Registration Rights Agreement


dated as of December 23, 2008


among


HC Innovations, Inc.,


the Subsidiary Guarantors Listed Herein and


the Noteholders Listed Herein






Table of Contents


	
 

	
 

	
 


	
1.

	
Definitions

	
1


	
 

	
 

	
 


	
2.

	
Demand Registration Rights

	
4


	
 

	
 

	
 


	
3.

	
Piggyback Registration Rights

	
6


	
 

	
 

	
 


	
4.

	
Registration Procedures

	
9


	
 

	
 

	
 


	
5.

	
Registration Expenses

	
14


	
 

	
 

	
 


	
6.

	
Indemnification

	
15


	
 

	
 

	
 


	
7.

	
Miscellaneous

	
17


	
 

	
 

	
 


	
Exhibit A- Form of Notice to Transfer Agent

	
21


	
 

	
 


	
Exhibit B- Holder Information

	
 





-i-






REGISTRATION RIGHTS AGREEMENT


          This
Agreement is dated as of December 23, 2008, between HC Innovations, Inc., a
Delaware corporation (and any successors thereto, the “Company”), the
Subsidiary Guarantors listed herein and the Holders (as defined below).


          This
Agreement is entered into pursuant to the Securities Amendment and Purchase
Agreement dated as of December 23, 2008 among the Company and the Noteholders
identified therein (the “Securities Amendment and Purchase Agreement”).


          NOW, THEREFORE,
in consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, each of the parties to this Agreement
agrees as follows:


          1. Definitions. As used in this Agreement,
the
following terms shall have the following meanings:


          “Agreement”
means this Agreement, as the same may be amended or supplemented from time to
time in accordance with the terms hereof. 


          “Affiliate(s)”
has the meaning set forth in Rule 144.


          “Additional
Effectiveness Deadline” has the
meaning set forth in Section 2(b) of this Agreement.


          “Additional
Filing Deadline” has the meaning set forth in Section 2(b) of this
Agreement.


          “Business
Day” means any day except Saturday, Sunday and any day which shall be a
federal legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other governmental action to
close


          “Commission”
means the U.S. Securities and Exchange Commission.


          “Common
Stock” means the common shares of the Company, $0.001 par value per share.


          “Company”
has the meaning set forth in the preamble to this Agreement.


          “Convertible
Notes” means the Senior Secured Convertible Notes to be issued by the
Company pursuant to the Securities Amendment and Purchase Agreement.


          “Effective
Date” means the date that a Registration Statement filed pursuant to Section
2(a) or Section 2(b), as applicable, is first declared effective by
the Commission.


          “Effectiveness
Deadline” means, as applicable, the Initial Effectiveness Deadline and any
Additional Effectiveness Deadline.






          “Effectiveness
Period” has the meaning set forth
in Section 2(a) of this Agreement.


          “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder.


          “Filing
Deadline” has the meaning set forth in Section 2(b) of this
Agreement.


          “Grace
Period” has
the meaning set forth in Section 4(g) of this Agreement.


          “Holders”
means those Persons designated as “Holders” on the signature pages hereof and
their respective successors and assigns.


          “Indemnified
Party” has the meaning set forth in
Section 6(c) of this Agreement.


          “Indemnifying
Party” has the meaning set forth in
Section 6(c) of this Agreement.


          “Initial
Effectiveness Deadline” has the meaning set forth in Section 2(a) of
this Agreement.


          “Initial
Filing Deadline” has the meaning set forth in Section 2(a) of this
Agreement.


          “Inspectors”
has the meaning set forth in Section
4(o) of this Agreement.


          “Losses”
has the meaning set forth in Section
6(a) of this Agreement.


          “Note
Shares” means the shares of Common Stock issuable upon conversion of the
Convertible Notes pursuant to the terms of the Securities Amendment and
Purchase Agreement and the Convertible Notes.


          “Person”
means any individual, partnership, corporation, limited liability company,
incorporated or unincorporated association, trust, joint venture,
unincorporated organization, joint stock company, governmental unit or other
entity of any kind.


          “Piggyback
Notice” has the meaning set forth
in Section 3(a) of this Agreement.


          “Piggyback
Registration” has the meaning set
forth in Section 3(a) of this Agreement.


          “Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.


          “Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A or 430B promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities






covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.


          “Records”
has the meaning set forth in Section
4(o) of this Agreement.


          “Registrable
Securities” means each of the Note Shares, the Warrant Shares and the
shares of Common Stock from time to time held by the Holders, together with any
securities issued or issuable in respect of such securities upon any stock
split, dividend or other distribution, recapitalization or similar event, or
any conversion price or exercise price adjustment with respect thereto.


