INVESTOR RIGHTS AGREEMENT

 

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                            INVESTOR RIGHTS AGREEMENT

 

        This Investor Rights Agreement (this "Agreement") is made and entered

into as of September 21, 2004 among Critical Home Care, Inc., a Nevada

corporation (the "Company"), and each of the purchasers executing this Agreement

and listed on SCHEDULE 1 attached hereto (collectively, the "Purchasers").

 

        This Agreement is being entered into pursuant to the Promissory Note and

Warrant Purchase Agreement, dated as of the date hereof, by and among the

Company and the Purchasers (the "Purchase Agreement").

 

        The Company and the Purchasers hereby agree as follows:

 

        1.       DEFINITIONS.

 

        Capitalized terms used and not otherwise defined herein shall have the

meanings given such terms in the Purchase Agreement. As used in this Agreement,

the following terms shall have the following meanings:

 

        "ADVICE" shall have the meaning set forth in Section 3(m).

 

        "AFFILIATE" means, with respect to any Person, any other Person that

directly or indirectly controls or is controlled by or under common control with

such Person. For the purposes of this definition, "control," when used with

respect to any Person, means the possession, direct or indirect, of the power to

direct or cause the direction of the management and policies of such Person,

whether through the ownership of voting securities, by contract or otherwise;

and the terms of "affiliated," "controlling" and "controlled" have meanings

correlative to the foregoing.

 

        "BLACKOUT PERIOD" shall have the meaning set forth in Section 3(n).

 

         "BOARD" shall have the meaning set forth in Section 3(n).

 

        "BUSINESS DAY" means any day except Saturday, Sunday and any day which

shall be a legal holiday or a day on which banking institutions in the State of

Michigan generally are authorized or required by law or other government actions

to close.

 

        "COMMISSION" means the Securities and Exchange Commission.

 

        "COMMON STOCK" means the Company's Common Stock, par value $0.001 per

share.

 

        "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2.

 

        "EVENT" shall have the meaning set forth in Section 7(e).

 

        "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

 

        "FILING DATE" means the 30th day following the Filing Period Start Date.

 

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        "FILING PERIOD START DATE" means the 180th day following the Closing

Date.

 

        "HOLDER" or "HOLDERS" means the holder or holders, as the case may be,

from time to time of Registrable Securities, including without limitation the

Purchasers and their assignees.

 

        "INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).

 

        "INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).

 

        "LOSSES" shall have the meaning set forth in Section 5(a).

 

        "PERSON" means an individual or a corporation, partnership, trust,

incorporated or unincorporated association, joint venture, limited liability

company, joint stock company, government (or an agency or political subdivision

thereof) or other entity of any kind.

 

        "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.

 

        "PROMISSORY NOTES" means the 6% Promissory Notes of the Company issued

pursuant to the Purchase Agreement.

 

        "PROSPECTUS" means the prospectus included in any 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 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 such

Registration Statement, and all other amendments and supplements to the

Prospectus, including post-effective amendments, and all material incorporated

by reference in such Prospectus.

 

        "REGISTRABLE SECURITIES" means (a) the Warrant Shares (without regard to

any limitations on beneficial ownership contained in the Purchase Agreement or

Warrants) or other securities issued or issuable to each Purchaser or its

transferee or designee (i) upon exercise of the Warrants, or (ii) upon any

distribution with respect to, any exchange for or any replacement of such

Warrants or (iii) upon any conversion, exercise or exchange of any securities

issued in connection with any such distribution, exchange or replacement; (b)

securities issued or issuable upon any stock split, stock dividend,

recapitalization or similar event with respect to the foregoing; and (c) any

other security issued as a dividend or other distribution with respect to, in

exchange for, in replacement or redemption of, or in reduction of the

liquidation value of, any of the securities referred to in the preceding

clauses; provided, however, that such securities shall cease to be Registrable

Securities when such securities have been sold to or through a broker or dealer

or underwriter in a public distribution or a public securities transaction or

when such securities may be sold without any restriction pursuant to Rule 144(k)

as determined by the counsel to the Company pursuant to a written opinion

letter, addressed to the Company's transfer agent to such effect as described in

Section 2 of this Agreement.

