Document:

Exhibit 10.3

 

 

FORBEARANCE UNDER LOAN AND SECURITY AGREEMENT

This Forbearance under Loan and Security Agreement (this "Forbearance") is entered into as of September 9 , 2016 (the "Forbearance Effective Date"), by and between Partners for Growth IV, L.P., a Delaware limited partnership with its principal place of business at 1660 Tiburon Blvd., Suite D, Tiburon California 94920 ("PFG") and ActiveCare, Inc., a Delaware corporation with its principal place of business at 1365 West Business Park Drive, Suite 100, Orem, UT 84058 ("Borrower").

WHEREAS, PFG and Borrower entered into that certain Loan and Security Agreement dated as of February 19, 2016 (the "Loan Agreement") and certain other Security Documents (as defined below), pursuant to  which PFG  has  made  available  to  Borrower the  maximum  aggregate  principal  amount of

$4,500,000 of which (Facility A) $929,518.43 (as of September 7, 2016) and (Facility B) $1,652,777.74 in the aggregate of Tranche 1 and Tranche 2 is outstanding on the Forbearance Effective Date;

WHEREAS, Borrower has requested PFG's consent to its incurring up to $1,000,000 in Indebtedness in the form of a bridge loan from investors (the "Bridge Loan");

WHEREAS, Borrower has notified PFG that it has failed to comply with the minimum EBITDA financial covenant for the reporting month of July 2016 and will not be able to report compliance with the same financial covenant for the reporting months of August 2016 and September 2016 (such financial covenant default for the specified periods, the "Specified Defaults");

WHEREAS, PFG is willing to provide its consent to the Bridge Loan;

WHEREAS, PFG is willing to forbear from exercising remedies under the Loan Agreement due to the Specified Defaults upon the terms and conditions set forth herein;

NOW THEREFORE, the parties hereby agree as follows:

	
1.

	
DESCRIPTION OF EXISTING INDEBTEDNESS: Borrower is indebted to PFG for Obligations pursuant to the Loan Documents, as set forth in the Recitals. Defined terms used but not otherwise defined herein shall have the same meanings set forth in the Loan Agreement.

	
2.

	
DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral, as described in the Loan Agreement and in an Intellectual Property Security Agreement and other documents of even date therewith. The above-described security documents, together with all other documents securing repayment of the Obligations, shall be referred to herein as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations are referred to as the "Existing Loan Documents".

	
3.

	
CONSENT. Subject to the terms of the Bridge Loan expressly specifying the Bridge Loan Indebtedness to be subordinate in priority and repayment to the PFG Liens and prior payment of the Obligations, PFG hereby consents to and approves the Indebtedness proposed by Borrower to be incurred under the Bridge Loan.

1

	
4.

	
RATIFICATION OF LOAN DOCUMENTS; FURTHER ASSURANCES.

	
(a)

	
Borrower acknowledges and agrees that (i) each of the Existing Loan Documents remain in full force and effect in accordance with the original terms, except as expressly modified hereby, (ii) the Liens granted by the Borrower to PFG under the Existing Loan Documents shall remain in place, unimpaired by the transactions contemplated by this Forbearance, and PFG's priority with respect thereto shall not be affected hereby or thereby, and (iii) the Existing Loan Documents shall continue to secure all Obligations as stated therein except as expressly amended and modified by this Forbearance and the Forbearance Documents (as hereinafter defined).

	
(b)

	
Borrower ratifies, reaffirms, restates and incorporates by reference all of its representations, warranties, covenants, and agreements made under the Existing Loan Documents.

	
(c)

	
Borrower hereby ratifies, confirms, and reaffirms that the Obligations include, without limitation, the Loans, and any future modifications, amendments, substitutions or renewals thereof.

	
(d)

	
Borrower hereby agrees that this Forbearance is the legal, valid and binding obligation of Borrower, enforceable against Borrower.

	
(e)

	
Borrower and PFG acknowledge that the Specified Defaults are ongoing, existing and continuing Defaults or Events of Default under the Loan Agreement.