          “Registration
Statement” means collectively: (i) the initial registration statement which
is required to register the resale of the Registrable Securities pursuant to Section
2(a), and (ii) each additional registration statement, if any,
contemplated by Section 2(b), and including, in each case, the
Prospectus, amendments and supplements to each such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.


          “Required
Holders” means those Holders owning at least 66-2/3% of the Registrable
Securities, being calculated for such purposes by aggregating (i) the number of
Note Shares, Warrant Shares and shares of Common Stock held by all Holders that
were issued on or prior to the date of calculation and (ii) the number of Note
Shares and Warrant Shares that would be issuable if all Convertible Notes and
Warrants, as the case may be, held by all Holders were converted or exercised,
as the case may be, on such date of calculation.


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


          “Rule
415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.


          “Rule
424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.


          “Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.


          “Subsidiary
Guarantor” has the meaning set forth in the
preamble to this Agreement.


          “Unregistered
Registrable Securities” has the meaning set forth in Section 2(b) of this
Agreement.






          “underwritten
offering” means a registration in which securities of the Company are sold
to an underwriter for reoffering to the public.


          “Warrant
Shares” means the shares of Common Stock issuable upon conversion of the
Warrants issued to the Holders under the Securities Amendment and Purchase
Agreement.


          2. Demand
Registration Rights.


          (a)
Initial Filing & Effectiveness Deadlines. (i) If, at any time
subsequent to May 31, 2009, any Holder or group of Holders owning at least 20%
of the Registrable Securities shall deliver a written request to the Company (a
“Registration Request”) containing the matters set forth in the next
following sentence, the Company shall within 30 days of receiving such request
file with the Commission (an “Initial Filing Deadline”) a Registration
Statement for an offering on a continuous or delayed basis pursuant to Rule 415
covering the resale of Registrable Securities held by the requesting Holder or
Holders. Each Registration Request shall certify the following (i) the number
of Registrable Securities held by the Holder making such Registration Request;
and (ii) if less than all, the number of Registrable Securities of the
requesting Holder to be covered by the Registration Statement. The requesting
Holder shall give notice to the other Holders of its Registration Request at
the same time as the requesting Holder delivers the request to the Company; and
the other Holders shall have the right to include any or all of their
Registrable Securities on such Registration Statement if it or they provide the
Company with the necessary information regarding such Holder and the applicable
Registerable Securities to be included in the Registration Statement within 20
Business Days of such request, subject to Section 2(c). Subject to the
agreement of the Holders registering Registrable Securities, the Company shall
also have the right to include any of its securities on such Registration
Statement, subject to Section 2(c).


          (ii)
The Company shall use its best efforts to cause any Registration Statement
filed in response to a request pursuant to Section 2(a)(i) to be
declared effective under the Securities Act as soon as possible but, in any
event, no later than the earlier of:


          (A)
120 days after the Initial Filing Deadline, and


          (B)
the tenth Business Day following the date on which the Company is notified by
the Commission that the Registration Statement filed pursuant to Section
2(a)(i) will not be reviewed or is no longer subject to further review and
comments (an “Initial Effectiveness Deadline”), and shall use
its best efforts to keep the Registration Statement continuously effective
under the Securities Act until the earliest of:


          (i)
the date when all Registrable Securities covered by the Registration Statement
have been sold;


          (ii)
the date when all Registrable Securities have been sold pursuant to Rule 144;






          (iii)
the date when all Registrable Securities covered by the Registration Statement
may be sold without restriction pursuant to Rule 144, as determined by counsel
to the Company pursuant to a written opinion letter to such effect, upon
receipt by the Holders of a notice from the Company stating that the Company
will deliver certificates without restrictive legends upon surrender by the
Holders of the existing certificates along with appropriate seller’s and
broker’s representation letters;


          (iv)
the date two years after the date that the Registration Statement is declared
effective by the Commission; or


          (v)
the date when all Registrable Securities cease to be outstanding (together, the
“Effectiveness Period”).


