Exhibit 10.1
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AGREEMENT
This
Agreement is made as
of the 31st day of August 2005, by and between
ATC HEALTHCARE, INC., a Delaware corporation with its principal executive
offices located at 1983 Marcus Avenue,
Suite E122, Lake
Success, New York 11042
(the "Company") and each of the following parties, STUART SAVITSKY, an
individual with a principal residence located at 961 South
End, Woodmere,
New
York 11598, SHABSI SCHREIER, an individual
with a principal residence located at
342 Grant Avenue, Woodmere, New York 11598, and STEVEN WIENER, an individual
with a principal residence located at 520
Cedarwood Drive, Cedarhurst, New York
11516 (each sometimes referred to as, a "Noteholder"
and collectively as, the
"Noteholders").
WITNESSETH:
WHEREAS,
each of Stuart Savitsky, Shabsi Schreier and Steven Wiener
previously sold assets to the Company and
received certain debt
obligations as
partial consideration for such asset sale and which debt obligations are
currently evidenced by Subordinated Promissory Notes of the Company's
subsidiaries, ATC Healthcare Services, Inc. and ATC Staffing Services,
Inc.,
dated April 22, 2005, each in the principal
amount of Two Million
Seven Hundred
Thousand Dollars ($2,700,000), for an aggregate principal amount of Eight
Million One Hundred Thousand Dollars ($8,100,000) (each a "Note" and
collectively, the "Notes"); and
WHEREAS,
the Company has
established a grantor
trust (the "Trust")
under
that certain Grantor Trust Agreement dated as of an even date herewith
by and
between the Company and David J. Hirsch, as
Trustee (the "Trust
Agreement"), a
copy of which is attached as Exhibit A
hereto, pursuant to which the Company has
issued, or will issue, a total of Four
Thousand Fifty (4,050) shares (the "Trust
Shares") of its newly created 5% Convertible Series B Preferred Stock (the
"Series B Preferred Stock"), with such
Series B Preferred Stock being held under
the Trust (a copy of the Certificate of Designation for
such Series B Preferred
Stock is attached as Exhibit B hereto), subject to the claims of Company's
creditors in the event of Company's Insolvency, as defined in the Trust
Agreement, until any such shares of Series
B Preferred Stock are released by the
Trust for the Company to issue appropriate certificates in the name of each
Noteholder and/or their respective beneficiaries in a manner and at times as
specified this Agreement, the Trust and the Certificate of
Designation for the
Series B Preferred Stock that the Company
filed with the
Secretary of State of
the State of Delaware; and
WHEREAS, it is
the intention of the parties that the Trust shall constitute
an unfunded arrangement and shall not affect the status of the Company's
unfunded promise in this Agreement that is maintained for the purpose of
providing installment payments in
consideration of the Noteholders previous sale
of assets to the Company;
<PAGE>
NOW, THEREFORE,
the parties agree as follows:
1. Cancellation of Debt.
(a) Subject to the terms and conditions of this Agreement, each of the
Noteholders agrees that the Subordinated
Note, or Subordinated
Notes, that are
made payable to each such Noteholder, including all principal and any accrued
interest thereon, are hereby cancelled and of no
further force and effect, in
exchange for the Company's unfunded promise to issue a total of One
Thousand
Three Hundred Fifty (1,350) shares of it Series B Preferred Stock to each
Noteholder in certain installments as more
fully provided in the Trust Agreement
and an amount equal to any dividends declared and paid on that Series B
Preferred Stock to the extent that the Trust is the record holder for the
dividends.
(b) The Company agrees that upon the
release of any of the Trust Shares to
the Noteholders under the Trust Agreement, it will issue appropriate stock
certificates in the name of each Noteholder
evidencing the
requisite number
of
shares of its Series B Preferred Stock that are being released and issued to
each Noteholder at such release date.
