Document:

Exhibit 4.13

                          REGISTRATION RIGHTS AGREEMENT
                          -----------------------------

                                  COMMON STOCK
                              AND RELATED WARRANTS
                                       of
                              ATC HEALTHCARE, INC.

     This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of January
12, 2007 by and among (i) ATC  Healthcare,  Inc.,  a Delaware  corporation  (the
"Company")  and  (ii)  Roaring  Fork  Capital  SBIC LP  ("Roaring  Fork"  or the
"Investor") which parties have entered into this date a Common Stock and Warrant
Purchase  Agreement (the "Purchase  Agreement")  with respect to the purchase of
the Company's  Class A Common Stock (the "Stock") and  accompanying  Warrants to
purchase shares of Class A Common Stock (the "Warrants"),  and (iii) each person
or entity that subsequently  becomes a party to this Agreement  pursuant to, and
in  accordance  with,  the  provisions of Section 11 hereof  (collectively,  the
"Investor  Permitted  Transferees" and each individually an "Investor  Permitted
Transferee").

     WHEREAS,  the  Company  has agreed to issue and sell to Roaring  Fork,  and
Roaring  Fork has agreed to  purchase  Stock  from the  Company,  together  with
accompanying  Warrants,  all upon the  terms  and  conditions  set  forth in the
Purchase Agreement; and

     WHEREAS,  in  connection  with the  execution  and delivery of the Purchase
Agreement,  the  Company  has agreed  with  Roaring  Fork to provide it with the
rights set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
contained herein, the parties hereto hereby agree as follows:

     1.  DEFINITIONS.  The  following  terms  shall have the  meanings  provided
therefor below:

     "Effective  Date" means the date the  Mandatory  Registration  Statement is
declared effective by the SEC.

     "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended,
and all of the rules and regulations promulgated thereunder.

     "Investors"  shall  mean,  collectively,  Roaring  Fork  and  the  Investor
Permitted  Transferees;  provided,  however,  that the term Investors  shall not
include Roaring Fork or any Investor Permitted  Transferee that ceases to own or
hold any Registrable Shares.

     "Issuance  Price"  shall  mean  $0.30 per share of Stock,  as  adjusted  to
reflect the occurrence of any stock split,  stock dividend,  stock  combination,
stock subdivision or similar recapitalization affecting such share.

<PAGE>

     "Last Sale  Price"  shall mean the last sale  price on the  American  Stock
Exchange,  or if the Company's  Common Stock is not traded on the American Stock
Exchange,  the  reported  last sale price for the  Company's  Common  Stock,  as
furnished by the National  Association  of  Securities  Dealers,  Inc.,  for the
applicable period.

     "Majority  Holders" shall mean, at the relevant time of reference  thereto,
those Investors holding and/or having the right to acquire,  as the case may be,
more than  fifty  percent  (50%) of the  Registrable  Shares  held by all of the
Investors.

     "Penalty Warrants" shall mean those warrants described in paragraph 3(c) of
this Agreement.

     "Qualifying  Holder" shall have the meaning  ascribed thereto in Section 11
hereof.

     "Registrable  Shares"  shall  mean  the  shares  of  Class A  Common  Stock
purchased pursuant to the Purchase Agreement, the shares of Class A Common Stock
purchasable  upon the  exercise  of  Warrants,  and the shares of Class A Common
Stock purchasable upon the exercise of the Penalty Warrants;  provided, however,
that such term shall not include any of such shares of Common  Stock that become
or have become eligible for resale pursuant to Rule 144(k).

     "Rule 144" shall mean Rule 144 promulgated under the Securities Act and any
successor or substitute rule, law or provision.

     "SEC" shall mean the Securities and Exchange Commission.

     "Securities Act" shall mean the Securities Act of 1933, as amended, and all
of the rules and regulations promulgated thereunder.

     "Trading  Days"  shall  mean any day on which the  Class A Common  Stock is
traded on the American Stock Exchange,  or if the American Stock Exchange is not
the principal trading market for the Class A Common Stock, then on the principal
securities  exchange or  securities  market on which the Class A Common Stock is
then traded;  provided that "Trading Day" shall not include any day on which the
Class A Common Stock is  scheduled to trade on such  exchange or market for less
than  4.5  hours or any day that the  Class A  Common  Stock is  suspended  from
trading  during the final hour of trading on such exchange or market (or if such
exchange or market does not  designate in advance the closing time of trading on
such exchange or market,  then during the hour ending at 4:00:00 p.m.,  New York
time)

     2.  EFFECTIVENESS.  The  Company  shall  be  required  to use  commercially
reasonable efforts to keep the Mandatory  Registration  Statement (as defined in
Section 3(a)) continuously  effective until such date that is the earlier of (i)
the date when all of the Registrable  Shares  registered  thereunder  shall have
been sold,  (ii) the date when  Roaring  Fork  becomes  Rule 144(k)  eligible or
(iiii)  the  third  (3rd)  anniversary  of the date the  Mandatory  Registration
Statement is first declared effective.

                                       2
<PAGE>

     3. MANDATORY REGISTRATION; PIGGYBACK REGISTRATION.
        -----------------------------------------------

     (a) Within One Hundred Twenty (120) days of the Final Closing,  the Company
will prepare and file with the SEC a  registration  statement on Form S-3 or its
equivalent  for the purpose of  registering  under the Securities Act all of the
Registrable  Shares  for resale by, and for the  account  of, the  Investors  as
selling stockholders  thereunder (the "Mandatory Registration  Statement").  The
Mandatory  Registration  Statement shall permit the Investors to offer and sell,
on a delayed or continuous  basis pursuant to Rule 415 under the Securities Act,
any or all of the  Registrable  Shares.  The  Company  agrees to use  reasonable
efforts to cause the  Mandatory  Registration  Statement to become  effective as
soon as practicable.

     (b) The offer and sale of the Registrable  Shares pursuant to the Mandatory
Registration Statement shall not be underwritten.

     (c) In the  event  the  Company  does not file the  Mandatory  Registration
Statement with the SEC by the Filing  Deadline (as defined  below),  the Company
shall issue to Roaring Fork Penalty  Warrants to purchase  500,000 shares of the
Stock.  The exercise price for the Penalty  Warrants shall be equal to the lower
of (i) the thirty  (30) day  average  Last Sale Price  immediately  prior to the
Filing Deadline or (ii) Forty-five Cents ($0.45) per share. The Penalty Warrants
shall be exercisable for a period of five (5) years.  Each Penalty Warrant shall
be in  substantially  the form as attached as Exhibit B hereto.  For purposes of
this  Agreement,  the "Filing  Deadline"  shall be one hundred twenty (120) days
following the closing of Roaring Fork's purchase of the Stock and Warrants under
the Purchase Agreement (the "Final Closing").

     (d) In the event that the Mandatory  Registration Statement is not declared
effective by the SEC by the earlier to occur of (i) 180 days after its filing or
(ii) 180 days after the Filing Deadline (the "Effectiveness Deadline"), then the
Company shall issue to Roaring Fork Penalty  Warrants to purchase 500,000 shares
of the Stock.  The exercise price for the Penalty Warrants shall be equal to the
lower of (i) the thirty (30) day average  Last Sale Price  immediately  prior to
the Effectiveness Deadline or (ii) Forty-five Cents ($0.45) per share. If on any
day after the Effective Date sales of all the Registrable  Securities  cannot be
made (other than during an  Allowable  Suspension  Period (as defined in Section
10) pursuant to the Mandatory  Registration  Statement or otherwise  (including,
without  limitation,  because  of a failure to keep the  Mandatory  Registration
Statement  effective,  to disclose such information as is necessary for sales to
be  made  pursuant  to the  Mandatory  Registration  Statement,  to  register  a
sufficient  number of shares of Common Stock) (a  "Maintenance  Failure")  then,
after expiration of a single period of time not to exceed seventy-five (75) days
from  any  such  date for the  Company  to cure  such  Maintenance  Failure,  as
liquidated  damages  and not as a penalty to any  Investor by reason of any such
delay in or reduction of its ability to sell the Stock,  then the Company  shall
be required to pay to each  Investor a payment equal to Five Percent (5%) of the
Issuance Price of the Stock, on each of the following dates: (i) the initial day
of a Maintenance  Failure and (ii) on every  thirtieth day (prorated for periods
taking less than  thirty  days)  thereafter  until such  Maintenance  Failure is
covered.  Provided, that, in no event shall the aggregate amount of payments for
Maintenance  Failure  exceed,  in the aggregate,  25% of the aggregate  Issuance
Price.  Such payments,  if any, arising under this Section 3(d) shall be payable
by the Company  within ten (10)  business  days of the  expiration of the single
seventy-five  (75) day cure  period.  If such  payments are not made in a timely
manner,  the  amounts due shall bear  interest  at the rate of one and  one-half
percent (1.5%) per month (prorated for partial months) until paid in full.