          (b)
Possible Subsequent Registration. If the Commission does not permit all
of the Registrable Securities to be included in the Registration Statement
initially filed pursuant to Section 2(a)(i) as a result of the
Commission’s application of Rule 415, then the Company shall prepare and file
as soon as possible after the date on which the Commission indicates as being
the first date or time that such filing may be made (which shall be the later
of sixty (60) days following the sale of substantially all of the Registrable
Securities included in such initial Registration Statement or six months
following the Effective Date of such initial Registration Statement), but in
any event by the 10th Business Day following such date or, in the event the
Commission does not so indicate, no later than six months after the Effective
Date of the Registration Statement filed pursuant to Section 2(a)(i) (an
“Additional Filing Deadline” and, together with an Initial Filing
Deadline, a “Filing Deadline”), an additional Registration Statement
covering the resale of all Registrable Securities not already covered by an
existing and effective Registration Statement for an offering to be made on a
continuous or delayed basis pursuant to Rule 415. The Company shall use its
best efforts to cause each such Registration Statement to be declared effective
under the Securities Act as soon as possible but, in any event, no later than
60 days following the date on which the Company becomes aware that such
Registration Statement is required to be filed under this Agreement (an “Additional
Effectiveness Deadline” for such
Registration Statement), and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act during
the Effectiveness Period. To the extent the staff of the Commission does not
permit all of the Registrable Securities that have not yet been covered on an
effective Registration Statement (the
“Unregistered Registrable Securities”)to be registered on such additional Registration Statement,
the Company shall file one or more additional Registration Statements
successively trying to register on each such successive Registration Statement
the maximum number of Unregistered Registrable Securities permitted by the
Commission until all of the Registrable Securities have been registered with
the Commission, subject to any subsequent Filing Deadline and subsequent Effectiveness
Deadline and in accordance with the agreements of the Company contained in this
Section 2(b). In the event that on the filing date of the applicable
additional Registration Statement, the Company’s financial statements would be
“stale” (more than 135 days old), the Company shall have ten (10) days from the
date that the applicable financial






statements are
filed with the Commission as part of a 10-K or 10_Q filing to file such
additional Registration Statement.


          (c)
Allocation of Registrable Securities in Registration Statement. The
initial number of Registrable Securities included in any Registration Statement
and any increase in the number of Registrable Securities included therein shall
be allocated pro rata among the Holders (based on the number of Registrable
Securities held by each Holder), and any securities of the Company to be
included in such Registration Statement at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof is filed
with the Commission. In the event that a Holder sells or otherwise transfers
any of such Holder’s Registrable Securities, each transferee shall be allocated
a pro rata portion of the then remaining number of Registrable Securities
included in such Registration Statement for such transferor. Any Registrable
Securities included in a Registration Statement which remain allocated to any
Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Holders, pro rata
based on the number of Registrable Securities then held by such Holders which
are covered by such Registration Statement. In no event shall the Company
include any securities other than Registrable Securities on any Registration Statement
without the prior written consent of the Required Holders.


          (d)
Holder Cooperation. Each Holder hereby agrees:


          (i)
to cooperate with the reasonable requests of Company in connection with the
preparation and filing of any Registration Statement hereunder by providing the
Company with information regarding such Holder which was requested by the
Company in writing in order to effect the registration of such Holder’s
Registrable Securities, including if requested, a statement as to (i) the
identity of the beneficial owner of the Registrable Securities, (ii) the number
of Registrable Securities beneficially owned by such Holder and any Affiliate
thereof and (iii) the intended method of distribution of such Registrable
Securities included in such Registration Statement, unless such Holder has
notified the Company in writing of such Holder’s election to exclude all of
such Holder’s Registrable Securities from such Registration Statement; and


          (ii)
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 4(h)(iii) such Holder will discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holders’ receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed.


          3.
Piggyback Registration Rights.


          (a)
Right to Piggyback. If at any time, and from time to time, the Company
proposes to file a registration statement under the Securities Act with respect
to an offering of any class of equity or equity-linked securities of the
Company (other than a registration statement (i) on Form S-4, Form S-8 or in each
case any successor forms thereto, (ii) in respect of a dividend reinvestment or
similar plan for shareholders of the Company or (iii) filed in connection with
an offering made solely to existing shareholders or employees of the Company),
whether or not for






its own
account, then the Company will give written notice (the “Piggyback Notice”)
of such proposed filing to the Holders at least 30 days before the anticipated
filing date. Such notice will offer the Holders the opportunity to register
such amount of Registrable Securities as each Holder may request on the same
terms and conditions as the proposed registration that gave rise to the
Piggyback Notice (a “Piggyback Registration”). The Company will include
in each Piggyback Registration all Registrable Securities for which the Company
has received written requests from Holders for inclusion within ten Business
Days after delivery of the Piggyback Notice, subject to Section 3(b).