 

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        "REGISTRATION STATEMENT" means the registration statements and any

additional registration statements contemplated by Section 2 or Section 7(d),

including (in each case) the Prospectus, amendments and supplements to such

registration statement or Prospectus, including pre- and post-effective

amendments, all exhibits thereto, and all material incorporated by reference in

such registration statement.

 

        "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 158" means Rule 158 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.

 

        "SECURITIES ACT" means the Securities Act of 1933, as amended.

 

        "SPECIAL COUNSEL" means Wiggin and Dana LLP.

 

        "WARRANT SHARES" means the shares of Common Stock issuable upon the

exercise of the Warrants issued or to be issued to the Purchasers or their

assignees or designees in connection with the offering consummated under the

Purchase Agreement.

 

        2.       REGISTRATION. Unless a Registration Statement with respect to

all of the Registrable Securities is declared effective prior to the filing

Period Start Date, as soon as possible following the Filing Period Start Date

(but not later than the Filing Date), the Company shall prepare and file with

the Commission a "shelf" Registration Statement covering all Registrable

Securities for a secondary or resale offering to be made on a continuous basis

pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or if

such form is not available to the Company on another form appropriate for such

registration in accordance herewith). The Company shall use its best efforts to

cause the Registration Statement to be declared effective as promptly following

the filing date of the Registration Statement as is reasonably practicable

(including filing with the Commission a request for acceleration of

effectiveness in accordance with Rule 461 promulgated under the Securities Act

within five (5) Business Days of the date that the Company is notified (orally

or in writing, whichever is earlier) by the Commission that a Registration

Statement will not be "reviewed," or not be subject to further review) and to

keep such Registration Statement continuously effective under the Securities Act

until such date as is the earlier of (x) the date when all Registrable

Securities covered by such Registration Statement have been sold or (y) with

respect to any Holder, such time as all Registrable Securities held by such

Holder may be sold without any restriction pursuant to Rule 144(k) as determined

by the counsel to the

 

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Company pursuant to a written opinion letter, addressed to the Company's

transfer agent to such effect (the "Effectiveness Period"). Such Registration

Statement also shall cover, to the extent allowable under the Securities Act and

the Rules promulgated thereunder (including Securities Act Rule 416), such

indeterminate number of additional shares of Common Stock resulting from stock

splits, stock dividends or similar transactions with respect to the Registrable

Securities.

 

        3.       REGISTRATION PROCEDURES.

 

        In connection with the Company's registration obligations hereunder, the

Company shall:

 

        (a)      Prepare and file with the Commission on or prior to the Filing

Date, a Registration Statement on Form S-3 (or if such form is not available to

the Company on another form appropriate for such registration in accordance

herewith) (which shall include a Plan of Distribution substantially in the form

of EXHIBIT A attached hereto), and cause the Registration Statement to become

effective and remain effective as provided herein; provided, however, that not

less than three (3) Business Days prior to the filing of the Registration

Statement or any related Prospectus or any amendment or supplement thereto, the

Company shall (i) furnish to the Special Counsel, copies of all such documents

proposed to be filed, which documents (other than those incorporated by

reference) will be subject to the review of such Special Counsel, and (ii) at

the request of any Holder cause its officers and directors, counsel and

independent certified public accountants to respond to such inquiries as shall

be necessary, in the reasonable opinion of counsel to such Holders, to conduct a

reasonable investigation within the meaning of the Securities Act. The Company

shall not file the Registration Statement or any such Prospectus or any

amendments or supplements thereto to which the Holders of a majority of the

Registrable Securities or the Special Counsel shall reasonably object within

three (3) Business Days after their receipt thereof. In the event of any such

objection, the Holders shall provide the Company with any requested revisions to

such prospectus or supplement within two (2) Business Days of such objection.