                                       3
<PAGE>

     (e) If (but  without  any  obligation  to do so) at any  time  prior to the
earlier to occur of (i) the  expiration or  termination  of the Warrants or (ii)
the  date  that  sales of the  Stock  issued  in  connection  with the  Purchase
Agreement can be made under Rule 144(k), the Company proposes to register any of
its  securities  under the Act in  connection  with the public  offering of such
securities  solely for cash (other than a registration  on Form S-4, Form S-8 or
any form which does not include  substantially  the same information as would be
required to be included in a  registration  statement  covering  the sale of the
Registrable  Securities and a registration statement relating to a PIPE (private
investment public equity) or similar transaction),  the Company shall, each such
time, promptly give each Investor written notice of such registration.  Upon the
written  request of an Investor  given within  twenty (20) days after receipt of
such written notice from the Company,  the Company shall cause to be included in
the registration  statement all of the Registrable  Securities that the Investor
has requested to be registered (a "Piggyback Registration Statement"); provided,
however,  that if the managing  underwriter of any underwritten  offering by the
Company expresses reasonable written objection to the registration of all of the
Registrable   Securities,   then  the  Registrable  Securities  which  shall  be
registered in such offering on behalf of holders of Registrable Securities shall
be reduced in the  proportion  equal to the average  proportion  of reduction as
that of all such holders seeking  registration in connection with such offering,
subject to any rights granted to other holders of securities of the Company that
are expressly by the terms of their agreements with the Company entitled to have
priority registration rights. If, at any time after giving written notice of its
intention to register any such Registrable Securities and prior to the effective
date of the  Piggyback  Registration  Statement  filed in  connection  with such
registration,  the Company shall  determine for any reason not to register or to
delay  registration  of such  Registrable  Securities,  the Company  may, at its
election,  give  written  notice of such  determination  to each  Investor  and,
thereupon,  in the case of a determination not to register, the Company need not
register any Registrable Securities in connection with such registration.

     4. OBLIGATIONS OF THE COMPANY. In connection with the Company's  obligation
under Section 3 hereof to file a Mandatory  Registration  Statement or Piggyback
Registration Statement with the SEC (collectively,  a "Registration  Statement")
and to use its reasonable efforts to cause the Registration  Statement to become
effective  as soon as  practicable,  the  Company  shall,  as  expeditiously  as
reasonably possible:

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

     (b) Furnish or otherwise  make  available to the  Investors  such number of
copies of a prospectus,  including a preliminary prospectus,  in conformity with
the  requirements of the Securities  Act, and such other  documents  (including,
without limitation, prospectus amendments and supplements as are prepared by the
Company in accordance  with Section 4(a) above) as the Investors may  reasonably
request in order to facilitate the  disposition of such  Investors'  Registrable
Shares;

                                       4
<PAGE>

     (c) Notify the  Investors,  at any time when a  prospectus  relating to the
Registration  Statement is required to be delivered under the Securities Act, of
the  happening of any event as a result of which the  prospectus  included in or
relating  to the  Registration  Statement  contains  an  untrue  statement  of a
material  fact or omits any fact  necessary to make the  statements  therein not
misleading;  and,  thereafter,  the Company will  promptly  prepare  (and,  when
completed,  give notice to each  Investor) a  supplement  or  amendment  to such
prospectus  so  that,  as  thereafter   delivered  to  the  purchasers  of  such
Registrable  Shares,  such prospectus will not contain an untrue  statement of a
material fact or omit to state any fact necessary to make the statements therein
not  misleading;  provided  that  upon such  notification  by the  Company,  the
Investors  will not  offer or sell  Registrable  Shares  until the  Company  has
notified the  Investors  that it has prepared a supplement  or amendment to such
prospectus and delivered  copies of such  supplement or amendment to the selling
Investors  (it being  understood  and agreed by the Company  that the  foregoing
proviso shall in no way diminish or otherwise impair the Company's obligation to
promptly prepare a prospectus  amendment or supplement as above provided in this
Section  4(c) and  deliver  copies of same as above  provided  in  Section  4(b)
hereof); and

     (d) Use  commercially  reasonable  efforts  to  register  and  qualify  the
Registrable  Shares  covered  by the  Registration  Statement  under  such other
securities  or Blue  Sky  laws of such  jurisdictions  as  shall  be  reasonably
appropriate  in the opinion of the Company,  provided that the Company shall not
be required in connection  therewith or as a condition  thereto to qualify to do
business  or to file a general  consent to service of process in any such states
or jurisdictions,  and provided further that  (notwithstanding  anything in this
Agreement  to the  contrary  with  respect to the  bearing of  expenses)  if any
jurisdiction  in which any of such  Registrable  Shares shall be qualified shall
require that expenses incurred in connection with the  qualification  therein of
any such Registrable Shares be borne by the selling Investors,  then the selling
Investors shall, to the extent required by such jurisdiction, pay their pro rata
share of such qualification expenses.

     (e) The Company shall file additional registration statements or amendments
to register any  additional  shares of Class A Common Stock that may be issuable
upon  exercise of Warrants or Penalty  Warrants as a result of any change in the
per share price of any Warrant or Penalty Warrant.

     (f) The Company  shall use its best efforts  either to (i) cause all of the
Registrable  Shares  covered  by a  Registration  Statement  to be listed on the
American Stock Exchange or each securities  exchange on which  securities of the
same class or series  issued by the  Company  are then  listed,  if any,  if the
listing of such Registrable Securities is then permitted under the rules of such
exchange.  The  Company  shall  pay all fees and  expenses  in  connection  with
satisfying its obligation under this Section 3(k).

     (g) The Company shall  cooperate  with the  Investors who hold  Registrable
Shares  being  offered  and,  to the extent  applicable,  facilitate  the timely
preparation  and delivery of certificates  (not bearing any restrictive  legend)
representing  the  Registrable  Shares to be offered  pursuant to a Registration
Statement and enable such  certificates to be in such  denominations or amounts,
as the case may be, as the Investors may  reasonably  request and  registered in
such names as the Investors may request.

                                       5
<PAGE>

     5. FURNISH  INFORMATION.  Each  Investor  shall furnish to the Company such
information  regarding the Investor and the securities held by it as the Company
shall  reasonably  request  and as shall be  required  in  order to  effect  any
registration  by the Company  pursuant to this  Agreement,  unless such Investor
desires to exclude its Registrable Securities from the Registration Statement.

     6. EXPENSES OF REGISTRATION.  All expenses  incurred in connection with the
registration  of the Registrable  Shares  pursuant to this Agreement  (excluding
underwriting,  brokerage and other selling commissions and discounts), including
without limitation all registration and qualification and filing fees, printing,
and fees and  disbursements  of counsel and auditors  for the Company,  shall be
borne by the Company.

     7.  DELAY OF  REGISTRATION.  The  Investors  shall  not take any  action to
restrain,  enjoin or  otherwise  delay  any  registration  as the  result of any
controversy   which  might  arise  with   respect  to  the   interpretation   or
implementation of this Agreement.

     8. INDEMNIFICATION.

     (a)  Notwithstanding  any termination of this  Agreement,  the Company will
indemnify and hold harmless each Investor, any investment banking firm acting as
an underwriter  for the  Investors,  any  broker/dealer  acting on behalf of any
Investors and each officer and director of such Investor, such underwriter, such
broker/dealer  and  each  person,  if any,  who  controls  such  Investor,  such
underwriter or  broker/dealer  within the meaning of the Securities  Act, to the
fullest extent permitted by law, against any losses, claims, damages, judgments,
fines, penalties,  charges, or liabilities,  joint or several, costs, reasonable
attorneys'  fees,  amounts  paid in  settlement  or  expenses,  joint or several
(collectively,  "Claims") to which they may become  subject under the Securities
Act or  otherwise,  insofar  as such  Claims  arise out of or are based upon any
untrue or  alleged  untrue  statement  of any  material  fact  contained  in the
Registration  Statement,  in any  preliminary  prospectus  or  final  prospectus
relating  thereto  or in any  amendments  or  supplements  to  the  Registration
Statement or any such preliminary  prospectus or final prospectus,  or arise out
of or are  based  upon the  omission  or  alleged  omission  to state  therein a
material fact required to be stated therein, or necessary to make the statements
therein not  misleading;  and will reimburse such  Investor,  such  underwriter,
broker/dealer or such officer,  director or controlling  person for any legal or
other expenses  reasonably  incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,  however,
that the indemnity  agreement  contained in this Section 8(a) shall not apply to
amounts paid in  settlement  of any such Claim,  if such  settlement is effected
without the  consent of the Company  (which  consent  shall not be  unreasonably
withheld),  nor shall the  Company be liable in any such case for any such Claim
to the  extent  that it arises out of or is based  upon an untrue  statement  or
alleged untrue  statement or omission made in connection  with the  Registration
Statement,  any preliminary  prospectus or final prospectus  relating thereto or
any  amendments  or  supplements  to the  Registration  Statement  or  any  such
preliminary  prospectus or final prospectus,  in reliance upon and in conformity
with  written   information   furnished   specifically   for  inclusion  in  the
Registration Statement or any such preliminary prospectus or final prospectus by
the Investors,  any underwriter  for them or controlling  person with respect to
them.  The Company shall  reimburse  the  indemnified  persons  promptly as such
expenses  are  incurred  and are due and  payable,  for any legal  fees or other
reasonable  expenses  incurred  by  them in  connection  with  investigating  or
defending any such Claim.

                                       6
<PAGE>

     (b) Notwithstanding  any termination of this Agreement,  each Investor will
severally and not jointly  indemnify and hold harmless the Company,  each of its
directors,  each of its officers who have signed the Registration Statement, and
each  person,  if any,  who  controls  the  Company  within  the  meaning of the
Securities  Act,  against any Claims to which the Company or any such  director,
officer,  or controlling  person may become subject to, under the Securities Act
or  otherwise,  insofar as such Claims arise out of or are based upon any untrue
or alleged untrue  statement of any material fact contained in the  Registration
Statement or any preliminary prospectus or final prospectus, relating thereto or
in any  amendments  or  supplements  to the  Registration  Statement or any such
preliminary  prospectus or final  prospectus,  or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements  therein not  misleading,  in
each case to the extent and only to the extent  that such  untrue  statement  or
alleged  untrue  statement  or  omission  or  alleged  omission  was made in the
Registration  Statement,  in any  preliminary  prospectus  or  final  prospectus
relating  thereto  or in any  amendments  or  supplements  to  the  Registration
Statement or any such preliminary  prospectus or final  prospectus,  in reliance
upon and in  conformity  with  written  information  furnished  by the  Investor
specifically  for inclusion in the  Registration  Statement,  or any preliminary
prospectus or final  prospectus;  and such Investor will  reimburse any legal or
other expenses reasonably incurred by the Company or any such director, officer,
or controlling  person in connection  with  investigating  or defending any such
Claim, provided, however, that the liability of each Investor hereunder shall be
limited to the proceeds (net of underwriting discounts and commissions,  if any)
received by such Investor  from the sale of  Registrable  Shares  covered by the
Registration  Statement,  and  provided,  further,  however,  that the indemnity
agreement  contained  in this  Section  8(b) shall not apply to amounts  paid in
settlement  of any  such  loss,  claim,  damage,  liability  or  action  if such
settlement is effected  without the consent of those  Investor(s)  against which
the request for indemnity is being made (which consent shall not be unreasonably
withheld).

