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 0000 Xxxxxx Xxxxxx, Xxxxx X000, Xxxx Xxxxxxx, Xxx Xxxx 00000
(the "Company") and each of the following parties, XXXXXX XXXXXXXX, an
individual with a principal residence located at 000 Xxxxx Xxx, Xxxxxxxx, Xxx
Xxxx 00000, XXXXXX XXXXXXXX, an individual with a principal residence located at
000 Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, and XXXXXX XXXXXX, an individual
with a principal residence located at 000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxx
00000 (each sometimes referred to as, a "Noteholder" and collectively as, the
"Noteholders").
WITNESSETH:
WHEREAS, each of Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx and Xxxxxx Xxxxxx
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 Xxxxx X. Xxxxxx, 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;
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
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:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) All corporate action on the part of the Company and its officers,
directors and stockholders necessary for the execution, delivery and performance
of this Agreement and the authorization, issuance and delivery of the Series B
Preferred Stock pursuant to this Agreement and the Trust Agreement has been
taken.
(c) Any shares of the Company's Class A Common Stock, $.01 par value per
share, ("Common Stock") issued upon the conversion of the Series B Preferred
Stock shall be duly and validly issued, fully paid and non-assessable.
(d) The Company is not in violation of any applicable statute, rule or
regulation adopted, enacted or promulgated by any government or governmental
authority, except where any such violation would not have an adverse effect on
the consummation of the transactions contemplated by this Agreement or a
material adverse effect on the Company's business or financial condition.
(e) Neither execution or delivery of this Agreement by the Company nor
consummation of the transactions contemplated hereby will (i) violated or
conflict with the certificate of incorporation or by-laws of the Company, (ii)
violate any provisions of law applicable to the Company or (iii) violate,
conflict with or result in a breach of or default under any contract, instrument
or other agreement to which the Company is a party or any governmental or
judicial order or decree applicable to the Company.
4. Noteholders' Representations and Warranties. By executing this
Agreement, each Noteholder makes the following representations, declarations and
warranties to the Company as of the date hereof, with the intent and
understanding that the Company will rely thereon:
(a) All documents, records and books relating to such Noteholder's
investment in the Series B Preferred Stock and the Company, to the extent
created under the Trust, requested by such Noteholder have been made available
or delivered to such Noteholder, and all questions of such Noteholder relating
to said investments have been answer by the Company.
(b) The Noteholder understands that the Series B Preferred Stock and the
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
(the "Securities") are speculative investments that involve a high degree of
risk of loss by the Noteholder of part or all of his investment herein.
(c) The Noteholder has been offered the opportunity to ask questions of
appropriate officers of the Company with respect to its business and affairs,
and such officers have answered all such questions to his satisfaction.
(d) The Noteholder's acceptance the Securities is being made for his own
account for investment purposes only and with no intention of immediate
distribution.
(e) The Noteholder has the requisite knowledge and experience in financial
and business matters to enable him to evaluate the merits and risks of an
investment in the Securities.
(f) The Noteholder is aware that the Securities are "restricted
securities" with the meaning of that term under Rule 144 of the rule promulgated
under the Act ("Rule 144"), that the Securities will be subject to the resale
restrictions of Rule 144 and the Act (unless another exemption for sale is
available under the Act), and that, if he is at any time deemed to be an
"affiliate" of the Company, the Securities will be subject to the additional
resale restrictions under Rule 144 applicable to affiliates.
(g) The Noteholder is aware that until the Securities are registered
under the Act, he may be unable to liquidate his investment in the Securities
despite a need to do so.
(h) The Noteholder is aware that the Securities will bear a legend
conditioning the transfer of the Securities upon, among other things, the
receipt by the Company of a satisfactory opinion to the effect that any proposed
transfer of the Securities is exempt from registration under the Act.
5. Registration Rights. The Company and each of the Noteholders shall
concurrently herewith execute and deliver a Registration Rights Agreement dated
as of an even date herewith, a copy of which is attached as Exhibit C hereto.
6. Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws applicable to contracts made and wholly performed in
the State of New York.
7. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original and, all of
which, taken together, shall be deemed one and the same instrument.
8. Persons Bound. This Agreement shall, except as otherwise provided
herein, inure to the benefit of and be binding on the Company and its successors
and assigns and on each Noteholder who executes this Agreement and his
respective heirs, executors, administrators, successors and assigns.
9. Entire Agreement. This Agreement, when accepted by the Company, will
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written, except as herein contained. This Agreement may not be modified,
changed, waived or terminated other than by a writing executed by all the
parties hereto. No course of conduct or dealing shall be construed to modify,
amend or otherwise affect any of the provisions hereof.
10. Assignability. Each Noteholder acknowledges that he may not assign any
of his rights to or interest in or under this Agreement without the prior
written consent of the Company, and any attempted assignment without such
consent shall be void and without effect.
