreement (the "Standby Equity
Distribution Agreement") dated as of
the date hereof, pursuant to which the Investor will purchase shares of the
Company's Class A Common Stock,
$.01 par value per
share (the "Common
Stock"),
at a price per share equal to the Purchase
Price, as that term is defined in the
Standby Equity Distribution Agreement, in an aggregate amount of up to Five
Million Dollars ($5,000,000). The Standby
Equity Distribution Agreement provides
that on each Advance Date the Investor, as that term is defined in the
Standby
Equity Distribution Agreement, shall
deposit the Advance pursuant to the Advance
Notice in a segregated escrow account to be
held by Escrow Agent and the Company
shall deposit shares of the Company's
Common Stock, which are being purchased by
the Investor as set forth in the Standby
Equity Distribution Agreement, with the
Escrow Agent in electronic form as provided herein, in order to effectuate a
disbursement to the Company of the Advance by the Escrow Agent and a
disbursement to the Investor of the shares of the
Company's Common Stock by
Escrow Agent at a closing to be held as set forth in the Standby Equity
Distribution Agreement (the "Closing").
WHEREAS,
Escrow Agent has
agreed to accept,
hold, and disburse the funds
and the shares of the Company's Common Stock deposited with it in accordance
with the terms of this Agreement.
WHEREAS,
in order to
establish the escrow of funds and shares to
effect
the provisions of the Standby Equity
Distribution Agreement, the parties hereto
have entered into this Agreement.
NOW
THEREFORE, in
consideration of the foregoing, it is hereby agreed as
follows:
1.
Definitions. The following terms shall have the following meanings
when
used herein:
a. "Escrow Funds"
shall mean the Advance funds deposited with the
Escrow Agent pursuant to this
Agreement.
b. "Joint Written Direction" shall mean a written direction
executed
by the Investor and the Company directing Escrow Agent to disburse all or a
portion of the Escrow Funds or to take or refrain from taking any action
pursuant to this Agreement.
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c. "Common
Stock Joint Written Direction" shall mean a written
direction executed by the Investor and the Company
directing Escrow Agent to
disburse all or a portion of the
shares of the
Company's Common Stock or to
refrain from taking any action pursuant to
this Agreement.
2.
Appointment of and Acceptance by Escrow Agent.
a. The Investor and the Company hereby appoint Escrow Agent to
serve
as Escrow Agent hereunder. Escrow Agent hereby accepts such
appointment
and,
upon receipt by wire transfer of the Escrow
Funds in accordance
with Section 3
below, agrees to hold, invest and disburse the Escrow
Funds in accordance with
this Agreement.
b. The Investor and the Company hereby appoint the Escrow Agent to
serve as the holder of the shares of the
Company's Common Stock which shall be
purchased by the Investor. The Escrow Agent
hereby accepts such appointment and,
upon receipt via D.W.A.C of the shares of
Common Stockin accordance with Section
3 below, agrees to hold and disburse the
shares of the Company's Common Stock in
accordance with this Agreement.
c. The Company hereby
acknowledges that the Escrow Agent is counsel
to the Investor in connection with the
transactions
contemplated and referenced
herein. The Company agrees that in the event of any dispute arising in
connection with this Escrow Agreement or otherwise in connection with any
transaction or agreement contemplated and referenced
herein, the Escrow Agent
shall be permitted to continue to represent the Investor and the Company
will
not seek to disqualify such counsel.
3.
Creation of Escrow Account/Common Stock Account.
a. On or prior to the date of this Agreement the Escrow Agent
shall
establish an escrow account for the deposit of the Escrow
Funds entitled as
follows: ATC Healthcare, Inc/Cornell Capital Partners, LP. The Investor will
wire funds to the account of the Escrow
Agent as follows:
BANK:
Wachovia, N.A. of New Jersey
ROUTING #:
031201467
ACCOUNT #:
2020000659170
NAME ON ACCOUNT:
Butler Gonzalez LLP as Escrow Agent
NAME ON SUB-ACCOUNT:
ATC Healthcare, Inc/Cornell Capital Partners, LP
Escrow account
b. On or prior to the date of this Agreement the Escrow Agent
shall
establish an account for the D.W.A.C. of
the shares of Common Stock. The Company
will D.W.A.C. shares of the Company's Common
Stock to the account of the Escrow
Agent as follows:
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BROKERAGE FIRM:
Crown Financial Group
CLEARING HOUSE:
Fiserv
ACCOUNT #:
56797702
DTC #:
0632
NAME ON ACCOUNT:
Butler Gonzalez LLP Escrow Account
4.
Deposits into the
Escrow Account.
The Investor
agrees that it
shall
promptly deliver each Advance to the Escrow Agent for deposit in the Escrow
Account.
5.