     (c) Promptly after receipt by an indemnified  party under this Section 8 of
notice of the  commencement  of any action,  such  indemnified  party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement  thereof
and the  indemnifying  party shall have the right to  participate in and, to the
extent the indemnifying party desires, jointly with any other indemnifying party
similarly  noticed,  to assume at its expense the defense  thereof  with counsel
mutually  satisfactory  to the  indemnifying  parties  with the  consent  of the
indemnified party which consent will not be unreasonably  withheld,  conditioned
or delayed.  In the event that the indemnifying  party assumes any such defense,
the  indemnified  party may participate in such defense with its own counsel and
at its own expense,  provided,  however,  that the counsel for the  indemnifying
party shall act as lead  counsel in all matters  pertaining  to such  defense or
settlement  of such  claim and the  indemnifying  party  shall only pay for such
indemnified   party's  expenses  for  the  period  prior  to  the  date  of  the
indemnifying  party's  participation  in such defense.  The failure to notify an
indemnifying  party  promptly  of  the  commencement  of  any  such  action,  if
prejudicial   to  his  ability  to  defend  such  action,   shall  relieve  such
indemnifying  party of any liability to the indemnified party under this Section
8, but the omission so to notify the indemnifying  party will not relieve him of
any liability  which he may have to any  indemnified  party otherwise other than
under this Section 8.

                                       7
<PAGE>

     (d) Notwithstanding anything to the contrary herein, the indemnifying party
shall  not be  entitled  to  settle  any  claim,  suit or  proceeding  unless in
connection with such settlement the indemnified  party receives an unconditional
release with respect to the subject matter of such claim, suit or proceeding and
such  settlement  does not contain  any  admission  of fault by the  indemnified
party.

     9. REPORTS UNDER THE EXCHANGE  ACT. With a view to making  available to the
Investors  the benefits of Rule 144 and any other rule or  regulation of the SEC
that may at any time permit the Investors to sell the Registrable  Shares to the
public without registration,  the Company agrees to use commercially  reasonable
efforts: (i) to make and keep public information  available,  as those terms are
understood and defined in the General Instructions to Form S-3, or any successor
or  substitute  form,  and in Rule  144,  (ii) to file  with the SEC in a timely
manner all  reports  and other  documents  required  to be filed by an issuer of
securities  registered  under the  Securities  Act or the Exchange Act, (iii) as
long as any Investor owns any Stock,  Warrants or Registrable Shares, to furnish
in writing upon such Investor's  request a written statement by the Company that
it  has  complied  with  the  reporting  requirements  of  Rule  144  and of the
Securities  Act and the Exchange  Act, and to furnish to such Investor a copy of
the most  recent  annual or  quarterly  report of the  Company,  and such  other
reports and documents so filed by the Company as may be reasonably  requested in
availing  such  Investor of any rule or  regulation  of the SEC  permitting  the
selling of any Registrable  Shares without  registration  and (iv) undertake any
additional  actions  reasonably  necessary to maintain the  availability  of the
Registration Statement or the use of Rule 144.

     10. DEFERRAL AND LOCK-UP. Notwithstanding anything in this Agreement to the
contrary,  if the Company shall  furnish to the selling  Investors a certificate
signed by the President or Chief  Executive  Officer of the Company stating that
the  Board of  Directors  of the  Company  has made the good  faith,  reasonable
determination   (i)  that  continued  use  by  the  selling   Investors  of  the
Registration  Statement for purposes of effecting offers or sales of Registrable
Shares  pursuant  thereto would  require,  under the Securities  Act,  premature
disclosure in the Registration Statement (or the prospectus relating thereto) of
material,   nonpublic  information  concerning  the  Company,  its  business  or
prospects or any proposed material transaction  involving the Company, (ii) that
such  premature  disclosure  would be  materially  adverse to the  Company,  its
business or prospects or any such proposed  material  transaction  or would make
the  successful  consummation  by the Company of any such  material  transaction
significantly  less likely and (iii) that it is  therefore  advisable to suspend
the use by the  Investors of such  Registration  Statement  (and the  prospectus
relating  thereto)  for  purposes of  effecting  offers or sales of  Registrable
Shares  pursuant  thereto,  then the right of the selling  Investors  to use the
Registration  Statement  (and the prospectus  relating  thereto) for purposes of
effecting  offers  or sales of  Registrable  Shares  pursuant  thereto  shall be
suspended for a period (the  "Suspension  Period") after delivery by the Company
of the certificate  referred to above in this Section 10; provided  further that
no Suspension  Period shall exceed  forty-five  (45) days and during any 365 day
period  shall not exceed an  aggregate  of ninety (90) days and the first day of
any Suspension  Period must be at least five (5) trading days after the last day
of any prior suspension period (each, an "Allowable Suspension Period").  During
the Suspension Period, none of the Investors shall offer or sell any Registrable
Shares  pursuant  to or in  reliance  upon the  Registration  Statement  (or the
prospectus  relating  thereto).  The Company shall use  commercially  reasonable
efforts to cause the  termination of the Suspension  Period to occur as promptly
as practicable.

                                       8
<PAGE>

     11. TRANSFER OF REGISTRATION RIGHTS.
         --------------------------------

     (a) None of the  rights  of any  Investor  under  this  Agreement  shall be
transferred  or  assigned to any person  unless (i) such person is a  Qualifying
Holder (as defined below), and (ii) such person agrees to become a party to, and
bound by, all of the terms and  conditions  of, this Agreement by duly executing
and delivering to the Company an Instrument of Adherence in the form attached as
Exhibit A hereto. For purposes of this Section 11, the term "Qualifying  Holder"
shall  mean,  with  respect to any  Investor,  any direct  transferee  from such
Investor  of  those  Registrable  Shares  held or that may be  acquired  by such
Investor.  None of the  rights of any  Investor  under this  Agreement  shall be
transferred  or  assigned  to  any  Person  (including,  without  limitation,  a
Qualifying Holder) that acquires Registrable Shares in the event that and to the
extent that such Person is eligible to resell such  Registrable  Shares pursuant
to Rule 144(k) of the  Securities  Act (or any successor or substitute  rule) or
may otherwise resell such  Registrable  Shares pursuant to an exemption from the
registration provisions of the Securities Act.

     (b) Notwithstanding  anything to the contrary contained in this Section 11,
to the extent the Company  previously  has  registered  the  Registrable  Shares
pursuant to a Registration  Statement  which has been declared  effective by the
SEC and,  thereafter,  an Investor  assigns its Registrable  Shares to any other
person, the assignee shall have the right to cause the Registration Statement to
be amended or the prospectus related thereto to be supplemented,  in either case
to name such assignee as a selling  stockholder,  provided that (i) the use of a
post-effective  amendment  or a  supplement  to the  prospectus  is permitted by
applicable law for such purpose, and (ii) all costs and expenses to the Company,
including without limitation legal and accounting expenses, incurred to so amend
such  Registration  Statement or supplement the prospectus  shall be paid by the
assignee  requesting such amendment (or shared on a pro rata basis to the extent
more than one assignee requests such amendment).

     12. ENTIRE  AGREEMENT.  This Agreement  constitutes and contains the entire
agreement and  understanding  of the parties with respect to the subject  matter
hereof, and it also supersedes any and all prior  negotiations,  correspondence,
agreements or understandings with respect to the subject matter hereof.

     13. MISCELLANEOUS.

     (a) This  Agreement  may not be  amended,  modified or  terminated,  and no
rights or  provisions  may be waived,  except  with the  written  consent of the
Majority  Holders and the Company.  The Company may not assign any of its rights
or obligations  arising under this Agreement  without the written consent of the
Majority  Holders,  except to the extent that such assignment is the result of a
merger or consolidation of the Company.

     (b) This  Agreement  shall be governed  by and  construed  and  enforced in
accordance with the laws of the State of Colorado, and shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,  personal
representatives,  successors or assigns,  provided that the terms and conditions
of Section 11 hereof are satisfied.  This  Agreement  shall also be binding upon
and inure to the benefit of any transferee of any of the Stock,  Warrants or the
Registrable  Shares  provided that the terms and conditions of Section 11 hereof
are satisfied. Notwithstanding anything in this Agreement to the contrary, if at
any time any  Investor  shall cease to own any Stock,  Warrants  or  Registrable
Shares,  all of such Investor's  rights under this Agreement  shall  immediately
terminate.  EACH PARTY  HEREBY  IRREVOCABLY  WAIVES  ANY RIGHT IT MAY HAVE,  AND
AGREES  NOT TO  REQUEST,  A JURY  TRIAL  FOR  THE  ADJUDICATION  OF ANY  DISPUTE
HEREUNDER  OR IN  CONNECTION  HEREWITH OR ARISING OUT OF THIS  AGREEMENT  OR ANY
TRANSACTION CONTEMPLATED HEREBY.

