Exhibit 10.86






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                            COMMON STOCK AND WARRANT
                               PURCHASE AGREEMENT



                              ATC Healthcare, Inc.



                                January 12, 2007



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                            COMMON STOCK AND WARRANT
                            ------------------------
                               PURCHASE AGREEMENT
                               ------------------

     THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"),  dated
as of  January  12,  2007,  is by and among ATC  Healthcare,  Inc.,  a  Delaware
corporation  (the  "Company"),  and Roaring Fork Capital SBIC,  L.P., a Delaware
limited partnership ("Roaring Fork" or the "Purchaser").

                                    Recitals
                                    --------

     A. The Company and Roaring Fork are executing and delivering this Agreement
in reliance upon the exemption from securities  registration afforded by Section
4(2) of the  Securities  Act and Rule 506 of Regulation D as  promulgated by the
SEC under the Securities Act.

     B. Roaring Fork wishes to purchase,  and the Company  wishes to sell,  upon
the terms and  conditions  stated in this  Agreement,  (i)  2,000,000  shares of
Common  Stock  (the  "Shares")  and (ii)  warrants,  in  substantially  the form
attached hereto as Exhibit A (the  "Warrants") to acquire up to 1,000,000 shares
of Common Stock (the "Warrant Shares").

     C. The  Shares,  the  Warrants  and the  Warrant  Shares  collectively  are
referred to herein as the "Securities".

     The parties  hereto,  in  consideration  of the  premises  and their mutual
covenants  and  agreements  herein set forth and  intending to be legally  bound
hereby, covenant and agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

     1.1 Certain  Definitions.  In  addition  to other  words and terms  defined
elsewhere in this Agreement, the following words and terms have the meanings set
forth below (and such meanings shall be equally  applicable to both the singular
and plural form of the terms defined, as the context may require):

     "Affiliate" shall mean with respect to any Person, any other Person that is
directly or indirectly  controlling,  controlled by or under common control with
such  Person  or  entity  or any of its  Subsidiaries,  and the  term  "control"
(including the terms "controlled by" and "under common control with") shall mean
having,  directly or  indirectly,  the power to direct or cause the direction of
the management  and policies of a Person,  whether  through  ownership of voting
securities or by contract or otherwise.  Without limiting the foregoing, (i) the
ownership  of ten  percent  (10%) or more of the voting  securities  of a Person
shall be  deemed to  constitute  control  and  notwithstanding  anything  to the
contrary  herein,  and (ii) neither Roaring Fork nor any of its Affiliates shall
be  deemed  to be  Affiliates  of the  Company  by  virtue  of the  transactions
contemplated in this Agreement.

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     "Agreement" shall mean this Common Stock and Warrant Purchase Agreement, as
the same may be amended, restated,  supplemented or otherwise modified from time
to time.

     "Board" shall mean the Board of Directors of ATC Healthcare, Inc.

     "Business" shall mean the principal business of the Company as set forth in
Section 4.1(b) hereof and as such shall  continue to be conducted  following the
purchase and sale of the Common Stock and the Warrants hereby.

     "Business  Day" shall mean any day other than a  Saturday,  Sunday or other
day on which banking institutions in Denver, Colorado are authorized or required
by law to close.

     "Bylaws"   shall  mean  the  Bylaws  or  analogous   instrument   governing
operations, including all amendments and supplements thereto.

     "Charter  Documents" shall mean the certificate of incorporation filed with
the  appropriate   Governmental   Authorities,   including  all  amendments  and
supplements thereto.

     "Closing"  shall mean the  closing of the  purchase  and sale of the Common
Stock and the Warrants pursuant to this Agreement.

     "Closing Date" shall mean January 12, 2007.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Common Stock" shall mean the Class A Common Stock of the Company.

     "Company" shall have the meaning  assigned to such term in the introductory
paragraph hereto, except as provided otherwise in this Agreement.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
the same may from time to time be amended,  and the rules and regulations of any
governmental  agency or authority,  as from time to time in effect,  promulgated
thereunder.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Fiscal Year" or "fiscal  year" shall mean each  12-month  period ending on
December 31 of each year.

     "Governmental Authorities" shall mean any federal, state or municipal court
or  other  governmental  department,   commission,   board,  bureau,  agency  or
instrumentality, governmental or quasi-governmental, domestic or foreign.

     "IRS" shall mean the Internal Revenue Service and any governmental  body or
agency succeeding to the functions thereof.

     "Laws" shall mean all U.S. and foreign  federal,  state or local  statutes,
laws, rules, regulations,  ordinances, codes, policies, rules of common law, and
the like, now or hereafter in effect,  including any judicial or  administrative
interpretations  thereof, and any judicial or administrative  orders,  consents,
decrees or judgments.

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     "Lien"  shall  mean any  security  interest,  pledge,  bailment,  mortgage,
hypothecation,  deed of trust,  conditional sales and title retention  agreement
(including  any  lease in the  nature  thereof),  charge,  encumbrance  or other
similar  arrangement  or  interest in real or personal  property,  whether  such
interest is based on common law, statute or contract.

     "Material  Adverse  Effect"  shall  mean a material  adverse  effect on the
business,  properties, assets, liabilities or condition (financial or otherwise)
of the Company, individually and/or taken as a whole.

     "Person"  shall  mean any  individual,  partnership,  limited  partnership,
corporation, limited liability Company, association, joint stock company, trust,
joint venture, unincorporated organization or governmental entity or department,
agency or political subdivision thereof.

     "Plan" shall mean any employee  benefit plan (within the meaning of Section
3(3) of ERISA),  established  or  maintained by the Company or any member of the
Controlled Group.

     "Principal Market" shall mean the American Stock Exchange.

     "Properties and Facilities" shall have the meaning assigned to such term in
Section 4.1(r) hereof.

     "Property"  shall  mean,  as to any  Person,  all types of real,  personal,
tangible,  intangible  or mixed  property  owned by such  Person  whether or not
included in the most recent  balance  sheet of such Person and its  subsidiaries
under GAAP.

     "Proprietary  Rights"  shall mean all  patents,  trademarks,  trade  names,
service marks, copyrights,  inventions,  production methods, licenses, formulas,
know-how,  trade  secrets  and  good  will  related  to any  of  the  foregoing,
regardless of whether such are  registered  with any  Governmental  Authorities,
including applications therefor.

     "Purchase  Documents"  shall mean this  Agreement  (including all schedules
attached to the Agreement),  the Registration Rights Agreement, the Common Stock
and the Warrants as any or all of the foregoing may be  supplemented  or amended
from time to time.

     "Purchaser"   shall  have  the  meaning   assigned  to  such  term  in  the
introductory paragraph hereto.

     "Registrable  Securities" shall mean the Shares, the Warrant Shares and any
shares issued or issuable upon any stock split,  dividend or other distribution,
recapitalization  or similar  event,  or any exercise or other price  adjustment
with respect to the Common Stock.

     "Roaring  Fork" shall mean Roaring Fork Capital SBIC,  L.P., the Purchaser,
which is managed by Roaring Fork Capital Management, LLC.

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     "SBA Compliance  Agreement" means the SBA Compliance  Agreement between the
Company and Roaring Fork dated as of January 12, 2007.

     "SEC" means the U.S. Securities and Exchange Commission.