          (b)
Priority on Piggyback Registrations. If the Piggyback Registration is an
underwritten offering, the Company will cause the managing underwriter of that
proposed offering to permit the Holders that have requested Registrable
Securities to be included in the Piggyback Registration to include all such
Registrable Securities on the same terms and conditions as any similar
securities, if any, of the Company or any other applicable selling
securityholder. The right of any Holder to participate in any such underwritten
offering shall be conditioned on such Holder’s entering into an underwriting
agreement in customary form with the underwriter or underwriters selected by
the Company. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such underwritten offering advises the Company and the selling
Holders in writing that, in its good faith determination, the total amount of
securities that the Company and the Holders propose to include in such offering
is such as to materially and adversely affect the success of such underwritten
offering or that if the managing underwriter of an underwritten offering under
this Section 3(b) advises the Company and such Holders in writing that
the total number of shares requested to be included in such registration
exceeds the number of shares of Common Stock which can be sold in such offering
or that the success or pricing of the offering would be materially and
adversely affected by the inclusion of all of the shares of Common Stock
requested to be included, then:


          (i)
if such Piggyback Registration is a primary registration by the Company for its
own account, the Company will include in such Piggyback Registration in the
following order of priority: (A) first, the full amount of securities proposed
to be offered by the Company; (B) second, up to the full amount of securities
requested to be included in such Piggyback Registration by the Holders making
such Piggyback Request, allocated pro rata
among such Holders, on the basis of the amount of securities requested to be
included therein by each such Holder; and (C) third, any other securities
requested to be included in such registration so that the total amount of
securities to be included in such underwritten offering is the full amount
that, in the opinion of such managing underwriter, can be sold without materially
and adversely affecting the success of such underwritten offering; and


          (ii)
if such Piggyback Registration is an underwritten secondary registration for
the account of holders of securities of the Company, the Company will include
in such registration, in the following order of priority: (A) first, the full
amount of securities proposed to be included in the registration pursuant to
arrangements entered into or proposed to be entered into among the Company and
the holders of securities of the Company for whose account such underwritten
secondary registration is being undertaken; (B) second, up to the full amount
of securities requested to be included in such Piggyback Registration by the
Holders making such 






Piggyback
Request, allocated pro rata among
such Holders, on the basis of the amount of securities requested to be included
therein by each such Holder; and (C) third, any other securities requested to
be included in such registration so that the total amount of securities to be
included in such underwritten offering is the full amount that, in the written
opinion of such managing underwriter, can be sold without materially and
adversely affecting the success of such underwritten offering.


          (iii)
If so requested (pursuant to a timely written notice) by the managing
underwriter in any underwritten offering, the Holders participating in such
underwritten offering will agree not to effect any public sale or distribution
(or any other type of sale, offer, disposition or other transaction as the
managing underwriter determines is necessary in order to effect the
underwritten offering) of any Common Stock or similar securities, including a
sale pursuant to Rule 144 (but excluding any Registrable Securities included in
such underwritten offering), during the 10 days prior to, and during
(A) for an initial public offering of Common Shares or other similar
securities of the Company, 180 days and (B) for a secondary offering of
Common Shares or other similar securities of the Company, 90 days, in each case
(or such additional period as the managing underwriter determines is necessary
in order to effect the underwritten offering), following, the pricing date of
such underwritten offering (or such longer period as may be required by the
applicable underwriting agreement). In the event of such a request, the Company
may impose, during such period, appropriate stop-transfer instructions with
respect to the Common Stock or similar securities subject to such restrictions.


          (c)
Withdrawal of Piggyback Registration.


          (i)
If at any time after giving the Piggyback Notice and prior to the effective
date of the Registration Statement filed in connection with the Piggyback
Registration, the Company determines for any reason to delay or not to register
the Piggyback Registration, the Company may, at its election, give written
notice of its determination to all Holders, and (A) in the case of a
determination not to register, will be relieved of its obligation to register
any Registrable Securities in connection with the abandoned Piggyback
Registration, without prejudice, and (B) in the case of a determination to
delay the Piggyback Registration, will be permitted to delay the registration
for the same period.


          (ii)
Any Holder of Registrable Securities requesting to be included in a Piggyback
Registration may withdraw its request for inclusion by giving written notice to
the Company of its intention to withdraw from that registration, provided, however,
(A) the Holder’s request must be made in writing, in the case of an
underwritten offering, at least five Business Days prior to the anticipated
effective date of the applicable Registration Statement, or if the registration
is not an underwritten offering, at least five Business Days prior to the
anticipated filing date of the applicable Registration Statement covering the
Piggyback Registration, and (B) the withdrawal will be irrevocable and,
after making the withdrawal, a Holder will no longer have any right to include
its Registrable Securities in that Piggyback Registration.






          (iii)
The Company shall be deemed to have satisfied its obligations with respect to
any Piggyback Registration to any Holder under this Section 3
notwithstanding an election to withdraw under this Section 3(c).


          4.
Registration Procedures.


          In
connection with the Company’s registration obligations hereunder, the Company
shall:


          (a)
Registration Statement Form. In the event that Form S-3 is not available
for the registration of the resale of Registrable Securities covered by this
Agreement, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form and (ii) undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the Commission.


          (b)
Rule 424 Prospectus Filing. By 9:30 am, New York City time, on the
Business Day following the applicable Effective Date and immediately following
the preparation of a supplement to a Prospectus, the Company shall file with
the Commission in accordance with Rule 424 under the Securities Act the
applicable, final Prospectus to be used in connection with resales pursuant to
such Registration Statement.


