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  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.

<PAGE>

     (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.

<PAGE>

     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 mark 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]


<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:
                                       -----------------------------------------


Print Name:                            STUART SAVITSKY
                                       -----------------------------------------

Date:
                                       -----------------------------------------

Residence or Mailing Address:          961 South End, Woodmere, NY  11598
                                       -----------------------------------------

Telephone Numbers (include Area Code):
                                       -----------------------------------------
                                       Business:            Home:
Social Security or Taxpayer
     Identification Number(s):
                                       -----------------------------------------
Mailing Address for Correspondence
     from the Company:
                                       -----------------------------------------

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

<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:
                                       -----------------------------------------

Print Name:                            SHABSI SCHREIER
                                       -----------------------------------------

Date:
                                       -----------------------------------------

Residence or Mailing Address:          342 Grant Avenue, Woodmere, NY  11598
                                       -----------------------------------------
Telephone Numbers (include Area Code):
                                       -----------------------------------------
                                       Business:            Home:
Social Security or Taxpayer
     Identification Number(s):
                                       -----------------------------------------
Mailing Address for Correspondence
     from the Company:
                                       -----------------------------------------

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

<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:
                                       -----------------------------------------

Print Name:                            STEVEN WEINER
                                       -----------------------------------------

Date:
                                       -----------------------------------------
Residence or Mailing Address:          520 Cedarwood Drive, Cedarhurst, NY 11516
                                       -----------------------------------------

Telephone Numbers (include Area Code):
                                       -----------------------------------------
                                       Business:            Home:
Social Security or Taxpayer
     Identification Number(s):
                                       -----------------------------------------
Mailing Address for Correspondence
from the Company:
                                       -----------------------------------------

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


<PAGE>




                       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:
                                               ---------------------------------
                                               Andrew C. Reiben,
                                                Senior Vice President




<PAGE>



                                    Exhibit A

  Grantor Trust Agreement executed and delivered by the Company and the Trustee
  -----------------------------------------------------------------------------


                                  See Attached




<PAGE>



                                    Exhibit B

    Certificate of Designation of 5% Convertible Series B Preferred Stock of
    ------------------------------------------------------------------------
       ATC Healthcare, Inc. filed with the Secretary of State of Delaware
       ------------------------------------------------------------------


                                  See Attached




<PAGE>



                                    Exhibit C


   Registration Rights Agreement executed and delivered by the Company and the
   ---------------------------------------------------------------------------
                                  Noteholders
                                  -----------


                                  See Attached