                                       9
<PAGE>

     (c)  (i)  Any  notices,   reports  or  other  correspondence   (hereinafter
collectively referred to as "Correspondence")  required or permitted to be given
hereunder  shall be sent by  courier  (overnight  or same  day) or  telecopy  or
delivered  by hand to the  party to whom  such  Correspondence  is  required  or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.

          (i) All Correspondence to the Company shall be addressed in the manner
set forth in the Purchase Agreement.

          (ii)  All  Correspondence  to any  Investor  shall  be  sent  to  such
Purchaser at the address set forth in the Purchase Agreement.

     (d) Any entity may change the address to which  Correspondence  to it is to
be addressed by notification as provided for herein.

     (e) The  parties  acknowledge  and agree that in the event of any breach of
this  Agreement,  remedies  at law may be  inadequate,  and each of the  parties
hereto shall be entitled to seek specific  performance of the obligations of the
other parties hereto and such appropriate injunctive relief as may be granted by
a court of competent jurisdiction.

     (f) This  Agreement  may be  executed in a number of  counterparts,  all of
which together shall for all purposes  constitute one Agreement,  binding on all
the parties  hereto  notwithstanding  that all such  parties have not signed the
same counterpart.

             [INTENTIONALLY LEFT BLANK - NEXT PAGE IS SIGNATURE PAGE

                                       10
<PAGE>

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

                                       ATC HEALTHCARE, INC.

                                       By:
                                           -------------------------------------
                                           Daniel Pess
                                           Senior Vice President/Chief Financial
                                           Officer

                                       ROARING FORK CAPITAL SBIC L.P.

                                       BY: Roaring Fork Capital Management, LLC,
                                           its General Partner

                                       By:
                                           -------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                       11
<PAGE>

                                    EXHIBIT A
                                    ---------

                             INSTRUMENT OF ADHERENCE

     Reference is hereby made to that  certain  Registration  Rights  Agreement,
dated as of January 12, 2007, among ATC Healthcare, Inc., a Delaware corporation
(the  "Company"),  Roaring Fork Capital  SBIC,  L.P. and the Investor  Permitted
Transferees,  as  amended  and in effect  from  time to time (the  "Registration
Rights Agreement").  Capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Registration Rights Agreement.

     The  undersigned,  in order to become the owner or holder of (i) ___ shares
of Class A Common  Stock or (ii)  Warrant(s)  to purchase  ___ shares of Class A
Common Stock of the Company, hereby agrees that, from and after the date hereof,
the undersigned has become a party to the  Registration  Rights Agreement in the
capacity  of an  Investor  Permitted  Transferee,  and is entitled to all of the
benefits  under,  and is subject  to all of the  obligations,  restrictions  and
limitations set forth in the  Registration  Rights Agreement that are applicable
to Investor  Permitted  Transferees.  This  Instrument  of Adherence  shall take
effect and shall become a part of the Registration Rights Agreement  immediately
upon execution.

     Executed as of the date set forth below.

                                            Signature:__________________________

                                            Name of Signatory:__________________

                                            Title:______________________________

                                            ____________________________________
                                            Name of Investor (if not individual)
Accepted:

ATC HEALTHCARE, INC.

By:___________________________

Name: ________________________

Title: _______________________

Date:_________________________

<PAGE>

                                    EXHIBIT B
                                    ---------

                             FORM OF PENALTY WARRANT

                                  See Attached

<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

THIS  WARRANT  AND THE  SHARES  ISSUABLE  UPON  EXERCISE  HEREOF  HAVE  NOT BEEN
REGISTERED  OR QUALIFIED FOR SALE UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
(THE "ACT"),  OR ANY STATE  SECURITIES LAW 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.

                           WARRANT TO PURCHASE SHARES
                                       OF
                              CLASS A COMMON STOCK
                              --------------------

                            Void after _______, 20__

     THIS IS TO CERTIFY that, as of this ___ day of __________,  20__, for value
received  and subject to the  provisions  hereinafter  set forth,  Roaring  Fork
Capital  SBIC,  L. P.  (the  "Purchaser"),  is  entitled  to  purchase  from ATC
Healthcare,  Inc., a Delaware corporation (the "Company"),  at any time from the
date hereof to and  including  ________,  20__ [five years from  issuance]  (the
"Expiration  Date"), at a price initially equal to _______ ($___) per share (the
"Warrant  Calculation  Price"),  Five Hundred  Thousand  (500,000) (the "Warrant
Number") shares of the Class A Common Stock of the Company (the "Stock").

     The aggregate price for the shares of Stock purchasable  hereunder shall be
equal to the  initial  Warrant  Calculation  Price  multiplied  by the number of
shares initially purchasable hereunder. Such aggregate price is herein sometimes
referred to as the "Aggregate Warrant Price". The Warrant  Calculation Price per
share is, however, subject to adjustment as hereinafter provided (such price, or
such price as last adjusted, as the case may be, being herein referred to as the
"Per Share Warrant Price"). The Warrant Number is likewise subject to adjustment
as hereinafter provided.

1. EXERCISE OF WARRANT.  Subject to the conditions  hereinafter set forth,  this
Warrant may be exercised in whole at any time,  or in part from time to time, by
the holder hereof, by delivery of a written notice in the form at the end hereof
(the "Exercise  Notice") duly executed at the principal office of the Company in
Lake  Success,  New York or at such other office as the Company may designate by
written  notice to the holder hereof within the  above-mentioned  period and, at
the  election  of the  holder,  either by paying to the  Company  the  Aggregate
Warrant Price (or the  proportionate  part thereof if exercised in part) for the
shares so purchased  in current  funds,  in which case payment  shall be made in
cash, by wire transfer,  or by certified or official bank check,  or by cashless
exercise as hereinafter  set forth.  The holder shall not be required to deliver
the  original  Warrant in order to effect an  exercise  of the  Warrant.  At its
option, the holder may request, pursuant to Section 1, that the Company exchange
this  Warrant for a  particular  number of shares  subject to the  Warrant  (the
"Converted Warrant Shares") by delivering to the holder,  without payment by the
holder of the Warrant Price or any cash or other  consideration,  that number of
shares of Stock as is equal to the  quotient  obtained by dividing the Net Value
(as  hereinafter  defined) of the  Converted  Warrant  Shares by the Fair Market
Value (as determined (i) by reference to the current market price based upon the
average last sale price for the three  business  days prior to exercise,  if the
Stock is publicly traded or (ii) by the Board of Directors  acting in good faith
if the Stock is not publicly  traded) of a single share of Stock,  determined in
each case as of the close of business  on the date of exercise of this  Warrant.
The  "Net  Value"  of the  Converted  Warrant  Shares  shall  be  determined  by
subtracting the Aggregate Warrant Price of the Converted Warrant Shares from the
aggregate  Fair  Market  Value  of  the  Converted  Warrant  Shares.  All  other
provisions  of the  Warrants  shall apply to any such  exchange of the  Warrants
pursuant to the terms of this Section 1.

<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

Company's Failure to Timely Deliver Securities.  If within ten (10) Trading Days
after the  Company's  receipt of the  facsimile  copy of an Exercise  Notice the
Company shall fail to issue and deliver a certificate to the holder and register
such  shares of Common  Stock on the  Company's  share  register  or credit  the
holder's  balance  account  with DTC for the number of shares of Common Stock to
which the holder is entitled  upon the  holder's  exercise  hereunder,  and such
failure to issue and deliver such  certificate(s)  continues  for more than five
(5) Business Days after the Company receives written notice of non-delivery from
the holder  (with the total  period of time of the 10  Trading  Day period and 5
Business Day period  referenced  herein being  referred to as the "Cure Period")
and if on or after the expiration of the Cure Period without the delivery of the
applicable  certificate(s),  the holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of shares of Common Stock  issuable  upon such  exercise  that the holder
anticipated  receiving  from the Company (a "Buy-In"),  then the Company  shall,
within  three (3) Business  Days after the holder's  request and in the holder's
discretion, either (i) pay cash to the holder in an amount equal to the holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased  (the "Buy-In  Price"),  at which point the  Company's
obligation  to deliver  such  certificate  (and to issue  such  shares of Common
Stock) shall terminate,  or (ii) promptly honor its obligation to deliver to the
Holder a certificate or  certificates  representing  such shares of Common Stock
and pay cash to the  Holder in an  amount  equal to the  excess  (if any) of the
Buy-In  Price  over the  product of (A) such  number of shares of Common  Stock,
times (B) the dollar volume Weighted Average Price on the date of exercise.

If this Warrant is exercised in respect of fewer than all of the shares of Stock
at the time  purchasable  hereunder,  the holder  hereof  shall be  entitled  to
receive a new  Warrant  covering  the  number of shares in respect of which this
Warrant shall not have been  exercised  and setting forth the Aggregate  Warrant
Price  applicable to such shares.  Notwithstanding  anything to the contrary set
forth herein,  this Warrant or any new Warrant issued as the result of a partial
exercise hereof and all rights and options  hereunder or thereunder shall expire
and shall be wholly null and void to the extent this Warrant or such new warrant
is not  exercised  before it expires at the close of business on the  Expiration
Date.

2. RESERVATION OF STOCK. The Company covenants and agrees that during the period
within  which the rights  represented  by this  Warrant  may be  exercised,  the
Company will at all times have authorized,  and in reserve,  a sufficient number
of shares of its Stock to provide for the exercise of the rights  represented by
this  Warrant;  provided,  however,  that in the  event  there is at any time an
insufficient  number of shares of Stock reserved and available the Company shall
as soon as practicable take such action as is required to increase the Company's
authorized  shares  of Stock in order to  provide  a  sufficient  number of such
shares.

