Document:

Exhibit 10.2

                          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.

                  "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

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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.

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         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

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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.

         (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;

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                  (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.

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         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

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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.

               (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

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any liability  which he may have to any  indemnified  party otherwise other than
under this Section 8.

               (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

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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.

         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.

                                       30
<PAGE>

         (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.

         (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

                                       31
<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:  /s/ Daniel Pess
                      ---------------------------------------------------------
                          Daniel Pess
                          Senior Vice President/Chief Financial Officer

                 ROARING FORK CAPITAL SBIC L.P.

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

                 By: /s/ G. Michael Machens
                     -------------------------------------------------

                 Name:    G. Michael Machens

                 Title: Manager

                                       32
<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

<PAGE>

           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

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.

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.

                                       36
<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

                                       37
<PAGE>

           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

         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.

         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;

                                       38
<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

                                       39
<PAGE>

           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

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.

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

                                       40
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           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

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.

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

                                       41
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           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

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.

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

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           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

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.

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

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           FORM OF PENALTY WARRANT UNDER REGISTRATION RIGHTS AGREEMENT

         stockholder,  provided that the use of a post-effective  amendment or a
         supplement to the  prospectus  is permitted by applicable  law for such
         purpose.

         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.

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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

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           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.

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           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.

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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: __________________________

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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:

-------------------------------------------NEITHER  THIS  DEBENTURE  NOR  THE  SECURITIES  INTO  WHICH  THIS  DEBENTURE  IS
CONVERTIBLE  HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE  SECURITIES  COMMISSION  OF  ANY  STATE.  THESE SECURITIES HAVE BEEN SOLD IN
RELIANCE  UPON  AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS  AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT  PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR  PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE  REGISTRATION  REQUIREMENTS  OF  THE  SECURITIES  ACT AND IN ACCORDANCE WITH
APPLICABLE  STATE  SECURITIES  LAWS.

                         LOCATEPLUS HOLDINGS CORPORATION
                          SECURED CONVERTIBLE DEBENTURE

Issuance Date:  March___, 2007     Original Principal Amount:  $3,000,000
No.  LPHC-1-1

     FOR VALUE RECEIVED, LOCATEPLUS HOLDINGS CORPORATION, a Delaware corporation
(the  "Company"),  hereby  promises  to  pay  to  the  order  of CORNELL CAPITAL
PARTNERS,  L.P. or registered assigns (the "Holder") the amount set out above as
the  Original Principal Amount (as reduced pursuant to the terms hereof pursuant
to  redemption, conversion or otherwise, the "Principal") when due, whether upon
the  Maturity  Date  (as defined below), on any Installment Date with respect to
the  Installment  Amount due on such Installment Date (each, as defined herein),
acceleration, redemption or otherwise (in each case in accordance with the terms
hereof)  and  to  pay  interest ("Interest") on any outstanding Principal at the
applicable  Interest  Rate from the date set out above as the Issuance Date (the
"Issuance  Date")  until  the  same  becomes  due  and  payable, whether upon an
Interest  Date  (as defined below), any Installment Date or the Maturity Date or
acceleration,  conversion,  redemption  or otherwise (in each case in accordance
with  the  terms  hereof).  This  Secured  Convertible  Debenture (including all
Secured  Convertible  Debentures  issued  in  exchange,  transfer or replacement
hereof,  this  "Debenture") is one of an issue of Secured Convertible Debentures
issued  pursuant  to  the  Securities  Purchase  Agreement  (collectively,  the
"Debentures"  and  such  other  Senior  Convertible  Debentures,  the  "Other
Debentures").  Certain  capitalized terms used herein are defined in Section 17.

(1)     GENERAL  TERMS

(a)     Payment  of  Principal.  On each Installment Date, the Company shall pay
to  the Holder an amount equal to the Installment Amount due on such Installment
Date  in accordance with Section 3.  On the Maturity Date, the Company shall pay
to  the Holder an amount in cash representing all outstanding Principal, accrued
and  unpaid  Interest.  The  "Maturity  Date" shall be March __, 2010, as may be
extended  at the option of the Holder (i) in the event that, and for so long as,
an  Event of Default (as defined below) shall have occurred and be continuing on
the  Maturity  Date (as may be extended pursuant to this Section 1) or any event
shall  have  occurred and be continuing on the Maturity Date (as may be extended
pursuant  to  this  Section  1) that with the passage of time and the failure to
cure  would result in an Event of Default.  Other than as specifically permitted
by  this  Debenture,  the  Company  may  not prepay or redeem any portion of the
outstanding  Principal  without  the  prior  written  consent  of  the  Holder.

(b)     Interest.  Interest shall accrue on the outstanding principal balance
hereof at an annual rate equal to eight and one half percent (8.5%) ("Interest
Rate").  Interest shall be calculated on the basis of a 365-day year and the
actual number of days elapsed, to the extent permitted by applicable law.
Interest hereunder shall be paid on monthly, beginning on May 1, 2007 and
continuing on the first business day of each succeeding month and on the
Maturity Date (or sooner as provided herein) to the Holder or its assignee in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures at the option of the Company in cash,
or, provided that the Equity Conditions are then satisfied converted into Common
Stock at the Company Conversion Price.

(c)     Security.  The Debenture is secured by a security interest in all of the
assets of the Company and of each of the Company's subsidiaries as evidenced by
the security agreement of even date herewith (the "Security Document").

(2)     EVENTS  OF  DEFAULT.