          (c)
Holder Review of Filings. Not less than ten Business Days prior to the
proposed filing of a Registration Statement or any related Prospectus or any
amendment or supplement thereto, the Company shall furnish to the Holders
complete drafts of all such documents proposed to be filed, and shall use its
best efforts to reflect in each such document such comments as the Holders
shall propose. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto prior to correcting
information in such documents regarding a Holder to which such Holder shall
object in good faith. Each Registration Statement, as of the applicable Filing
Date, the applicable Effective Date and each day thereafter during which such
Registration Statement remains effective (including all amendments or
supplements thereto, as of their respective filing and effective dates and each
day thereafter), shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and the Prospectus contained in such Registration
Statement, as of its filing date and each day thereafter during which such
Registration Statement remains effective (including all amendments and supplements
thereto, as of their respective filing dates and each day thereafter), shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.


          (d)
Holder Requests for Inclusion of Information in Registration Statements
& Prospectuses. If requested by a Holder, the Company shall (i) as soon
as possible, incorporate in a prospectus supplement or post-effective amendment
such information as a Holder requests to 






be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to
be sold in such offering; (ii) as soon as possible, make all required filings
of such prospectus supplement or post-effective amendment after being notified
of the matters to be incorporated in such prospectus supplement or
post-effective amendment, except that the Company shall not be obligated to
make any filings with FINRA’s Corporate Finance Department; and (iii) as soon
as possible, supplement or make amendments to any Registration Statement if
requested by a Holder holding any Registrable Securities.


          (e)
Requirement to File Amendments and Supplements; Securities Law Compliance.
The Company shall (i) prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities if not
otherwise covered by another Registration Statement; (ii) cause each
Registration Statement and the related Prospectus to be amended or supplemented
by any post-effective amendment and any required prospectus supplement or
issuer “free writing prospectus” (as defined by Rule 405 promulgated by the
Commission pursuant to the Securities Act) as soon as possible so that such
Registration Statement and Prospectus do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein,
including upon the occurrence of any event contemplated by Section 4(h)
or following a Grace Period contemplated by Section 4(g) that would
require the filing of an amendment or supplement to any Registration Statement
or Prospectus to the extent that such Registration Statement or Prospectus
would not then contain a material misstatement or omission; (iii) respond as
promptly as possible to any comments received from the Commission with respect
to each Registration Statement or any amendment thereto and, as promptly as
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to such Registration Statement that
pertains to the Holders as selling shareholders but not any comments that would
result in the disclosure to the Holders of material and non-public information
concerning the Company; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to any
Registration Statement filed with the Commission and the disposition of all
Registrable Securities covered by each such Registration Statement.


          (f)
Avoidance of Stop Orders, etc. Use its best efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order suspending
the effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.


          (g)
Grace Periods. Notwithstanding anything to the contrary herein, at any
time after the Effective Date of a Registration Statement, the Company may
delay the disclosure of material, non-public information concerning the Company
the disclosure of which at such time is not, in the good faith opinion of the
board of directors of the Company, in the best interest of the 






Company and,
in the opinion of counsel to the Company, otherwise required to be disclosed
pursuant to the Securities Act or the Exchange Act for a period of time not to
exceed an aggregate of 60 days in any 12 month period (any such period, a “Grace
Period”); provided, that the Company shall promptly (i) notify the Holders
in writing of the existence of material, non-public information giving rise to
a Grace Period, provided that in each notice the Company will not disclose the
content of such material, non-public information to the Holders and the date on
which the Grace Period will begin, and (ii) notify the Holders in writing of
the date on which the Grace Period ends. For purposes of determining the length
of a Grace Period above, the Grace Period shall begin on and include the date
the Holders receive the notice referred to in clause (i) and shall end on and
include the later of the date the Holders receive the notice referred to in
clause (ii) and the date referred to in such notice.


          (h)
Notices to Holders. Notify the Holders as promptly as possible of the
following:


          (i)
(i)(A) when a Registration Statement, Prospectus, any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a review of
such Registration Statement by the staff of the Commission and whenever the Commission
comments in writing on such Registration Statement, the Company shall provide
true and complete copies thereof and all written responses thereto to each of
the Holders that pertain to the Holders as selling shareholders or to the Plan
of Distribution section of the Prospectus, but not information which the
Company believes would constitute material and non-public information; and (C)
with respect to each Registration Statement or any post-effective amendment,
when the same has become effective;


          (ii)
of any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information that pertains to the Holders as
selling shareholders or the Plan of Distribution section of the Prospectus; and


