REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of May 22, 2007 by and between HC INNOVATIONS, INC., a
Delaware corporation (the "COMPANY"), and ______________ (the "HOLDER"). All
capitalized terms used herein shall have the meaning ascribed to it in that
certain Subscription Agreement for the Purchase of Securities.
BACKGROUND
WHEREAS, the Company is offering for sale 1,666,667 shares of Common
Stock (the "Common Stock") and Warrants to purchase 833,333 shares of its Common
Stock (the "Warrants") to certain of the Company's current shareholders;
WHEREAS, This Agreement grants certain registration rights to the
Holders with respect to the shares of Common Stock purchased under the Offering
Materials and the shares of Common Stock underlying the Warrants (the "Warrant
Shares") that are exercised prior to the expiration thereof, upon the terms and
subject to the conditions as hereinafter set forth.
The parties agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"RESTRICTED STOCK" shall mean the Common Stock and Warrant Shares the
certificates for which are required to bear the legend set forth in Section 2
hereof.
..
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
2. RESTRICTIVE LEGEND. The shares of Common Stock and the Warrant
Shares and each certificate representing such Restricted Stock and, except as
otherwise provided in Section 3 hereof, each certificate issued upon exchange or
transfer of any such securities shall be stamped or otherwise imprinted with a
legend substantially in the following form:
"THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER
SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY
THAT
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
Restricted Stock (other than under the circumstances described in Section 4
hereof), the Holder shall give written notice to the Company of its intention to
effect such transfer. Each such notice shall describe the manner of the proposed
transfer and, if requested by the Company, shall be accompanied by an opinion of
counsel satisfactory to the Company to the effect that the proposed transfer may
be effected without registration under the Securities Act, whereupon such Holder
shall be entitled to transfer such securities in accordance with the terms of
its notice. All Restricted Stock transferred as above provided shall bear the
legend set forth in Section 2, except that such securities shall not bear such
legend if (i) such transfer is in accordance with the provisions of Rule 144 (or
any other rule permitting public sale without registration under the Securities
Act) or (ii) the opinion of counsel referred to above is to the further effect
that the transferee and any subsequent transferee (other than an affiliate of
the Company) would be entitled to transfer such securities in a public sale
without registration under the Securities Act.
4. PIGGYBACK REGISTRATION. Holder's rights under this Agreement
commence after the last closing described in the Offering Documents and
terminates on the second anniversary of this Agreement, unless earlier
terminated pursuant to Section 9(a) hereof (the "PIGGYBACK REGISTRATION
PERIOD"). If the Company at any time during the Piggyback Registration Period
proposes to register any of its securities under the Securities Act for sale to
the public, whether for its own account or for the account of other security
holders or both (other than a Registration Statement associated with the merger
of the Company with a public company or similar transaction or in connection a
Registration Statement for an initial public offering of the Company's Common
Stock or a registration on Form-S-4, Form S-8 or other limited purpose form),
then in each instance, it will give written notice to all Holders of Restricted
Stock of its intention to file a Registration Statement, PROVIDED, HOWEVER, that
for the purposes of this sentence, the Company shall treat the Holders in the
same manner and IN PARI PASSU with all other holders of unregistered capital
stock of the Company who (i) have registration rights with respect to such stock
or (ii) presently or at any time hereafter are officers, directors, or 5%
shareholders of the Company, or any affiliate, successor, or assign thereof.
Upon the written request of any such Holders, given within 20 days after the
date of any such notice, to register any of its Restricted Stock (which request
shall state the intended method of disposition thereof), the Company will use
its best efforts to cause the Restricted Stock as to which registration shall
have been so requested to be included in the securities to be covered by the
Registration Statement proposed to be filed by the Company all to the extent
requisite to permit the sale or other disposition by the Holders (in accordance
with their written request) of such Restricted Stock so registered. The Company
may withdraw any such Registration Statement before it becomes effective or
postpone the offering of securities contemplated by such Registration Statement
without any obligation to the Holders of any Restricted Stock. Anything herein
to the contrary notwithstanding, the Company shall be required to include
Holders' Restricted Stock in no more than two Registration Statements, which
have been filed during the Piggyback Registration Period.