(a)     An  "Event  of  Default",  wherever  used  herein,  means any one of the
following  events  (whatever  the  reason  and  whether it shall be voluntary or
involuntary  or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
     governmental  body):

(i)     the  Company's  failure  to  pay  to the Holder any amount of Principal,
Interest,  or  other  amounts  when  and as due under this Debenture (including,
without  limitation,  the  Company's  failure  to pay any redemption payments or
amounts  hereunder)  or  any  other  Transaction  Document;

(ii)     The Company or any subsidiary of the Company shall commence, or there
shall be commenced against the Company or any subsidiary of the Company under
any applicable bankruptcy or insolvency laws as now or hereafter in effect or
any successor thereto, or the Company or any subsidiary of the Company commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the Company or any
subsidiary of the Company any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Company or any
subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Company or any subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Company or any subsidiary of the Company
makes a general assignment for the benefit of creditors; or the Company or any
subsidiary of the Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary of the Company shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Company or any subsidiary of the Company shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary of the Company for the purpose of effecting any of the
foregoing;

(iii)     The Company or any subsidiary of the Company shall default in any of
its obligations under any other debenture or any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or evidenced
any indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the Company in an
amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable;

(iv)     If the Common Stock is quoted or listed for trading on any of the
following and it ceases to be so quoted or listed for trading and shall not
again be quoted or listed for trading on any Primary Market within five (5)
Trading Days of such delisting: (a) the American Stock Exchange, (b) New York
Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or
(e) the Nasdaq OTC Bulletin Board ("OTCBB") (each, a "Primary Market");

(v)     The Company or any subsidiary of the Company shall be a party to any
Change of Control Transaction (as defined in Section 6) unless in connection
with such Change of Control Transaction this Debenture is retired;

(vi)     The Company shall fail to file the Underlying Shares Registration
Statement (or, in the case of the Non-Registered Shares, as such term is defined
in the Registration Rights Agreement, the Subsequent Registration Statement)
with the Commission, or the Underlying Shares Registration Statement (or, in the
case of the Non-Registered Shares, the Subsequent Registration Statement) shall
not have been declared effective by the Commission, in each case within thirty
(30) days of the periods set forth in the Registration Rights Agreement
("Registration Rights Agreement") dated [MARCH ___, 2007] among the Company and
each Buyer listed on Schedule I attached thereto, or, while the Underlying
Shares Registration Statement is required to be maintained effective pursuant to
the terms of the Investor Registration Rights Agreement, the effectiveness of
the Underlying Shares Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of all of the Holder's Registrable Securities (as defined in the
Investor Registration Rights Agreement) in accordance with the terms of the
Investor Registration Rights Agreement, and such lapse or unavailability
continues for a period of more than ten (10) consecutive Trading Days or for
more than an aggregate of twenty (20) days in any 365-day period (which need not
be consecutive);

(vii)     the Company's (A) failure to cure a Conversion Failure by delivery of
the required number of shares of Common Stock within five (5) Business Days
after the applicable Conversion Failure or (B) notice, written or oral, to any
holder of the Debentures, including by way of public announcement, at any time,
of its intention not to comply with a request for conversion of any Debentures
into shares of Common Stock that is tendered in accordance with the provisions
of the Debentures, other than pursuant to Section 4(c);

(viii)     The Company shall fail for any reason to deliver the payment in cash
pursuant to a Buy-In (as defined herein) within three (3) Business Days after
such payment is due;

(ix)     The Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach or default of
any provision of this Debenture (except as may be covered by Section 2(a)(i)
through 2(a)(vii) hereof) or any Transaction Document (as defined in Section 16)
which is not cured within the time prescribed;

(x)     Any Event of Default (as defined in the Other Debentures) occurs with
respect to any Other Debentures.
(b)     During  the  time  that any portion of this Debenture is outstanding, if
any  Event  of  Default  has  occurred, the full unpaid Principal amount of this
Debenture, together with interest and other amounts owing in respect thereof, to
     the date of acceleration shall become at the Holder's election, immediately
due  and  payable  in  cash; provided however, the Holder may request (but shall
have  no  obligation  to request) payment of such amounts in Common Stock of the
Company.  Furthermore,  in addition to any other remedies, the Holder shall have
the  right  (but not the obligation) to convert this Debenture at any time after
an Event of Default at the lower of the Conversion Price, the Company Conversion
Price,  or $.057.  The Holder need not provide and the Company hereby waives any
presentment,  demand,  protest or other notice of any kind, (other than required
notice  of  conversion) and the Holder may immediately and without expiration of
any  grace  period  enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder. No such
rescission  or  annulment shall affect any subsequent Event of Default or impair
any  right  consequent  thereon.

(3)     COMPANY  INSTALLMENT  CONVERSION  OR  REDEMPTION.

(a)     General.  On  each applicable Installment Date, the Company shall pay to
the  Holder  of  this  Debenture  the  Installment  Amount  due  on such date by
converting  such  Installment Amount into shares of Common Stock of the Company,
provided that there is not then an Equity Conditions Failure, in accordance with
     this  Section  3  (a  "Company  Conversion");  provided,  however, that the
Company  may,  at  its  option  following  notice  to  the  Holder,  redeem such
Installment  Amount  (a "Company Redemption") or by any combination of a Company
Conversion and a Company Redemption so long as all of the outstanding applicable
Installment  Amount  shall  be  converted  and/or redeemed by the Company on the
applicable Installment Date, subject to the provisions of this Section 3.  On or
prior to the date which is the fifth (5th) Trading Day prior to each Installment
Date (each, an "Installment Notice Due Date"), the Company shall deliver written
notice  (each,  a  "Company  Installment  Notice"),  to the Holder which Company
Installment  Notice shall (i) either (A) confirm that the applicable Installment
Amount  of  the  Holder's  Debenture  shall  be converted in whole pursuant to a
Company  Conversion  or  (B)  (1) state that the Company elects to redeem, or is
required  to redeem in accordance with the provisions of the Debenture, in whole
or  in  part, the applicable Installment Amount pursuant to a Company Redemption
and  (2) specify the portion (including Interest) which the Company elects or is
required to redeem pursuant to a Company Redemption (such amount to be redeemed,
the  "Company  Redemption Amount") and the portion (including Interest), if any,
that the Company elects to convert pursuant to a Company Conversion (such amount
a "Company Conversion Amount") which amounts when added together, must equal the
applicable  Installment Amount and (ii) if the Installment Amount is to be paid,
in whole or in part, pursuant to a Company Conversion, certify that there is not
then  an  Equity  Conditions  Failure  as of the date of the Company Installment
Notice.  Each  Company  Installment Notice shall be irrevocable.  If the Company
does  not  timely  deliver  a Company Installment Notice in accordance with this
Section  3,  then  the  Company shall be deemed to have delivered an irrevocable
Company  Installment  Notice confirming a Company Conversion and shall be deemed
to  have  certified  that  there  is  not  then  an Equity Conditions Failure in
connection with any such conversion.  The Company Conversion Amount (whether set
forth in the Company Installment Notice or by operation of this Section 3) shall
be  converted  in accordance with Section 3(b) and the Company Redemption Amount
shall  be  paid  in  accordance  with  Section  3(c).

