Exhibit 10.1 


HC Innovations, Inc. 

November 26, 2008 

Binding Term Sheet

Senior Secured Notes

	Amount: 	
         Extension
      of maturity of US$8M existing senior secured notes (the “Notes”)
      to include accrued interest and unpaid fees (if any), plus funding of approximately $250,000
      to repay existing bank indebtedness (as set forth in “Basic Terms
    and Conditions (i)” below). 

	 	 
	
Issuer:  	
     HC Innovations, Inc. (“HCNV”)  
	 	 
	
Guarantors:  	
     All subsidiaries of HCNV.  
	 	 
	
Holders:  	
     Senior secured lenders (“Holders”).  
	 	 
	Initial Closing:	
         On
      or before December 19, 2008. Consummation of the transactions contemplated
      by this Term Sheet will be subject to negotiation, execution and delivery
    of mutually acceptable definitive documentation. 

	 	 
	Ranking: 	
         First
      ranking security interest over all the assets of HCNV and each of its subsidiaries.
      Security shall remain in place until all Notes are converted or are repaid
      in full. The Holders have requested that HCNV's unsecured indebtedness
      (other than ordinary course trade payables) be made junior and subordinate
      in right of payment to the Notes. Representatives of HCNV and the Holders
      will meet with representatives of the unsecured indebtedness to attempt
      to negotiate subordination or other arrangements satisfactory to all parties.a The
        definitive documents will contain a representation from HCNV as to accuracy
        and completeness of the schedule of secured and unsecured indebtedness
    previously supplied to the Holders. 

	 	 
	Extension: 	      In
        order to accommodate the transaction which is contemplated in that certain
        letter of interest that was submitted to HCNV on November 11, 2008 and
        provided to the Holders, or such third party who makes an offer which
        would provide for the mandatory repayment in full of the Holders and
        which the Board of Directors has a fiduciary duty to consider (collectively
        referred to herein as a “Transaction
    Company”) on the terms set forth either in the November 11, 2008 letter
    of interest, or in such other offer received by HCNV (the “Transaction”),
    the maturity of the Notes shall be extended (the “Extension Period”)
    to May 31, 2009 (“Maturity”). No late fees or penalties, other
    than those contemplated herein, will be assessed on HCNV during the Extension
    Period. 

	 	 
	Interest:	
         1%
      percent per month (or part thereof) compound interest applied effective
      as of the first day of each calendar month on the Notes. Interest shall
      be payable in cash at Maturity, however, in the event the Transaction is
      not consummated for any reason, at the election of the Holders interest
      shall be convertible into stock and warrants of HCNV as set forth in the
    Section titled “Conversion”. 





 

 a  Treatment of Bigl's
letter agreement subject to discussion when it has been located.  









	Expenses: 	
           HCNV to
        pay all of Holders' reasonable legal and professional costs incurred
        in connection with the transactions contemplated hereby, which, if the
        Initial Closing occurs on or before December 19, 2008, will not exceed
        an aggregate of $75,000, plus all of Holders' reasonable travel and
        subsistence costs. All such costs shall be paid on the earlier to occur
        of the Initial Closing and December 19, 2008. Any legal and professional
        costs incurred after December 19, 2008 shall not be subject to the foregoing
        limitations. It is contemplated that the Holders party to this Term Sheet
    will select one law firm to act on their behalf in the proposed transaction. 

	 	 
	Maturity: 	      The Notes shall mature on
      either (a) the earlier of (x) May 31, 2009, or (y) the closing of the
      Transaction; or (b) in the event the Transaction does not close by May
      31, 2009, the Notes shall mature on May 30, 2010, subject to the terms
    set forth below.

	 	 
	Conversion: 	
           In
        the event the Transaction does not close by May 31, 2009, at any time
        thereafter the Holders may convert the Notes plus accrued interest into
        HCNV common stock at $0.20 per share. HCNV will covenant to reserve
        and keep available authorized and unissued common stock for purposes
    of conversion of the Notes. 