	
(f)

	
Borrower and PFG confirm that neither party has heretofore waived or modified, and has not agreed to waive or modify, any term of the Existing Loan Documents, and any actions that Borrower takes or fails to take (including the expenditure of any funds) is voluntary, informed and taken at its own risk.

	
(g)

	
Borrower shall, from and after the execution of this Forbearance, execute and deliver to PFG whatever additional documents, instruments, and agreements that PFG may reasonably require in order to perfect the Collateral granted in the Loan Agreement more securely in PFG and to otherwise give effect to the terms and conditions of this Forbearance.

	
5.

	
FORBEARANCE PERIOD. Subject to Borrower's strict compliance and performance with the terms of this Forbearance and each Forbearance Document (as defined in Section 7(c)) and so long as no Event of Default (other than the Specified Defaults) or Termination Event occurs, PFG will forbear from enforcing its rights and remedies under the Existing Loan Documents from the date hereof through October 31, 2016 (the "Forbearance Period"). Except as expressly provided herein, this Forbearance does not constitute a waiver or release by PFG of any Obligations or of any Default or Event of Default which may arise in the future after the Forbearance Effective Date.

	
6.

	
TERMINATION. The Forbearance Period shall terminate automatically and without notice to Borrower upon the occurrence of a Termination Event.

	
7.

	
TERMINATION EVENTS. The occurrence of any one or more of the following events shall constitute a termination event (hereinafter, a "Termination Event") under this Forbearance:

	
(a)

	
the failure of the Borrower to cause PFG's Obligations to be repaid as and when required by the Loan Agreement, it being expressly acknowledged and agreed that TIME IS OF THE ESSENCE;

2

 

	
(b)

	
the filing of a petition for relief by or against Borrower under the United States Bankruptcy Code;

	
(c)

	
the failure of the Borrower to promptly, punctually, or faithfully perform any other material term, condition, or covenant of this Forbearance or any of the other documents executed and delivered in connection with this Forbearance (the "Forbearance Documents") as and when due, it being expressly acknowledged and agreed that TIME IS OF THE ESSENCE;

	
(d)

	
the occurrence of any Default or Event of Default (other than the Specified Defaults and for the periods specified within said definition) under the Loan Agreement, any other Loan Document or any Forbearance Document;

	
(e)

	
any recital, representation or warranty made herein, in any Forbearance Document, or in any report, certificate, financial statement or other instrument or document previously, now or hereafter furnished by or on behalf of Borrower in connection with this Forbearance or any Forbearance Document, shall prove to have been false, incomplete or misleading in any material respect on the date as of which it was made;

	
(f)

	
the failure of Borrower to have received $500,000 or more in proceeds of the Bridge Loan by September 19, 2016;

	
(g)

	
the failure of Borrower to have received $1,000,000 or more in proceeds of the Bridge Loan (inclusive of the amount of $500,000 or more received by Borrower under clause (f), above) by September 30, 2016; or

	
(h)

	
a material impairment in the perfection or priority of PFG's security interest in the Collateral or in the value of such Collateral taken as a whole occurs.

	
8.

	
RIGHTS UPON TERMINATION. Upon the earlier of (i) the occurrence of any Termination Event or (ii) the expiration of the Forbearance Period, all of the Obligations shall, without notice or demand, become immediately due and payable in full and at the sole discretion of PFG and PFG shall be entitled to immediately pursue any and all remedies available under applicable law or pursuant to the Existing Loan Documents.

	
9.

	
BORROWERS' REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that:

	
(a)

	
immediately upon giving effect to this Forbearance (i) the representations and warranties contained in the Loan Agreement are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct in all material respects as of such date), and (ii) no Default or Event of Default has occurred and is continuing (other than the Specified Defaults for the period giving rise  to the Specified Defaults;

	
(b)

	
Borrower has the corporate power and authority to execute and deliver this Forbearance and to perform its obligations under the Existing Loan Documents, as amended by this Forbearance;

	
(c)

	
the certificate of incorporation, bylaws and other organizational documents of Borrower delivered to PFG on the Forbearance Effective Date of the Loan Agreement either remain true, accurate and complete as delivered on such Forbearance Effective Date or Borrower shall have delivered true and  correct copies of the foregoing, as amended, supplemented or restated and, in each case, all of the foregoing are and continue to be in full force and effect;