(b)     Mechanics of Company Conversion.  Subject to Section 3(d), if the
Company delivers a Company Installment Notice and elects, or is deemed to have
elected, in whole or in part, a Company Conversion in accordance with Section
3(a), then the applicable Company Conversion Amount, if any, which remains
outstanding as of the applicable Installment Date shall be converted as of the
applicable Installment Date by converting on such Installment Date such Company
Conversion Amount at the Company Conversion Price; provided that the Equity
Conditions are then satisfied (or waived in writing by the Holder) on such
Installment Date and that the Holder Pro Rata Amount of the Installment Volume
Limitation is not exceeded.  If the Equity Conditions are not satisfied (or
waived in writing by the Holder) on such Installment Date or the Holder Pro Rata
Amount of the Installment Volume Limitation is exceeded, then at the option of
the Holder designated in writing to the Company, the Holder may require the
Company to do any one or more of the following: (i) the Company shall redeem all
or any part of the unconverted Company Conversion Amount designated by the
Holder (such designated amount is referred to as the "Unconverted Redemption
Amount") and the Company shall pay to the Holder within three (3) days of such
Installment Date, by wire transfer of immediately available funds, an amount in
cash equal to such Unconverted Redemption Amount, and/or (ii) the Company
Conversion shall be null and void with respect to all or any part of the
unconverted Company Conversion Amount designated by the Holder and the Holder
shall be entitled to all the rights of a holder of this Debenture with respect
to such designated amount of the Company Conversion Amount; provided, however,
that the Conversion Price for such unconverted Company Conversion Amount shall
thereafter be adjusted to equal the lesser of (A) the Company Conversion Price
as in effect on the date on which the Holder voided the Company Conversion and
(B) the Company Conversion Price as in effect on the date on which the Holder
delivers a Conversion Notice relating thereto.  If the Company fails to redeem
any Unconverted Redemption Amount by the third (3rd) day following the
applicable Installment Date, then the Holder shall have all rights under this
Debenture (including, without limitation, such failure constituting an Event of
Default).  Notwithstanding anything to the contrary in this Section 3(b), but
subject to Section 4(c)(i), until the Company delivers Common Stock representing
the Company Conversion Amount to the Holder, the Company Conversion Amount may
be converted by the Holder into Common Stock pursuant to Section 4.  In the
event that the Holder elects to convert the Company Conversion Amount prior to
the applicable Installment Date as set forth in the immediately preceding
sentence, the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the applicable Conversion Notice.

(c)     Mechanics of Company Redemption.  If the Company elects a Company
Redemption in accordance with Section 3(a), then the Company Redemption Amount,
if any, which is to be paid to the Holder on the applicable Installment Date
shall be redeemed by the Company on such Installment Date, and the Company shall
pay to the Holder on such Installment Date, by wire transfer of immediately
available funds, in an amount in cash (the "Company Installment Redemption
Price") equal to the Principal portion of the Company Redemption Amount plus
accrued and unpaid Interest.  If the Company fails to redeem the Company
Redemption Amount on the applicable Installment Date by payment of the Company
Installment Redemption Price on such date, then at the option of the Holder
designated in writing to the Company (any such designation, "Conversion Notice"
for purposes of this Debenture), the Holder may require the Company to convert
all or any part of the Company Redemption Amount into shares of Common Stock of
the Company at the Company Conversion Price.  Conversions required by this
Section 3(c) shall be made in accordance with the provisions of Section 4(b).
Notwithstanding anything to the contrary in this Section 3(c), but subject to
Section 4(c)(i), until the Company Installment Redemption Price (together with
any interest thereon) is paid in full, the Company Redemption Amount (together
with any interest thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to Section 4.  In the event the Holder elects to
convert all or any portion of the Company Redemption Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Redemption Amount so converted shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the applicable Conversion Notice.

(d)     Deferred Installment Amount.  Notwithstanding any provision of this
Section 3 to the contrary, the Holder may, at its option and in its sole
discretion, deliver a written notice to the Company at least two (2) days prior
to any Installment Notice Due Date electing to have the payment of all or any
portion of an Installment Amount payable on the next Installment Date deferred
to the Maturity Date.  Any amount deferred to the Maturity Date pursuant to this
Section 3(d) shall continue to accrue Interest through the Maturity Date.

(e)     Cancellation of Installment Amount.  Notwithstanding any provision of
this Section 3 to the contrary, in the event that the Volume Weighted Average
Price of the Common Stock equals or exceeds 120% of the applicable Conversion
Price for each of the five (5) consecutive Trading Days immediately preceding
the Installment Notice Due Date and no Event of Default has occurred then the
Installment Amount payable on such Installment Date shall be deferred to the
Maturity Date.  Any amount deferred to the Maturity Date pursuant to this
Section 3(e) shall continue to accrue Interest through the Maturity Date.