          (iii)
(A) of the issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose,
including pursuant to Section 8A of the Securities Act; (B) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Securities
for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; or (C) of the occurrence of any event or passage
of time (including due to the existence of a Grace Period) that makes (I) the
financial statements included in a Registration Statement ineligible for
inclusion therein or stale under Regulation S-X or (II) the Registration
Statement, as of the applicable Filing Date, the applicable Effective Date and
each day thereafter during which such Registration Statement remains effective
(including all amendments or supplements thereto, as of their respective filing
and effective dates and each day thereafter), contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Prospectus contained in such
Registration Statement, as of its filing date and 






each day
thereafter during which such Registration Statement remains effective
(including all amendments and supplements thereto, as of their respective
filing dates and each day thereafter), contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.


          (j)
Delivery of Copies to Holders.


          (i)
Furnish to each Holder, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission; provided, that the Company shall have no obligation to provide any
document pursuant to this clause that is available on the EDGAR system.


          (ii)
Promptly deliver to each Holder, without charge, as many copies of each
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.


          (k)
Blue Sky. Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities, Blue Sky or other laws of such jurisdictions or
governmental authorities or agencies within or outside the United States as any
Holder may in writing request, and to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statements; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or subject the Company to
any material tax or other material expense in any such jurisdiction where it is
not then so subject.


          (l)
Certificates. Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to the Registration Statements, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such Holders may request.


          (m)
Notices to Transfer Agent, Etc. Within ten Business Days after a
Registration Statement which covers Registrable Securities is declared
effective by the Commission, or the Registrable Securities of such Holder are
otherwise freely transferable pursuant to Rule 144, the Company shall deliver
to the transfer agent for such Registrable Securities confirmation in the 






form attached
hereto as Exhibit A. The Company shall cause its transfer agent to
deliver unlegended shares of Common Stock or Registrable Securities, as the
case may be, to a transferee of a Holder in connection with any sale of
Registrable Securities with respect to which a Holder has entered into a
contract for sale and the Company has delivered the confirmation in the form
attached hereto as Exhibit A.


          (n)
Exchange Act Filings. The Company shall timely file with the Commission
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company pursuant to Section 13
(a) or 15(d) of the Exchange Act. The Company will take such further action as
any Holder may request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act.


          (o)
Holders’ Due Diligence. Upon the written request of any Holder in
connection with such Holder’s due diligence requirements, if any, the Company
shall make available for inspection by (i) any Holder, (ii) such Holder’s legal
counsel and (iii) one firm of accountants or other agents retained by the
Holders that has previously executed a confidentiality agreement in favor of
the Company in form and substance reasonably satisfactory to the Company
(collectively, the “Inspectors”), all pertinent financial information,
other records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), and cause the Company’s officers,
directors and employees to supply all information, in each case, which any
Inspector may reasonably request and as shall be customary for such due
diligence examinations; provided, however, that each Inspector shall hold in
strict confidence and shall not make any disclosure or use of any Record or
other information provided by the Company, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this Agreement or any other Transaction Document.
Each Holder agrees that it shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. Nothing herein
(or in any other confidentiality agreement between the Company and any Holder)
shall be deemed to limit the Holders’ ability to sell Registrable Securities in
a manner which is otherwise consistent with applicable laws and regulations.


          (p)
Comfort Letters & Legal Opinions. If any Holder is required to be
named by the Commission, is deemed to be or reasonably believes it may be
deemed or alleged to be, an underwriter or is required under applicable
securities laws to be described in the Registration Statement as an
underwriter, at the request of such Holder, the Company shall cause to be
furnished to such Holder, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as any Holder may
request (i) a comfort letter, dated such date, from the Company’s independent
registered public accountants in form and substance 






as is
customarily given by independent certified public accountants to underwriters
in underwritten public offerings, addressed to such Holder (A) containing
statements and information of the type ordinarily included in accountants’
comfort letters to underwriters, delivered according to Statement of Auditing
Standards No. 72 (or any successor bulletin), with respect to the audited and
unaudited financial statements and certain financial information contained in
the Registration Statement, and (B) confirming that they are (1) registered,
independent public or certified public accountants as required by the Securities
Act and the Exchange Act and (2) in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X;
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as is
customarily given to an underwriter in an underwritten public offering,
addressed to the Holders containing customary legal opinions and a “10b-5” or
“negative assurance” letter or statement in its opinion letter, in each case,
customary for underwritten public offerings. Neither the Company nor any
subsidiary or Affiliate thereof shall identify any Holder as an underwriter in
any public disclosure or filing with the Commission or any Trading Market
without the prior written consent of such Holder. If the Company is required by
law to identify a Holder as an underwriter in any public disclosure or filing
with the Commission or any Trading Market, it must notify such Holder in
advance and such Holder shall have the option, in its sole discretion, to
consent to such identification as an underwriter within five Business Days or
such Holder shall be deemed to have consented to have its Registrable
Securities removed from the applicable Registration Statement.