     "Securities" means the Shares, Warrants and the Warrant Shares.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Subsidiary" of any corporation shall mean any other corporation or limited
liability  company of which the outstanding  capital stock possessing a majority
of voting power in the election of directors  (otherwise than as the result of a
default) is owned or  controlled  by such  corporation  directly  or  indirectly
through Subsidiaries.

     "Trading  Day"  means  (i) a day on which the  Common  Stock is traded on a
Trading Market (other than the OTC Bulletin Board),  or (ii) if the Common Stock
is not listed on a Trading Market (other than the OTC Bulletin  Board), a day on
which the Common Stock is traded in the over-the-counter  market, as reported by
the OTC  Bulletin  Board,  or (iii) if the  Common  Stock is not  quoted  on any
Trading   Market,   a  day  on  which  the   Common   Stock  is  quoted  in  the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated (or any similar  organization or agency succeeding to its functions
of reporting prices);  provided,  that in the event that the Common Stock is not
listed or quoted as set forth in (i),  (ii) and (iii)  hereof,  then Trading Day
shall mean a Business Day.

     "Trading  Market"  means  whichever  of the New York  Stock  Exchange,  the
American  Stock  Exchange,  the NASDAQ Global  Market,  the NASDAQ Global Select
Market,  the NASDAQ  Capital  Market or OTC  Bulletin  Board on which the Common
Stock is listed or quoted for trading on the date in question.

     "Transaction  Documents"  shall have the  meaning  assigned to such term in
Section 4.1(f) hereof.

     "Transactions"  shall mean the  purchase of the Shares and the  Warrants as
contemplated by this Agreement, and all other agreements contemplated hereby and
thereby.

     1.2 Accounting Principles. The character or amount of any asset, liability,
capital  account  or  reserve  and  of any  item  of  income  or  expense  to be
determined,  and any  consolidation or other accounting  computation to be made,
and the construction of any definition  containing a financial term, pursuant to
this Agreement shall be determined or made in accordance with generally accepted
accounting  principles  in the  United  States of America  consistently  applied
("GAAP").

     1.3 Other Definitional  Provisions;  Construction.  Whenever the context so
requires, neuter gender includes the masculine and feminine, the singular number
includes the plural and vice versa. The words "hereof"  "herein" and "hereunder"
and words of similar  import  when used in this  Agreement  shall  refer to this
Agreement as a whole and not in any particular provision of this agreement,  and
references to section, article, annex, schedule, exhibit and like references are
references to this  Agreement  unless  otherwise  specified.  References in this
Agreement to any Persons shall include such  Persons'  successors  and permitted
assigns.

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                                    ARTICLE 2

                   ISSUE AND SALE OF COMMON STOCK AND WARRANTS

     2.1 Authorization and Issuance of the Shares and Warrants.  The Company has
duly authorized the offering of the Shares and Warrants to Roaring Fork.

     2.2 Purchase  Price.  Subject to the terms and  conditions  and in reliance
upon the  representations,  warranties  and  agreements  set forth  herein,  the
Company  shall sell to Roaring  Fork for  $600,000  invested in the Company (the
"Purchase Price"),  and Roaring Fork shall purchase from the Company, the Shares
and the  Warrants.  Roaring  Fork and the Company  agree that the Shares and the
Warrants  constitute an "investment unit" for purposes of Section  1273(c)(2) of
the Code. On or before the Closing  Date,  Roaring Fork shall notify the Company
of its  determination  of the  allocation of the issue price of such  investment
unit between the Shares and the Warrants in accordance  with Section  1273(c)(2)
of the Code and Treasury  Regulation  Section  1.1273-2(h),  and neither Roaring
Fork nor the Company shall take any position  inconsistent  with such allocation
in any tax return or in any judicial or administrative  proceeding in respect of
taxes.

     2.3 The Closing. Delivery of and payment for the Shares and the Warrants to
be sold to Roaring  Fork will be made on the Closing Date at such place and date
as may be mutually  agreeable to the Company and Roaring  Fork.  Delivery of the
Shares  and  Warrants  shall be made to  Roaring  Fork  against  payment  of the
$600,000,  by check or by wire transfer of  immediately  available  funds in the
manner  agreed to by the Company and Roaring  Fork.  The Shares and the Warrants
shall be issued in the name of Roaring Fork.

                                    ARTICLE 3

                                   CONDITIONS

     3.1 Conditions to Purchase of Securities. The obligation of Roaring Fork to
purchase  and pay for the Shares and  Warrants  is subject to the  satisfaction,
prior  to or at the  Closing,  of the  following  conditions  at the time of its
purchase:

     (a) Representations and Warranties True. The representations and warranties
contained in Article 4 hereof shall be true and correct in all material respects
at and as of the  Closing  Date as though  then  made,  except to the  extent of
changes caused by the transactions expressly contemplated herein.

     (b) Material Adverse Change. Except as described in the SEC Reports,  there
will have been no material  adverse  change in the business of the Company since
September 30, 2006.

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     (c) Closing  Documents.  The Company shall have  delivered or ordered to be
delivered to the Purchaser all of the following  documents in form and substance
satisfactory to the Purchaser:

          (i) the certificate for the Shares, duly completed and executed by the
     Company;

          (ii) the Warrants, duly completed and executed by the Company;

          (iii) the Registration  Rights Agreement,  duly completed and executed
     by the Company;

          (iv) the Amendments to the  Certificate of Designation of the Series C
     Preferred  Stock and the warrants issued to Roaring Fork in connection with
     the  purchase  and  sale of the  Series  C  Preferred  Stock  changing  the
     conversion  price of the Series C Preferred  Stock to $.40 and the exercise
     price of the warrants to $.45, respectively.

          (v) a  copy  of the  Charter  Documents  and  Bylaws  of  the  Company
     certified by the Secretary or Assistant  Secretary of the Company as of the
     Closing Date;

          (vi) copies of the resolutions  duly adopted by the Board  authorizing
     the  execution,  delivery and  performance by the Company of this Agreement
     and each of the other  agreements,  instruments and documents  contemplated
     hereby to which the Company is a party,  and the consummation of all of the
     other  Transactions,  certified as of each Closing Date by the president or
     secretary of the Company;

          (vii) a  certificate  dated as of the Closing Date from the  President
     and  Secretary,  as officers of the Company,  stating  that the  conditions
     specified  in this  Section  3.1 have  been  fully  satisfied  or waived by
     Roaring Fork with respect to its purchase;

          (viii) the SBA  Compliance  Agreement,  duly completed and executed by
     the Company; and

          (ix) such other documents relating to the Transactions contemplated by
     this Agreement that Roaring Fork may reasonably request.

     (d)  Proceedings.  All  proceedings  taken  or  required  to  be  taken  in
connection  with the  transactions  contemplated  hereby to be consummated at or
prior to the Closing and all documents  incident thereto will be satisfactory in
form and substance to Roaring Fork.