(f)     Company's Additional Cash Redemption.  The Company at its option shall
have the right to redeem ("Optional Redemption") a portion or all amounts
outstanding under this Debenture in addition to any Installment Amount prior to
the Maturity Date provided that as of the date of the Holder's receipt of a
Redemption Notice (as defined herein) (i) the Closing Bid Price is less than the
Conversion Price, and (ii) no Event of Default has occurred.  The Company shall
pay an amount equal to the principal amount being redeemed plus a redemption
premium ("Redemption Premium") equal to fifteen percent (15%) of the Principal
amount being redeemed, and accrued Interest, (collectively referred to as the
"Company Additional Redemption Amount").  In order to make a redemption pursuant
to this Section, the Company shall first provide written notice to the Holder of
its intention to make a redemption (the "Redemption Notice") setting forth the
amount of Principal it desires to redeem.  After receipt of the Redemption
Notice the Holder shall have five (5) Business Days to elect to convert all or
any portion of this Debenture, subject to the limitations set forth in Section
4(b).  On the sixth (6th) Business Day after the Redemption Notice, the Company
shall deliver to the Holder the Company Additional Redemption Amount with
respect to the Principal amount redeemed after giving effect to conversions
effected during the five (5) Business Day period.

(4)     CONVERSION  OF  DEBENTURE.     This  Debenture shall be convertible into
shares  of  the Company's Common Stock, on the terms and conditions set forth in
this  Section  4.

(a)     Conversion  Right.  Subject  to  the  provisions of Section 4(c), at any
time  or  times  on  or after the Issuance Date, the Holder shall be entitled to
convert  any portion of the outstanding and unpaid Conversion Amount (as defined
below)  into  fully  paid and nonassessable shares of Common Stock in accordance
with  Section  4(b),  at  the Conversion Rate (as defined below).  The number of
shares  of  Common  Stock  issuable  upon  conversion  of  any Conversion Amount
pursuant  to  this  Section  4(a)  shall  be  determined  by  dividing  (x) such
Conversion  Amount  by  (y)  the  Conversion Price (the "Conversion Rate").  The
Company  shall  not  issue  any  fraction  of  a  share of Common Stock upon any
conversion.  If  the  issuance  would  result in the issuance of a fraction of a
share  of  Common  Stock,  the  Company  shall round such fraction of a share of
Common  Stock  up to the nearest whole share.  The Company shall pay any and all
transfer,  stamp  and  similar  taxes  that  may  be payable with respect to the
issuance  and delivery of Common Stock upon conversion of any Conversion Amount.

(i)     "Conversion  Amount" means the portion of the Principal to be converted,
redeemed  or  otherwise  with respect to which this determination is being made.

(ii)     "Conversion Price" means, as of any Conversion Date (as defined below)
or other date of determination, $0.314, subject to adjustment as provided
herein.

(b)     Mechanics  of  Conversion.

(i)     Optional  Conversion.  To  convert  any Conversion Amount into shares of
Common Stock on any date (a "Conversion Date"), the Holder shall (A) transmit by
     facsimile  (or  otherwise  deliver), for receipt on or prior to 11:59 p.m.,
New  York  Time, on such date, a copy of an executed notice of conversion in the
form  attached  hereto as Exhibit I (the "Conversion Notice") to the Company and
(B)  if  required  by Section 4(b)(iv), surrender this Debenture to a nationally
recognized  overnight  delivery  service  for  delivery  to  the  Company (or an
indemnification  undertaking reasonably satisfactory to the Company with respect
to  this Debenture in the case of its loss, theft or destruction).  On or before
the third Business Day following the date of receipt of a Conversion Notice (the
"Share  Delivery Date"), the Company shall (X) if legends are not required to be
placed  on  certificates  of  Common  Stock  pursuant to the Securities Purchase
Agreement  and  provided  that  the  Transfer  Agent  is  participating  in  the
Depository  Trust  Company's ("DTC") Fast Automated Securities Transfer Program,
credit such aggregate number of shares of Common Stock to which the Holder shall
be  entitled  to the Holder's or its designee's balance account with DTC through
its  Deposit  Withdrawal Agent Commission system or (Y) if the Transfer Agent is
not  participating  in the DTC Fast Automated Securities Transfer Program, issue
and deliver to the address as specified in the Conversion Notice, a certificate,
registered  in  the name of the Holder or its designee, for the number of shares
of  Common  Stock to which the Holder shall be entitled which certificates shall
not bear any restrictive legends unless required pursuant to Section 2(g) of the
Securities  Purchase Agreement.  If this Debenture is physically surrendered for
conversion  and  the outstanding Principal of this Debenture is greater than the
Principal  portion  of  the  Conversion Amount being converted, then the Company
shall  as soon as practicable and in no event later than three (3) Business Days
after receipt of this Debenture and at its own expense, issue and deliver to the
holder  a  new  Debenture  representing the outstanding Principal not converted.
The  Person  or  Persons entitled to receive the shares of Common Stock issuable
upon  a  conversion  of  this Debenture shall be treated for all purposes as the
record holder or holders of such shares of Common Stock upon the transmission of
a  Conversion  Notice.  In  the  event of a partial conversion of this Debenture
pursuant  hereto,  the  principal  amount  converted  shall be deducted from the
Installment  Amounts  relating  to  the  Installment  Dates  as set forth in the
Conversion  Notice.

(ii)     Company's Failure to Timely Convert.  If within three (3) Trading Days
after the Company's receipt of the facsimile copy of a Conversion Notice the
Company shall fail to issue and deliver a certificate to the Holder or credit
the Holder's balance account with DTC for the number of shares of Common Stock
to which the Holder is entitled upon such holder's conversion of any Conversion
Amount (a "Conversion Failure"), and if on or after such Trading Day the Holder
purchases (in an open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by the Holder of Common Stock issuable upon such
conversion 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 and other out of pocket expenses, 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 Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such 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 Closing Bid Price on the
Conversion Date.

(iii)     Book-Entry. Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Debenture in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Debenture
to the Company unless (A) the full Conversion Amount represented by this
Debenture is being converted or (B) the Holder has provided the Company with
prior written notice (which notice may be included in a Conversion Notice)
requesting reissuance of this Debenture upon physical surrender of this
Debenture.  The Holder and the Company shall maintain records showing the
Principal and Interest converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Debenture upon conversion.

(c)     Limitations on Conversions.