                                       15
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

3. PROTECTION AGAINST DILUTION.
   ----------------------------

     3.1 Sales of Stock Below Per Share Warrant Price. In case the Company shall
     issue or grant to any person (a) rights,  warrants,  options,  exchangeable
     securities or convertible  securities (each referred to herein as "Rights")
     entitling  such person to  subscribe  for or purchase  shares of Stock at a
     price per share  less than the Per  Share  Warrant  Price or (b)  shares of
     Stock at a price per share less than the Per Share  Warrant  Price,  on the
     date fixed for the determination of persons entitled to receive such Rights
     or such shares,  the Per Share Warrant Price in effect  immediately  before
     the close of  business  on the date fixed for such  determination  shall be
     reduced by multiplying such Per Share Warrant Price by a fraction, of which
     (i) the numerator is the number of shares of Stock  outstanding  (including
     all shares of Stock issued or issuable upon  conversion of any  convertible
     security or upon the  exercise of any rights,  warrants or options) on such
     date plus the number of shares of Stock which the aggregate of the offering
     price of the total number of shares of Stock so offered for subscription or
     purchase pursuant to such Rights,  or so issued,  would purchase at the Per
     Share  Warrant  Price on such  date and (ii) the  denominator  shall be the
     number of shares of Stock outstanding (including all shares of Stock issued
     or  issuable  upon  conversion  of any  convertible  security  or upon  the
     exercise  of any  rights,  warrants or options) at the close of business on
     such date plus the number of shares of Stock so offered for subscription or
     purchase  pursuant to such Rights,  or so issued.  If, after any such date,
     any such  Rights or shares  are not in fact  issued,  or are not  exercised
     prior to the  expiration  thereof,  the Per Share  Warrant  Price  shall be
     immediately  readjusted,  effective  as of the date  such  Rights or shares
     expire,  or the date the Board of  Directors  determines  not to issue such
     Rights or shares,  to the Per Share  Warrant  Price that would have been in
     effect if the unexercised Rights had never been granted or such record date
     had not  been  fixed,  as the case may be.  Such  adjustment  shall be made
     successively  whenever any such event shall occur. For the purposes of this
     paragraph,  the aggregate of the offering  price received or to be received
     by the Company shall include the minimum  aggregate amount (if any) payable
     upon exercise or conversion of such Rights.  The value of any consideration
     received  or to be received by the  Company,  if other than cash,  is to be
     determined by the Board of Directors in good faith.

     3.2 Stock Splits and  Dividends.  If  outstanding  shares of the  Company's
     Stock shall be subdivided  into a greater number of shares or a dividend in
     Stock  shall be paid in respect of Stock,  the Per Share  Warrant  Price in
     effect  immediately prior to such subdivision or at the record date of such
     dividend shall simultaneously with the effectiveness of such subdivision or
     immediately  after the  record  date of such  dividend  be  proportionately
     reduced.  If  outstanding  shares of Stock shall be combined into a smaller
     number of shares,  the Per Share Warrant Price in effect  immediately prior
     to such combination  shall,  simultaneously  with the effectiveness of such
     combination,  be proportionately increased. When any adjustment is required
     to be made in the Per Share  Warrant  Price,  the number of shares of Stock
     purchasable  upon the  exercise  of this  Warrant  shall be  changed to the
     number  determined  by dividing (i) an amount equal to the number of shares
     issuable  upon  the  exercise  of this  Warrant  immediately  prior to such
     adjustment, multiplied by the Per Share Warrant Price in effect immediately
     prior to such  adjustment,  by (ii) the Per Share  Warrant  Price in effect
     immediately after such adjustment.

                                       16
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

     3.3 Reclassification, Etc. In case of any reclassification or change of the
     outstanding  securities  of the  Company  or of any  reorganization  of the
     Company (or any other  corporation  the stock or securities of which are at
     the time  receivable  upon the  exercise  of this  Warrant)  or any similar
     corporate  reorganization  on or after the date hereof that is not a Change
     of Control  (as defined  herein),  then and in each such case the holder of
     this Warrant,  upon the exercise hereof at any time after the  consummation
     of such  reclassification,  change,  reorganization,  merger or conveyance,
     shall be entitled to receive,  in lieu of the stock or other securities and
     property  receivable upon the exercise  hereof prior to such  consummation,
     the stock or other  securities  or property to which such holder would have
     been entitled  upon such  consummation  if such holder had  exercised  this
     Warrant  immediately  prior thereto,  all subject to further  adjustment as
     provided in Section 3.2; and in each such case, the terms of this Section 3
     shall be  applicable  to the shares of stock or other  securities  properly
     receivable upon the exercise of this Warrant after such consummation.

     3.4 Exempted  Issuances.  Notwithstanding  any other provision herein,  the
     foregoing  provisions  of  this  Section  3  shall  not  apply  to,  and no
     adjustment shall be made to the Per Share Warrant Price for:

          (a) shares of Stock  issuable  upon the  exercise  of options or other
          convertible  securities  previously  issued  pursuant to the Company's
          stock option, employee stock purchase or other employee benefit plan;

          (b) shares of Stock to be issued pursuant to the Company's outstanding
          stock option,  employee stock purchase or other employee  benefit plan
          that total not more than 200,000 shares of Stock per employee per year
          and an  aggregate  maximum of  2,000,000  shares of Stock per year and
          that do not contain exercise prices that are below $0.30 per share;

          (c) shares of Stock  issuable  upon  conversion  of shares of Series C
          Preferred Stock or warrants issued in connection therewith;

          (d)  shares  of  Stock  issuable  upon  conversion  of  shares  of  7%
          Convertible  Series  A  Preferred  Stock  or 5%  Convertible  Series B
          Preferred Stock of the Company or any warrants outstanding on the date
          of the filing of this Designation;

          (e) shares of Stock issuable upon conversion of Class B Common Stock;

          (f)  securities  that have been  approved for issuance or grant by the
          holders of at least a majority of the  outstanding  shares of Series C
          Preferred Stock;

                                       17
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

          (g) securities that are issued in conjunction with an acquisition or a
          non-financing   strategic   transaction   approved  by  the  Board  of
          Directors;  provided,  however,  that the number of shares of Stock or
          securities convertible into Stock issued by the Company in conjunction
          with  non-financing  strategic  transactions  that are exempt from the
          foregoing  provisions of this Section 3 shall be limited to 10% of the
          shares of Stock  outstanding  (including all shares of Stock issued or
          issuable  upon  conversion  of any  convertible  security  or upon the
          exercise of any rights,  warrants or options) immediately prior to the
          date of such transaction; or

          (h) Shares of Stock that are issued  pursuant to that  certain  Common
          Stock and Warrant Purchase Agreement dated as of an even date herewith
          between the Company and Purchaser,  pursuant to which the Purchaser is
          purchasing this Warrant, and the related Registration Rights Agreement
          referenced therein, including, without limitation, any shares of Stock
          to be issued in connection with any penalty or anti-dilution provision
          contained in such  documents,  any shares of Common Stock issued under
          the Warrants issued as part of that offering or under the terms of the
          Common Stock and Warrant  Purchase  Agreement  relating  thereto,  and
          shares of Common Stock issued in private offerings  completed prior to
          May 31,  2007 as  provided  in Section  7.10 of the  Common  Stock and
          Warrant Purchase Agreement,  or under Warrants issued as part of those
          other  offerings,  or  under  the  terms  of the  purchase  agreements
          relating to those other offerings.

     3.5 Deferral of Small Adjustments.  Any adjustment in the Per Share Warrant
     Price otherwise  required by this Section 3 may be postponed until the date
     of the next adjustment  otherwise  required by this Section 3 to be made if
     such adjustment (together with any other adjustments  postponed pursuant to
     this paragraph (ix) and not theretofore made) would not require an increase
     or  decrease  of  more  than 1 % in  such  Per  Share  Warrant  Price.  All
     calculations  under this  Section 3 shall be made to the nearest cent or to
     the nearest I/100th of a share, as the case may be.

     3.6 Authority of Board of Directors.  The Board of Directors shall have the
     power to resolve any  ambiguity or correct any error in this Section 3, and
     its action in good faith in so doing shall be final and conclusive.

     3.7 Notice of  Adjustment.  Whenever  the  Warrant  Number or the Per Share
     Warrant  Price is adjusted  under this Section 3, the Company shall provide
     notice thereof to the holder within thirty (30) days of such adjustment.