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                                    ARTICLE 4

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     4.1  Representations  and  Warranties  of the  Company.  Unless the context
requires  otherwise,  all references to the "Company"  shall include each of the
Company's  Subsidiaries,  unless the context requires  otherwise.  As a material
inducement to Roaring Fork to enter into this  Agreement and purchase the Shares
and the Warrants,  the Company hereby represents and warrants to Roaring Fork as
follows:

     (a) Organization and Power. The Company is duly organized, validly existing
and in good standing  under the laws of its state of  organization.  The Company
has all requisite corporate or other  organizational power and authority and all
material licenses,  permits,  approvals and authorizations  necessary to own and
operate  its  properties,  to  carry  on its  businesses  as now  conducted  and
presently  proposed to be conducted  and to carry out the  Transactions,  and is
qualified to do business in every  jurisdiction  where the failure to so qualify
might reasonably be expected to have a Material Adverse Effect.  The Company has
its  principal  place of business in Lake Success,  New York.  The copies of the
Charter  Documents and Bylaws of the Company that have been furnished to Roaring
Fork reflect all  amendments  made thereto at any time prior to the date of this
Agreement and are correct and complete.

     (b)  Principal  Business.  The Company is  primarily  engaged in  providing
medical supplemental staffing services (the "Business").

     (c) SEC  Reports;  Financial  Statements.  Except as set forth on  Schedule
4.1(c),  the Company has filed all reports  required to be filed by it under the
Securities  Act and the Exchange  Act,  including  pursuant to Section  13(a) or
15(d) thereof  reports filed on Form 10-K,  Form 10-Q, and Form 8-K, for the two
years  preceding  the date  hereof (or such  shorter  period as the  Company was
required  by  law  to  file  such  reports)  (the  foregoing   materials   being
collectively  referred to herein as the "SEC  Reports"  and,  together  with the
Schedules to this  Agreement (if any), the  "Disclosure  Materials") on a timely
basis or has timely filed a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension.  Attached as
Schedule  4.1(c) is a list of any SEC Reports not available on the EDGAR system.
As of their respective  dates, the SEC Reports complied in all material respects
with the  requirements  of the Securities Act and the Exchange Act and the rules
and regulations of the SEC promulgated thereunder,  and none of the SEC Reports,
when filed,  contained  any untrue  statement  of a material  fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  The financial  statements of the Company  included in the
SEC  Reports  comply  in  all  material  respects  with  applicable   accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing.  Such financial  statements  have been prepared in
accordance with GAAP applied on a consistent basis during the periods  involved,
except as may be otherwise  specified in such financial  statements or the notes
thereto,  and fairly present in all material respects the financial  position of
the Company and its  consolidated  Subsidiaries  as of and for the dates thereof
and the  results  of  operations  and cash  flows for the  periods  then  ended,
subject, in the case of unaudited statements,  to normal,  immaterial,  year-end
audit adjustments.  The Company's Common Stock is registered pursuant to Section
12(g) of the Exchange  Act, and the Company has taken no action  designed to, or
which  to its  knowledge  is  likely  to have the  effect  of,  terminating  the
registration  of the Common  Stock  under the  Exchange  Act nor has the Company
received  any  notification  that  the  SEC is  contemplating  terminating  such
registration.  No other  information  provided by or on behalf of the Company to
Roaring  Fork  which  is not  included  in the  SEC  Reports,  including  in any
disclosure schedules,  contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made not misleading.

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     (d)  Capitalization  and  Related  Matters.  As of  the  Closing  Date  and
immediately  thereafter,  the  authorized  capital  stock of the Company and the
shares of stock that are issued,  outstanding  and reserved  for  issuance  upon
conversion  of notes,  exercise  of warrants  and  Options  and  exercise of the
Warrants hereunder (after giving effect to anti-dilution adjustments) are as set
forth on Schedule  4.1(d)  hereto.  As of the Closing Date, the Company will not
have outstanding any capital stock or securities convertible or exchangeable for
any shares of its capital stock except as set forth in Schedule 4.1(d), and will
not have  outstanding  any rights or options to subscribe for or to purchase its
capital stock or any stock or securities  convertible  into or exchangeable  for
its capital  stock,  except as set forth in Schedule  4.1(d).  As of the Closing
Date,  the  Company  will  not be  subject  to  any  obligation  (contingent  or
otherwise)  to  repurchase  or  otherwise  acquire  or retire  any shares of its
capital  stock,   except  as  set  forth  herein  and  the  Charter   Documents,
respectively,  as in effect on the date hereof.  As of the  Closing,  all of the
outstanding shares of the Company's capital stock will be validly issued,  fully
paid and nonassessable. Except as set forth on the Schedule 4.1(d), there are no
statutory or contractual stockholders' preemptive rights or notices with respect
to the  issuance of the Shares and Warrants  hereunder.  Subject to and based on
the accuracy of all representations  made by Roaring Fork in this Offering,  the
Company has not  violated any  applicable  federal or state  securities  laws in
connection with the offer, sale or issuance of any of its capital stock, and the
offer,  sale and  issuance of the Shares and  Warrants  hereunder do not require
registration under the Securities Act or any applicable state securities laws.

     (e) Subsidiaries.  Except as set forth on Schedule 4.1(e), the Company does
not own,  or hold any  rights  to  acquire,  any  shares  of stock or any  other
security or interest in any other Person. The Company has no Subsidiaries except
as set forth on Schedule 4.1(e).

     (f) Authorization;  No Breach.  The execution,  delivery and performance of
the Purchase  Documents,  and the SBA Compliance  Agreement  (collectively,  the
"Transaction  Documents"),  and the consummation of the  Transactions  have been
duly  authorized by the Company.  The Company has the requisite  corporate power
and authority to enter into and perform its  obligations  under the  Transaction
Documents  and to issue the Shares,  Warrants and Warrant  Shares in  accordance
with the terms hereof and  thereof.  Except as set forth in Section  4.1(f),  no
further filing,  consent, or authorization is required by the Company, its Board
of Directors,  or its stockholders.  Except as set forth on Schedule 4.1(f), the
execution,  delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions  contemplated hereby and
thereby (including,  without limitation, the issuance of the Shares and Warrants
and  reservation  for issuance and issuance of the Warrant  Shares) will not (i)
result in a violation of any certificates or articles of incorporation, articles
of formation,  certificates  or articles of  designations  or other  constituent
documents of the Company or any of its  Subsidiaries,  any capital  stock of the
Company  or any of its  Subsidiaries  or  bylaws  of the  Company  or any of its
Subsidiaries  or (ii) conflict  with, or constitute a default (or an event which
would  with  notice  or lapse of time or both  would  become a  default)  in any
respect  under,  or  give  to  others  any  rights  of  termination,  amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the  Company  or any of its  Subsidiaries  is a  party,  or  (iii)  result  in a
violation of any law, rule,  regulation,  order,  judgment or decree,  including
foreign,  federal and state  securities  laws and  regulations and the rules and
regulations  of the  Principal  Market,  applicable to the Company or any of its
Subsidiaries  or by which any  property  or asset of the  Company  or any of its
Subsidiaries is bound or effective.

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     (g)  Enforceability.  This  Agreement  constitutes,  and each of the  other
Transaction  Documents  when duly  executed  and  delivered  by the Company will
constitute,  legal, valid and binding  obligations of the Company enforceable in
accordance with their respective terms.