(i)     Beneficial  Ownership.  The  Company shall not effect any conversions of
this Debenture and the Holder shall not have the right to convert any portion of
     this  Debenture  or  receive  shares of Common Stock as payment of interest
hereunder  to  the extent that after giving effect to such conversion or receipt
of such interest payment, the Holder, together with any affiliate thereof, would
beneficially own (as determined in accordance with Section 13(d) of the Exchange
Act  and  the  rules promulgated thereunder) in excess of 4.99% of the number of
shares  of  Common  Stock  outstanding  immediately  after giving effect to such
conversion or receipt of shares as payment of interest.    Since the Holder will
not  be  obligated to report to the Company the number of shares of Common Stock
it  may  hold  at  the  time of a conversion hereunder, unless the conversion at
issue  would result in the issuance of shares of Common Stock in excess of 4.99%
of  the  then  outstanding  shares  of  Common Stock without regard to any other
shares  which  may  be beneficially owned by the Holder or an affiliate thereof,
the  Holder  shall  have  the  authority and obligation to determine whether the
restriction  contained  in  this  Section  will  limit any particular conversion
hereunder  and  to  the  extent  that  the Holder determines that the limitation
contained  in  this  Section  applies, the determination of which portion of the
principal  amount  of  this Debenture is convertible shall be the responsibility
and  obligation  of the Holder.  If the Holder has delivered a Conversion Notice
for  a  principal  amount  of  this  Debenture that, without regard to any other
shares  that  the Holder or its affiliates may beneficially own, would result in
the  issuance  in  excess  of  the permitted amount hereunder, the Company shall
notify  the  Holder  of this fact and shall honor the conversion for the maximum
principal amount permitted to be converted on such Conversion Date in accordance
with Section 4(a) and, any principal amount tendered for conversion in excess of
the  permitted  amount  hereunder shall remain outstanding under this Debenture.
The  provisions of this Section may be waived by a Holder (but only as to itself
and  not  to  any  other  Holder) upon not less than 65 days prior notice to the
Company.  Other  Holders  shall  be  unaffected  by  any  such  waiver.

(d)     Other Provisions.

(i)     Subject  to  the Company's obligation to increase its authorized capital
as  set  forth  in  the  Securities Purchase Agreement, the Company shall at all
times  reserve  and  keep  available out of its authorized Common Stock the full
number  of  shares  of  Common Stock issuable upon conversion of all outstanding
amounts  under  this Debenture; and within three (3) Business Days following the
receipt  by  the  Company  of  a  Holder's  notice  that  such minimum number of
Underlying  Shares  is  not  so  reserved,  the Company shall promptly reserve a
sufficient  number  of  shares  of Common Stock to comply with such requirement.

(ii)     All calculations under this Section 4 shall be rounded to the nearest
$0.0001 or whole share.

(iii)     The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of this Debenture and payment of
interest on this Debenture, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the Holder,
not less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in this Debenture or in the Transaction Documents) be issuable (taking
into account the adjustments and restrictions set forth herein) upon the
conversion of the outstanding principal amount of this Debenture and payment of
interest hereunder. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid, nonassessable and, if the Underlying Shares Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Shares Registration Statement.

(iv)     Nothing herein shall limit a Holder's right to pursue actual damages or
declare an Event of Default pursuant to Section 2 herein for the Company 's
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief,
in each case without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

(5)     Adjustments to Conversion Price

(a)     Adjustment  of  Conversion  Price upon Issuance of Common Stock.  If the
Company, at any time while this Debenture is outstanding, issues or sells, or in
     accordance  with  this  Section  5(a) is deemed to have issued or sold, any
shares  of  Common  Stock,  excluding shares of Common Stock deemed to have been
issued  or sold by the Company in connection with any Excluded Securities, for a
consideration  per  share  (the "New Issuance Price") less than a price equal to
the  Conversion  Price  in  effect immediately prior to such issue or sale (such
price  the  "Applicable  Price")  (the  foregoing  a  "Dilutive Issuance"), then
immediately  after  such  Dilutive  Issuance the Conversion Price then in effect
shall  be reduced to an amount equal to the New Issuance Price.  For purposes of
determining the adjusted Conversion Price under this Section 5(a), the following
shall  be  applicable:

(i)     Issuance  of  Options.  If the Company in any manner grants or sells any
Options  and  the  lowest price per share for which one share of Common Stock is
issuable  upon the exercise of any such Option or upon conversion or exchange or
exercise  of any Convertible Securities issuable upon exercise of such Option is
less  than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
     the granting or sale of such Option for such price per share.  For purposes
of this Section, the "lowest price per share for which one share of Common Stock
is  issuable upon the exercise of any such Option or upon conversion or exchange
or exercise of any Convertible Securities issuable upon exercise of such Option"
shall  be  equal  to  the  sum  of  the lowest amounts of consideration (if any)
received  or  receivable  by the Company with respect to any one share of Common
Stock  upon granting or sale of the Option, upon exercise of the Option and upon
conversion  or  exchange  or  exercise of any Convertible Security issuable upon
exercise of such Option.  No further adjustment of the Conversion Price shall be
made  upon  the  actual  issuance  of  such  share  of  Common  Stock or of such
Convertible  Securities  upon  the  exercise  of such Options or upon the actual
issuance  of  such  Common Stock upon conversion or exchange or exercise of such
Convertible  Securities.

(ii)     Issuance of Convertible Securities.  If the Company in any manner
issues or sells any Convertible Securities and the lowest price per share for
which one share of Common Stock is issuable upon such conversion or exchange or
exercise thereof is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible Securities for
such price per share.  For the purposes of this Section, the "lowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange or exercise" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the issuance or sale of the Convertible Security
and upon the conversion or exchange or exercise of such Convertible Security.
No further adjustment of the Conversion Price shall be made upon the actual
issuance of such share of Common Stock upon conversion or exchange or exercise
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of the Conversion Price had been or are to be made pursuant to other provisions
of this Section, no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.

(iii)     Change in Option Price or Rate of Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exchange or exercise of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.  For purposes of this Section, if the terms
of any Option or Convertible Security that was outstanding as of the Issuance
Date are changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed issuable
upon exercise, conversion or exchange thereof shall be deemed to have been
issued as of the date of such change.  No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.