	 	 
	Warrants 	      HCNV
          shall issue warrants for the Holders to purchase HCNV common stock
          at 100% of the note value, plus interest, exercisable at a price of $0.30
          per share, exercisable in the event the Transaction does not close
          by May 31, 2009. These warrants will include a provision stipulating
          that exercise of the warrants will be subject to HCNV shareholder approval,
          to the extent required, to increase the authorized shares available
          for issuance upon exercise of the warrants. HCNV covenants to ensure
          these warrants are properly issued, and will use its best efforts to
          cause such shareholder approval to be obtained, and, thereafter, to
          reserve and keep available authorized and unissued common stock for
          purposes of exercise of warrants. Prior to obtaining the above-referenced
          shareholder approval, HCNV will not issue common stock, except pursuant
          to conversion of Notes, exercise of the above referenced warrants or
          pursuant to obligations to which HCNV is subject as of the date of
    this Term Sheet. 

	 	 
	Warrant Tenure: 	
           In
        the event warrants become exercisable, they shall be exercisable for
    a period of five years from May 31, 2009.

	 	 
	Anti Dilution: 	
           The
        Holders shall be protected for the period from the date of this term
        sheet through May 31, 2011 by a contractual obligation upon HCNV to reset
        the terms of the Note conversion and the warrant exercise price in the
        event of the issuance of equity at a price lower than the strike price
        of the warrants referred to above based on a “Volume Weighted Average.” Anti-dilution
        protection shall contain exceptions for employee stock option plans and
        other stock based compensation plans in amounts and upon terms to be
    agreed. 

	 	 
	Required Holders: 	
           Most
        amendments and waivers will be subject to a two-thirds majority vote
        of outstanding principal amount of the Notes, with exceptions for certain
        fundamental changes such as extensions, changes in principal and interest,
    and the like, which will require unanimity. 

	 	 
	Basic Terms and 

      Conditions: 	
      

     Consummation
        of the transactions contemplated by this Term Sheet will be subject to
        negotiation, execution and delivery of mutually acceptable definitive
    documentation, which will include the following (non-exhaustive) items: 

	 	 


	 	a)     	 Holders to be repaid in full in cash
    at closing of the Transaction. 



 










	 	
b)     	
     Existing legal agreements and structure to be fully reviewed by Holder’s nominated US attorney, and revised as appropriate.
  
	 
	 	
c)     	
     Holders to have rights to nominate two directors to HCNV’s Board of Directors out of a maximum of 5 directors on the earlier of (i) May 31, 2009, or (ii) the termination of the offer letter from
the Transaction Company. Additionally, during the Extension Period, no director shall be replaced, provided, however, that HCNV shall be permitted to fill any vacancies in the three board seats that are not held by the Holders or their
nominees.
  
	 
	 	
d)     	
     The Holders shall have the right to veto the appointment of the CFO of HCNV until such time as all Notes are either converted or repaid in full. However, the Holders accept the current CFO.
  
	 
	 	
e)     	
     During the Extension Period, HCNV’s Board or management shall not initiate any changes in the CEO, CFO, president and COO without the Required Holders' express approval.
  
	 
	 	
f)     	
     During the Extension Period, HCNV shall not modify existing, or enter into new, management agreements or consulting agreements without the Required Holders' consent. Notwithstanding the foregoing,
HCNV shall not be required to obtain such consent to enter into agreements which are in the ordinary course of HCNV’s business.
  
	 
	 	g)	      HCNV shall provide confirmation that the
      prior Ansley contract for services has been terminated as of June 30th (executed
      August 1, 2008) and that there will be no further retainers and or expenses
      and or fees of any kind payable to any investment bankers except on a success
      fee basis only. The current Engagement Letter with Ansley will be amended
      (executed August 1, 2008) such that any future Placement Fee shall be based
      solely on new monies from sources outside of the Holders and their affiliated
      entities and or the existing investors. HCNV agrees that it will share
      all information with the Holders regarding the mandate to sell the business
    and / or raise new capital. 
	 	 	 
	 	
h)     	
     HCNV shall provide a representation to Holders as to its belief that the financing herein contemplated is adequate to meet the concerns previously expressed by HIP and other key customers of HCNV as
to the adequacy of working capital available to HCNV to fully support HCNV’s current service offerings in support of these HMO’s.
  
	 
	 	
i)     	
     The Holders will provide funding at the Initial Closing to pay off HCNV’s bank indebtedness (approximately $250,000). Immediately upon repayment of the bank indebtedness and filing of
appropriate UCC-3 termination statements or other termination documents, the Holders shall have a first ranking security interest over all the assets of HCNV and each of its subsidiaries.
  
