SETTLEMENT AGREEMENT

      This SETTLEMENT AGREEMENT (the "Agreement"), dated May 4, 2001 by and
among, STEINBOCK-BRAFF, INC., a New York corporation (ASTEINBOCK-BRAFF@), COREY
STEINBOCK ("STEINBOCK"), G-MAT DIST. INC., a New York corporation ("G-Mat"),
LEONARD WALD ("Wald" and together with Steinbock-Braff, Steinbock and G-Mat, the
"Plaintiffs") and ATEC GROUP, INC. ("ATEC" or "Defendant"), sometimes
individually referred to as a "Party" or collectively referred to as "Parties".

                                    RECITALS

WHEREAS, each of the Parties are a party to a lawsuit pending in the Supreme
Court of the State of New York, Nassau County styled Steinbock-Braff, Inc. d/b/a
Kat Nap Products, Corey Steinbock d/b/a G-Mat Dist. Inc, and Leonard Wald v.
ATEC Group, Inc., Index No. 017923/98 (the "Litigation"); and

WHEREAS, ATEC believes that the claims against it in the Litigation are without
merit and deny any liability to the Plaintiffs and have agreed to settle this
action solely to avoid the inconvenience and expense of litigation.

NOW THEREFORE, in consideration of their mutual promises and undertakings
contained in this agreement, the Parties agree, as follows:

      1. General Release. At the Closing (as defined below), the Plaintiffs and
the Defendant shall exchange duly executed general releases in the form annexed
hereto as Exhibit A. Said releases are to be held in escrow by the attorneys for
the parties, pending the completion of the parties' obligations pursuant to this
Stipulation of Settlement.

      2. Settlement Payments. ATEC shall pay $200,000, by check payable to
Braverman Warfield LLP, as attorneys, at the Closing;

      3. Preferred Stock and Representations.

            (a) ATEC shall adopt and file with the Secretary of State of
            Delaware on or before the Closing (as defined below) a Certificate
            of Designations, Preferences and Rights (the "Certificate of
            Designation") setting forth the terms and conditions of ATEC=s
            Series J Convertible Preferred Stock, par value $.01 per share (the
            "Series J Preferred Stock"), such Certificate of Designation to be
            in the form and substance of the Certificate of Designation annexed
            hereto as Exhibit B. Such Certificate of Designation will further
            amend ATEC's Certificate of Incorporation.

            (b) At the Closing, ATEC shall deliver to counsel for the
            Plaintiff=s preferred stock certificates representing an aggregate
            of 105,000 shares of its Series J Preferred Stock (the APreferred
            Shares@). The Preferred Shares shall be issued to the following
            persons in share amounts designated as follows:


<PAGE>

                 Holder
                 ------
            Maryann Steinbock                              43,417.5 Shares
            Leonard Wald and Elizabeth Wald                26,617.5 Shares
            Braverman Warfield LLP                         34,965   Shares

            (c) The Plaintiffs and each of the holders of the Preferred Shares
            acknowledge that the Preferred Shares and the shares of Common Stock
            (as defined in Section 5 below) to be issued upon the conversion of
            the Preferred Shares (collectively, the "Securities") are being
            acquired for investment and that the Plaintiffs will not offer, sell
            or otherwise dispose of the Securities except under circumstances
            which will not result in a violation of federal or state securities
            laws. The certificates for the Securities (unless registered under
            the Securities Act of 1933 , as amended (the "Securities Act"))
            shall bear the following legend:

            THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
            THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT"), OR
            THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
            SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
            REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
            OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
            REGISTRATION IS NOT REQUIRED.

            After the above requirement for a legend is no longer applicable
            because the Preferred Shares or the shares of Common Stock into
            which they are convertible are freely transferable under the
            Securities Act, ATEC shall with all due diligence and without delay
            instruct ATEC=s counsel to remove such legend upon request of any
            Plaintiff and or "Holder" of the shares as designated in paragraph
            3(b) hereinabove.

      4. Stipulation Discontinuing Action. At the Closing, the Plaintiffs and
ATEC will execute a Stipulation Discontinuing Action, substantially in the form
annexed hereto as Exhibit C, dismissing the Litigation with prejudice and
without costs, which stipulation shall be filed with the Court by the attorneys
for ATEC.

      5. Registration Rights.

            (a) This Section 5 sets forth ATEC=s agreement with respect to the
            registration of shares of Common Stock that the Plaintiffs may
            acquire upon conversion of any shares of Series J Preferred Stock.
            Subject to the foregoing, ATEC covenants and agrees with respect to
            the registration of the Common Stock as follows:

                  (1) Definitions. For purposes of this Section 5:


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<PAGE>

                  (i) The term ACommon Stock@ shall mean ATEC=s common stock,
                  par value $.01 per share.