     (h) No Material  Adverse  Change.  Except as disclosed in Schedule  4.1(h),
since the date of the latest audited  financial  statements  included within the
SEC Reports,  except as specifically disclosed in the SEC Reports, (i) there has
been no event,  occurrence or development  that has had or that could reasonably
be expected  to result in a Material  Adverse  Effect,  (ii) the Company has not
incurred  any  liabilities  (contingent  or  otherwise)  other  than  (A)  trade
payables, accrued expenses and other liabilities incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial  statements pursuant to GAAP or required to
be  disclosed  in filings  made with the  Commission,  (iii) the Company has not
altered  its method of  accounting  or the  identity of its  auditors,  (iv) the
Company has not declared or made any dividend or  distribution  of cash or other
property to its  stockholders  or purchased,  redeemed or made any agreements to
purchase or redeem any shares of its capital stock,  and (v) except as set forth
on Schedule  4.1(h),  the Company  has not issued any equity  securities  to any
officer, director or Affiliate. The Company does not have pending before the SEC
any request for confidential treatment of information.

     (i) Litigation. Except as described in the SEC Reports, the Company has not
received notice of the filing of any material  actions,  suits or proceedings at
law or in equity or by or before any  arbitrator or any  Governmental  Authority
(collectively,  "Lawsuits")  now  pending  nor,  to the  best  knowledge  of the
Company's  management  after  due  inquiry,  have  any  material  Lawsuits  been
threatened  against or filed by or  materially  affecting the Company or against
any of its directors or officers or Affiliates  relating to the assets or rights
of the Company or the Business.

     (j) Compliance with Laws. The Company is not in violation of any applicable
Law in any material  respect.  The Company is not in default with respect to any
judgment,   order,  writ,   injunction,   decree,  rule  or  regulation  of  any
Governmental  Authority.  There  is  no  investigation,  enforcement  action  or
regulatory action pending or threatened  against or affecting the Company by any
Governmental Authority. There is no remedial or other corrective action that the
Company is required to take to remain in compliance  with any  judgment,  order,
writ,  injunction  or decree of any  Governmental  Authority  or to maintain any
material permits, approvals or licenses granted by any Governmental Authority in
full force and  effect.  During the past five (5) years,  none of the  officers,
directors or  management  of the Company have been  arrested or convicted of any
material crime nor have any of them been bankrupt or an officer or director of a
bankrupt company.

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     (k) Transactions With Affiliates and Employees.  Except as set forth in the
SEC Reports referenced in Schedule 4.1(k),  none of the officers or directors of
the Company or the Principal  Shareholders and, to the knowledge of the Company,
none of the  employees  of the Company is  presently a party to any  transaction
with the Company (other than for services as employees, officers and directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property to or from,  or  otherwise  requiring  payments to or from any officer,
director or such  employee or, to the  knowledge  of the Company,  any entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

     (l) Sarbanes-Oxley  Act. The Company is in material compliance with any and
all applicable material  requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof,  and any and all applicable  material rules and
regulations  promulgated by the SEC thereunder that are effective as of the date
hereof.

     (m) Certain  Fees.  Neither the  Company,  nor any of its  Subsidiaries  or
Affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D) in  connection  with the offer or sale of the Shares and Warrants.
Except for any payments  that may be due to Bathgate  Capital  Partners  LLC, no
brokerage or finder's fees or commissions  are or will be payable by the Company
to any  broker,  financial  advisor  or  consultant,  finder,  placement  agent,
investment  banker,  bank or  other  Person  with  respect  to the  transactions
contemplated  by this  Agreement.  Roaring  Fork shall have no  obligation  with
respect to any fees or with  respect to any claims made by or on behalf of other
Persons  for  fees of a type  contemplated  in this  Section  that may be due in
connection with the transactions contemplated by this Agreement.

     (n)  Application  of  Takeover  Protections.  The  Company  has  taken  all
necessary  action,  if any, in order to render  inapplicable  any control  share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Charter  Documents,  or the laws of its state of incorporation  that is or could
become  applicable to the Purchaser as a result of the Purchaser and the Company
fulfilling  their  obligations or exercising  their rights under the Transaction
Documents,  including without  limitation the Company's  issuance of the Shares,
the Warrants and the Warrant Shares and Roaring Fork's  ownership of the Shares,
the Warrants, and the Warrant Shares.

     (o) Taxes. Except as set forth on Schedule 4.1(o), the Company has filed or
caused to be filed all Federal, state and local tax returns that are required to
be filed by it, and has paid or caused to be paid all taxes  shown to be due and
payable on such returns or on any assessments  received by it, including payroll
taxes.

     (p)  Labor  and  Employment.  The  Company  is and each of its Plans are in
compliance in all material  respects with those  provisions of ERISA,  the Code,
the Age  Discrimination  in Employment  Act, and the  regulations  and published
interpretations thereunder which are applicable to the Company or any such Plan.
The  Company  is in  compliance  in all  material  respects  with all  labor and
employment laws, rules,  regulations and requirements of all applicable domestic
and foreign  jurisdictions.  There are no pending or threatened  labor disputes,
work stoppages or strikes.

                                     - 10 -
<PAGE>


     (q) Properties; Security Interests. Except as set forth in Schedule 4.1(q),
the Company has good and marketable  title to, or valid leasehold  interests in,
all of the material  assets and properties  used or useful by the Company in the
Business (collectively,  the "Properties and Facilities"). All of the Properties
and  Facilities  are in good repair,  working  order and  condition and all such
assets  and  properties  are,  except  as set  forth  in the  SEC  Reports.  The
Properties and Facilities constitute all of the material assets,  properties and
rights of any type used in or necessary for the conduct of the Business.

     (r) Intellectual  Property. The Company has good title and ownership of, or
has  sufficient  rights  to,  all  trademarks,   service  marks,   trade  names,
copyrights,  trade  secrets,  licenses,  information,   proprietary  rights  and
processes and patents,  including  without  limitation  the  Proprietary  Rights
(collectively,  the  "Intellectual  Property")  used  in or  necessary  for  its
business  as  now  conducted  or  as  proposed  to be  conducted.  None  of  the
Intellectual  Property used in or necessary  for the  Company's  business as now
conducted conflicts with or infringes,  nor has the Company received any written
or oral communications  alleging that the Company has violated or, by conducting
its business,  would violate, any Intellectual Property of any other Person. The
transactions  contemplated  under  this  Agreement  will not  alter,  impair  or
otherwise  affect any rights of the Company in the  Intellectual  Property.  The
Company has taken  commercially  reasonable  measures to protect the proprietary
nature of the  Intellectual  Property  and to maintain in  confidence  all trade
secrets and confidential information owned or used by the Company.

There  are  no  legal  or  governmental  proceedings,   including  interference,
re-examination,   reissue,  opposition,  nullity,  or  cancellation  proceedings
pending that relate to any of the  Intellectual  Property,  other than review of
pending  patent  applications,  and the Company is not aware of any  information
indicating  that  such   proceedings  are  threatened  or  contemplated  by  any
governmental entity or any other Person.