 

        (b)      (i) Prepare and file with the Commission such amendments,

including post-effective amendments, to the Registration Statement as may be

necessary to keep the Registration Statement continuously effective as to the

applicable Registrable Securities for the Effectiveness Period and to the extent

any Registrable Securities are not included in such Registration Statement for

reasons other than the failure of the Holder to comply with Section 3(m) hereof,

shall prepare and file with the Commission such amendments to the Registration

Statement or such additional Registration Statements in order to register for

resale under the Securities Act all Registrable Securities; (ii) cause the

related Prospectus to be amended or supplemented by any required Prospectus

supplement, and as so supplemented or amended to be filed pursuant to Rule 424

(or any similar provisions then in force) promulgated under the Securities Act;

(iii) respond as promptly as possible to any comments received from the

Commission with respect to the Registration Statement or any amendment thereto

and as promptly as reasonably possible provide the Holders true and complete

copies of all correspondence from and to the Commission relating to the

Registration Statement; and (iv) comply in all material respects with the

provisions of the

 

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Securities Act and the Exchange Act with respect to the disposition of all

Registrable Securities covered by the Registration Statement during the

applicable period in accordance with the intended methods of disposition by the

Holders thereof set forth in the Registration Statement as so amended or in such

Prospectus as so supplemented.

 

        (c)      Notify Holders of Registrable Securities to be sold and the

Special Counsel as promptly as possible (A) when a Prospectus or any Prospectus

supplement or post-effective amendment to the Registration Statement is proposed

to be filed (but in no event in the case of this subparagraph (A), less than

three (3) Business Days prior to date of such filing); (B) when the Commission

notifies the Company whether there will be a "review" of such Registration

Statement and whenever the Commission comments in writing on such Registration

Statement; and (C) with respect to the Registration Statement or any

post-effective amendment, when the same has become effective, and after the

effectiveness thereof: (i) of any request by the Commission or any other Federal

or state governmental authority for amendments or supplements to the

Registration Statement or Prospectus or for additional information; (ii) of the

issuance by the Commission of any stop order suspending the effectiveness of the

Registration Statement covering any or all of the Registrable Securities or the

initiation of any Proceedings for that purpose; (iii) 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; and (iv) if the financial statements included in the Registration

Statement become ineligible for inclusion therein or of the occurrence of any

event that makes any statement made in the Registration Statement or Prospectus

or any document incorporated or deemed to be incorporated therein by reference

untrue in any material respect or that requires any revisions to the

Registration Statement, Prospectus or other documents so that, in the case of

the Registration Statement or the Prospectus, as the case may be, it will not

contain any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary to make the statements therein,

in the light of the circumstances under which they were made, not misleading.

Without limitation to any remedies to which the Holders may be entitled under

this Agreement, if any of the events described in Section 3(c)(C)(i),

3(c)(C)(ii) and 3(c)(C)(iii) occur, the Company shall use its best efforts to

respond to and correct the event.

 

        (d)      Use its best efforts to avoid the issuance of, or, if issued,

use best efforts to obtain the withdrawal of, (i) any order suspending the

effectiveness of the 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 time.

 

        (e)      If requested by any Holder of Registrable Securities, (i)

promptly incorporate in a Prospectus supplement or post-effective amendment to

the Registration Statement such information as the Company reasonably agrees

should be included therein and (ii) make all required filings of such Prospectus

supplement or such post-effective amendment as soon as practicable after the

Company has received notification of the matters to be incorporated in such

Prospectus supplement or post-effective amendment.

 

        (f)      Furnish to each Holder and the Special Counsel, without charge,

at least one conformed copy of each Registration Statement and each amendment

thereto, including

 

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financial statements and schedules, 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.

 

        (g)      Promptly deliver to each Holder and the Special Counsel, without

charge, as many copies of the Prospectus or Prospectuses (including each form of

prospectus) and each amendment or supplement thereto as such Persons may

reasonably request; and 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.