                  (ii) The term "Holder" means any person owning or having the
                  right to acquire Registrable Securities.

                  (iii) The term "1934 Act" shall mean the Securities Exchange
                  Act of 1934, as amended.

                  (iv) The term "register," "registered," and "registration"
                  refer to a registration effected by preparing and filing a
                  registration statement or similar document in compliance with
                  the Securities Act, and the declaration or ordering of
                  effectiveness of such registration statement or document.

                  (v) The term "Registrable Securities" means the Common Stock
                  issuable or issued upon conversion of the Series J Preferred
                  Stock and any other shares of Common Stock issued in respect
                  of such shares (because of stock splits, stock dividends,
                  reclassifications, recapitalizations, or similar events.)

                  (vi) The term "SEC" shall mean the Securities and Exchange
                  Commission.

            (b) On or before June 30, 2001, ATEC shall prepare and file with the
            SEC a registration statement ("Registration Statement") on any form
            for which ATEC then qualifies under the Securities Act covering the
            registration of 105,000 shares of the Registrable Securities.

            (c) Whenever required under this Section 5 to effect the
            registration of any Registrable Securities, ATEC shall:

                  (1) Prepare and file with the SEC a Registration Statement
                  with respect to such Registrable Securities and use its
                  reasonable best efforts to cause such Registration Statement
                  to become effective and remain effective until the sale of all
                  Registrable Securities covered thereby, provided ATEC shall
                  have no further obligation to cause the Registration Statement
                  to remain effective if the Registrable Securities may be sold
                  to the public pursuant to Rule 144 promulgated under the
                  Securities Act.

                  (2) Prepare and file with the SEC such amendments and
                  supplements to such Registration Statement and the prospectus
                  used in connection with such Registration Statement as may be
                  necessary to comply with the provisions of the Securities Act
                  with respect to the disposition of all securities covered by


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<PAGE>

                  such Registration Statement, provided ATEC shall have no
                  further obligation to prepare and file such amendments and
                  supplements if the Registrable Securities may be sold to the
                  public pursuant to Rule 144 promulgated under the Securities
                  Act.

                  (3) Furnish to the Holders such numbers of copies of a
                  prospectus, including a preliminary prospectus, in conformity
                  with the requirements of the Securities Act, and such other
                  documents as they may reasonably request in order to
                  facilitate the disposition of Registrable Securities owned by
                  them.

                  (4) Use its reasonable best efforts to register and to qualify
                  the securities covered by such Registration Statement under
                  such other securities or Blue Sky laws of such jurisdictions
                  as shall be reasonably requested by the Holders if applicable
                  as determined by ATEC=s counsel; provided that ATEC shall not
                  be required in connection therewith or as a condition thereto
                  to qualify to do business or to file a general consent to
                  service of process or to submit to the jurisdiction of any
                  taxing authority in any such states or jurisdictions.

                  (5) Notify each Holder of Registrable Securities covered by
                  such Registration Statement, at any time when a prospectus
                  relating thereto is required to be delivered under the
                  Securities Act, of the happening of any event as a result of
                  which the prospectus included in such Registration Statement,
                  as then in effect, to the knowledge of ATEC, includes an
                  untrue statement of a material fact or omits to state a
                  material fact required to be stated therein or necessary to
                  make the statements therein not misleading in the light of the
                  circumstances then existing.

                  (6) Cause all such Registrable Securities registered hereunder
                  to be listed on any securities exchange on which similar
                  securities issued by ATEC are then listed.

                  (7) Provide a transfer agent and registrar for all Registrable
                  Securities registered pursuant hereto.

            (d) In the event that any Preferred Shares remain outstanding on
            October 31, 2003, upon request of any Plaintiff who is holder of the
            Preferred Shares, which request must be delivered to ATEC by
            November 30, 2003, ATEC shall prepare and file a Registration
            Statement by the Maturity Date (as defined in the Certificate of
            Designations) covering the remaining Registrable Securities, if any,
            provided, ATEC shall have no obligation to prepare or file such
            Registration Statement pursuant to this Section 5(d) and may at its
            election terminate or withdraw such registration (i) if the
            Registrable Securities may be resold to the public pursuant to Rule
            144 promulgated under the Securities Act or (ii) if at any time
            there are no remaining Preferred Shares outstanding.


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<PAGE>

            (e) It shall be a condition precedent to the obligations of ATEC
            under this Section 5 that all of Holders furnish to ATEC such
            information regarding himself or itself, the Registrable Securities
            and the intended method of disposition of the Registrable Securities
            as shall be reasonably requested, and shall execute such documents
            in connection with such registration as ATEC may reasonably request.