     (s) Employment Agreements; Intellectual Property Agreements. The Company is
not aware that any of its  employees  or  independent  contractors  is obligated
under any contract (including licenses,  covenants or commitments of any nature)
or other agreement, or subject to any judgment,  decree or order of any court or
administrative  agency,  that would interfere with the use of such employee's or
independent  contractor's best efforts to promote the interest of the Company or
that would conflict with the Company's  business as now conducted or as proposed
to be conducted.  Neither the execution or delivery of this  Agreement,  nor the
carrying  on  of  the  Company's  business  by  the  employees  and  independent
contractors  of the Company,  nor the conduct of the  Company's  business as now
conducted,  or as currently  proposed to be  conducted,  will,  to the Company's
knowledge,  conflict  with or result in a breach of the  terms,  conditions,  or
provisions  of, or  constitute  a  default  under,  any  contract,  covenant  or
instrument  under  which any such  employee  or  independent  contractor  is now
obligated.  It is not and will not be necessary to use any  inventions of any of
the Company's  employees (or persons the Company currently intends to hire) made
prior to their  employment by the Company.  Schedule 4.1(s) and the specific SEC
Reports referenced therein list all material  employment  agreements,  including
non-competition   agreements,    confidentiality   and   intellectual   property
agreements,  between the Company and its directors,  officers, key employees and
agents.  To the  knowledge of the Company,  no key employee of the Company is in
violation of any term of any employment contract,  patent disclosure  agreement,
proprietary  information  agreement,  noncompetition  agreement,  or  any  other
contract or agreement or any restrictive  covenant  relating to the right of any
such key  employee to be  employed  by the Company  because of the nature of the
business  conducted  or to be conducted by the Company or relating to the use of
trade secrets or proprietary information of others, and the continued employment
of the key  employees  does not  subject  the  Company  or  Roaring  Fork to any
material liability to third parties.

                                     - 11 -
<PAGE>


To the  knowledge  of  the  Company,  no  key  employee  of  the  Company  whose
termination,  either  individually  or in the  aggregate,  would have a Material
Adverse  Effect,   has  expressed  any  present  intention  of  terminating  his
employment with the Company

     (t) Complete Disclosure.  All factual information furnished by or on behalf
of the  Company to  Roaring  Fork for  purposes  of or in  connection  with this
Agreement  or the  Transactions  is,  and all  other  such  factual  information
hereafter furnished by or on behalf of the Company will be, true and accurate in
all material  respects on the date as of which such information is furnished and
not incomplete by omitting to state any fact necessary to make such  information
not  misleading  at such time in light of the  circumstances  under  which  such
information was provided.

     (u) Side  Agreements.  Neither the Company nor any Affiliate of the Company
nor any  director,  officer or employee of the Company or any of its  Affiliates
has entered  into,  as of the date hereof,  any side  agreement,  either oral or
written,  with any  individual  or  business,  pursuant  to which the  director,
officer,  employee,  Company  or  Affiliate  agreed to do  anything  beyond  the
requirements  of the  formal,  written  contracts  executed  by the  Company and
disclosed in the SEC reports.

     (v) Product  Liabilities.  There are no product  recalls,  trade  disputes,
product liabilities or product tampering claims now pending,  threatened against
or made  by or  affecting  the  Company  or any of its  directors,  officers  or
employees or the businesses, assets or rights of the Company.

     (w) Business Plan. The business plan which the Company delivered to Roaring
Fork on or about  December  14,  2006,  has been  prepared  honestly and in good
faith,  with  reasonable  basis,  by  management  of the Company.  All potential
material  changes that have become known to Management  since December 14, 2006,
with respect to the Company's business plan are listed on Schedule 4.1(h).

     (x) Environmental Laws. Except as set forth in Schedule 4.1(x), the Company
and its Subsidiaries,  to their knowledge,  (i) are in material  compliance with
any and all Environmental Laws (as hereinafter defined),  (ii) have received all
permits,   licenses  or  other  approvals  required  of  them  under  applicable
Environmental  Laws to  conduct  their  respective  businesses  and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing  clauses (i), (ii) and (iii),  the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment  (including,   without  limitation,   ambient  air,  surface  water,
groundwater,  land surface or subsurface strata), including, without limitation,
laws  relating to  emissions,  discharges,  releases or  threatened  releases of
chemicals, pollutants,  contaminants, or toxic or hazardous substances or wastes
(collectively,   "Hazardous  Materials")  into  the  environment,  or  otherwise
relating to the manufacture,  processing, distribution, use, treatment, storage,
disposal,  transport  or  handling  of  Hazardous  Materials,  as  well  as  all
authorizations,   codes,  decrees,  demands  or  demand  letters,   injunctions,
judgments,  licenses,  notices  or notice  letters,  orders,  permits,  plans or
regulations issued, entered, promulgated or approved thereunder.

                                     - 12 -
<PAGE>


     (y)  Subsidiary  Rights.  The  Company or one of its  Subsidiaries  has the
unrestricted  right to vote, and (subject to  limitations  imposed by applicable
law) to receive dividends and  distributions  on, all capital  securities of its
Subsidiaries as owned by the Company or such Subsidiary.

     (z) Internal  Accounting and Disclosure  Controls.  The Company and each of
its Subsidiaries maintain a system of internal accounting controls sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
and  liability   accountability,   (iii)  access  to  assets  or  incurrence  of
liabilities  is  permitted  only in  accordance  with  management's  general  or
specific  authorization  and (iv) the  recorded  accountability  for  assets and
liabilities is compared with the existing  assets and  liabilities at reasonable
intervals and appropriate  action is taken with respect to any  difference.  The
Company maintains disclosure controls and procedures (as such term is defined in
Rule  13a-14  under  the  Exchange  Act) that are  effective  in  ensuring  that
information required to be disclosed by the Company in the reports that it files
or  submits  under the  Exchange  Act is  recorded,  processed,  summarized  and
reported,  within the time periods  specified in the rules and forms of the SEC,
including,  without limitation,  controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
or  submits  under the  Exchange  Act is  accumulated  and  communicated  to the
Company's management,  including its principal executive officer or officers and
its principal  financial  officer or officers,  as appropriate,  to allow timely
decisions regarding required  disclosure.  During the twelve months prior to the
date hereof  neither the Company nor any of its  Subsidiaries  have received any
notice or correspondence  from any accountant relating to any potential material
weakness  in any part of the  system  of  internal  accounting  controls  of the
Company or any of its Subsidiaries.

