Document:

Exhibit 10.1 - Executive Officer Compensation

         The Temecula Valley Bank ("Bank") Board of Directors, upon the
recommendation of the Executive Officer Compensation Committee, approved 2006
bonuses for certain executive officers who participate in the discretionary
executive bonus pool and whose bonuses are not subject to predetermined
formulas, as follows: Scott J. Word -- $100,000; Donald L. Schempp -- $50,000;
and Martin E. Plourd -- $35,000.Exhibit 10.2 - Chief Financial Officer and Other Named Officer Compensation

         The Bank's Board of Directors, upon the recommendation of the Executive
Officer Compensation Committee, approved 2006 bonuses for the Chief Financial
Officer and one named officer, both of whom are participants in the
discretionary executive bonus pool and whose bonuses are not subject to
predetermined formulas, as follows: Donald A. Pitcher -- $105,000; and Thomas M.
Shepherd -- $120,000.EXHIBIT 10.1

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

                            COMMON STOCK AND WARRANT
                               PURCHASE AGREEMENT

                              ATC HEALTHCARE, INC.

                                  MARCH 5, 2007

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

<PAGE>

                            COMMON STOCK AND WARRANT
                               PURCHASE AGREEMENT

         THIS COMMON STOCK AND WARRANT  PURCHASE  AGREEMENT (this  "AGREEMENT"),
dated as of February __, 2007, is by and among ATC Healthcare,  Inc., a Delaware
corporation  (the  "COMPANY"),  and the  purchasers  signatory  hereto (each,  a
"PURCHASER" and, collectively, the "PURCHASERS").

                                    RECITALS

         A. The Company and the  Purchasers  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. The Purchasers, severally and not jointly, wish to purchase, and the
Company wishes to sell, upon the terms and conditions  stated in this Agreement,
an aggregate of (i) up to 5,000,000  shares of Common Stock (the  "SHARES")  and
(ii)  warrants,  in  substantially  the form  attached  hereto as Exhibit A (the
"WARRANTS"),  to acquire up to 2,500,000  shares of Common  Stock (the  "WARRANT
SHARES").

         C. The Shares,  the  Warrants and the Warrant  Shares are  collectively
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 the  Purchasers  nor any of
their  respective  Affiliates shall be deemed to be Affiliates of the Company by
virtue of the transactions contemplated in this Agreement.

         "BATHGATE CAPITAL" shall mean Bathgate Capital Partners LLC.

                                      -1-
<PAGE>

         "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 Shares
and the Warrants pursuant to this Agreement.

          "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.

         "COMPANY  COUNSEL"  shall mean Keevican Weiss Bauerle & Hirsch LLC with
offices located at 11th Floor, 1001 Liberty Avenue, Pittsburgh, PA 15222.

         "CURRENT  RATIO"  shall  mean the ratio of total  consolidated  current
assets of the Company to total consolidated  current  liabilities of the Company
(both as determined in accordance with GAAP).

         "ENABLE CAPITAL" shall mean Enable Capital Management, LLC.

          "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.

         "FWS" means Feldman  Weinstein & Smith LLP with offices  located at 420
Lexington Avenue, Suite 2620, New York, New York 10170-0002.

         "GAAP" shall have the meaning given to such term in Section 1.2.

         "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.

                                      -2-
<PAGE>

         "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.

         "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.

         "PER SHARE  PURCHASE  PRICE"  equals $0.30,  subject to adjustment  for
reverse and forward stock splits, stock dividends,  stock combinations and other
similar  transactions  of the Common  Stock  that  occur  after the date of this
Agreement.

          "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.

         "PREFERRED  STOCK"  shall mean the 7%  Convertible  Series A  Preferred
Stock of the Company issued  pursuant to a certificate  of designation  that was
filed on June 18, 2003 with the Secretary of State of the State of Delaware.

         "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.

                                      -3-
<PAGE>

         "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.

         "REGISTRATION  RIGHTS  AGREEMENT"  shall mean the  Registration  Rights
Agreement of even date herewith between the Purchaser and the Company.

         "RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
rule or regulation  hereafter adopted by the Commission having substantially the
same effect as such Rule.

          "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.

         "SHAREHOLDER  APPROVAL"  means such  approval as may be required by the
applicable  rules  and  regulations  of the  American  Stock  Exchange  (or  any
successor  entity)  from the  shareholders  of the Company  with  respect to the
transactions  contemplated by the Transaction Documents,  including the issuance
of all of the  Shares and  Warrant  Shares in excess of 19.99% of the issued and
outstanding Common Stock on the Closing Date.