(iv)     Calculation of Consideration Received.  In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for the difference of (x) the aggregate fair market value of
such Options and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Option, issued
or sold in such transaction and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or sold for the
balance of the consideration received by the Company.  If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount raised by the Company; provided, however, that such gross
amount is not greater than 110% of the net amount received by the Company
therefor.  If any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Company will be the Closing Bid Price of such
securities on the date of receipt.  If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be.  The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the Holder.  If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such consideration will be
determined within five (5) Business Days after the tenth (10th) day following
the Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the Holder.  The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.

(v)     Record Date.  If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

(b)     Adjustment of Conversion Price upon Subdivision or Combination of Common
     Stock.  If  the  Company,  at any time while this Debenture is outstanding,
shall (a) pay a stock dividend or otherwise make a distribution or distributions
on  shares  of  its  Common  Stock  or  any  other  equity  or equity equivalent
securities  payable  in shares of Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares,  or  (d)  issue  by  reclassification  of shares of the Common Stock any
shares  of  capital  stock  of  the  Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common  Stock  (excluding treasury shares, if any) outstanding before such event
and  of  which  the  denominator  shall  be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall
become  effective  immediately  after  the  record date for the determination of
stockholders  entitled to receive such dividend or distribution and shall become
effective  immediately  after  the  effective date in the case of a subdivision,
combination  or  re-classification.

(c)     Purchase Rights.  If at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Debenture (without taking into account any limitations or restrictions on the
convertibility of this Debenture) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

(d)     Other Events.  If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holder under this Debenture; provided that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 5.

(e)     Other Corporate Events.  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 a
conversion of this Debenture, at the Holder's option, (i) in addition to the
shares of Common Stock receivable upon such conversion, such securities or other
assets to which the Holder would have been entitled with respect to such shares
of Common Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Debenture) or (ii) in
lieu of the shares of Common Stock otherwise receivable upon such conversion,
such securities or other assets received by the holders of shares of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Debenture
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate.  Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
Required Holders.  The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without regard to
any limitations on the conversion or redemption of this Debenture.

(f)     Whenever the Conversion Price is adjusted pursuant to Section 5 hereof,
the Company shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.

(g)     In case of any (1) merger or consolidation of the Company or any
subsidiary of the Company with or into another Person, or (2) sale by the
Company or any subsidiary of the Company of more than one-half of the assets of
the Company in one or a series of related transactions, a Holder shall have the
right to (A) exercise any rights under Section 2(b), (B) convert the aggregate
amount of this Debenture then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, require the surviving
entity to issue to the Holder a convertible Debenture with a principal amount
equal to the aggregate principal amount of this Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Debenture shall have terms identical
(including with respect to conversion) to the terms of this Debenture, and shall
be entitled to all of the rights and privileges of the Holder of this Debenture
set forth herein and the agreements pursuant to which this Debentures were
issued. In the case of clause (C), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible Debentures shall be
based upon the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as
to continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.

(6)     REISSUANCE  OF  THIS  DEBENTURE.

(a)     Transfer.  If  this  Debenture  is  to  be transferred, the Holder shall
surrender  this Debenture to the Company, whereupon the Company will, subject to
the  satisfaction  of  the  transfer  provisions  of  the  Securities  Purchase
Agreement,  forthwith  issue  and  deliver  upon  the  order of the Holder a new
Debenture  (in  accordance  with  Section  5(d)),  registered in the name of the
registered  transferee or assignee, representing the outstanding Principal being
transferred  by the Holder and, if less then the entire outstanding Principal is
being  transferred,  a  new  Debenture  (in accordance with Section 5(d)) to the
Holder representing the outstanding Principal not being transferred.  The Holder
     and  any  assignee,  by acceptance of this Debenture, acknowledge and agree
that,  by  reason of the provisions of Section 4(b)(iii) following conversion or
redemption  of  any  portion  of  this  Debenture,  the  outstanding  Principal
represented  by this Debenture may be less than the Principal stated on the face
of  this  Debenture.

(b)     Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Debenture, the Company shall execute and deliver to the Holder a new Debenture
(in accordance with Section 5(d)) representing the outstanding Principal.

(c)     Debenture Exchangeable for Different Denominations.  This Debenture is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Debenture or Debentures (in accordance with Section 5(d))
representing in the aggregate the outstanding Principal of this Debenture, and
each such new Debenture will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.

(d)     Issuance of New Debentures.  Whenever the Company is required to issue a
new Debenture pursuant to the terms of this Debenture, such new Debenture (i)
shall be of like tenor with this Debenture, (ii) shall represent, as indicated
on the face of such new Debenture, the Principal remaining outstanding (or in
the case of a new Debenture being issued pursuant to Section 5(a) or Section
5(c), the Principal designated by the Holder which, when added to the principal
represented by the other new Debentures issued in connection with such issuance,
does not exceed the Principal remaining outstanding under this Debenture
immediately prior to such issuance of new Debentures), (iii) shall have an
issuance date, as indicated on the face of such new Debenture, which is the same
as the Issuance Date of this Debenture, (iv) shall have the same rights and
conditions as this Debenture, and (v) shall represent accrued and unpaid
Interest from the Issuance Date.