     (aa)  Indebtedness  and Other  Contracts.  Except as  disclosed in Schedule
4.1(aa) or in the SEC Reports,  neither the Company nor any of its  Subsidiaries
(i) has any outstanding  Indebtedness (as defined below), (ii) is a party to any
contract,  agreement or  instrument,  the  violation of which,  or default under
which, by the other  party(ies) to such contract,  agreement or instrument could
reasonably  be  expected  to result in a Material  Adverse  Effect,  (iii) is in
violation  of any  term  of or in  default  under  any  contract,  agreement  or
instrument  relating  to any  Indebtedness,  except  where such  violations  and
defaults  would not  result,  individually  or in the  aggregate,  in a Material
Adverse  Effect,  or (iv) is a party to any  contract,  agreement or  instrument
relating to any  Indebtedness,  the performance of which, in the judgment of the
Company's  officers,  has or is  expected  to have a  Material  Adverse  Effect.
Schedule  4.1(aa)  provides a detailed  description of the material terms of any
such   outstanding   Indebtedness.   For   purposes  of  this   Agreement:   (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money in excess of $100,000  individually (the "Debt  Threshold"),  (B)
all obligations in excess of the Debt Threshold issued, undertaken or assumed as
the deferred  purchase price of property or services  (other than trade payables
entered into in the  ordinary  course of  business),  (C) all  reimbursement  or
payment  obligations  with respect to letters of credit,  surety bonds and other
similar  instruments  in excess of the Debt  Threshold,  (D) all  obligations in
excess of the Debt Threshold  evidenced by notes,  bonds,  debentures or similar
instruments,  including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses, (E) all indebtedness in excess of
the Debt Threshold  created or arising under any conditional sale or other title
retention  agreement,  or incurred as financing,  in either case with respect to
any property or assets  acquired  with the proceeds of such  indebtedness  (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property),  (F) all
monetary  obligations  in excess of the Debt  Threshold  under  any  leasing  or
similar  arrangement  which,  in connection with generally  accepted  accounting
principles,  consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness  referred to in clauses (A) through (F)
above secured by (or for which the holder of such  Indebtedness  has an existing
right,  contingent or otherwise,  to be secured by) any mortgage,  lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including  accounts and contract  rights) owned by any Person,  even though the
Person which owns such assets or property  has not assumed or become  liable for
the payment of such indebtedness,  and (H) all Contingent  Obligations in excess
of the Debt Threshold in respect of indebtedness or obligations of others of the
kinds referred to in clauses (A) through (G) above; (y) "Contingent  Obligation"
means,  as to any  Person,  any  direct or  indirect  liability,  contingent  or
otherwise,  of that Person with respect to any Indebtedness of another Person if
the primary  purpose or intent of the Person  incurring such  liability,  or the
primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged,  or that any agreements relating
thereto will be complied  with,  or that the holders of such  liability  will be
protected  (in whole or in part)  against  loss with  respect  thereto;  and (z)
"Person" means an individual,  a limited  liability  company,  a partnership,  a
joint venture,  a corporation,  a trust, an  unincorporated  organization  and a
government or any department or agency thereof.

                                     - 13 -
<PAGE>


     (bb) Off Balance Sheet Arrangements. There is no transaction,  arrangement,
or other  relationship  between the Company and an  unconsolidated  or other off
balance  sheet  entity that is required  to be  disclosed  by the Company in its
Exchange  Act  filings  and is not so  disclosed  or  that  otherwise  would  be
reasonably likely to have a Material Adverse Effect.

     (cc) Investment  Company Status.  The Company is not, and upon consummation
of the sale of the Securities  will not be, an  "investment  company," a company
controlled  by  an  "investment  company"  or  an  "affiliated  person"  of,  or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.

                                     - 14 -
<PAGE>


     (dd) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with  the  sale  and  transfer  of the  Securities  to be sold to  Roaring  Fork
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.

     (ee)  Foreign  Corrupt  Practices.  Neither  the  Company  nor  any  of its
Subsidiaries nor any director,  officer,  agent, employee or other Person acting
on behalf of the  Company or any of its  Subsidiaries  has, in the course of its
actions  for, or on behalf of, the Company or any of its  Subsidiaries  (i) used
any corporate funds for any unlawful contribution,  gift, entertainment or other
unlawful  expenses  relating  to  political  activity;  (ii) made any  direct or
indirect  unlawful  payment to any  foreign or domestic  government  official or
employee  from  corporate  funds;  (iii)  violated  or is in  violation  of  any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate,  payoff,  influence payment,  kickback or other
unlawful payment to any foreign or domestic government official or employee.

     (ff) No Undisclosed Events, Liabilities,  Developments or Circumstances. No
event,  liability,  development or  circumstance  has occurred or exists,  or is
contemplated  to occur with respect to the Company,  its  Subsidiaries  or their
respective business, properties,  prospects,  operations or financial condition,
that  would  be  required  to be  disclosed  by  the  Company  under  applicable
securities  laws on a  registration  statement  on Form S-1  filed  with the SEC
relating  to an issuance  and sale by the Company of its Common  Stock and which
has not been publicly announced.

     (gg) No Integrated Offering. None of the Company, its Subsidiaries,  any of
their  affiliates,  and any  Person  acting on their  behalf  has,  directly  or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any security,  under circumstances that would require registration of any of
the Securities under the Securities Act or cause this offering of the Securities
to be  integrated  with prior  offerings  by the  Company  for  purposes  of the
Securities Act or any applicable  stockholder  approval  provisions,  including,
without limitation, under the rules and regulations of any exchange or automated
quotation  system on which any of the  securities  of the  Company are listed or
designated.  None of the Company,  its  Subsidiaries,  their  affiliates and any
Person  acting on their behalf will take any action or steps  referred to in the
preceding  sentence that would  require  registration  of any of the  Securities
under  the  Securities  Act  or  cause  the  offering  of the  Securities  to be
integrated with other offerings.

     (hh) Dilutive Effect.  The Company  understands and  acknowledges  that the
number of Warrant Shares issuable upon exercise of the Warrants will increase in
certain  circumstances.  The Company further acknowledges that its obligation to
issue the Warrant  Shares upon exercise of the Warrants in accordance  with this
Agreement  and the  Warrants  is,  in each  case,  absolute  and  unconditional,
regardless  of the dilutive  effect that such issuance may have on the ownership
interests of other stockholders of the Company.

     (ii) No Changes to Bylaws or Charter Documents.  There have been no changes
in the Bylaws or the charter  documents  for the  Company  and its  Subsidiaries
since the closing of the Series C Preferred Stock.

                                     - 15 -
<PAGE>


     4.2 Survival of Company Representations and Warranties. All representations
and  warranties  contained  in  this  Agreement  and any  financial  statements,
instruments,  certificates, schedules or other documents delivered in connection
herewith,  shall survive the execution and delivery of this Agreement only for a
period of eighteen (18) months from the date of this Agreement.

                                    ARTICLE 5

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     Roaring Fork hereby represents and warrants to the Company as follows:

     5.1  Purchase  Entirely for Its Own  Account.  This  Agreement is made with
Roaring Fork in reliance upon its  representation to the Company that the Shares
and the  Warrants  will be  acquired  for  investment  for the  Purchaser's  own
account, not as a nominee or agent, and not with any agreement for the resale or
distribution of any part thereof.  Subject to the immediate  preceding sentence,
nothing contained herein shall be deemed a representation or warranty by Roaring
Fork to hold any of the Securities for any period of time.

     5.2 Disclosure of Information.  Roaring Fork has had the opportunity to ask
questions of, and receive answers from officers and directors of the Company, to
review the SEC  Reports,  and to obtain  additional  information  regarding  the
Company and this Offering.  Neither such  inquiries nor any other  investigation
conducted  by or on behalf of  Roaring  Fork or its  representatives  or counsel
shall  modify,  amend or  affect  Roaring  Fork's  right  to rely on the  truth,
accuracy  and  completeness  of  the  Disclosure  Materials  and  the  Company's
representations and warranties contained in the Purchase Documents.

     5.3 Accredited and Sophisticated Investor;  Investment Experience.  Roaring
Fork represents that it is a sophisticated investor and an "accredited investor"
as defined in Rule 501 under the Securities  Act.  Roaring Fork also  represents
that it is an investor in restricted securities and acknowledges that it is able
to fend for itself,  can bear the economic risk of its investment,  and has such
knowledge and experience in financial or business  matters that it is capable of
evaluating the merits and risks of the investment in the Shares and Warrants and
can bear the economic  risk of loss of the  investment in the  Securities  being
purchased.