         "SHORT  SALES"  means  all  "short  sales"  as  defined  in Rule 200 of
Regulation  SHO under the  Exchange  Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).

         "SUBSCRIPTION AMOUNT" means, as to each Purchaser, the aggregate amount
to be paid for Shares and Warrants  purchased  hereunder as specified below such
Purchaser's name on the signature page of this Agreement and next to the heading
"Subscription  Amount," in United States  dollars and in  immediately  available
funds.

         "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.

         "TOTAL ASSETS" shall mean the total consolidated  assets of the Company
determined in accordance with GAAP.

         "TOTAL  LIABILITIES" shall mean the total  consolidated  liabilities of
the Company determined in accordance with GAAP.

         "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.

                                      -4-
<PAGE>

         "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.

                                   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 the Purchasers.

          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 the Purchasers, and the Purchasers shall purchase from
the Company,  an aggregate of up to  $2,500,000  of the Shares and the Warrants.
The Purchasers 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,  each  Purchaser  shall  notify  the  Company of such
Purchaser's  determination  of the allocation of such  Purchaser's  Subscription
Amount 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 the Purchasers 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.

                                      -5-
<PAGE>

          2.3 THE  CLOSING.  Delivery  of and  payment  for the  Shares  and the
Warrants  to be sold to the  Purchasers  shall be made at such place and date as
may be mutually  agreeable to the Company and the Purchasers,  provided that the
Company and the  Purchaser  agree that such date shall be as soon as  reasonably
practicable  following the execution of this Agreement  (such date, the "CLOSING
DATE").  Delivery  of the Shares and  Warrants  shall be made to the  Purchasers
against  payment of their  respective  Subscription  Amounts by wire transfer of
immediately  available  funds in the  manner  agreed to by the  Company  and the
Purchasers.  Each Purchaser's  allocation of he Shares and the Warrants shall be
issued in the name of such Purchaser.

                                   ARTICLE 3

                                   CONDITIONS

          3.1  CONDITIONS  TO PURCHASE OF  SECURITIES.  The  obligation  of each
Purchaser  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  of the Company  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  EFFECT.  There  shall  have  been no
Material Adverse Effect from the date of execution of this Agreement through and
including the Closing Date.

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

                              (i) this Agreement, duly completed and executed by
                    the Company;

                              (ii) a legal  opinion of Company  Counsel,  in the
                    form of EXHIBIT C attached hereto;

                              (iii) a letter to American  Stock  Transfer,  Inc.
                    ("American  Stock"),  transfer  agent for the Common  Stock,
                    executed by the Company and in form reasonably  satisfactory
                    to the  Purchaser  instructing  American  Stock to issue the
                    number  of  Shares  equal to such  Purchaser's  Subscription
                    Amount divided by the Per Share Purchase  Price,  registered
                    in the name of such Purchaser;

                              (iv) a  Warrant  registered  in the  name  of such
                    Purchaser  to  purchase  up to a number  of shares of Common
                    Stock  equal  to 50% of  such  Purchaser's  Shares,  with an
                    exercise  price  equal  to  $0.45,   subject  to  adjustment
                    therein;

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

                              (vi) 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;

                                      -6-
<PAGE>

                              (vii)  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;

                              (viii) 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 such
                    Purchhaser with respect to its purchase;

                              (ix) a lock-up agreement, in the form of EXHIBIT B
                    attached hereto, executed by (a) David Savitsky, (b) Stephen
                    Savitsky and (c) any  principals  or  affiliates of Bathgate
                    Capital who  participate  in the  offering,  whereby each of
                    them  agrees to  lock-up  its  shares of Common  Stock for a
                    period  ending  60 days  after  the  Mandatory  Registration
                    Statement (as defined in the Registration  Rights Agreement)
                    is declared effective; and

                              (x)  such   other   documents   relating   to  the
                    Transactions   contemplated  by  this  Agreement  that  such
                    Purchaser 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 the Purchasers.

                                   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. As a material inducement to each Purchaser to enter into
this  Agreement  and purchase the Shares and the  Warrants,  the Company  hereby
represents and warrants to each Purchaser 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 the Purchasers 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, as described in the Company's
Form 10-K for the fiscal year ended February 28, 2006 (the "BUSINESS").

                                      -7-
<PAGE>

                    (c) SEC REPORTS; FINANCIAL STATEMENTS. 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 Disclosure 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.  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 the Purchasers  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.