 

        (h)      Prior to any public offering of Registrable Securities, use its

best efforts to register or qualify or cooperate with the selling Holders and

the Special Counsel 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 or Blue Sky laws of such

jurisdictions within the United States as any Holder requests in writing, 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 a Registration Statement; provided, however,

that the Company shall not be required to qualify generally to do business in

any jurisdiction where it is not then so qualified or to take any action that

would subject it to general service of process in any jurisdiction where it is

not then so subject or subject the Company to any material tax in any such

jurisdiction where it is not then so subject.

 

        (i)      Cooperate with the Holders to facilitate the timely preparation

and delivery of certificates representing Registrable Securities to be sold

pursuant to a Registration Statement, which certificates shall be free, to the

extent permitted by applicable law and the Purchase Agreement, of all

restrictive legends, and to enable such Registrable Securities to be in such

denominations and registered in such names as any Holder may request at least

two (2) Business Days prior to any sale of Registrable Securities. In connection

therewith, the Company shall promptly after the effectiveness of the

Registration Statement cause an opinion of counsel to be delivered to and

maintained with its transfer agent, together with any other authorizations,

certificates and directions required by the transfer agent, which authorize and

direct the transfer agent to issue such Registrable Securities without legend

upon sale by the Holder of such shares of Registrable Securities under the

Registration Statement.

 

        (j)      Following the occurrence of any event contemplated by Section

3(c)(C)(iv), as promptly as possible, prepare a supplement or amendment,

including a post-effective amendment, to the Registration Statement or a

supplement to the related Prospectus or any document incorporated or deemed to

be incorporated therein by reference, and file any other required document so

that, as thereafter delivered, neither the Registration Statement nor such

Prospectus will contain an 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 the light of the circumstances under which they were

made, not misleading.

 

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        (k)      Cause all Registrable Securities relating to such Registration

Statement to be listed on any United States securities exchange, quotation

system, market or over-the-counter bulletin board, if any, on which similar

securities issued by the Company are then listed.

 

        (l)      Comply in all material respects with all applicable rules and

regulations of the Commission and make generally available to its security

holders earnings statements satisfying the provisions of Section 11(a) of the

Securities Act and Rule 158 not later than 45 days after the end of any 3-month

period (or 90 days after the end of any 12-month period if such period is a

fiscal year) commencing on the first day of the first fiscal quarter of the

Company after the effective date of the Registration Statement, which statement

shall conform to the requirements of Rule 158.

 

        (m)      Request each selling Holder to furnish to the Company

information regarding such Holder and the distribution of such Registrable

Securities as is required by law or the Commission to be disclosed in the

Registration Statement, and the Company may exclude from such registration the

Registrable Securities of any such Holder who fails to furnish such information

within a reasonable time prior to the filing of each Registration Statement,

supplemented Prospectus and/or amended Registration Statement.

 

        If the Registration Statement refers to any Holder by name or otherwise

as the holder of any securities of the Company, then such Holder shall have the

right to require (if such reference to such Holder by name or otherwise is not

required by the Securities Act or any similar federal statute then in force) the

deletion of the reference to such Holder in any amendment or supplement to the

Registration Statement filed or prepared subsequent to the time that such

reference ceases to be required.

 

        Each Holder agrees by its acquisition of such Registrable Securities

that, upon receipt of a notice from the Company of the occurrence of any event

of the kind described in Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii),

3(c)(C)(iv), or 3(n), such Holder will forthwith discontinue disposition of such

Registrable Securities under the Registration Statement until such Holder's

receipt of the copies of the supplemented Prospectus and/or amended Registration

Statement contemplated by Section 3(j), or until it is advised in writing (the

"Advice") by the Company that the use of the applicable Prospectus may be

resumed, and, in either case, has received copies of any additional or

supplemental filings that are incorporated or deemed to be incorporated by

reference in such Prospectus or Registration Statement.