            (f) All expenses other than underwriting discounts, transfer taxes
            and commissions incurred in connection with registrations, filings
            or qualifications pursuant to this Section 5, including (without
            limitation) all registration, filing and qualification fees,
            printers' and accounting fees, fees and disbursements of counsel for
            ATEC shall be borne by ATEC.

            (g) In the event that any Registrable Securities are included in a
            Registration Statement under this Section 5:

                  (1) To the extent permitted by law, ATEC will indemnify and
                  hold harmless each Holder, any underwriter (as defined in the
                  Securities Act) for such Holder and each person, if any, who
                  controls such Holder or underwriter within the meaning of the
                  Securities Act or the 1934 Act, against any losses, claims,
                  damages, or liabilities to which they may become subject under
                  the Securities Act, the 1934 Act or other federal or state
                  law, insofar as such losses, claims, damages, or liabilities
                  (or actions in respect thereof) arise out of or are based upon
                  any of the following statements, omissions or violations
                  (collectively a "Violation"): (i) any untrue statement to the
                  knowledge of ATEC, of a material fact contained in such
                  Registration Statement, including any preliminary prospectus
                  or final prospectus contained therein or any amendments or
                  supplements thereto, (ii) the omission to state therein a
                  material fact required to be stated therein, or necessary to
                  make the statements therein not misleading, or (iii) any
                  violation by ATEC of the Securities Act, the 1934 Act, any
                  state securities law or any rule or regulation promulgated
                  under the Securities Act, or the 1934 Act or any state
                  securities law; and ATEC will pay to each such Holder,
                  underwriter or controlling person, as incurred, any legal or
                  other expenses reasonably incurred by them in connection with
                  investigating or defending any such loss, claim, damage,
                  liability or action; provided, however, that the indemnity
                  agreement contained in this section 5(g), shall not apply to
                  amounts paid in settlement of any such loss, claim, damage,
                  liability, or action if such settlement is effected without
                  the consent of ATEC, nor shall ATEC be liable in any such case
                  for any such loss, claim, damage, liability, or action to the
                  extent that it arises out of or is based upon a Violation
                  which occurs in reliance upon and in conformity with written
                  information furnished expressly for use in connection with
                  such registration by any such Holder, underwriter or
                  controlling person.

                  (2) The obligations of ATEC under this Section 5 (g) shall
                  survive the completion of any offering of Registrable
                  Securities in a Registration Statement under this Section 5.


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<PAGE>

            (h) With a view to making available to the Holders the benefits of
            Rule 144 promulgated under the Securities Act and any other rule or
            regulation of the SEC that may at any time permit a Holder to sell
            securities of ATEC to the public without registration, ATEC agrees
            to use its reasonable best efforts to:

                  (1) make and keep public information available, as those terms
                  are understood and defined in SEC Rule 144, at all times;

                  (2) file with the SEC in a timely manner all reports and other
                  documents required of ATEC under the Securities Act and the
                  1934 Act as to comply with Rule 144; and

                  (3) furnish to any Holder, so long as the Holder owns any
                  Preferred Shares or Registrable Securities, upon request (i) a
                  written statement by ATEC that it has complied with the
                  reporting requirements of SEC Rule 144, the Securities Act,
                  and the 1934 Act (ii) a copy, if not publicly available, if
                  applicable, of the most recent annual or quarterly report of
                  ATEC and such other reports and documents filed by ATEC with
                  the SEC, and (iii) such other information as may be reasonably
                  requested in availing a Holder of any rule or regulation of
                  the SEC which permits the selling of any such securities
                  without registration.

            (i) The rights to cause ATEC to register Registrable Securities
            pursuant to this Agreement may be assigned (but only with all
            related obligations) by a Holder subject to an opinion of counsel
            acceptable to ATEC authorizing said assignment to (i) a partner or
            shareholder of such Holder or (ii) a transferee or assignee of such
            securities who acquires at least twenty percent (20%) of the
            Registrable Securities (as adjusted for stock splits, combinations
            and the like) owned by such Holder, provided that: (a) ATEC is,
            within a reasonable time after such transfer, furnished with written
            notice of the name and address of such transferee or assignee and
            the securities with respect to which such registration rights are
            being assigned; (b) such transferee or assignee agrees in writing to
            be bound by and subject to the terms and conditions of this
            Agreement; and (c) such assignment shall be effective only if
            immediately following such transfer the further disposition of such
            securities by the transferee is not a public offering requiring
            registration under the Act.

      6. The Closing. The closing under this Agreement (the "Closing") shall
take place at the offices of Braverman Warfield LLP, 3333 New Hyde Park Road,
Suite 305, New Hyde Park, New York, at 10:00 a.m. on May 9, 2001.

      7. Each of the parties represents that all necessary action has been taken
by such party to authorize the execution, delivery and performance of this
Agreement. and that this Agreement is and will be after its execution the legal,
valid and binding obligation of the parties in accordance its terms.