                    (d) CAPITALIZATION  AND RELATED MATTERS.  The capitalization
of the Company is as set forth on SCHEDULE  4.1(D),  which SCHEDULE 4.1(D) shall
also  include the number of shares of Common  Stock owned  beneficially,  and of
record,  by Affiliates  of the Company as of the date hereof.  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 the Purchasers 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.
No further approval or authorization of any stockholder,  the Board of Directors
of the  Company  or  others  is  required  for  the  issuance  and  sale  of the
Securities.  There are no stockholders  agreements,  voting  agreements or other
similar  agreements  with respect to the  Company's  capital  stock to which the
Company is a party or, to the knowledge of the Company,  between or among any of
the Company's stockholders.

                                      -8-
<PAGE>

                    (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   (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. No further filing,  consent, or authorization is required by
the  Company,  its  Board of  Directors,  or its  stockholders.  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.

                    (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. 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) 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.  Except for the  issuance of the  Securities  contemplated  by this
Agreement or as set forth on SCHEDULE 4.1(H), no event, liability or development
has occurred or exists with respect to the Company or its  Subsidiaries or their
respective business,  properties,  operations or financial condition, that would
be required to be disclosed by the Company under  applicable  securities laws at
the time this  representation  is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this  representation  is
made.

                                      -9-
<PAGE>

                    (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.

                    (k) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  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 and are
set forth on SCHEDULE  4.1(M),  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. The Purchasers
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.

                                      -10-
<PAGE>

                    (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 the ownership of the Shares,
the Warrants, and the Warrant Shares by the Purchasers

                    (o) TAXES.  The  Company has filed or caused to be filed all
Federal, state and ocal 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.

                    (q) PROPERTIES; SECURITY INTERESTS. 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.

                                      -11-
<PAGE>

                    (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.  The SEC Reports 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 the  Purchasers  to any  material  liability to third
parties.

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. Except with respect to the material
terms  and  conditions  of the  transactions  contemplated  by  the  Transaction
Documents,  the Company  confirms that neither it nor any other Person acting on
its behalf has  provided any of the  Purchasers  or their agents or counsel with
any  information  that it believes  constitutes  or might  constitute  material,
non-public information. The Company understands and confirms that the Purchasers
will  rely  on  the  foregoing   representation  in  effecting  transactions  in
securities of the Company. All factual information  furnished by or on behalf of
the  Company  to the  Purchasers  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.  The press releases disseminated by the Company during
the twelve months  preceding the date of this Agreement  taken as a whole do not
contain any untrue statement of a material fact or omit 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 and when made,
not misleading.  The Company  acknowledges and agrees that no Purchaser makes or
has made any  representations  or  warranties  with respect to the  transactions
contemplated hereby other than those specifically set forth in Article 5 herein.

                    (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.

                                      -12-
<PAGE>

                    (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) ENVIRONMENTAL LAWS. 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.

                    (x)   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.

                    (y) 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.

                                      -13-
<PAGE>

                    (z) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed 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(Z)  provides  a
description of 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.

                    (aa)   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.

                                      -14-
<PAGE>

                    (bb) 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.

                    (cc) 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
the Purchasers  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.

                    (dd) 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.

                    (ee) 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.

                    (ff)  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.

                    (gg) SOLVENCY. Based on the consolidated financial condition
of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder,  (i) the fair
saleable  value of the Total Assets  exceeds the amount that will be required to
be paid on or in respect of the Company's  existing debts and other  liabilities
(including known contingent  liabilities) as they mature;  (ii) the Total Assets
do not  constitute  unreasonably  small  capital to carry on its business as now
conducted  and as proposed to be conducted  including  its capital  needs taking
into account the particular  capital  requirements of the business  conducted by
the  Company,  and  projected  capital  requirements  and  capital  availability
thereof;  and (iii) the  current  cash flow of the  Company,  together  with the
proceeds  the  Company  would  receive,  were it to  liquidate  all of the Total
Assets,  after taking into account all  anticipated  uses of the cash,  would be
sufficient  to pay all  amounts on or in respect  of its  liabilities  when such
amounts  are  required to be paid.  The  Company  does not intend to incur debts
beyond its ability to pay such debts as they  mature  (taking  into  account the
timing and  amounts  of cash to be  payable  on or in respect of its debt).  The
Company has no knowledge of any facts or circumstances  which lead it to believe
that it will file for  reorganization  or  liquidation  under the  bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.