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(d)

	
the execution and delivery by Borrower of this Forbearance and the performance by Borrower of its obligations under the Existing Loan Documents, as amended by this Forbearance, have been duly authorized by all necessary corporate action on the part of Borrower;

	
(e)

	
this Forbearance has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against it in accordance with the terms of this Forbearance, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights;

	
(f)

	
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against PFG or any past, present or future agent, attorney, legal representative, predecessor-in-interest, affiliate, successor, assign, employee, director or officer of PFG, directly or indirectly, arising out of, based upon, or in any manner connected with, any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, or began prior to the execution of this Forbearance and accrued, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of the terms or conditions of the Existing Loan Documents, or which directly or indirectly relate to or arise out of or in any manner are connected with any of the Existing Loan Documents;

	
(g)

	
the proceeds of the Bridge Loan will be used by Borrower for general working capital purposes;

	
(h)

	
Borrower has freely and voluntarily entered into this Forbearance after an adequate opportunity and sufficient period of time to review, analyze and discuss all terms and conditions of this Forbearance and all factual and legal matters relevant hereto with counsel freely and independently chosen by it. Borrower further acknowledges that it has actively and with full understanding participated in the negotiation of this Forbearance after consultation and review with its counsel and that this Forbearance has been negotiated, prepared and executed without fraud, duress, undue influence or coercion of any kind or nature whatsoever having been exerted by or imposed upon any party to this Forbearance.

	
(i)

	
Borrower has not voluntarily or involuntarily, granted any Liens to any creditor not previously disclosed to PFG in writing on or before the Forbearance Effective Date or taken any action or failed to take any action which could or would impair, change, jeopardize or otherwise adversely affect the priority, perfection, validity or enforceability of any Liens securing all or any portion of the Obligations or the priority or validity of PFG's claims with respect to the Obligations relative to any other creditor of Borrower, subject only to Permitted Liens. Borrower acknowledges that PFG has acted in good faith and has conducted in a commercially reasonable manner its relationship with such Borrower in connection with this Forbearance and in connection with the Existing Loan Documents;

	
(j)

	
the Security Documents relating to Intellectual Property either disclose an accurate, complete and current listing of all Collateral that consists of Intellectual Property or  Borrower has included revised and updated Intellectual Property schedules as part of an update to the Representations required in Section 11 of this Forbearance;

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(k)

	
as of the date hereof, Borrower ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in the Representations dated as of the Forbearance Effective Date, as amended by any update to the Representations required in Section 11 of this Forbearance;

	
(l)

	
except as expressly stated in this Forbearance, neither PFG nor any agent, employee or representative of PFG has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Forbearance;

	
(m)

	
Borrower has made such investigation of the facts pertaining to this Forbearance and all of the matters appertaining thereto, as it deems necessary;

	
(n)

	
the terms of this Forbearance are contractual and not a mere recital; and

	
(o)

	
Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Borrower shall indemnify PFG, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein..

Borrower understands and acknowledges that PFG is entering into this Forbearance in reliance upon, and in partial consideration for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate.

	
10.

	
CONTINUING VALIDITY. Except as expressly set forth (if at all) in this Forbearance, the terms of the Existing Loan Documents remain unchanged and in full force and effect. PFG's agreement to modifications to the existing Obligations in no way shall obligate PFG to make any future consents, waivers or modifications to the Obligations. Nothing in this Forbearance shall constitute a satisfaction of the Obligations or a waiver of any default under the Existing Loan Documents. It is the intention of PFG and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by PFG in writing. Unless expressly released herein, no maker, endorser, or guarantor will be released by virtue of this Forbearance. The terms of this paragraph apply not only to this Forbearance, but also to all subsequent forbearances, loan modification agreements and consents.

	
11.

	
CONDITIONS. The effectiveness of this Forbearance is conditioned upon each of:

	
(a)

	
Execution and Delivery. Borrower shall have duly executed and delivered to PFG a counterpart of this Forbearance.