4. MERGERS,  CONSOLIDATIONS,  SALES;  NON-IMPAIRMENT OF RIGHTS. The Company will
not,  by  amendment  of  its  Certificate  of   Incorporation   or  through  any
reorganization,  recapitalization,  transfer of assets,  consolidation,  merger,
dissolution, issuance or sale of securities or any other voluntary action, avoid
or seek to avoid the  performance of any of the terms of this Warrant,  but will
at all times in good faith take all necessary  action to carry out the intent of
all such terms.  Without  limiting the generality of the foregoing,  the Company
(a) will not cause the par value of any  securities  receivable  on  exercise of
this Warrant to be in excess of the amount  payable  therefor on such  exercise,
and (b) will take all  action as may be  necessary  or  appropriate  so that the
Company may validly and legally  issue fully paid and  nonassessable  shares (or
other  securities or property  deliverable  hereunder) upon the exercise of this
Warrant.  In  the  event  the  Company  sells  or  otherwise  transfers  all  or
substantially  all of its assets to another  corporation  or other  entity  and,
following the sale or transfer,  a majority of the combined  voting power of the
then-outstanding securities of the other corporation or entity immediately after
the sale or transfer is held in the aggregate by the holders of Voting Stock (as
defined below)  immediately prior to the sale or transfer,  then, as a condition
of such sale or transfer,  lawful and adequate  provision  shall be made whereby
the holder of this Warrant shall  thereafter  have the right to receive upon the
basis and upon the  terms and  conditions  specified  herein  and in lieu of the
shares of Stock immediately  theretofore  purchasable hereunder,  such shares of
stock,  securities  or assets as may (by virtue of such  consolidation,  merger,
sale,  reorganization or  reclassification) be issued or payable with respect to
or in exchange for a number of  outstanding  shares of Stock equal to the number
of shares of Stock  immediately  theretofore so  purchasable  hereunder had such
sale or transfer not taken  place,  and in any such case  appropriate  provision
shall be made with  respect to the rights  and  interests  of the holder of this
Warrant to the end that the provisions hereof  (including,  without  limitation,
provisions for adjustment of the Warrant Number and the Per Share Warrant Price)
shall thereafter be applicable as nearly as may be, in relation to any shares of
stock,  securities  or  assets  thereafter  deliverable  upon  exercise  of this
Warrant.  The Company shall not effect any such sale or transfer unless prior to
or  simultaneously  with the consummation  thereof,  the entity  purchasing such
assets shall assume by written instrument, reasonably satisfactory to the holder
of this Warrant, executed and mailed or delivered to the holder of this Warrant,
the  obligation  to deliver to such holder such shares of stock,  securities  or
assets as, in  accordance  with the  foregoing  provisions,  such  holder may be
entitled to receive.

                                       18
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

5. DISSOLUTION OR LIQUIDATION.  In the event of any proposed distribution of the
assets of the Company in dissolution or liquidation  (except under circumstances
when the foregoing  Section 4 shall be applicable) the Company shall mail notice
thereof  to the  holder  of this  Warrant  and  shall  make no  distribution  to
shareholders  until the  expiration  of 30 days from the date of  mailing of the
aforesaid  notice and, in any such case, the holder of this Warrant may exercise
this Warrant within 30 days from the date of the mailing of such notice, and all
rights  herein  granted  not  so  exercised  within  such  30 day  period  shall
thereafter become null and void.

6. CHANGE OF CONTROL; FUNDAMENTAL TRANSACTIONS.

     (a)  Change of  Control.  In the event of a Change of  Control,  as defined
below, the Company shall provide notice thereof to the holder of this Warrant at
least ten (10) days prior to the contemplated closing date or occurrence of such
Change of  Control  (the  "Contemplated  Closing  Date").  Upon the  Purchaser's
receipt of the Company's  notice of a Change of Control,  the Purchaser  may, at
its option, elect to exercise this Warrant pursuant to Section 1 hereof.  Should
the  Purchaser  decline or fail to exercise  this  Warrant  before 5:00 p.m. New
York, New York time on the  Contemplated  Closing Date,  then this Warrant shall
immediately prior to the closing of the Change of Control be deemed to have been
exercised by cashless exercise, as provided for in Section 1 hereof, without any
further  action  on the  part of the  Purchaser,  and  all  rights  and  options
hereunder  shall  expire  and  shall be wholly  null and void.  In the case of a
cashless  exercise  pursuant to this  Section,  from and after the  Contemplated
Closing  Date,  the  Purchaser  shall be  deemed  the  holder  of  record of the
securities  issuable  upon  exercise of this  Warrant,  and this  Warrant  shall
represent  only the right to receive,  upon return of the Warrant to the Company
for  cancellation,  a certificate  representing  the securities  issuable to the
Purchaser upon exercise of this Warrant.

                                       19
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

For purposes of this Warrant,  a "Change of Control" shall be deemed to occur if
(A) any of the following occur:

     (i) The Company is merged, consolidated or reorganized into or with another
     corporation or other entity,  and as a result of the merger,  consolidation
     or reorganization  less than a majority of the combined voting power of the
     then-outstanding  securities of the corporation or entity immediately after
     the  transaction  is held in the  aggregate  by the holders of Voting Stock
     immediately prior to the transaction;

     (ii) The Company sells or otherwise  transfers all or substantially  all of
     its assets to another  corporation  or other entity and, as a result of the
     sale or transfer,  less than a majority of the combined voting power of the
     then-outstanding  securities of the other corporation or entity immediately
     after the sale or  transfer  is held in the  aggregate  by the  holders  of
     Voting Stock immediately prior to the sale or transfer; or

     (iii)  Any  person or group of  persons  (within  the  meaning  of  Section
     13(d)(3) of the Securities Exchange Act of 1934) that holds less than 5% of
     the  Voting  Stock of the  Company  outstanding  on the  date of the  first
     issuance of any of the Warrants  becomes the beneficial owner of a majority
     of the Voting Stock.;

     and (B) the per share price for any such transaction mentioned in (A) above
     is at least $1.35 per share of Stock.

For purposes of this Warrant, the term "Voting Stock" means the capital stock of
the Company of any class or series entitled to vote generally in the election of
directors.

     (b) Fundamental Transactions.  The Company shall not enter into or be party
to a  Fundamental  Transaction  that is not a Change of  Control  unless (i) the
Successor  Entity assumes in writing all of the obligations of the Company under
this  Warrant  and the  other  Transaction  Documents  in  accordance  with  the
provisions  of this  Section  6  pursuant  to  written  agreements  in form  and
substance  satisfactory  to the  Required  Holders and  approved by the Required
Holders prior to such Fundamental  Transaction,  including agreements to deliver
to each  holder of  Warrants  in  exchange  for such  Warrants a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and  substance  to this  Warrant,  including,  without  limitation,  an adjusted
exercise  price equal to the value for the shares of Common  Stock  reflected by
the terms of such Fundamental  Transaction,  and exercisable for a corresponding
number of shares of  capital  stock  equivalent  to the  shares of Common  Stock
acquirable and receivable  upon exercise of this Warrant  (without regard to any
limitations  on  the  exercise  of  this  Warrant)  prior  to  such  Fundamental
Transaction,  and satisfactory to the Required  Holders.  Upon the occurrence of
any  Fundamental  Transaction,  the  Successor  Entity shall  succeed to, and be
substituted  for  (so  that  from  and  after  the  date  of  such   Fundamental
Transaction,  the  provisions of this Warrant  referring to the "Company"  shall
refer instead to the Successor  Entity),  and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such  Successor  Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction,  the Successor
Entity shall deliver to the Holder  confirmation that there shall be issued upon
exercise of this Warrant at any time after the  consummation  of the Fundamental
Transaction,  in lieu of the  shares of the Common  Stock (or other  securities,
cash, assets or other property)  issuable upon the exercise of the Warrant prior
to such Fundamental Transaction,  such shares of stock, securities, cash, assets
or any other  property  whatsoever  (including  warrants  or other  purchase  or
subscription  rights)  which the Holder would have been entitled to receive upon
the happening of such  Fundamental  Transaction  had this Warrant been converted
immediately  prior to such  Fundamental  Transaction,  as adjusted in accordance
with the provisions of this Warrant.  In addition to and not in substitution for
any  other  rights  hereunder,  prior  to the  consummation  of any  Fundamental
Transaction  pursuant to which holders of shares of Common Stock are entitled to
receive  securities or other assets with respect to or in exchange for shares of
Common Stock (a "Corporate Event"), the Company shall make appropriate provision
to insure  that the Holder  will  thereafter  have the right to receive  upon an
exercise of this Warrant at any time after the  consummation  of the Fundamental
Transaction  but  prior to the  Expiration  Date,  in lieu of the  shares of the
Common Stock (or other securities, cash, assets or other property) issuable upon
the exercise of this Warrant prior to such Fundamental Transaction,  such shares
of stock,  securities,  cash, assets or any other property whatsoever (including
warrants or other purchase or  subscription  rights) which the Holder would have
been entitled to receive upon the happening of such Fundamental  Transaction had
this Warrant been exercised  immediately prior to such Fundamental  Transaction.
Provision  made  pursuant  to the  preceding  sentence  shall  be in a form  and
substance  reasonably  satisfactory to the Required  Holders.  The provisions of
this  Section  shall  apply  similarly  and  equally to  successive  Fundamental
Transactions  and Corporate  Events and shall be applied  without  regard to any
limitations on the exercise of this Warrant.

                                       20
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     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

7. FRACTIONAL SHARES. Fractional shares shall not be issued upon the exercise of
this  Warrant  but in any case where the  holder  hereof  would,  except for the
provisions of this  paragraph,  be entitled  under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant,  the Company shall,
upon the  exercise of this  Warrant for the largest  number of whole shares then
called for,  pay a sum in cash equal to the excess of the Fair  Market  Value of
such fractional share over the proportional  part of the Per Share Warrant Price
represented by such fractional share.

8. FULLY PAID STOCK;  TAXES. The Company covenants and agrees that the shares of
stock represented by each and every certificate for its Stock to be delivered on
any  exercise  of this  Warrant  shall,  at the time of such  delivery,  be duly
authorized,  validly issued and outstanding and be fully paid and nonassessable.
The Company  further  covenants and agrees that it will pay when due and payable
any and all federal and state  taxes,  other than taxes on income,  which may be
payable in respect of this Warrant or any Stock or  certificates  therefor  upon
the  exercise of the rights  herein  provided  for  pursuant  to the  provisions
hereof. The Company shall not, however,  be required to pay any tax which may be
payable in respect of any  transfer  involved in the  transfer  and  delivery of
stock  certificates  in the name other  than that of the  holder of the  Warrant
converted,  and any  such  tax  shall  be paid by  such  holder  at the  time of
presentation.