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In the event that any registration pursuant to this Section 4 shall be,
in whole or in part, an underwritten public offering of Common Stock, any
request by Holders pursuant to this Section 4 to register Restricted Stock shall
specify that such Restricted Stock is to be included in the underwriting on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such registration. The number of shares of Restricted
Stock to be included in such an underwriting may be cut back (PRO RATA among the
requesting Holders) if and to the extent that the managing underwriter shall be
of the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein.
Notwithstanding anything to the contrary contained in this Section 4,
in the event that there is an underwritten offering of securities of the Company
pursuant to a registration covering Restricted Stock and a selling Holder of
Restricted Stock does not elect to sell his, her, or its Restricted Stock to the
underwriters of the Company's securities in connection with such offering, such
Holder shall refrain from selling such Restricted Stock not registered pursuant
to this Section 4 during the period of distribution of the Company's securities
by such underwriters and the period in which the underwriting syndicate
participates in the after market; PROVIDED, HOWEVER, that such Holder shall, in
any event, be entitled to sell its Restricted Stock in connection with such
registration commencing on the 180th day after the effective date of such
Registration Statement.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Section 4 hereof to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement
(which, in the case of an underwritten public offering pursuant to Section 4
hereof, shall be on Form S-1, Form SB-2, or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such Registration
Statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period specified in Section 5 (a) above and as to comply with the provisions
of the Securities Act with respect to the disposition of all Restricted Stock
covered by such Registration Statement in accordance with the sellers' intended
method of disposition set forth in such Registration Statement for such period;
(c) furnish to each seller and to each underwriter such number of
copies of the Registration Statement and the prospectus included therein
(including each preliminary prospectus) as such persons may reasonably request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such Registration Statement;
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(d) use its best efforts to register or qualify the Restricted Stock
covered by such Registration Statement under the securities or blue sky laws of
such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter shall reasonably request;
(e) immediately notify each seller under such Registration Statement
and each underwriter, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein not misleading in the light of the
circumstances then existing;
(f) use its best efforts to furnish, at the request of any seller, on
the date that Restricted Stock is delivered to the underwriters for sale
pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters in a form and substance as is customarily given to underwriters in
an underwritten public offering, and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters in a form and substance as is customarily given by independent
public accountants to underwriters in an underwritten public offering; and
(g) make available for inspection by any underwriter participating in
any distribution pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such underwriter, attorney, accountant, or agent in
connection with such Registration Statement.
For purposes of Sections 5 (a) and (b) above, the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby or nine months
after the effective date thereof.
In connection with each registration hereunder, the selling Holders of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as shall be
necessary in order to assure compliance with Federal and applicable state
securities laws or as the Company may reasonably request.
In connection with each registration pursuant to Section 4 hereof
covering an underwritten public offering, the Company agrees to enter into a
written agreement with the managing underwriter selected in the manner herein,
in such form and containing such provisions as are customary in the securities
business for such an arrangement.
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6. EXPENSES. All expenses incurred by the Company in complying with
Section 4 hereof, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees of the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars, but excluding
any Selling Expenses, are herein called "REGISTRATION EXPENSES". All
underwriting discounts and selling commissions and transfer taxes applicable to
the sale of Restricted Stock are herein called "SELLING EXPENSES".
The Company will pay all Registration Expenses in connection with each
Registration Statement filed pursuant to Section 4 hereof. All Selling Expenses
incurred in connection with any sale of Restricted Stock by any participating
seller shall be borne by such participating seller or by such persons other than
the Company (except to the extent the Company shall be a seller) as they may
agree.
7. INDEMNIFICATION. In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4 hereof, the
Company will indemnify and hold harmless each seller of such Restricted Stock
thereunder and each underwriter of such Restricted Stock thereunder and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act, against any and all losses, claims, damages, expenses, or
liabilities, joint or several, to which such seller or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such Restricted Stock was registered under the Securities Act pursuant to
Section 4, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, 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 each such seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability,
expense, or action; PROVIDED, HOWEVER, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such seller, such underwriter or such controlling person in writing
specifically for use in such Registration Statement or prospectus.