	 
	 	
j)     	
     During the Extension Period, HCNV shall provide the Holders, in a timely manner, all material financial information (the “Information”), subject to HCNV’s legal obligations and the
Holders’ representations that they understand that the Information is not public and that they cannot and will not trade on the Information.
  
	 
	 	
k)     	
     During the Extension Period, HCNV shall report to the Holders non-financial matters including but not limited to major client problems, senior management problems, and contract cancellations, within
four days of their occurrence.
  
	 
	 	
l)     	
     During the Extension Period, there shall be a weekly report to the Holders, either by e-mail or conference call, regarding the Transaction Company project.
  
	 
	 	
m)     	
     In the event that the Transaction is not completed, or if the Notes otherwise come due on May 31, 2009, HCNV shall thereafter pay the Holders a monthly fee of $10,000.
  
	 
	 	
n)     	
     The parties contemplate that all or most of the members of the so-called "Markman" group will agree to an extension of their notes, on terms substantially similar to those
  
	 












	 	 	
contemplated by this Term Sheet. If this does not occur, the parties will attempt to negotiate alternative, mutually satisfactory, arrangements with members of this group.

  
	 
	 	
o)     	
     Such other terms and conditions as the parties may agree to for a transaction of this nature including, without limitation, representations and warranties, affirmative and negative covenants, and
defaults substantially similar to those contained in the August 27, 2008 draft Securities Exchange and Purchase Agreement previously made available to HCNV.
  
	 


	Forbearance: 	     The
          Holders, by executing this Term Sheet, hereby agree to forbear from
          exercising any rights and remedies that may exist under the Notes for
          the period from November 26, 2008 through December 19, 2008 (the “Forbearance
          Period”). HCNV acknowledges and agrees that this Term Sheet is
          not intended to, nor shall it, establish any course of dealing between
          HCNV and the Holders that is inconsistent with the express terms of
          the Notes and the documents related thereto. HCNV acknowledges and
          agrees that (a) this Term Sheet shall not operate as a waiver of any
          right, power or remedy of the Holders under the Notes or other documents
          related thereto, nor shall it constitute a continuing waiver at any
          time, (b) the Holders shall not have any obligation to extend the term
          of the Forbearance Period, (c) nothing herein shall be deemed to constitute
          a waiver of any Default or Event of Default under the Notes or any
          documents related thereto, and nothing herein shall in any way prejudice
          the rights and remedies of the Holders under the Notes, any documents
          related thereto or applicable law. In addition, the Holders shall have
          the right to waive any condition or conditions set forth in this Term
          Sheet, the Notes or any other documents related thereto, in their sole
          discretion, and any such waiver shall not prejudice, waive or reduce
          any other right or remedy that the Holders may have against HCNV. 

            Except
          as expressly provided in the first sentence of the immediately preceding
          paragraph, all provisions of the Notes and the other documents related
    thereto shall remain in full force and effect and be unaffected hereby. 

	 	 
	Termination: 	
           The
        obligations of the Holders hereunder shall terminate on December 19,
        2008, and shall thereafter be of no further force and effect, and
          none of the parties hereto shall have any rights or remedies against
          any other party hereto arising out of or in connection with this Term
    Sheet.



 

 

 

 












                                    Agreed and Accepted: 


HOLDERS: 

	 	 	              HCNV

	 	                  	/s/
    David Chess 
	Welwyn Management Company 	   	
By: David Chess, Chief Executive              
	/s/
    Richard DeLater 	   	
Officer and President  
	
By: Richard DeLater  	   	
Date: November 26, 2008  
	
Date: November 26, 2008  	   	   
	 	 	 
	
Nicholas Barham


/s/ Nicholas Barham	   	   
	
Date: November 26, 2008  	   	   
	 	 	 
	
The Kenneth D Lamé Living Trust          

/s/ Kenneth D Lamé  	   	   
	
By: Kenneth D. Lamé  	   	   
	
Date: November 26, 2008  	   	   
	 	 	 
	
Pacific Aerie Holding LLC

/s/ Jon T. Lamé  	   	   
	
By: Jon T. Lamé, Manager  	   	   
	
Date: November 26, 2008  	   	   
	 	 	 
	
James J. Bigl Revocable Trust

 /s/ James J. Bigl	   	   
	
By: James J. Bigl  	   	   
	
Date: November 26, 2008