                                       21
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

9. CLOSING OF TRANSFER BOOKS.  The holder of this Warrant shall continue to have
the right to exercise this Warrant even during a period when the stock  transfer
books of the  Company  for its  Stock  are  closed.  The  Company  shall  not be
required, however, to deliver certificates of its Stock upon such exercise while
such books are duly closed for any  purpose,  but the Company may  postpone  the
delivery of the certificates for such Stock until the opening of such books, and
they shall, in such case, be delivered forthwith upon the opening thereof, or as
soon as practicable thereafter.

10.  RESTRICTIONS  ON  TRANSFERABILITY  OF WARRANTS AND SHARES;  COMPLIANCE WITH
SECURITIES ACT;  EXCHANGE,  ASSIGNMENT OR LOSS OF WARRANT.  This Warrant and the
Stock issued upon the exercise  hereof,  and any security  into which such Stock
may be convertible  ("Underlying  Stock") shall not be transferable  except upon
the conditions  hereinafter  specified,  which conditions are intended to insure
compliance with the provisions of the Securities Act of 1933, as amended, or any
similar Federal statute at the time in effect (the "Securities  Act") in respect
of the transfer of any Warrant or any such Stock or any security into which such
Stock may be convertible.

     10.1 Assignments  Generally.  Except as may otherwise be expressly provided
     herein, this Warrant is exchangeable, without expense, at the option of the
     holder, upon presentation and surrender of the Warrant to the Company,  for
     other Warrants of different  denominations  entitling the holder thereof to
     purchase in the  aggregate  the same number of shares of Stock  purchasable
     hereunder. Any assignment shall be made by surrender of this Warrant to the
     Company with the Form of Assignment  annexed hereto duly executed and funds
     sufficient  to pay any transfer  tax,  provided the Company has received an
     opinion or other  evidence  satisfactory  to the Company  that the transfer
     will be in compliance with the provisions of the Securities Act of 1933, as
     amended,  or any  similar  Federal  statute  at the  time  in  effect  (the
     "Securities  Act")  in  respect  of the  transfer  of  this  Warrant.  Upon
     compliance  with the  express  provisions  of this  Section 10, the Company
     shall,  without charge, cause to be executed and delivered a new Warrant in
     the name of the assignee  named in such  instrument of assignment  and this
     Warrant shall promptly be canceled. This Warrant may be divided or combined
     with other warrants that carry the same rights upon presentation  hereof to
     the  Company  together  with a  written  notice  specifying  the  names and
     denominations  in which new  Warrants  are to be issued  and  signed by the
     holder hereof.

     10.2 Certain Assignments Following Registration.  Notwithstanding  anything
     to the  contrary  contained  herein,  if the  Company  has  registered  the
     Underlying  Stock  pursuant  to a  Registration  Statement  which  has been
     declared  effective by the  Securities and Exchange  Commission  (SEC) and,
     thereafter,  the  holder  purports  to  assigns  all  or a  portion  of the
     Underlying Stock to any other person,  the assignee shall have the right to
     cause the  Registration  Statement to be amended or the prospectus  related
     thereto to be supplemented (at the expense of the Company),  in either case
     to name such assignee as a selling stockholder,  provided that the use of a
     post-effective  amendment or a supplement to the prospectus is permitted by
     applicable law for such purpose.

                                       22
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

     10.3  Restrictive  Legends.  Each Warrant  shall bear on the face thereof a
     legend  substantially  in the form of the notice endorsed on the first page
     of this Warrant.

     Each  certificate for shares of Underlying  Stock initially issued upon the
     exercise of any Warrant and each certificate for shares of Underlying Stock
     issued  to a  subsequent  transferee  of  such  certificate  shall,  if not
     registered  for  resale,   bear  on  the  face  thereof  a  legend  reading
     substantially as follows:

     THE SHARES OF CLASS A COMMON STOCK REPRESENTED 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  LAW 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.

     10.4  Removal of Legend.  In the event that the  Company  shall  receive an
     opinion  of  its  counsel  or  counsel  of the  holder,  which  opinion  is
     reasonably  acceptable to it, that,  in the opinion of such  counsel,  such
     legend is not, or is no longer,  necessary or required (including,  without
     limitation,  because of the availability of the exemption  afforded by Rule
     144 of the General Rules and  Regulations  of the  Securities  and Exchange
     Commission),  the Company shall,  or shall instruct its transfer agents and
     registrars  to,  remove such legend from the  certificates  evidencing  the
     Restricted  Stock or issue new  certificates  without  such  legend in lieu
     thereof.  The Company shall also remove the legend if the Underlying  Stock
     has been registered for resale with the SEC.

11.  PARTIAL  EXERCISE AND PARTIAL  ASSIGNMENT.  If this Warrant be exercised in
part only, the holder hereof shall be entitled to receive a new Warrant covering
the  number of shares  in  respect  of which  this  Warrant  shall not have been
exercised  as  provided  in  paragraph 1 hereof.  If this  Warrant is  partially
assigned,  this Warrant  shall be  surrendered  at the  principal  office of the
Company (with the partial assignment form at the end hereof duly executed),  and
thereupon a new Warrant shall be issued to the holder hereof covering the number
of shares not assigned and setting  forth the  proportionate  Aggregate  Warrant
Price  applicable  to such shares not  assigned.  The  assignee of such  partial
assignment  of this  Warrant  shall also be  entitled  to receive a new  Warrant
covering  the number of shares so assigned and setting  forth the  proportionate
Aggregate Warrant Price applicable to such assigned shares.

12.  REGISTRATION  RIGHTS.  A holder of a  Warrant  is  entitled  to any and all
applicable  registration rights as set forth in that certain Registration Rights
Agreement,  dated January 12, 2007,  relating to the Common Stock of the Company
and this and other Warrants.

                                       23
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     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

13. LOST, STOLEN WARRANTS,  ETC. In case any Warrant shall be mutilated,  stolen
or  destroyed,  the  Company  may issue a new  Warrant of like  date,  tenor and
denomination  and  deliver the same in exchange  and  substitution  for and upon
surrender and cancellation of any mutilated  Warrant,  or in lieu of any Warrant
lost, stolen or destroyed,  upon receipt of evidence satisfactory to the Company
of the loss, theft or destruction of such Warrant, and upon receipt of indemnity
satisfactory to the Company.

14. WARRANT HOLDER NOT SHAREHOLDER. This Warrant does not confer upon the holder
hereof any right to vote or to consent or to receive  notice as a shareholder of
the Company, as such, in respect of any matters whatsoever,  or any other rights
or liabilities as a shareholder,  prior to the exercise  hereof as  hereinbefore
provided.

15.  SEVERABILITY.  Should any part of this  Warrant  for any reason be declared
invalid,  such decision shall not affect the validity of any remaining  portion,
which remaining  portion shall remain in force and effect as if this Warrant had
been  executed with the invalid  portion  thereof  eliminated,  and it is hereby
declared the  intention of the parties  hereto that they would have executed and
accepted the remaining  portion of this Warrant  without  including  therein any
such part,  parts or portion  which may, for any reason,  be hereafter  declared
invalid.

16.  NOTICE.  All notices and other  communications  required or permitted to be
given under any  Agreement  shall be deemed given when  personally  delivered or
sent by certified mail,  return receipt  requested,  postage prepaid,  overnight
delivery or confirmed  facsimile  transmission  to the parties at the  following
address or fax number:

     To the Company at:

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

     With a copy to:

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

                                       24
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

     To the Purchaser at:

          The address set forth in the Purchase Agreement under which the
          Purchaser acquired, among other things, this Warrant.

or, as to either party or any subsequent  holder of this Warrant,  to such other
address and/or  facsimile  number as such party  designates by written notice to
the other party or parties.

17. CERTAIN DEFINITIONS.

     (a) "Business Day" means any day other than  Saturday,  Sunday or other day
on which  commercial banks in The City of New York are authorized or required by
law to remain closed.

     (b)  "DTC"  means  The  Depository  Trust  Company  and its Fast  Automated
Securities Transfer Program.

     (c)  "Fundamental  Transaction"  means that the Company shall,  directly or
indirectly,  in one or more related transactions,  (i) consolidate or merge with
or into  (whether  or not the  Company  is the  surviving  corporation)  another
Person, or (ii) sell,  assign,  transfer,  convey or otherwise dispose of all or
substantially  all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase,  tender or exchange offer that
is  accepted by the  holders of more than the 50% of the  outstanding  shares of
Common  Stock (not  including  any shares of Common  Stock held by the Person or
Persons making or party to, or associated or affiliated  with the Persons making
or party to, such  purchase,  tender or exchange  offer),  or (iv)  consummate a
stock  purchase  agreement or other  business  combination  (including,  without
limitation,   a   reorganization,   recapitalization,   spin-off  or  scheme  of
arrangement)  with another Person  whereby such other Person  acquires more than
the 50% of the  outstanding  shares of Common Stock (not including any shares of
Common  Stock held by the other Person or other  Persons  making or party to, or
associated or affiliated  with the other Persons  making or party to, such stock
purchase agreement or other business combination), (v) reorganize,  recapitalize
or reclassify its Common Stock,  or (vi) any "person" or "group" (as these terms
are used for  purposes of Sections  13(d) and 14(d) of the  Exchange  Act) is or
shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act),  directly or  indirectly,  of 50% of the aggregate  ordinary  voting power
represented by issued and outstanding Common Stock.

     (d)  "Person"  means  an  individual,   a  limited  liability   company,  a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
association,  any other  entity and a  government  or any  department  or agency
thereof.

     (e) "Required  Holders" means the holders of the Warrants  representing  at
least a majority of shares of the Underlying Stock.