In the event of a registration of any of the Restricted Stock under the
Securities Act pursuant to Section 4 hereof, each seller of such Restricted
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company and each person, if any, who controls the Company within the meaning
of the Securities Act, each officer of the Company who signs the Registration
Statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages, expenses, or liabilities, joint or several, to which
the Company or such officer or director or underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, expenses, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement under which such
Restricted Stock was registered under the Securities Act pursuant to Section 4,
any preliminary prospectus or final
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prospectus contained therein, or any amendment or supplement thereof, 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 the Company and each such officer,
director, underwriter, and 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, and PROVIDED, HOWEVER, that such
seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage, or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such Registration Statement or prospectus; PROVIDED, FURTHER,
HOWEVER, that the liability of each seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability, or expense which is equal
to the proportion that the public offering price of the shares sold by such
seller under such Registration Statement bears to the total public offering
price of all securities sold thereunder, but not to exceed the proceeds received
by such seller from the sale of Restricted Stock covered by such Registration
Statement.
Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party under this Section 7. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying party
of the announcement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of its
election to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 7 for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected; PROVIDED, HOWEVER, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same
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jurisdiction, be liable for the fees and disbursements of more than one separate
firm qualified in such jurisdiction to act as counsel for the indemnified party.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnification provided for in the first
two paragraphs of this Section 7 is unavailable to or insufficient to hold
harmless an indemnified party under such paragraphs in respect of any losses,
claims, damages or liabilities or actions in respect thereof referred to
therein, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or actions in
such proportion as appropriate to reflect the relative fault of the Company, on
the one hand, and the sellers of such Restricted Stock, on the other, in
connection with the statement or omissions which resulted in such losses,
claims, damages, liabilities, or actions, as well as any other relevant
equitable considerations including the failure to give any notice under the
third paragraph of this Section 7. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or by the
sellers of such Restricted Stock, on the other, and to the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
The Company and the sellers of Restricted Stock agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by PRO RATA allocation (even if all of the sellers of Restricted Stock were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities, or action in
respect thereof, referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this and the immediately preceding paragraph, the sellers of such
Restricted Stock shall not be required to contribute any amount in excess of the
amount, if any, by which the total price at which the Restricted Stock sold by
each of them was offered to the public exceeds the amount of any damages which
they would have otherwise been required to pay by reason of such untrue or
alleged untrue statement of omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The indemnification of underwriters provided for
in this Section 7 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters.
8. RULE 144 REPORTING. From and after the date hereof, the Company
agrees with the Holders of Restricted Stock as follows:
(a) The Company shall make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after 90
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days following the effective date of the first registration of the Company under
the Securities Act of an offering of its Common Stock to the general public.
(b) The Company shall file with the Commission in a timely manner all
reports and other documents as the Commission may prescribe under Section 13(a)
or 15(d) of the Securities Exchange Ac of 1934, as amended (the "EXCHANGE ACT")
at any time after the Company has become subject to such reporting requirements
of the Exchange Act.
(c) The Company shall furnish to such Holder of Restricted Stock
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after 90 days following the effective date of the first Registration Statement
of the Company for an offering of its Common Stock to the general public), and
of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), (ii) a copy of the most recent annual
or quarterly report of the Company and (iii) such other reports and documents so
filed as a Holder may reasonably request to avail itself of any rule or
regulation of the Commission allowing a Holder of Restricted Stock to sell any
such securities without registration.
9. MISCELLANEOUS.
(a) The rights arising under Section 4 shall terminate on the second
anniversary of this Agreement, or if earlier, when (i) the Holder of the
Restricted Stock is no longer an "affiliate" as used in Rule 144 and (ii) the
Holder of the Restricted Stock is permitted to sell all Restricted Stock then
held by it pursuant to Rule 144(k).
(b) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. Without limiting the generality of the foregoing, the registration rights
conferred herein on the Holders of Restricted Stock shall inure to the benefit
of any and all subsequent permitted holders from time to time of the Restricted
Stock for so long as the certificates representing the Restricted Stock shall be
required to bear the legend specified in Section 2 hereof.
(c) All notices, requests, consents, and other communications hereunder
shall be in writing and shall be mailed by generally recognized overnight
courier, postage prepaid, to the Holder of the Restricted Stock at his, her, or
its address set forth in the records of the Company and to the Company at its
principal place of business or, in any case, at such other address or addresses
as shall have been furnished in writing to the Company (in the case of a Holder
of Restricted Stock) or to the Holders of Restricted Stock (in the case of the
Company).
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(e) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
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THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL
JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY
WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT THE SUCH COURTS ARE AN
INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 9(C), SUCH SERVICE TO
BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
(f) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified or amended except
in writing.
(g) This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first written above.
THE COMPANY:
HC Innovations, Inc.
By:
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Name:
Title:
HOLDER:
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By:
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Name:
Title:
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