(7)     NOTICES.     Any  notices,  consents,  waivers  or  other communications
required  or permitted to be given under the terms hereof must be in writing and
will  be  deemed  to  have  been  delivered:  (i)  upon  receipt, when delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
     sending  party);  or  (iii)  one  (1)  Trading  Day  after  deposit  with a
nationally  recognized  overnight  delivery  service,  in  each  case  properly
addressed to the party to receive the same.  The addresses and facsimile numbers
for  such  communications  shall  be:

If to the Company, to:     LocatePLUS Holdings Corporation
     100 Cummings Center, Suite 235M
     Beverly, MA 01915
     Attention:  Chief Executive Officer
     Telephone:
     Facsimile:

With a copy to:     Sichenzia Ross Friedman Ference LLP
     1065 Avenue of the Americas
     New York, NY 10018
     Attention:
     Telephone:   (212) 930-9700
     Facsimile:    (212) 930-9725

If to the Holder:     Cornell Capital Partners, LP
     101 Hudson Street, Suite 3700
     Jersey City, NJ  07303
     Attention:  Mark Angelo
     Telephone:  (201) 985-8300

With a copy to:     David Gonzalez, Esq.
     101 Hudson Street - Suite 3700
     Jersey City, NJ 07302
     Telephone:  (201) 985-8300
     Facsimile:  (201) 985-8266

     or at such other address and/or facsimile number and/or to the attention of
such  other  person as the recipient party has specified by written notice given
to  each  other party three (3) Business Days prior to the effectiveness of such
change.  Written  confirmation  of  receipt  (i)  given by the recipient of such
notice,  consent,  waiver  or  other  communication,  (ii)  mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date,  recipient  facsimile  number  and  an  image  of  the  first page of such
transmission  or  (iii)  provided  by a nationally recognized overnight delivery
service,  shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with  clause  (i),  (ii)  or  (iii)  above,  respectively.

(8)     Except  as  expressly  provided  herein,  no provision of this Debenture
shall  alter  or  impair  the obligations of the Company, which are absolute and
unconditional,  to pay the principal of, interest and other charges (if any) on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
     prescribed.  This  Debenture is a direct obligation of the Company. As long
as  this  Debenture  is outstanding, the Company shall not and shall cause their
subsidiaries  not  to,  without  the  consent  of  the  Holder,  (i)  amend  its
certificate  of  incorporation,  bylaws  or  other  charter  documents  so as to
adversely  affect  any  rights of the Holder; (ii) repay, repurchase or offer to
repay,  repurchase  or  otherwise  acquire  shares  of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or  required  under the Transaction Documents; or (iii) enter into any agreement
with  respect  to  any  of  the  foregoing.

(9)     This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.

(10)     No indebtedness of the Company is senior to this Debenture in right of
payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise.  Without the Holder's consent, the Company will not
and will not permit any of their subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits there from that is senior in
any respect to the obligations of the Company under this Debenture.

(11)     This Debenture shall be governed by and construed in accordance with
the laws of the State of New Jersey, without giving effect to conflicts of laws
thereof.  Each of the parties consents to the jurisdiction of the Superior
Courts of the State of New Jersey sitting in Hudson County, New Jersey and the
U.S. District Court for the District of New Jersey sitting in Newark, New Jersey
in connection with any dispute arising under this Debenture and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens to the bringing of any such proceeding in such
jurisdictions.

(12)     If the Company fails to strictly comply with the terms of this
Debenture, then the Company shall reimburse the Holder promptly for all fees,
costs and expenses, including, without limitation, attorneys' fees and expenses
incurred by the Holder in any action in connection with this Debenture,
including, without limitation, those incurred: (i) during any workout, attempted
workout, and/or in connection with the rendering of legal advice as to the
Holder's rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection, preservation
or enforcement of any rights or remedies of the Holder.

(13)     Any waiver by the Holder of a breach of any provision of this Debenture
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Debenture. The failure
of the Holder to insist upon strict adherence to any term of this Debenture on
one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Debenture. Any waiver must be in writing.

(14)     If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.

(15)     Whenever any payment or other obligation hereunder shall be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day.

(16)     THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.

(17)     CERTAIN  DEFINITIONS     For  purposes of this Debenture, the following
terms  shall  have  the  following  meanings:

(a)     "Approved  Stock  Plan" means a stock option plan that has been approved
by  the  Board  of  Directors  of  the  Company, pursuant to which the Company's
securities may be issued only to any employee, officer, or director for services
     provided  to  the  Company.

(b)     "Bloomberg" means Bloomberg Financial Markets.

(c)     "Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close.

(d)     "Change of Control Transaction" means the occurrence of (a) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of fifty percent
(50%) of the voting securities of the Company (except that the acquisition of
voting securities by the Holder or any other current holder of convertible
securities of the Company shall not constitute a Change of Control Transaction
for purposes hereof), (b) a replacement at one time or over time of more than
one-half of the members of the board of directors of the Company which is not
approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (c) the merger, consolidation or sale of fifty
percent (50%) or more of the assets of the Company or any subsidiary of the
Company in one or a series of related transactions with or into another entity,
or (d) the execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set forth above
in (a), (b) or (c).

(e)     "Closing Bid Price" means the price per share in the last reported trade
of the Common Stock on a Primary Market or on the exchange  which the Common
Stock is then listed as quoted by Bloomberg.

(f)     "Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Stock.

(g)     "Commission" means the Securities and Exchange Commission.

(h)     "Common Stock" means the common stock, par value $.01, of the Company
and stock of any other class into which such shares may hereafter be changed or
reclassified.

(i)     "Company Conversion Price" means, the lower of (i) the applicable
Conversion Price and (ii) that price which shall be computed as eighty percent
(80%) of the lowest daily Volume Weighted Average Price of the Common Stock
during the fifteen (15) consecutive Trading Days immediately preceding the
applicable Installment Date.  All such determinations to be appropriately
adjusted for any stock split, stock dividend, stock combination or other similar
transaction.