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<PAGE>

      8. The parties acknowledge this Agreement is a compromise and settlement
of disputed claims and that such compromise and settlement shall not be taken as
an admission of liability on the part of any party to this Agreement. Neither
the Agreement, nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Agreement or the
settlement (i) is or may be deemed to be or may be used as an admission of, or
evidence of, the validity of any claim, or of any wrongdoing or liability of any
of the parties hereto, or (ii) is or may be deemed to be or may be used as an
admission of, or evidence of. any fault or omission in any civil, criminal or
administrative proceeding in any court, administrative agency or other tribunal.

      9. This Agreement and the exhibits attached hereto constitute a complete
expression of the parties of the settlement agreed to by them and supersedes all
prior agreements and understandings among the parties hereto relating to the
subject matter hereof.

      10. This Agreement may not be modified, superseded, terminated or amended
and no provision of this Agreement may be waived, except by a writing making
specific reference hereto signed by the party to be bound.

      11. The terms of this Agreement may be disclosed as required by law or as
required by ATEC in order to comply with the disclosure requirements of federal
or state securities laws and the rules and regulations of the National
Association of Securities Dealers, Inc. and the American Stock Exchange.

      12. This Agreement shall be construed and enforced in accordance with the
laws of the state of New York applicable to agreements made and to be performed
in the State of New York.

      13. Any action to enforce this Agreement shall be brought only in the
federal or state courts of New York and each signatory hereby consents to the
jurisdiction and venue of such courts.

      14. This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their successors and assigns.

      15. Each party hereto acknowledges that it has been represented by legal
counsel of its own choice throughout all of the negotiations which preceded the
execution of this Agreement and that it has executed this Agreement with the
consent and upon the advice of such independent legal counsel.

      16. Each party hereto acknowledges that it has read this Agreement and
consulted with its attorneys as to the full meaning and effect of this Agreement
and agrees to all of the terms and conditions contained herein without any
reservation whatsoever and that it is signing this Agreement with full knowledge
of any and all rights which it may have, that it is not relying on any
representations made by any party hereto which are not explicitly set forth
herein and that


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<PAGE>

it has conducted whatever investigation it has deemed necessary to ascertain all
facts and matters related to this Agreement.

      17. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party) or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:

      If to ATEC:

      ATEC Group, Inc.
      69 Mall Drive
      Commack, NY 11725

      Telephone:          (631) 543-2800
      Facsimile:          (631) 543-4250
      Attention:          President

      With a copy to:
      Silverman, Collura & Chernis, P.C.
      381 Park Avenue South
      New York, NY 10016
      Telephone: (212) 779-8600
      Facsimile: (212) 779-8858
      Attention: Peter Silverman, Esq.

      If to Steinbock-Braff, Steinbock and/or G-Mat:
      1316 Park Street
      Atlantic Beach, New York 11509
      Telephone:        (800) 638-8420
      Facsimile:        516 371-2258
      Attention:        Mr. Corey Steinbock

      With a copy to:
      Braverman Warfield LLP
      3333 New Hyde Park Road, Suite 305
      New Hyde Park, New York 11042
      Telephone:        (516) 365-3838
      Facsimile:        (516) 365-3261
      Attention: Ronald John Warfield, Esq.


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<PAGE>

      If to Wald:
      Mr. Leonard Wald
      348 Clearmeadow Drive
      East Meadow, NY  11554

      Telephone:        (516) 731-6725
      Facsimile:        (516) 731-8593
      Attention:  Mr. Leonard Wald

      With a copy to:

      Braverman Warfield LLP
      3333 New Hyde Park Road, Suite 305
      New Hyde Park, New York 11042
      Telephone:        (516) 365-3838
      Facsimile:        (516) 365-3261
      Attention: Ronald John Warfield, Esq.

      18. This Agreement may be signed in counterparts and shall be deemed
executed upon delivery by each party of the counterparts to the other parties.

                            [signature page follows]


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<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                        STEINBOCK-BRAFF, INC.

                                        ---------------------------------------
                                        By: COREY STEINBOCK
                                        Title:

                                        ---------------------------------------
                                        Corey Steinbock

                                        ---------------------------------------
                                        Maryann Steinbock

                                        G-MAT DIST. INC.

                                        ---------------------------------------
                                        By: Corey Steinbock
                                        Title:

                                        ---------------------------------------
                                        Leonard Wald

                                        --------------------------------------
                                        Elizabeth Wald

                                        BRAVERMAN WARFIELD LLP

                                        ---------------------------------------
                                        By:  Ronald John Warfield
                                        Title:  Partner

                                        ATEC Group, Inc.

                                        ---------------------------------------
                                        By:
                                        Title:


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