          5.
Registration Expenses. 


          All
fees and expenses incident to the Company’s performance of its obligations
under this Agreement (excluding any underwriting discounts selling commissions
and share transfer taxes) shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation and whether or not this Agreement is terminated, (i) all
registration and filing fees (including, without limitation, fees and expenses
with respect to (A) applications and filings required to be made with the
trading market, if any, on which the Common Stock is then listed for trading,
and (B) compliance with applicable state or non-U.S. securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is requested by any of the Holders included in
the Registration Statement), (iii) messenger, telephone and delivery expenses
of the Company, (iv) fees and disbursements of counsel for the Company, and (v)
fees and expenses of all other Persons or firms retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. The Company shall also reimburse the Holder with the greatest number
of Registrable Securities being registered on the Registration Statement for
the reasonable fees and disbursements of legal counsel, in connection with the
registration, filing or qualification pursuant to Sections 3 and 4
of this Agreement for each such registration, filing or qualification.






	
 

	
 

	
 


	
 

	
6. Indemnification.





          (a)
Indemnification by the Company and the Subsidiary Guarantor. The Company
and the Subsidiary Guarantors jointly and severally shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, investment advisors, partners, members,
shareholders, trustees and employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents, trustees
and employees of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, or any Prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
issuer free writing prospectus or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made) not misleading, except to the extent, but only to the extent, that
such untrue statements or omissions are based upon information regarding such
Holder or its intended method of distribution furnished in writing to the
Company by such Holder expressly for use therein. The Company shall notify the
Holder promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.


          (b)
Indemnification by Holders. Each Holder shall, notwithstanding any
termination of this Agreement, severally and not jointly, indemnify and hold
harmless the Company, its officers, directors, agents, investment advisors,
partners, members, shareholders, trustees and employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the officers, directors, agents,
investment advisors, partners, members, shareholders, trustees and employees of
each of such controlling Person, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, arising out of or related to any
untrue statement of a material fact contained in any Registration Statement,
any Prospectus, or in any amendment or supplement thereto, or arising out of or
related to any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading to the extent, but only
to the extent that, such untrue statements or omissions are based upon
information regarding such Holder or its intended method of distribution
furnished to the Company in writing by such Holder expressly for use therein. In
no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company and shall survive the
transfer of the Registrable Securities by the Holders pursuant to Section
7(e).


          (c)
Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified
Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall assume the defense thereof, 






including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.


          An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, counsel designated by the Indemnifying Party shall not represent
the Indemnified Party), provided,
that the Indemnifying Party shall not be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties (in addition to any local counsel). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding and does not contain any admission of wrongdoing by such
Indemnified Party.


          All
fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this Section 6)
shall be paid to the Indemnified Party, as incurred, within 10 Business Days of
written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).


          (d)
Contribution. If a claim for indemnification under Section 6(a)
or (b) is unavailable to an Indemnified Party (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other hand in connection with the actions, statements
or omissions that resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among 






other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 6(c), any reasonable attorneys’ or other reasonable
fees or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section 6 was available to such
party in accordance with its terms. The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
6(d), no Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by such
Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.


          No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to indemnification or
contribution from any person who was not guilty of such fraudulent
misrepresentation.


          The
indemnity and contribution agreements contained in this Section 6 are in
addition to any other liability that the Indemnifying Parties may have to the
Indemnified Parties.


	
 

	
 

	
 


	
 

	
7. Miscellaneous.





          (a)
Specific Performance. It is understood and agreed by each of the
signatories to this Agreement that money damages would not be a sufficient
remedy for any breach of this Agreement by any party and each non-breaching
party shall be entitled to specific performance, injunctive, recessionary or
other equitable relief as remedy for any such breach.


          (b)
No Third Party Beneficiaries. All Holders, whether or not they are
beneficial or registered holders of Securities as of the date of this
Agreement, are intended to be third-party beneficiaries of this Agreement.
Except as set forth in the preceding sentence, nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any Person other than the parties hereto, or is anything in this Agreement
intended to relieve or discharge the obligation of any third party to any party
to this Agreement, nor shall any provision give any third party any right of
subrogation or action over or against any party to this Agreement.


          (c)
Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement.






          (d)
Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing and shall be (a) transmitted by hand
delivery, (b) mailed by first class, registered or certified mail, postage
prepaid, (c) transmitted by overnight courier, or (d) transmitted by
electronic mail (“email”) or telecopy with confirmation and follow-up copy
delivered in the manner set forth in any of (a), (b) or (c) above, and in each
case, at the address set forth below or such other address for a party as such
party may specify by giving notice as specified herein:


	
 

	
 

	
 


	
 

	
If to the Company:

	
HC
 Innovations, Inc.