                                      -15-
<PAGE>

                    (hh) NO GENERAL  SOLICITATION.  Neither  the Company nor any
person acting on behalf of the Company has offered or sold any of the Securities
by any form of general  solicitation  or general  advertising.  The  Company has
offered  the  Securities  for sale  only to the  Purchasers  and  certain  other
"accredited investors" within the meaning of Rule 501 under the Securities Act.

                    (ii) ACCOUNTANTS. The Company's accounting firm is set forth
on SCHEDULE 4.1(II). To the knowledge and belief of the Company, such accounting
firm (i) is a registered  public accounting firm as required by the Exchange Act
and (ii) shall express its opinion with respect to the  financial  statements to
be  included  in the  Company's  Annual  Report on Form 10-K for the year ending
February 28, 2007.

                    (jj) NO DISAGREEMENTS  WITH  ACCOUNTANTS AND LAWYERS.  There
are no disagreements of any kind presently existing,  or reasonably  anticipated
by the Company to arise,  between the  Company and the  accountants  and lawyers
formerly or presently  employed by the Company  which could affect the Company's
ability  to  perform  any  of its  obligations  under  any  of  the  Transaction
Documents,  and except as set forth in  SCHEDULE  4.1(JJ) the Company is current
with respect to any fees owed to its accountants and lawyers.

                    (kk)  ACKNOWLEDGMENT   REGARDING   PURCHASERS'  PURCHASE  OF
SECURITIES.  The Company  acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length  purchaser  with respect to the
Transaction  Documents and the transactions  contemplated  thereby.  The Company
further  acknowledges  that no  Purchaser  is acting as a  financial  advisor or
fiduciary  of the  Company  (or in any  similar  capacity)  with  respect to the
Transaction  Documents and the transactions  contemplated thereby and any advice
given by any Purchaser or any of their respective  representatives  or agents in
connection  with the  Transaction  Documents and the  transactions  contemplated
thereby is merely incidental to the Purchasers' purchase of the Securities.  The
Company  further  represents to each  Purchaser  that the Company's  decision to
enter into this  Agreement  and the other  Transaction  Documents has been based
solely on the independent evaluation of the transactions  contemplated hereby by
the Company and its representatives.

                    (ll) ACKNOWLEDGEMENT REGARDING PURCHASER'S TRADING ACTIVITY.
Anything in this Agreement or elsewhere  herein to the contrary  notwithstanding
(except  as set  forth  in  Sections  5.7  and  6.1(m)),  it is  understood  and
acknowledged  by the Company (i) that none of the Purchasers  have been asked by
the Company to agree, nor has any Purchaser agreed, to desist from purchasing or
selling,  long  and/or  short,   securities  of  the  Company,  or  "derivative"
securities  based on securities  issued by the Company or to hold the Securities
for any  specified  term;  (ii)  that  past  or  future  open  market  or  other
transactions  by  any  Purchaser,   including  Short  Sales,   and  specifically
including, without limitation, Short Sales or "derivative" transactions,  before
or after the  closing  of this or future  private  placement  transactions,  may
negatively impact the market price of the Company's publicly-traded  securities;
(iii) that any Purchaser,  and  counter-parties in "derivative"  transactions to
which any such Purchaser is a party, directly or indirectly,  presently may have
a "short"  position in the Common Stock,  and (iv) that each Purchaser shall not
be  deemed  to have  any  affiliation  with or  control  over any  arm's  length
counter-party in any "derivative"  transaction.  The Company further understands
and  acknowledges  that  (a)  one or  more  Purchasers  may  engage  in  hedging
activities  at  various  times  during  the  period  that  the   Securities  are
outstanding, including, without limitation, during the periods that the value of
the Warrant Shares  deliverable  with respect to Securities are being determined
and (b) such hedging  activities (if any) could reduce the value of the existing
stockholders'  equity  interests  in the  Company at and after the time that the
hedging  activities  are being  conducted.  The Company  acknowledges  that such
aforementioned  hedging  activities  do not  constitute  a breach  of any of the
Transaction Documents.

                                      -16-
<PAGE>

                    (mm)  REGULATION M  COMPLIANCE.  The Company has not, and to
its  knowledge  no  one  acting  on its  behalf  has,  (i)  taken,  directly  or
indirectly,  any action designed to cause or to result in the  stabilization  or
manipulation  of the price of any security of the Company to facilitate the sale
or resale of any of the Securities,  (ii) sold, bid for, purchased, or, paid any
compensation for soliciting  purchases of, any of the Securities,  or (iii) paid
or agreed to pay to any  Person  any  compensation  for  soliciting  another  to
purchase any other securities of the Company, other than, in the case of clauses
(ii) and (iii),  compensation  paid to Bathgate  Capital in connection  with the
placement of the Securities.