     (f) "Successor  Entity" means the Person (or, if so elected by the Required
Holders,  the  Parent  Entity)  formed  by,  resulting  from  or  surviving  any
Fundamental  Transaction  or the  Person  (or,  if so  elected  by the  Required
Holders,  the Parent Entity) with which such Fundamental  Transaction shall have
been entered into.

                                       25
<PAGE>

     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

     (g) "Trading Day" means any day on which the Common Stock are traded on the
Principal  Market,  or, if the  Principal  Market is not the  principal  trading
market  for the Common  Stock,  then on the  principal  securities  exchange  or
securities  market on which the  Common  Stock are then  traded;  provided  that
"Trading  Day" shall not include any day on which the Common Stock are scheduled
to trade on such  exchange or market for less than 4.5 hours or any day that the
Common Stock are suspended from trading during the final hour of trading on such
exchange or market (or if such  exchange or market does not designate in advance
the closing  time of trading on such  exchange  or market,  then during the hour
ending at 4:00:00 p.m., New York time).

     (h) "Weighted  Average  Price" means,  for any security as of any date, the
dollar volume-weighted  average closing price for such security on the Principal
Market during the  immediately  preceeding  ten (10) business  days,  or, if the
foregoing does not apply,  the dollar  volume-weighted  average closing price of
such security in the  over-the-counter  market on the electronic  bulletin board
for such security during the  immediately  preceeding ten (10) business days, as
reported by Bloomberg, or, if no dollar volume-weighted average closing price is
reported  for such  security  by  Bloomberg  for such ten (10) day  period,  the
average of the highest closing bid price and the lowest closing ask price of any
of the market  makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau,  Inc.) for such ten (10) day
period.  If the Weighted Average Price cannot be calculated for such security on
such date on any of the  foregoing  bases,  the Weighted  Average  Price of such
security on such date shall be the fair market value as mutually  determined  by
the  Company  and  the  Required  Holders.  All  such  determinations  shall  be
appropriately  adjusted  for any share  dividend,  share split or other  similar
transaction during such period.

18. CALL OPTION.
    ------------

     18.1 Option to Call  Warrants.  The Company  shall be entitled to call this
Warrant if the Company's Stock trades at or above One and 35/100 Dollars ($1.35)
(as adjusted for any stock dividends,  splits,  combinations,  recapitalizations
and the like with  respect  to the Stock)  for  twenty  (20) out of thirty  (30)
consecutive  Trading Days with an average daily  trading  volume of over 150,000
shares and there is an effective  registration  statement registering the shares
underlying both the Series C Preferred Stock and Warrants.

     18.2 Call Price.  The call price for the Warrant  shall be One Cent ($0.01)
multiplied by the Warrant Number then in effect.

     18.3 Notice.  Notice of a call of this Warrant  under this Section 18 shall
be mailed by overnight courier and by fax,  addressed to the holder.  The notice
shall  state,  as  appropriate,   the  following  and  may  contain  such  other
information as the Company deems advisable: (a) the call date, which shall be at
least  thirty  (30) days  after the  "notice  date" as  defined  herein  (b) the
aggregate call price for the Warrant,  and (c) the place where the Warrant is to
be surrendered.  The "notice date" shall be the date such notice is mailed.  Any
notice mailed as provided in this Section 18.3 shall be conclusively presumed to
have been duly given, whether or not the holder receives such notice.

                                       26
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     FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

     18.4  Effectiveness  of Call. If notice of the call of the Warrant has been
duly given then,  notwithstanding  that the Warrant has not been surrendered for
cancellation,  on and  after  the  call  date  this  Warrant  shall  cease to be
outstanding  and all rights with respect to this Warrant shall forthwith on such
notice date cease and  terminate,  except only the right of the holder hereof to
receive the amount payable on such call without interest.

19. MISCELLANEOUS.
    --------------

     (a) This Warrant shall be governed by, construed and enforced in accordance
with the law of the State of  Delaware,  without  regard to its conflict of laws
principles.

     (b) The agreements which are contained herein shall survive the exercise of
this Warrant to the extent applicable thereafter.

     (c) This Warrant was originally  issued to Roaring Fork Capital SBIC,  L.P.
on _______, 20__.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of the day and year first set forth above.

                                                     ATC HEALTHCARE, INC.

                                                     By:________________________

                                                     Name:______________________

                                                     Title:_____________________

                                       27
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     FORM OF PENALTY WARRANT UNDER  REGISTRATION  RIGHTS AGREEMENT

                                   ASSIGNMENT
                                   ----------

FOR  VALUE  RECEIVED   ___________________________  hereby  sells,  assigns  and
transfers  unto  _______________________  the  within  Warrant  and  all  rights
evidenced    thereby    and   does    irrevocably    constitute    and   appoint
__________________________,  attorney, to transfer the said Warrant on the books
of the within named Company.

_________________________________

By_______________________________

Its______________________________

Dated:___________________________

<PAGE>

     FORM OF PENALTY WARRANT UNDER  REGISTRATION  RIGHTS AGREEMENT

                               PARTIAL ASSIGNMENT
                               ------------------

FOR VALUE  RECEIVED  ______________________________  hereby  sells,  assigns and
transfers  unto  _______________________________  that  portion  of  the  within
Warrant and the rights  evidenced  thereby which will an the date hereof entitle
the  holder  to  purchase  __________  shares  of  Class A  Common  Stock of ATC
Healthcare,   Inc.,   and  does  hereby   irrevocably   constitute  and  appoint
__________________________,  attorney, to transfer that part of the said Warrant
on the books of the within named Company.

_________________________________

By_______________________________

Its______________________________

Dated:___________________________

<PAGE>

                                 EXERCISE NOTICE
                                 ---------------

     (To be  completed  and signed only upon an exercise of the Warrant in whole
or in part)

TO: ATC Healthcare, Inc.:

The undersigned,  the holder of the attached Warrant,  hereby irrevocably elects
to exercise the purchase  right  represented by the Warrant for, and to purchase
thereunder,  ______  shares  of Class A Common  Stock (or  other  securities  or
property), and herewith makes payment as follows:

_____ By payment of  $____________  therefor in cash,  by  certified or official
bank check or such other form of payment as may be permitted under the Warrant.

____ By cashless exercise.

The undersigned  hereby requests that the  Certificate(s) for such securities be
issued in the name(s) and delivered to the address(es) as follows:

Name:                      _____________________________________________
Address:                   _____________________________________________
Social Security Number:    _____________________________________________
Deliver to:                _____________________________________________
Address:                   _____________________________________________

If the  foregoing  Exercise  Notice  evidences  an  exercise  of the  Warrant to
purchase fewer than all of the Shares (or other securities or property) to which
the undersigned is entitled under such Warrant,  please issue a new Warrant,  of
like  date and  tenor,  for the  remaining  portion  of the  Warrant  (or  other
securities or property) in the name(s),  and deliver the same to the  address(e'
s), as follows:

Name:                      ______________________________________________
Address:                   ______________________________________________

DATED:   ____________________, 200__

________________________________________________________________________________
(Social Security or Taxpayer Identification                     (Name of Holder)
         Number of Holder)
_________________________________
                                  (Signature of Holder or Authorized Signatory)

Signature Guaranteed:

_________________________________Exhibit 10.86

================================================================================

                            COMMON STOCK AND WARRANT
                               PURCHASE AGREEMENT

                              ATC Healthcare, Inc.

                                January 12, 2007

================================================================================

<PAGE>

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

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

                                    Recitals
                                    --------

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

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

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

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

                                    ARTICLE 1

                                   DEFINITIONS

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

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

                                     - 1 -
<PAGE>

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

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

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

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

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

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

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

     "Closing Date" shall mean January 12, 2007.

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

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

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

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

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

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

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

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

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

                                     - 2 -
<PAGE>

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

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

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

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

     "Principal Market" shall mean the American Stock Exchange.

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

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

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

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

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

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

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

                                     - 3 -
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                     - 4 -
<PAGE>

                                    ARTICLE 2

                   ISSUE AND SALE OF COMMON STOCK AND WARRANTS

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

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

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

                                    ARTICLE 3

                                   CONDITIONS

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

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

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

                                     - 5 -
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                     - 6 -
<PAGE>

                                    ARTICLE 4

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

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

                                     - 7 -
<PAGE>

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

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

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

                                     - 8 -
<PAGE>

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

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

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

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

                                      - 9 -
<PAGE>

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

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

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

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

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

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

                                     - 10 -
<PAGE>

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

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

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

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

                                     - 11 -
<PAGE>

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

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

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

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

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

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

                                     - 12 -
<PAGE>

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

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

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

                                     - 13 -
<PAGE>

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

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

                                     - 14 -
<PAGE>

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

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

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

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

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

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

                                     - 15 -
<PAGE>

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

                                    ARTICLE 5

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

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

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

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

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

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

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

                                     - 16 -
<PAGE>

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

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

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

                                    ARTICLE 6

                                    COVENANTS

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

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

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

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

                                     - 17 -
<PAGE>

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

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

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

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

                                    ARTICLE 7
                                  MISCELLANEOUS

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

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

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

                                     - 18 -
<PAGE>

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

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

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

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

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

         with a copy to:

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

             and

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

                                     - 19 -
<PAGE>

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

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

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

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

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

                                     - 20 -
<PAGE>

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

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

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

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

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

                                     - 21 -
<PAGE>

                                SIGNATURE PAGE TO
                   COMMON STOCK AND WARRANT PURCHASE AGREEMENT

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

                                    COMPANY:

                                    ATC Healthcare, Inc., a Delaware corporation

                                    By:_________________________________________

                                    Name:_______________________________________

                                    Title:______________________________________

                                    PURCHASER:

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

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

                                        By:_____________________________________
                                        Name:
                                        Title: Manager

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

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

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

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