 10 Progress Drive

 Suite 200

 Shelton, Connecticut 06484

 

 Telephone: (203) 925-9600

 Fax:

 Attention:


	
 

	
 

	
 


	
 

	
with a copy
 to 

 (for informational purposes only):

	
Gersten
 Savage LLP

 600 Lexington Avenue -9th Floor

 New York, NY 10022

 Attention:


	
 

	
 

	
 


	
 

	
If to a
 Holder

	
To the
 address or electronic mail set forth under such Holder’s name on Exhibit B
 to this Agreement with a copy to (for informational purposes only):


	
 

	
 

	
 


	
 

	
 

	
Thompson
 Hine LLP

 335 Madison Avenue

 12th Floor

 New York, New York 10017-4611

 Telephone: (212) 344-5680

 Fax: (212) 344-6101

 Attention: John M. Clapp





Notices mailed
or transmitted in accordance with the foregoing shall be deemed to have been
given upon receipt.


          (e)
Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon, the parties hereto and their respective successors and
permitted assigns. The Company may not assign its rights or obligations
hereunder without the prior written consent of the Required Holders.






          (f)
Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof. 


          (g)
Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.


          (h)
Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.


          (i)
Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.


          (j)
Headings. The headings of the sections, paragraphs and subsections of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.


          (k)
Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders.


          (l)
Limitation on Obligations. The obligations of each Holder hereunder are
several and not joint with the obligations of any other Holder, and no
provision of this Agreement is intended to confer any obligations on any Holder
vis-a-vis any other Holder. Nothing contained herein, and no action taken by
any Holder pursuant hereto, shall be deemed to constitute the Holder as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated herein.


          (m)
Termination. This Agreement and the obligations of the parties hereunder
shall terminate on such date as the Holders no longer own any Registrable
Securities, except for any liabilities or obligations under 5 and 6 hereof.


[Signature page follows]

































































Exhibit A


Form of Notice to Transfer Agent


[TRANSFER AGENT]

Attn.:


Re: HC Innovations, Inc.


Ladies and Gentlemen:


          We are
counsel to HC Innovations, Inc., a Delaware corporation (the “Company”).
[The Registration Statement on Form S-1 (File No. 333-_____) of the Company
(the “Registration Statement”) has been declared effective by the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
“Securities Act”). The Registration Statement covers the resale of the
Company’s common stock by the selling security holders listed therein. As a
result, the common stock held by such holders is available for resale under the
Securities Act pursuant to the Registration Statement.]


          [The shares
of common stock held by _____ [holder] may be freely resold under the
Securities Act without restriction under Rule 144 of the Securities Act.]


          This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holders pursuant [to the Registration
Statement] [Rule 144 of the Securities Act]. You need not require further
letters from us to effect any future legend-free issuance or reissuance of
shares of Common Stock to the Holders as contemplated by the Company’s
Irrevocable Transfer Agent Instructions dated [_____________].


	
 

	
 

	
 


	
 

	
Very truly
 yours,


	
 

	
 


	
 

	
[ISSUER’S
 COUNSEL]


	
 

	
 


	
 

	
By: 

	
 


	
 

	
 

	



	
 

	
 

	
 


	
cc: [List Names of Holders]

	
 

	
 












Exhibit B


Holder Information


	
 


	
Welwyn
 Management Company


	
 


	
901 Via
 Laguno


	
 


	
Winter Park,
 FL 32789


	
 


	
Attention:
 Richard F. DeLater


	
 


	 


	
 


	
Brahma
 Finance (BVI) Limited


	
 


	
Le
 Roccabella


	
 


	
24 Avenue
 Princesse Grace


	
 


	
Monte-Carlo,
 MC 98000


	
 


	
Monaco


	
 


	 


	
 


	
The Kenneth
 D. Lamé Living Trust


	
 


	
8813 S. Blue
 Jay Circle


	
 


	
Salt Lake
 City, UT 84121


	
 


	 


	
 


	
James J.
 Bigl Revocable Trust


	
 


	
4010 N.E.
 26th Avenue


	
 


	
Lighthouse
 Point


	
 


	
Pompano
 Beach, FL 33064


	
 












	
 


	
Pacific
 Aerie Holding LLC


	
 


	
8813 S. Blue
 Jay Circle


	
 


	
Salt Lake
 City, UT 84121


	
 


	
Attention: Kenneth D. Lamé


	
 


	 


	
 


	
Richard DeLater


	
 


	
P.O. Box 1523


	
 


	
Winter Park, FL 32790