          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 twenty-four (24) months from the date of this Agreement.

                                   ARTICLE 5

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         Each  Purchaser  hereby  represents  and  warrants  to the  Company  as
follows:

          5.1 PURCHASE ENTIRELY FOR ITS OWN ACCOUNT. This Agreement is made with
such  Purchaser  in reliance  upon its  representation  to the Company  that the
Shares and the Warrants will be acquired for investment for such 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 such
Purchaser to hold any of the Securities for any period of time.

          5.2 DISCLOSURE OF  INFORMATION.  The Purchaser 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 such Purchaser or its representatives
or counsel shall modify,  amend or affect such Purchaser'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.

                                      -17-
<PAGE>

          5.3 ACCREDITED AND SOPHISTICATED INVESTOR;  INVESTMENT EXPERIENCE. The
Purchaser  represents  that it is a  sophisticated  investor and an  "accredited
investor" as defined in Rule 501 under the  Securities  Act. Such Purchaser 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. The Purchaser 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  ASSIGNMENT.  Upon the assignment or transfer by such Purchaser 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.

          5.6 SHORT SALES AND  CONFIDENTIALITY  PRIOR TO THE DATE HEREOF.  Other
than consummating the transactions  contemplated  hereunder,  such Purchaser has
not,  nor has any Person  acting on behalf of or pursuant  to any  understanding
with such  Purchaser,  directly or  indirectly  executed any purchases or sales,
including  Short  Sales,  of the  securities  of the  Company  during the period
commencing  from the time  that  such  Purchaser  first  received  a term  sheet
(written or oral) from the Company or any other Person  representing the Company
setting  forth the material  terms of the  transactions  contemplated  hereunder
until the date hereof ("DISCUSSION TIME"). Notwithstanding the foregoing, in the
case of a Purchaser that is a multi-managed  investment vehicle whereby separate
portfolio  managers manage separate portions of such Purchaser's  assets and the
portfolio managers have no direct knowledge of the investment  decisions made by
the portfolio  managers managing other portions of such Purchaser's  assets, the
representation  set forth above shall only apply with  respect to the portion of
assets  managed by the portfolio  manager that made the  investment  decision to
purchase the Securities  covered by this Agreement.  Other than to other Persons
party to this Agreement,  such Purchaser has maintained the  confidentiality  of
all disclosures  made to it in connection with this  transaction  (including the
existence and terms of this transaction).

                                   ARTICLE 6

                                    COVENANTS

          6.1 COVENANTS.  The Company covenants that, so long as the Purcchasers
own 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
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.

                                      -18-
<PAGE>

                    (c) LEGENDS.  Unless (i) the Shares and Warrant  Shares have
been  registered  under the Securities  Act, (ii) such Shares and Warrant Shares
have been sold  pursuant to Rule 144,  (iii) such Shares and Warrant  Shares are
eligible  for sale  under  Rule  144(k) or (iv) such  legend on the  Shares  and
Warrant  Shares  is  not  required  under  the  applicable  requirements  of the
Securities Act (including judicial  interpretations and pronouncements issued by
the staff of the SEC),  the Company shall  instruct its transfer  agent to enter
stop transfer  orders with respect to such Shares and Warrants  Shares,  and all
certificates or instruments representing the Shares, Warrants and Warrant Shares
shall bear on the face thereof substantially the following legend:

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.

If the legend is not required  pursuant to clauses (i)-(iv) herein,  the Company
shall cause its counsel to issue a legal opinion to the Company's transfer agent
if required by such transfer agent to effect the removal of such legend.  If all
or a portion of a Warrant  is  exercised  at such time as no legend is  required
pursuant to clauses (i)-(iv) herein, such Warrant Shares shall be issued free of
all  legends.  The  Company  agrees that on such date that a legend is no longer
required pursuant to clauses (i)-(iv) herein, the Company shall deliver or cause
to be  delivered  to a  Purchaser,  no later  than 3 Business  Days (such  third
Business  Day,  the  "LEGEND  REMOVAL  DATE")  following  the  delivery  by such
Purchaser to the Company or its  transfer  agent of a  certificate  representing
Shares or Warrant Shares,  as the case may be, a certificate  representing  such
shares that is free from all  restrictive and other legends (such shares without
restrictions or legends, the "UNLEGENDED SHARES").  The Company may not make any
notation on its records or give  instructions to its transfer agent that enlarge
the  restrictions  on transfer set forth in this Section 5.5.  Certificates  for
Shares  or  Warrant  Shares  subject  to  legend  removal   hereunder  shall  be
transmitted  by the Company's  transfer agent to such Purchaser by crediting the
account of such  Purchaser's  prime  broker with the  Depository  Trust  Company
System.