(j)     "Equity Conditions" means that each of the following conditions is
satisfied:  (i) on each day during the period beginning two (2) weeks prior to
the applicable date of determination and ending on and including the applicable
date of determination (the "Equity Conditions Measuring Period"), either (x) the
Underlying Shares Registration Statement filed pursuant to the Registration
Rights Agreement shall be effective and available for the resale of all
applicable shares of Common Stock to be issued in connection with the event
requiring determination or (y) all applicable shares of Common Stock to be
issued in connection with the event requiring determination shall be eligible
for sale without restriction and without the need for registration under any
applicable federal or state securities laws; (ii) on each day during the Equity
Conditions Measuring Period, the Common Stock is designated for quotation on the
Principal Market and shall not have been suspended from trading on such exchange
or market nor shall delisting or suspension by such exchange or market been
threatened or pending either (A) in writing by such exchange or market or (B) by
falling below the then effective minimum listing maintenance requirements of
such exchange or market; (iii) during the Equity Conditions Measuring Period,
the Company shall have delivered Conversion Shares upon conversion of the
Debentures to the Holder on a timely basis as set forth in Section 4(b)(ii)
hereof; (iv) any applicable shares of Common Stock to be issued in connection
with the event requiring determination may be issued in full without violating
Section 4(c) hereof and the rules or regulations of the Primary Market; (v)
during the Equity Conditions Measuring Period, there shall not have occurred
either (A) an Event of Default or (B) an event that with the passage of time or
giving of notice would constitute an Event of Default; and (vii) the Company
shall have no knowledge of any fact that would cause (x) the Registration
Statements required pursuant to the Registration Rights Agreement not to be
effective and available for the resale of all applicable shares of Common Stock
to be issued in connection with the event requiring determination or (y) any
applicable shares of Common Stock to be issued in connection with the event
requiring determination not to be eligible for sale without restriction and
without the need for registration under any applicable federal or state
securities laws.

(k)     "Equity Conditions Failure" means that on any applicable date the Equity
Conditions have not been satisfied (or waived in writing by the Holder).

(l)     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(m)     "Excluded Securities" means, (a) shares issued or deemed to have been
issued by the Company pursuant to an Approved Stock Plan (b) shares of Common
Stock issued or deemed to be issued by the Company upon the conversion, exchange
or exercise of any right, option, obligation or security outstanding on the date
prior to date of the Securities Purchase Agreement, provided that the terms of
such right, option, obligation or security are not amended or otherwise modified
on or after the date of the Securities Purchase Agreement, and provided that the
conversion price, exchange price, exercise price or other purchase price is not
reduced, adjusted or otherwise modified and the number of shares of Common Stock
issued or issuable is not increased (whether by operation of, or in accordance
with, the relevant governing documents or otherwise) on or after the date of the
Securities Purchase Agreement, (c) shares issued in connection with any
acquisition by the Company, whether through an acquisition of stock or a merger
of any business, assets or technologies, leasing arrangement or any other
transaction the primary purpose of which is not to raise equity capital, and (d)
the shares of Common Stock issued or deemed to be issued by the Company upon
conversion of this Debenture.

(n)     "Holder Pro Rata Amount" means a fraction (i) the numerator of which is
the Original Principal Amount of this Debenture on the Issuance Date and (ii)
the denominator of which is the aggregate Purchase Price (as defined in the
Securities Purchase Agreement).

(o)     "Installment Amount" means with respect to any Installment Date, the
lesser of (A) the product of (i) $200,000, multiplied by (ii) Holder Pro Rata
Amount and (B) the Principal amount under this Debenture as of such Installment
Date, as any such Installment Amount may be reduced pursuant to the terms of
this Debenture, whether upon conversion, redemption or otherwise, together with,
in each case the sum of any accrued and unpaid Interest with respect to such
Principal amount. In the event the Holder shall sell or otherwise transfer any
portion of this Debenture, the transferee shall be allocated a pro rata portion
of the each unpaid Installment Amount hereunder.

(p)     "Installment Date" means [AUGUST 1, 2007], and the first Business Day of
each successive calendar month thereafter.

(q)     "Installment Volume Limitation" means 20% of the aggregate dollar
trading volume (as reported on Bloomberg) of the Common Stock on the Principal
Market over the fifteen (15) consecutive Trading Day period ending on the
Trading Day immediately preceding the applicable Installment Notice Date.

(r)     "Options" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

(s)     "Original Issue Date" means the date of the first issuance of this
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.

(t)     "Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.

(u)      "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

(v)     "Securities Purchase Agreement" means the Securities Purchase Agreement
dated [MARCH ___, 2007] by and among the Company and the Buyers listed on
Schedule I attached thereto.

(w)     "Trading Day" means a day on which the shares of Common Stock are quoted
on the OTCBB or quoted or traded on such Primary Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the
shares of Common Stock are not listed or quoted, then Trading Day shall mean a
Business Day.

(x)     "Transaction Documents" means the Securities Purchase Agreement or any
other agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Security Documents, the Irrevocable Transfer
Agent Instructions, and the Registration Rights Agreement.

(y)     "Underlying Shares" means the shares of Common Stock issuable upon
conversion of this Debenture or as payment of interest in accordance with the
terms hereof.

(z)     "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.

(aa)     "Volume Weighted Average Price" means, for any security as of any date,
the daily dollar volume-weighted average price for such security on the Primary
Market as reported by Bloomberg through its "Historical Prices - Px Table with
Average Daily Volume" functions, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg, 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.

(bb)     "Warrants" has the meaning ascribed to such term in the Securities
Purchase Agreement, and shall include all warrants issued in exchange therefor
or replacement thereof.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN  WITNESS  WHEREOF,  the  Company  has  caused  this  Secured Convertible
Debenture  to  be  duly executed by a duly authorized officer as of the date set
forth  above.

     COMPANY:
     LOCATEPLUS HOLDINGS CORPORATION

     By:
     Name:  Jon R. Latorella
     Title:  President and Chief Executive Officer

<PAGE>

                                    EXHIBIT I
                                CONVERSION NOTICE
        (TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE)

TO:

     The  undersigned  hereby  irrevocably  elects  to  convert  $
of  the principal amount of Debenture No.LPHC-1-1 into Shares of Common Stock of
LOCATEPLUS  HOLDINGS CORPORATION, according to the conditions stated therein, as
of  the  Conversion  Date  written  below.

CONVERSION DATE:
CONVERSION AMOUNT TO BE CONVERTED:     $
CONVERSION PRICE:     $
NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED:
AMOUNT OF DEBENTURE UNCONVERTED:     $

PLEASE ISSUE THE SHARES OF COMMON STOCK IN THE FOLLOWING NAME AND TO THE
FOLLOWING ADDRESS:

ISSUE TO:

AUTHORIZED SIGNATURE:
NAME:
TITLE:
BROKER DTC PARTICIPANT CODE:
ACCOUNT NUMBER:

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