     5.4 Restricted  Securities.  Roaring Fork acknowledges that the Shares, the
Warrants and the Warrant  Shares have not been  registered  under the Securities
Act and may be resold  only if  registered  pursuant  to the  provisions  of the
Securities Act or if an exemption from registration is available.

     5.5 Legends.  Unless the Shares and the Warrants have been registered under
the Securities  Act, the Company shall instruct its transfer agent to enter stop
transfer  orders with respect to such Shares and Warrants  (including any Common
Stock issued  pursuant to exercise of the  Warrants),  and all  certificates  or
instruments representing such Shares and Warrants shall bear on the face thereof
substantially the following legend:

                                     - 16 -
<PAGE>


THE  SECURITIES  EVIDENCED  BY THIS  CERTIFICATE  HAVE  NOT BEEN  REGISTERED  OR
QUALIFIED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),  OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED,  IN THE ABSENCE OF
SUCH REGISTRATION,  UNLESS THE COMPANY IS REASONABLY SATISFIED THAT THE PROPOSED
SALE OR TRANSFER IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.

     5.6  Assignment.  Upon the assignment or transfer by Roaring Fork or any of
its  successors  or  assignees  of all or any  part of the  Warrants,  the  term
"Purchaser" as used herein shall  thereafter  mean, to the extent  thereof,  the
then holder or holders of such Warrants, or portion thereof.

     5.7  Survival  of  Purchaser   Representations.   All  representations  and
warranties   contained  in  this   Agreement  by  Purchaser  and  any  financial
statements, instruments, certificates, schedules or other documents delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
regardless of any investigation made by the Company or on the Company's behalf.

                                    ARTICLE 6

                                    COVENANTS

     6.1 Affirmative  Covenants.  The Company covenants that, so long as Roaring
Fork owns any Shares, Warrants or Warrant Shares the Company shall:

     (a)  Existence.  Do or cause to be done all things  necessary  to preserve,
renew and keep in full force and effect its legal existence.

     (b) Furnishing of Information. Timely file (or obtain extensions in respect
thereof and file within the applicable  grace period) all reports required to be
filed by the Company  pursuant to the  Exchange  Act,  and if the Company is not
required to file reports  pursuant to such laws,  it will prepare and furnish to
the Purchaser and make  publicly  available in accordance  with Rule 144(c) such
information as is required for the Purchaser to sell the  Conversion  Shares and
Warrant Shares under Rule 144. The Company  further  covenants that it will take
such further action as any holder of Shares,  Warrants and or the Warrant Shares
may reasonably  request,  all to the extent required from time to time to enable
such Person to sell the Shares or Warrant Shares without  registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     (c) Indemnification of Investors.  In addition to the indemnity provided in
Article 7,  indemnify  and hold each  Purchaser  and its  respective  directors,
officers,  partners,  representatives,  employees and agents (each, an "Investor
Party")  harmless  from any and all losses,  liabilities,  obligations,  claims,
contingencies,  damages,  costs and expenses,  including all judgments,  amounts
paid in  settlements,  court costs and reasonable  attorneys'  fees and costs of
investigation  (collectively,  "Losses") that any such Investor Party may suffer
or  incur  as a  result  of or  relating  to any  misrepresentation,  breach  or
inaccuracy of any  representation,  warranty,  covenant or agreement made by the
Company in any  Transaction  Document.  In addition to the  indemnity  contained
herein,  the Company will reimburse each Investor Party for its reasonable legal
and other expenses  (including the cost of any  investigation,  preparation  and
travel in  connection  therewith)  incurred  in  connection  therewith,  as such
expenses are incurred.

                                     - 17 -
<PAGE>


     (d)  Common  Stock  Reserve.  Maintain  in  reserve,  at all times that the
Warrants are  unexercised,  authorized,  but unissued and unreserved,  shares of
Common Stock for issuance upon exercise of the Warrants.

     (e) Use of Proceeds. Use the funds received from Roaring Fork in connection
with the  Transactions  substantially  in  accordance  with the "Use of Proceeds
Schedule" attached hereto as Schedule 6.1(e).

     (f) Further Assurances. With reasonable promptness,  execute and deliver to
the Purchaser,  from time to time, upon the reasonable request of the Purchaser,
such  supplemental  agreements,   statements,   assignments  and  transfers,  or
instructions  on documents as the  Purchaser  may request in order that the full
intent of this  Agreement and the other  Purchase  Documents may be carried into
effect.

     6.2.  Amendment of Note.  The Company will deliver to the Purchaser  within
ten  (10)  days of the  Closing,  an  amendment  to  that  certain  15%  Secured
Convertible Subordinated Note Dated December 15, 2004 from the Company to Regina
Savitsky  (the  "Note")  that will (i) extend the  maturity  date of the Note to
January 15, 2009,  (ii) have the payee forebear on the Company's  obligations to
make principal  payments on the Note until the maturity date, (iii)  acknowledge
that the conversion  price is fixed at $0.38 per share,  the current price under
the formula in the Note,  and (iv) provide for the Company's  issuance to Regina
Savitsky in  connection  with such  amendment  of a Warrant to Purchase  350,000
shares of Class A Common  Stock at an  exercise  price of $0.50 per  share,  and
which will not include any provision for anti-dilution price adjustment.


                                    ARTICLE 7
                                  MISCELLANEOUS

     7.1 Successors and Assigns.  This Agreement shall be binding upon and inure
to the  benefit  of the  parties  hereto  and their  respective  successors  and
assigns,  except  that (a) the  Company  may not assign or  transfer  its rights
hereunder or any interest herein or delegate its duties hereunder.

     7.2 Modifications  and Amendments.  The provisions of this Agreement may be
modified,  waived or  amended,  but only by a written  instrument  signed by the
Company and the Purchaser.

     7.3 No Implied Waivers;  Cumulative Remedies; Writing Required. No delay or
failure in  exercising  any right,  power or remedy  hereunder  shall  affect or
operate as a waiver thereof; nor shall any single or partial exercise thereof or
any  abandonment or  discontinuance  of steps to enforce such a right,  power or
remedy  preclude any further  exercise  thereof or of any other right,  power or
remedy.  The rights and remedies  hereunder are  cumulative and not exclusive of
any rights or remedies  that the  Purchaser or any holder of Warrants or Warrant
Shares would otherwise have. Any waiver, permit, consent or approval of any kind
or character of any breach or default under this Agreement or any such waiver of
any provision or condition of this  Agreement  must be in writing,  and shall be
effective only to the extent in such writing specifically set forth.

                                     - 18 -
<PAGE>


     7.4 Fees and Expenses.  The Company  agrees to pay Roaring Fork $15,000] at
Closing as  reimbursement  of Roaring  Fork's legal fees in connection  with the
preparation of the Purchase Documents and other expenses.  It is understood that
counsel for Roaring Fork has only rendered legal advice to Roaring Fork, and not
to the  Company  or  any  other  Person  in  connection  with  the  transactions
contemplated  hereby,  and that each of the Company and Roaring  Fork has relied
for  such  matters  on the  advice  of its own  respective  counsel.  Except  as
specified in the immediately  preceding sentence,  each party shall pay the fees
and expenses of its advisers,  counsel,  accountants and other experts,  if any,
and all other  expenses  incurred  by such party  incident  to the  negotiation,
preparation, execution, delivery and performance of the Purchase Documents.