In addition to any other rights available to the Purchaser, if the Company fails
to cause its  transfer  agent to transmit  to the  Purchaser  a  certificate  or
certificates  representing  the  Unlegended  Shares  on or prior  to the  Legend
Removal Date, and if after such Legend Removal Date the Purchaser is required by
its broker to purchase  (in an open market  transaction  or  otherwise),  or the
Purchaser's  brokerage  firm  otherwise  purchases,  shares of  Common  Stock to
deliver in  satisfaction  of a sale by the  Purchaser of the  Unlegended  Shares
which  the  Purchaser  anticipated  receiving  by such  Legend  Removal  Date (a
"BUY-IN"),  then the  Company  shall (1) pay in cash to the Holder the amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of Unlegended Shares that the Company was required
to deliver to the Purchaser on the applicable  Legend Removal Date times (B) the
price at which  the sell  order  giving  rise to such  purchase  obligation  was
executed,  and (2)  deliver to the Holder the number of  Unlegended  Shares that
would  have been  issued  had the  Company  timely  complied  with its  delivery
obligations  hereunder.  For example,  if the Purchaser  purchases  Common Stock
having a total  purchase  price of  $11,000  to cover a Buy-In  with  respect to
Unlegended  Shares with an  aggregate  sale price  giving rise to such  purchase
obligation of $10,000,  under clause (1) of the immediately  preceding  sentence
the Company shall be required to pay the Purchaser  $1,000.  The Purchaser shall
provide  the  Company  written  notice  indicating  the  amounts  payable to the
Purchaser in respect of the Buy-In and, upon request of the Company, evidence of
the amount of such loss.  Nothing  herein  shall  limit a  Purchaser's  right to
pursue  any  other  remedies  available  to it  hereunder,  at law or in  equity
including,   without  limitation,   a  decree  of  specific  performance  and/or
injunctive  relief  with  respect to the  Company's  failure  to timely  deliver
Unlegended Shares as required pursuant to the terms hereof.

                                      -19-
<PAGE>

                    (d)  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.

                    (e) 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.

                    (f)  USE OF  PROCEEDS.  Use  the  funds  received  from  the
Purchasers in connection with the Transactions  substantially in accordance with
the "USE OF PROCEEDS SCHEDULE" attached hereto as SCHEDULE 6.1(E).

                    (g) 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.

                    (h) NO NEW FINANCINGS. From the date of this Agreement until
the date ninety (90) days after the effectiveness of the Mandatory  Registration
Statement  (as defined in the  Registration  Rights  Agreement)  (the  "BLOCKAGE
PERIOD"), the Company shall not, without the prior written consent of Purchasers
holding a majority-in-interest of the then-outstanding Securities, (i) issue any
equity  securities  of  the  Company  other  than  under  this  Agreement  or in
connection  with exercises of options or warrants of the Company  outstanding as
of the date  hereof or issued  hereafter  as  permitted  hereby,  except for (A)
securities  issued in a registered  public offering,  (B) securities issued to a
party in connection with forming a strategic  relationship or alliance with that
party or (C) Common Stock and Warrants issued for aggregate consideration of not
more than  $1,000,000  contemporaneously  herewith to other  investors  on terms
substantially similar to the terms hereof, or (ii) enter into any debt financing
arrangements not in place on the date hereof. Notwithstanding the foregoing, the
Company may during the Blockage Period enter into new or additional  senior debt
arrangements  or facilities  and/or  mezzanine debt  arrangements  or facilities
involving  notes with minimum  terms of at least two years and which may include
the issuance of warrants to purchase  Common  Stock of the  Company,  so long as
after entering into such arrangements or facilities,  on a pro forma basis based
on the  financial  statements  of the Company for the quarter  last ended before
entering into the  arrangements or facilities,  and assuming full advance of all
amounts  available  under the  arrangements  or facilities,  neither the Current
Ratio nor the ratio of Total Assets to Total  Liabilities of the Company is less
than 1:1.