	
(b)

	
Payment of PFG Expenses. Borrower shall have paid upon demand all PFG expenses (including all reasonable attorneys' fees and expenses) incurred in connection with this Forbearance.

	
(c)

	
Forbearance Fee. Borrower shall have paid PFG a fee in consideration of this Forbearance in the amount of $5,000.

	
(d)

	
Bridge Loan Documents. As a condition subsequent, Borrower shall provide true and correct copies of the Bridge Loan documents evidencing the subordinate nature of the Bridge Loans.

	
(e)

	
Update to Representations. Within ten (10) Business Days from the Forbearance Effective Date, Borrower shall have delivered an update to the Representations, to the extent required under Section 6 of the Schedule.

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12.

	
NON-INTERFERENCE. From and after the expiration or termination of the Forbearance Period, Borrower agrees not to interfere with the exercise by PFG of any of its rights and remedies. Borrower further agrees that it shall not seek to distrain or otherwise hinder, delay, or impair PFG's efforts to realize upon the Collateral, or otherwise to enforce its rights and remedies pursuant to the Existing Loan Documents. The provisions of this Section 12 shall be specifically enforceable by PFG.

	
13.

	
INTEGRATION; CONSTRUCTION. The Loan Agreement, other Existing Loan Documents and this Forbearance and any documents executed in connection herewith or pursuant hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Forbearance; provided, however, that any financing statements or other agreements or instruments filed by PFG with respect to Borrower shall remain in full force and effect. The quotation marks around modified clauses set forth herein and any differing font styles in which such clauses are presented herein are for ease of reading only and shall be ignored for purposes of construing and interpreting this Forbearance. This Forbearance is subject to the General Provisions of Section 8 of the Loan Agreement.

	
14.

	
RELEASE OF CLAIMS.

	
(a)

	
FOR AND IN CONSIDERATION OF PFG'S AGREEMENTS CONTAINED HEREIN, BORROWER, TOGETHER WITH ITS, SUCCESSORS AND ASSIGNS (INDIVIDUALLY AND COLLECTIVELY, "RELEASORS") HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER WAIVES AND DISCHARGES PFG AND EACH OF ITS RESPECTIVE PARENTS, DIVISIONS, SUBSIDIARIES, AFFILIATES, MEMBERS, MANAGERS, PARTICIPANTS, PREDECESSORS, SUCCESSORS, AND ASSIGNS, AND EACH OF THEIR RESPECTIVE CURRENT AND FORMER DIRECTORS, OFFICERS, SHAREHOLDERS, MEMBERS, MANAGERS, PARTNERS, AGENTS, AND EMPLOYEES, AND EACH OF THEIR RESPECTIVE PREDECESSORS, SUCCESSORS, HEIRS, AND ASSIGNS (INDIVIDUALLY AND COLLECTIVELY, THE "RELEASED PARTIES") FROM ALL POSSIBLE CLAIMS, COUNTERCLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES AND LIABILITIES WHATSOEVER, WHETHER KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT OR CONDITIONAL, OR AT LAW OR IN EQUITY, IN ANY CASE ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE FORBEARANCE EFFECTIVE DATE THAT ANY OF THE RELEASORS MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES, IF ANY, IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ARISING DIRECTLY OR INDIRECTLY FROM THE LAWSUIT, ANY PRIOR OR EXISTING LOANS BETWEEN RELEASORS AND RELEASED PARTIES, ANY OF THE EXISTING LOAN DOCUMENTS, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER ANY OF THE EXISTING LOAN DOCUMENTS, AND/OR NEGOTIATION FOR AND EXECUTION OF THIS FORBEARANCE, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE. EACH OF THE RELEASORS WAIVES THE BENEFITS OF ANY LAW INCLUDING SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH MAY PROVIDE IN SUBSTANCE: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY IT MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR." EACH OF THE RELEASORS UNDERSTANDS THAT THE FACTS WHICH IT BELIEVES TO BE TRUE AT THE TIME OF MAKING THE RELEASE PROVIDED FOR HEREIN MAY LATER TURN OUT TO BE DIFFERENT THAN IT NOW BELIEVES, AND THAT INFORMATION WHICH IS NOT NOW KNOWN OR SUSPECTED MAY LATER BE DISCOVERED. EACH OF THE RELEASORS ACCEPTS THIS POSSIBILITY, AND EACH OF THEM ASSUMES THE RISK OF THE FACTS TURNING OUT TO BE DIFFERENT AND NEW INFORMATION BEING DISCOVERED; AND EACH OF THEM FURTHER AGREES THAT THE RELEASE PROVIDED FOR HEREIN SHALL IN ALL RESPECTS CONTINUE TO BE EFFECTIVE AND NOT SUBJECT TO TERMINATION OR RESCISSION BECAUSE OF ANY DIFFERENCE IN SUCH FACTS OR ANY NEW INFORMATION.