     7.5 Reimbursement of Expenses-Enforcement and Collection.  The Company upon
demand shall pay or reimburse the  Purchaser for all fees and expenses  incurred
or payable by the Purchaser (including, without limitation,  reasonable fees and
expenses of counsel for the Purchaser),  from time to time arising in connection
with the enforcement of this Agreement.

     7.6 Notices. All notices and other communications given to or made upon any
party  hereto in  connection  with this  Agreement  shall,  except as  otherwise
expressly herein provided, be in writing (including telecopy,  but in such case,
a  confirming  copy will be sent by  another  permitted  means)  and  mailed via
certified mail,  telecopied or delivered by guaranteed  overnight parcel express
service or courier to the respective parties, as follows:

         to the Company:
         ---------------

         ATC Healthcare, Inc.
         1983 Marcus Avenue
         Lake Success, NY  11042
         Attn:  Chief Financial Officer
         Fax:  (516) 750-1754

         with a copy to:

         David J. Hirsch, Esq.
         Keevican Weiss Bauerle & Hirsch LLC
         11th Floor, Federated Investors Tower
         1001 Liberty Avenue
         Pittsburg, PA  15222
         Fax:  (412) 355-2609

             and

         To Roaring Fork and its counsel at the addresses set forth below the
         --------------------------------------------------------------------
         signature of Roaring Fork;
         --------------------------

                                     - 19 -
<PAGE>


or in accordance with any subsequent  written direction from the recipient party
to the sending party. All such notices and other communications shall, except as
otherwise expressly herein provided,  be effective upon delivery if delivered by
courier or overnight  parcel  express  service;  in the case of certified  mail,
three (3) Business  Days after the date sent;  or in the case of telecopy,  when
received.

     7.7 Survival. All representations,  warranties, covenants and agreements of
the Company  contained  herein or made in writing in connection  herewith  shall
survive  the  execution  and  delivery  of this  Agreement,  the Closing and the
purchase and delivery of the Common Stock and Warrants.

     7.8  Governing  Law;  Consent  to  Jurisdiction.  This  Agreement  shall be
governed  by,  and  construed  in  accordance  with,  the  laws of the  State of
Colorado,  without  regard to conflict of laws  principles.  Each of the parties
hereto  irrevocably  submits to the exclusive  jurisdiction of the courts of the
State of Colorado,  County of Arapahoe, and the United States District Court for
the  District of Colorado  for the purpose of any suit,  action,  proceeding  or
judgment  relating  or  arising  out of  this  Agreement  and  the  transactions
contemplated hereby. Service of process in connection with any such suit, action
or  proceeding  may be served on each  party  hereto by the same  methods as are
specified  for the giving of notices under this  Agreement.  Each of the parties
hereto  irrevocably  consents to the  jurisdiction of any such court in any such
suit,  action or  proceeding  and the laying of venue in such court.  Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or  proceeding  brought in such courts and  irrevocably  waives any claim
that any such  suit,  action or  proceeding  brought  in any such court has been
brought in an inconvenient forum.

     7.9 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including  recovery of damages,  the Purchaser will be
entitled to specific performance under the Purchase Documents. The parties agree
that monetary damages may not be adequate  compensation for any loss incurred by
reason of any breach of  obligations  described  in the  foregoing  sentence and
hereby  agrees  to waive in any  action  for  specific  performance  of any such
obligation the defense that a remedy at law would be adequate.

     7.10  Adjustment  Provisions.  The Company has  represented to Roaring Fork
that it plans to raise between  $900,000 and $1,900,000 in additional funds in a
private  offering  to be  completed  no later than May 31, 2007 on terms no more
favorable than those made to Roaring Fork pursuant to the Purchase Documents. If
the Company does not raise at least $900,000 by May 31, 2007 either through such
a private offering or through a mezzanine debt arrangement involving a note with
a minimum  term of two years or more that  includes a warrant,  then the Company
shall, for no additional consideration,  issue an additional 1,000,000 shares of
Common  Stock to Roaring Fork and the  exercise  price of the Warrants  shall be
reduced to $.30 and the Warrant Shares shall be increased by 500,000 shares.  If
the Company enters into a subsequent placement involving an equity issuance from
and after the date hereof until  September 30, 2007 and any of the terms of such
subsequent placement are more beneficial to the investors than those provided in
this  Agreement  or in any of the  other  Transaction  Documents,  the  relevant
Transaction  Document(s) shall be, without any further action by Roaring Fork or
the  Company,  deemed  amended  and  modified  in an  economically  and  legally
equivalent  manner such that Roaring Fork shall  receive the benefit of the more
favorable terms of such subsequent placement.  The Company hereby agrees, at its
expense,  to take such other actions  (such as entering into  amendments to this
Agreement or any other  Transaction  Document)  as Roaring  Fork may  reasonably
request to further effectuate the foregoing.

                                     - 20 -
<PAGE>


     7.11  Severability.  Whenever  possible,  each  provision of this Agreement
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law in any jurisdiction,  such provision shall be
ineffective  only to the  extent  of such  prohibition  or  invalidity,  without
invalidating any other provision of this Agreement.

     7.12 Headings.  Article,  section and subsection headings in this Agreement
are included for  convenience  of reference only and shall not constitute a part
of this Agreement for any other purpose.

     7.13  Counterparts.  This  Agreement  may  be  executed  in any  number  of
counterparts  and by any party hereto on separate  counterparts,  each of which,
when so executed and delivered,  shall be an original, but all such counterparts
shall together constitute one and the same instrument.

     7.14 Integration. This Agreement and the other Purchase Documents set forth
the entire  understanding  of the  parties  hereto  with  respect to all matters
contemplated  hereby and supersede all previous  agreements  and  understandings
among them  concerning  such  matters.  No  statements  or  agreements,  oral or
written, made prior to or at the signing hereof, shall vary, waive or modify the
written terms hereof.

      [remainder of page intentionally left blank; signature page follows]

                                     - 21 -
<PAGE>


                                SIGNATURE PAGE TO
                   COMMON STOCK AND WARRANT PURCHASE AGREEMENT


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

                                    COMPANY:

                                    ATC Healthcare, Inc., a Delaware corporation

                                    By:_________________________________________


                                    Name:_______________________________________


                                    Title:______________________________________

                                    PURCHASER:

                                    ROARING FORK CAPITAL SBIC, L.P.,
                                    a Delaware limited partnership

                                    By: Roaring Fork Capital Management, LLC,
                                        its general partner

                                        By:_____________________________________
                                        Name:
                                        Title: Manager

                                    Purchase Price: $600,000
                                    ------------------------

                                    Address for Notices to:
                                    Roaring Fork Capital SBIC, L.P.
                                    5350 S. Roslyn St., Ste. 380
                                    Greenwood Village, CO 80111
                                    Fax: (303) 694-1181

                                    With a copy to its counsel:
                                    Patton Boggs, LLP
                                    1660 Lincoln Street, Suite 1900
                                    Denver, Colorado 80264
                                    Attn: Robert M. Bearman, Esq.
                                    Fax: (303) 894-9239