                                      -20-
<PAGE>

                    (i) NO  VARIABLE  FINANCINGS  For so  long  as the  Warrants
issued  hereunder  remain  outstanding,  the  Company  shall not enter  into any
agreements  under  which it  agrees  to issue  equity  over a period  of time in
accordance with a pricing formula that varies over that period of time depending
on the market price of the equity of the Company at the time of issuance.

                    (j)  REDEMPTIONS.   For  so  long  as  the  Warrants  issued
hereunder  remain  outstanding,  the Company  shall not redeem any shares of its
capital  stock,  other than  mandatory  redemptions  of the  Preferred  Stock in
accordance  with its terms.

                    (k)  SECURITIES  LAWS  DISCLOSURE;  PUBLICITY.  The  Company
shall,  by 8:30  a.m.  (New  York  City  time) on the  Trading  Day  immediately
following the date hereof,  issue a Current  Report on Form 8-K,  disclosing the
material  terms  of  the  transactions   contemplated  hereby,  and  filing  the
Transaction  Documents as exhibits thereto. The Company and each Purchaser shall
consult with each other in issuing any other press  releases with respect to the
transactions  contemplated  hereby,  and neither  the Company nor any  Purchaser
shall issue any such press release or otherwise  make any such public  statement
without the prior  consent of the Company,  with respect to any press release of
any Purchaser,  or without the prior consent of each Purchaser,  with respect to
any press  release of the  Company,  which  consent  shall not  unreasonably  be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public  statement or  communication.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any  Purchaser  in any filing with the SEC or any  regulatory  agency or
Trading Market, without the prior written consent of such Purchaser,  except (i)
as required by federal  securities law in connection  with (A) any  registration
statement  contemplated by the Registration  Rights Agreement and (B) the filing
of final Transaction  Documents (including signature pages thereto) with the SEC
and (ii) to the extent such  disclosure  is  required  by law or Trading  Market
regulations,  in which case the Company shall provide the Purchasers  with prior
notice of such disclosure permitted under this clause (ii).

                    (l)  NON-PUBLIC  INFORMATION.  Except  with  respect  to the
material  terms  and  conditions  of  the   transactions   contemplated  by  the
Transaction Documents,  the Company covenants and agrees that neither it nor any
other Person  acting on its behalf will  provide any  Purchaser or its agents or
counsel with any  information  that the Company  believes  constitutes  material
non-public information,  unless prior thereto such Purchaser shall have executed
a written agreement  regarding the  confidentiality and use of such information.
The Company understands and confirms that each Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.

                                      -21-
<PAGE>

                    (m) LISTING OF COMMON STOCK.(n) The Company hereby agrees to
use best  efforts to  maintain  the  listing  of the  Common  Stock on a Trading
Market,  and as soon as  reasonably  practicable  following the Closing (but not
later  than  the  earlier  of  the  date  of   effectiveness  of  the  Mandatory
Registration  Statement and the first  anniversary  of the Closing Date) to list
all of the Shares and Warrant Shares on such Trading Market. The Company further
agrees,  if the  Company  applies to have the Common  Stock  traded on any other
Trading  Market,  it will  include  in such  application  all of the  Shares and
Warrant Shares,  and will take such other action as is necessary to cause all of
the  Shares and  Warrant  Shares to be listed on such  other  Trading  Market as
promptly as possible.  The Company will take all action reasonably  necessary to
continue  the listing and  trading of its Common  Stock on a Trading  Market and
will  comply in all  respects  with the  Company's  reporting,  filing and other
obligations under the bylaws or rules of the Trading Market.

                    (n) INTEGRATION.  The Company shall not sell, offer for sale
or solicit  offers to buy or otherwise  negotiate in respect of any security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated  with the offer or sale of the  Securities to the Purchasers
for  purposes of the rules and  regulations  of any Trading  Market such that it
would  require  shareholder   approval  prior  to  the  closing  of  such  other
transaction unless  shareholder  approval is obtained before the closing of such
subsequent transaction.