Under the terms of the
Trust, the Company
shall direct Trustee to release Trust
Shares to each Noteholder as follows: 166
shares on the third anniversary of the initial
issuance of the Trust
Shares to
the Trust by the Company (the "Initial Issuance"), 83 shares on the fourth
anniversary of the Initial Issuance,
166 shares on the
fifth anniversary of the
Initial Issuance, 83 shares on the sixth
anniversary of the Initial Issuance and
166 shares on the seventh anniversary of
the Initial Issuance.
All of the Trust
Shares remaining in the trust will be released in equal amount to each
Noteholder on the earlier of (a) the time
immediately prior to the occurrence of
a Change of Control (as such term is defined
in the Trust
Agreement)
of the
Company or (b) the tenth anniversary of the
Initial Issuance.
(c) Notwithstanding the scheduled
releases,
(i) if the Company redeems any Trust
Shares, the Company shall pay to each
Noteholder an amount
equal to one-third (1/3rd) of the redemption
proceeds, payable on
or about the time of the redemption payments to
the Trust, and to the
extent of any such
payments by the
Company to
the Noteholders,
any scheduled future
releases of Series B Preferred
Stock to the Noteholder shall first be reduced by one-third (1/3rd)
of
the number of Trust Shares redeemed; and further
(ii) if the
Internal Revenue Service makes a final determination to treat a
Noteholder as having made a disposition of his installment
obligations
or otherwise challenges the Noteholder's continued deferral of
capital
gain income
from his previous sale of assets from which the Note
derived and any such final determination or other challenge by the
Internal Revenue
Service is upheld if
contested,
the Company shall
<PAGE>
direct the immediate
release to such Noteholder of any remaining
Series B Preferred
Stock held by the Trust for the
benefit of that
Noteholder.
(d) The Company shall also distribute to each Noteholder
an amount equal
to any dividends declared and paid on the total of
One Thousand Three
Hundred
Fifty (1,350) shares of Series B Preferred Stock to be released to each
Noteholder but limited to the extent that the
Trust is still the record holder
of those shares.
2. Lost Debt Instrument. The Subordinated Notes
are attached hereto, or,
in the alternative, each of the Noteholders
represents as follows:
(i) The Noteholder is the lawful
owner, and is entitled
to possession and
legal and beneficial ownership, of the Subordinated Note or
Subordinated Notes evidencing the Debt (each a "Lost Note");
(ii) The
Noteholder has made a diligent search for the Lost Note(s) and
has
been unable to find or recover the Lost Note(s). The Noteholder has
not sold, assigned, pledged, transferred, deposited under any
agreement,
hypothecated, endorsed
or otherwise disposed
of the Lost
Note(s) or signed any power of attorney or other authorization with
respect to the same that is outstanding or in force; and no person,
firm, corporation,
agency or government,
other than the
Noteholder,
has asserted any right, title, agreement, equity or interest in, to
or
respecting the Lost Note(s);
(iii) These
representations
and agreements are made for the purpose of
inducing the Company to refuse to recognize any person other than the
undersigned as the owner of the Lost Note(s) and to refuse to take
any
action regarding the Lost Note(s) pursuant to the request or demand
of
any person other than the Noteholder, and to treat the Lost Note(s)
as
canceled;
(iv) In the
event the Noteholder
shall find or recover
the Lost Note(s),
the Noteholder hereby
covenants and agrees
to immediately
surrender
the same
to the Company for cancellation without further
consideration; and
(v) The Noteholder hereby agrees to indemnify and hold harmless the
Company and
its officers and any subsequent transferees of the
indebtedness evidenced
by the Lost
Note(s) from and
against any and
all loss, liability,
damage and expense in
connection with any claim
that the Lost Note(s)
continues to be outstanding obligations of the
Company from and after the date of this Agreement.
3. Company's Representations and Warranties. The Company makes the
following representations and warranties to each of the
Noteholders as of
the
date hereof:
<PAGE>
(a) The Company is a corporation
duly organized,
validly existing and
in
good standing under the laws of the State
of Delaware.
(b) All corpo