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(b)

	
By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by PFG with respect to the facts underlying this release or with regard to any of such party's rights or asserted rights.

	
(c)

	
This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Borrower acknowledges that the release contained herein constitutes a material inducement to PFG to enter into this Forbearance, and that PFG would not have done so but for PFG's expectation that such release is valid and enforceable in all events.

	
15.

	
GOVERNING LAW; VENUE. THIS FORBEARANCE SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Borrower and PFG submit to the exclusive jurisdiction of the State and Federal courts in San Francisco County, California, in connection with any proceeding or dispute arising in connection herewith.

7Exhibit 10.4

 

 

CONDITIONALLY-EFFECTIVE WARRANT CANCELLATION AGREEMENT

THIS CONDITIONALLY-EFFECTIVE WARRANT CANCELLATION AGREEMENT (this "Agreement") is made as of   September  9 , 2016, by and between the undersigned (the "Warrant Holders") and ActiveCare, Inc., a Delaware corporation (the "Company").

RECITALS

	
A.

	
The Company previously granted to the Warrant Holders (i) that certain warrant for 7,209,210 shares of Company Common Stock (Partners for Growth IV, L.P.) ("PFG"), (ii) that certain warrant for 576,737 shares of Company Common Stock (PFG Equity Investors, LLC) and (iii) that certain warrant for 4,229,403 shares of Company Common Stock (SVB Financial Group, by assignment from Silicon Valley Bank, its Affiliate), each dated as of February 19, 2016 (collectively, the "Warrants").

	
B.

	
The Company anticipates consummating an equity (only) financing raising not less than $15,000,000 in cash proceeds to the Company (such equity (only) financing at such minimum dollar threshold, the "Equity Financing").

	
C.

	
The Company has advised PFG that there may be certain negative accounting impacts associated with certain provisions of the Warrants and the Company has requested that the Warrants be canceled in exchange for other consideration.

	
D.

	
To facilitate the Equity Financing and to relieve the Company of certain potential negative accounting impacts of the Warrants on the Company, the Company and Warrant Holders are entering into this Agreement to provide for the termination and cancellation of the Warrants, contingent and effective upon the Effective Time, so long as not after the Outside Date.

NOW, THEREFORE, in consideration of the premises and covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Warrant Holders and the Company hereby agree as follows:

	
1.

	
Warrant Cancellation; Cancellation Payment. In consideration of the Company's promises under this Agreement, Warrant Holders hereby agrees with the Company (for the benefit of the Company) that, without the need for any further action or agreement on the part of Warrant Holders or the Company, contingent upon the conditions set forth in Section 4 being satisfied and effective as of the date and time (but not later than the Outside Date, as defined in Section 4(c)) that the Equity Financing has been irrevocably consummated and a written certification of the same by an authorized officer of the Company has been transmitted to each Warrant Holder (the "Effective Time"), the Warrants and all rights and obligations of the Company and Warrant Holders under the Warrants shall each be irrevocably and fully terminated in exchange for the Warrant Exchange Consideration (as defined below). The Warrant Holders hereby acknowledge and agree that in exchange for the cancellation of the Warrants, Warrant Holders will be entitled to receive in exchange: (i) Common Stock of the Company in the number of shares of Common Stock set forth in Schedule A (the "Stock Consideration"), and (ii) Company indebtedness in favor of PFG, in the form of an unsecured, full-recourse promissory note of the Company in the form set forth in Schedule B (the "Note") (the Stock Consideration and the Note (and proceeds thereof) collectively, the "Warrant Exchange Consideration").