                    (o) SHAREHOLDER  APPROVAL.  Unless Shareholder  Approval has
been obtained and deemed effective, neither the Company nor any Subsidiary shall
make any issuance  whatsoever of Common Stock or Common Stock  Equivalents which
would cause any  adjustment of the exercise  price of the Warrants to the extent
that the holders of the  Warrants  would not be  permitted,  pursuant to Section
1(c)(ii) of the Warrants,  to exercise  their  respective  Warrants in full. Any
Purchaser shall be entitled to obtain  injunctive  relief against the Company to
preclude  any such  issuance,  which remedy shall be in addition to any right to
collect damages

                    (p) SHORT SALES AND  CONFIDENTIALITY  AFTER THE DATE HEREOF.
Each Purchaser,  severally and not jointly with the other Purchasers,  covenants
that  neither  it nor any  Affiliate  acting on its  behalf or  pursuant  to any
understanding  with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this  Agreement  are first  publicly  announced as described in Section 6(j).
Each Purchaser,  severally and not jointly with the other Purchasers,  covenants
that until such time as the  transactions  contemplated  by this  Agreement  are
publicly  disclosed by the Company as described in Section 6(j),  such Purchaser
will maintain the confidentiality of the existence and terms of this transaction
and the  information  included  in the  Disclosure  Schedules.  Each  Purchaser,
severally and not jointly with any other Purchaser, understands and acknowledges
and agrees to act in a manner that will not violate the  positions of the SEC as
set forth in Item 65, Section A, of the Manual of Publicly  Available  Telephone
Interpretations,  dated July  1997,  compiled  by the  Office of Chief  Counsel,
Division of Corporation  Finance.  Notwithstanding  the foregoing,  no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in
Short  Sales  in  the  securities  of  the  Company  after  the  time  that  the
transactions  contemplated  by this  Agreement are first  publicly  announced as
described  in Section  6(j).  Notwithstanding  the  foregoing,  in the case of a
Purchaser that is a multi-managed  investment vehicle whereby separate portfolio
managers manage separate  portions of such Purchaser's  assets and the portfolio
managers  have no  direct  knowledge  of the  investment  decisions  made by the
portfolio  managers  managing other  portions of such  Purchaser's  assets,  the
covenant  set forth above shall only apply with respect to the portion of assets
managed by the portfolio  manager that made the investment  decision to purchase
the Securities covered by this Agreement.

                                      -22-
<PAGE>

                                   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 each 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.

          7.4 FEES AND EXPENSES. At Closing, the Company agrees to pay to Enable
Capital $15,000 as  reimbursement  of Enable's legal fees in connection with the
preparation of the Purchase Documents and other expenses.  It is understood that
counsel  for Enable has only  rendered  legal  advice to Enable,  and not to the
Company or any other Person in  connection  with the  transactions  contemplated
hereby,  and that each of the Company and Enable 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.

                                      -23-
<PAGE>

          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 EACH PURCHASER AS SET FORTH ON THE SIGNATURE PAGE HERETO;

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 New
York, 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
New York,  County of New York,  and the  United  States  District  Court for the
Southern District of New York 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.  EACH PARTY HERETO EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY.

          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.

                                      -24-
<PAGE>

          7.10 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.

          7.11  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.

          7.12  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.

          7.13 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.

          7.14  Independent  Nature of Purchasers'  Obligations and Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document.  Nothing contained herein
or in any  other  Transaction  Document,  and no action  taken by any  Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an  association,  a joint  venture  or any  other  kind of  entity,  or create a
presumption  that the  Purchasers are in any way acting in concert or as a group
with  respect  to  such  obligations  or the  transactions  contemplated  by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation,  the rights arising out of
this Agreement or out of the other  Transaction  Documents,  and it shall not be
necessary  for any other  Purchaser to be joined as an  additional  party in any
proceeding  for such purpose.  Each  Purchaser has been  represented  by its own
separate  legal  counsel in their  review  and  negotiation  of the  Transaction
Documents. For reasons of administrative  convenience only, Purchasers and their
respective  counsel have chosen to communicate with the Company through FWS. FWS
does not represent any of the Purchasers but only Enable, as investment  advisor
to one or more  Purchasers.  The Company  has elected to provide all  Purchasers
with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by the Purchasers.

      [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

                                      -25-
<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: /s/ David Savitsky
                             Name: David Savitsky
                             Title: Chief Executive Officer

<PAGE>

        [PURCHASER SIGNATURE PAGES TO AHN SECURITIES PURCHASE AGREEMENT]

         IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

Name of Purchaser: ______________________________________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: _________________________

Name of Authorized Signatory: ___________________________________________

Title of Authorized Signatory: __________________________________________

Email Address of Purchaser:______________________________________________

Fax Number of Purchaser: ________________________________________________

Address for Notice of Purchaser:

Address for Delivery of  Securities  for  Purchaser  (if not same as address for
notice):

Subscription Amount: $__________

Shares: ________________________

Warrant Shares: ________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}]]