11. Release of Liens. The Company is authorized (a) to xxxx and treat the
Subordinated Notes as "Cancelled," and any and all rights of the Noteholders
arising under the Subordinated Notes and any documents evidencing or securing
the Subordinated Notes are extinguished aand (b) to file Uniform Commercial Code
("UCC") termination statements terminating all Noteholders' UCC Financing
Statements against the Company or any of its subsidiaries and any and all other
releases and mortgage satisfactions, releasing all liens granted by the Company
or its subsidiaries to the Noteholders. Each Noteholder further agrees to
deliver to the Company any release, termination statement or reassignment
document which the Company, in its reasonable discretion, believes is necessary
to release any liens held by the Noteholder in the property of the Company or
its subsidiaries, and any other document the Company may reasonably request to
effectuate or confirm the agreements set forth in this Agreement.
12. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid, to the address of each party set forth herein.
Any such notice shall be deemed given when delivered personally, telegraphed,
telexed or sent by facsimile transmission or, if mailed, three days after the
date of deposit in the United States mails.
13. Interpretation.
13.1 When the context in which words are used in this Agreement
indicates that such is the intent, singular words shall include the plural, and
vice versa, and masculine words shall include the feminine and neuter genders,
and vice versa.
13.2 Captions are inserted for convenience only, are not a part of
this Agreement, and shall not be used in the interpretation of this Agreement.
[INTENTIONALLY LEFT BLANK -- NEXT PAGE IS SIGNATURE PAGE]
NOTEHOLDER SIGNATURE PAGE
The undersigned, desiring to cancel the Debt in exchange for a promise by
the Company to issue its Series B Preferred Stock to the Trust for further
issuance to the Noteholder in accordance with the provisions of this Agreement
and the Trust Agreement, acknowledges that he has received and understands the
terms and conditions of the Agreement and Trust Agreement attached hereto and
that he does hereby agree to all the terms and conditions contained therein.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement as
of the date set forth below.
Signature:
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Print Name: XXXXXX XXXXXXXX
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Date:
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Residence or Mailing Address: 000 Xxxxx Xxx, Xxxxxxxx, XX 00000
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Telephone Numbers (include Area Code):
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Business: Home:
Social Security or Taxpayer
Identification Number(s):
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Mailing Address for Correspondence
from the Company:
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NOTEHOLDER SIGNATURE PAGE
The undersigned, desiring to cancel the Debt in exchange for a promise by
the Company to issue its Series B Preferred Stock to the Trust for further
issuance to the Noteholder in accordance with the provisions of this Agreement
and the Trust Agreement, acknowledges that he has received and understands the
terms and conditions of the Agreement and Trust Agreement attached hereto and
that he does hereby agree to all the terms and conditions contained therein.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement as
of the date set forth below.
Signature:
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Print Name: XXXXXX XXXXXXXX
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Date:
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Residence or Mailing Address: 000 Xxxxx Xxxxxx, Xxxxxxxx, XX 00000
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Telephone Numbers (include Area Code):
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Business: Home:
Social Security or Taxpayer
Identification Number(s):
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Mailing Address for Correspondence
from the Company:
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NOTEHOLDER SIGNATURE PAGE
The undersigned, desiring to cancel the Debt in exchange for a promise by
the Company to issue its Series B Preferred Stock to the Trust for further
issuance to the Noteholder in accordance with the provisions of this Agreement
and the Trust Agreement, acknowledges that he has received and understands the
terms and conditions of the Agreement and Trust Agreement attached hereto and
that he does hereby agree to all the terms and conditions contained therein.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement as
of the date set forth below.
Signature:
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Print Name: XXXXXX XXXXXX
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Date:
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Residence or Mailing Address: 000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000
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Telephone Numbers (include Area Code):
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Business: Home:
Social Security or Taxpayer
Identification Number(s):
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Mailing Address for Correspondence
from the Company:
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ATC HEALTHCARE, INC. SIGNATURE PAGE
The undersigned, as a representative of the Company, acknowledges that he
has received an executed copy of this Agreement along with the original
Subordinated Note or Notes, or affidavit of lost note from each of the
Noteholders executing this Agreement and that the Company does hereby agree to
all the terms and conditions contained therein.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement as
of this _____ day of August 2005.
ATC HEALTHCARE, INC.
By:
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Xxxxxx X. Xxxxxx,
Senior Vice President
Exhibit A
Grantor Trust Agreement executed and delivered by the Company and the Trustee
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See Attached
Exhibit B
Certificate of Designation of 5% Convertible Series B Preferred Stock of
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ATC Healthcare, Inc. filed with the Secretary of State of Delaware
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See Attached
Exhibit C
Registration Rights Agreement executed and delivered by the Company and the
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Noteholders
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See Attached