 

         (n)      If (i) there is material non-public information regarding the

Company which the Company's Board of Directors (the "Board") reasonably

determines not to be in the Company's best interest to disclose and which the

Company is not otherwise required to disclose, or (ii) there is a significant

business opportunity (including, but not limited to, the acquisition or

disposition of assets (other than in the ordinary course of business) or any

merger, consolidation, tender offer or other similar transaction) available to

the Company which the Board reasonably determines not to be in the Company's

best interest to disclose and which the Company would be required to disclose

under the Registration Statement, then the Company may postpone or suspend

filing or effectiveness of a registration

 

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statement for a period not to exceed 30 consecutive days, provided that the

Company may not postpone or suspend its obligation under this Section 3(n) for

more than 60 days in the aggregate during any 12 month period (each, a "Blackout

Period").

 

        4.       REGISTRATION EXPENSES.

 

        All fees and expenses incident to the performance of or compliance with

this Agreement by the Company shall be borne by the Company whether or not the

Registration Statement is filed or becomes effective and whether or not any

Registrable Securities are sold pursuant to the Registration Statement. The fees

and expenses referred to in the foregoing sentence shall include, without

limitation, (i) all registration and filing fees (including, without limitation,

fees and expenses (A) with respect to filings required to be made with each

securities exchange, quotation system, market or over-the-counter bulletin board

on which Registrable Securities are required hereunder to be listed, (B) with

respect to filings required to be made with the Commission, and (C) in

compliance with state securities or Blue Sky laws (including, without

limitation, reasonable and documented fees and disbursements of Special Counsel

in connection with Blue Sky qualifications of the Registrable Securities and

determination of the eligibility of the Registrable Securities for investment

under the laws of such jurisdictions as the Holders of a majority of Registrable

Securities may designate)), (ii) printing expenses (including, without

limitation, expenses of printing certificates for Registrable Securities and of

printing or photocopying prospectuses), (iii) messenger, telephone and delivery

expenses, (iv) Securities Act liability insurance, if the Company so desires

such insurance, (v) fees and expenses of all other Persons retained by the

Company in connection with the consummation of the transactions contemplated by

this Agreement, including, without limitation, the Company's independent public

accountants (including, in the case of an underwritten offering, the expenses of

any comfort letters or costs associated with the delivery by independent public

accountants of a comfort letter or comfort letters) and legal counsel, and (vi)

reasonable and documented fees and expenses of the Special Counsel in connection

with any Registration Statement hereunder, not to exceed $10,000 without the

written consent of the Company. In addition, the Company shall be responsible

for all of its internal expenses incurred in connection with the consummation of

the transactions contemplated by this Agreement (including, without limitation,

all salaries and expenses of its officers and employees performing legal or

accounting duties), the expense of any annual audit, the fees and expenses

incurred in connection with the listing of the Registrable Securities on any

securities exchange as required hereunder.

 

        5.       INDEMNIFICATION.

 

        (a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding

any termination of this Agreement, indemnify and hold harmless each Holder, the

officers, directors, agents, brokers (including brokers who offer and sell

Registrable Securities as principal as a result of a pledge or any failure to

perform under a margin call of Common Stock), investment advisors 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 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,

costs of preparation and

 

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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 or incorporated by reference in the Registration

Statement, any Prospectus or any form of prospectus or in any amendment or

supplement thereto or in any preliminary 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 the case of any

Prospectus or form of prospectus or amendment or supplement thereto, in the

light of the circumstances under which they were made) not misleading, except to

the extent, but only to the extent, that (i) such untrue statements or omissions

are based solely upon information regarding such Holder furnished in writing to

the Company by such Holder expressly for use therein, which information was

reasonably relied on by the Company for use therein or to the extent that such

information relates to (x) such Holder and was reviewed and expressly approved

in writing by such Holder expressly for use in the Registration Statement, such

Prospectus or such form of prospectus or in any amendment or supplement thereto

or (y) such Holder's proposed method of distribution of Registrable Securities

as set forth in EXHIBIT A (or as such Holder otherwise informs the Company in

writing); or (ii) in the case of an occurrence of an event of the type described

in Section 3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder

of an outdated or defective Prospectus after the delivery to the Holder of

written notice from the Company that the Prospectus is outdated or defective and

prior to the receipt by such Holder of the Advice contemplated in Section 3(m);

provided, however, that the indemnity agreement contained in this Section 5(a)

shall not apply to amounts paid