Disbursements from the Escrow Account.
a. For each Advance at
such time as Escrow
Agent has received
the
total amount of the Advance and has
received the applicable number of shares of
Common Stock via D.W.A.C from the Company
which are to be issued to the Investor
pursuant to the Standby Equity Distribution Agreement, the Escrow Agent shall
notify the Company and the Investor. The
Escrow Agent will continue to hold such
funds until the Investor and Company execute and deliver a Joint Written
Direction directing the Escrow Agent to disburse the
Escrow Funds pursuant
to
Joint Written Direction at which time the Escrow
Agent shall wire the
Escrow
Funds to the Company. In disbursing such funds, Escrow Agent is authorized to
rely upon such Joint Written Direction from
Company and may accept any signatory
from the Company listed on the signature
page to this Agreement
or provided by
the Company in a written notice signed by the person
signing this Agreement and
any signature from the Investor that Escrow Agent already has on file.
Simultaneous with delivery of the executed
Joint Written Direction to the Escrow
Agent the Investor and Company shall execute and deliver a Common Stock
Joint
Written Direction to the Escrow Agent
directing the Escrow Agent to release via
D.W.A.C to the Investor the shares of the
Company's Common
Stock. In
releasing
such shares of Common Stock the Escrow Agent is authorized to rely upon such
Common Stock Joint Written Direction from Company and may accept any
signatory
from the Company listed on the signature page to this Agreement and any
signature from the Escrow Agent has on file or provided by the Company in a
written notice signed by the person signing
this Agreement.
In the
event the Escrow Agent
does not receive
the amount of an
Advance
from the Investor or the shares of Common
Stock to be purchased by the Investor
from the Company by the date of a
scheduled Closing, the Escrow Agent shall
notify the Company and the Investor.
In the
event that the Escrow
Agent has not received
the shares of Common
Stock to be purchased by the Investor from the Company by the date of a
scheduled Closing, in no event will the Escrow Funds
be released to the Company
until such shares are received by the
Escrow Agreement.
6. Deposit
of Funds. The Escrow Agent is hereby authorized to deposit the
wire transfer proceeds in the Escrow
Account.
7.
Suspension of Performance: Disbursement Into Court.
a. Escrow Agent. If at any time, there shall exist any dispute
between the Company and the Investor with
respect to holding or
disposition of
any portion of the Escrow Funds or the
Common Stock or any other obligations of
Escrow Agent hereunder, or if at any time Escrow Agent is
unable to determine,
to Escrow Agent's sole satisfaction, the proper disposition of any portion of
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the Escrow Funds or Escrow Agent's proper actions with respect to its
obligations hereunder, or if the parties
have not within thirty (30) days of the
furnishing by Escrow Agent of a notice of resignation pursuant to Section 9
hereof, appointed a successor Escrow Agent
to act hereunder, then
Escrow Agent
may, in its sole discretion, take either or
both of the following actions:
i. Suspend
the performance of any of its obligations
(including without limitation any disbursement
obligations) under
this Escrow
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of Escrow Agent or until a successor Escrow Agent shall be
appointed (as the case may be); provided
however, Escrow Agent shall continue to
invest the Escrow Funds in accordance with
Section 8 hereof; and/or
ii. Petition (by means of an interpleader action or any other
appropriate method) any court of competent
jurisdiction in any
venue convenient
to Escrow Agent, for instructions with respect to such dispute or
uncertainty,
and to the extent required by law, pay into such court, for holding and
disposition in accordance with the
instructions of such court, all funds held by
it in the Escrow Funds, after deduction and payment to Escrow Agent of the
expenses (including court costs and
attorneys' fees) incurred but not yet paid,
or reasonably expected to be incurred by Escrow Agent in connection with
performance of its duties and the exercise
of its rights hereunder.
iii. Escrow Agent shall have no liability to the Company,
the
Investor, or any person with respect to any
such suspension of
performance or
disbursement into court, specifically including any liability or claimed
liability that may arise, or be alleged to
have arisen, out of or as a result of
any delay in the disbursement of funds held in the
Escrow Funds or any delay in
with respect to any other action required
or requested of Escrow Agent.
8.
Investment of Escrow
Funds. The Escrow
Agent shall deposit the Escrow
Funds in a non-interest bearing money
market account.
If Escrow
Agent has not
received a Joint
Written Direction at any time
that an investment decision must be made, Escrow Agent may retain the
Escrow
Fund, or such portion thereof, as to which no Joint Written
Direction has been
received, in a non-interest bearing money
market account.
9.
Resignation and
Removal of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving
thirty (30) days'
prior written notice to the parties or may
be removed, with or without cause, by
the parties, acting jointly, by furnishing a Joint Written
Direction to Escrow
Agent, at any time giving ten (10) days'
prior written notice to Escrow Agent as
provided herein below. Upon any such notice of
resignation
or removal,
the
representatives of the Investor and the
Company identified in Sections 13a. (iv)
and 13b.(iv), below, jointly shall appoint a successor
Escrow Agent hereunder,
which shall be a commercial bank,
trust company or other
financial
institution
with a combined capital and surplus in excess of $10,000,000.00. Upon the
acceptance in writing of any appointment to be the Escrow Agent
hereunder by a
successor Escrow Agent, such successor Escrow Agent shall
thereupon succeed
to
and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged
from
its duties and obligations under this Escrow Agreement, but shall not be
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<PAGE>
discharged from any liability for actions
taken as Escrow Agent hereunder prior
to such succession. After any retiring Escrow Agent's
res