1

	
2.

	
Representations and Warranties of the Warrant Holders. The Warrant Holders hereby represents and warrants to the Company that: (a) Warrant Holders has full and complete power, legal right and authority to execute and deliver this Agreement and to carry out its provisions; (b) the execution, delivery and performance of this Agreement by the Warrant Holders has been duly authorized by all necessary action, if any, on the part of Warrant Holders; and (c) the Warrant Holders is the legal, record and beneficial owner of the Warrants and the Warrants consist of all warrants to purchase capital stock of the Company held by the Warrant Holders.

	
3.

	
Representations and Warranties of the Company.  The  Company hereby represents and warrants to the Warrant Holders as follows:

	
(a)

	
the Company has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and the transaction contemplated herein have been expressly authorized by the Company's Board of Directors;

	
(b)

	
the certificate of incorporation, bylaws and other organizational documents of the Company delivered to PFG in connection with this Agreement are true, accurate and complete and, in each case, all of the foregoing are and continue to be in full force and effect;

	
(c)

	
the execution and delivery by the Company of this Agreement and the performance by the Company of its obligations under this Agreement (including the Note), have been duly authorized by all necessary corporate action on the part of the Company;

	
(d)

	
this Agreement has been duly executed and delivered by the Company and is the binding obligation of the Company, enforceable against it in accordance with the terms of this Agreement, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights;

	
(e)

	
all stockholder consents require for the issuance of the Stock Consideration to each Warrant Holder have been secured or will have been secured.

	
4.

	
CONDITIONS TO EFFECTIVENESS. The automatic exchange of the Warrants for the Warrant Exchange Consideration shall be subject to;

	
(a)

	
the irrevocable stockholder consent to the issuance of the Stock Consideration;

	
(b)

	
                               the issuance of the Stock Consideration to the Warrant Holders; and

	
(c)

	
the consummation of an Equity Financing (at the dollar threshold specified within the definition thereof) on or before December 31, 2016 at 4:00 p.m. Pacific time (such date and time, the "Outside Date").

2

Notwithstanding anything to the contrary set forth herein, if the foregoing conditions have not been satisfied as and when due, this Warrant Cancellation Agreement shall be of no force and effect and neither the Warrant Holders or the Company shall have any obligations to the other hereunder.

	
5.

	
Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successor and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the Warrant Holders or the Company or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

	
6.

	
Miscellaneous. This Agreement contains the entire agreement of  the parties hereto relating to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those made herein. No amendment or modification of this Agreement shall be valid or binding unless made in writing and duly executed by the party against whom enforcement of any such amendment or modification is sought and making specific references to this Agreement. This Agreement and the rights and obligations of the parties hereunder shall be governed by the laws of the State of California, without regard to its conflicts of laws principles. This Agreement may be executed in any number of counterparts (including by facsimile or other electronic transmission), each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

3

SCHEDULE A

Stock Consideration

 

	
Partners for Growth IV, L.P.

	
3,240,000 Shares

	
SPFG Equity Investors, LLC

	
259,200 Shares

	
SVB Financial Group

	
1,900,800 Shares

 

4

SCHEDULE B NOTE

5

UNSECURED PROMISSORY NOTE

	
$180,000   (Initial Principal Amount)

	
September     , 2016

Subject to the terms and conditions of this Note, for good and valuable consideration received, ActiveCare, Inc., a Delaware company with its principal business address at 1365 West Business Park Drive, Suite 100, Orem, UT 84058 (the "Company"), irrevocably promises to pay to the order of Partners for Growth IV, L.P. or its designees, with Holder's principal business address at 1660 Tiburon Blvd., Suite D, Tiburon, CA 94920 (the "Holder") the Indebtedness Amount, as defined in Section 1. This Note shall be due and payable upon the earlier to occur of September , 2019 (the "Stated Maturity Date") and the occurrence of a Maturity Event as set forth in Section 3.

The following is a statement of the rights of the Holder under this Note and the terms and conditions to which this Note is subject:

	
1.

	
Interest; Principal Amount at Maturity. This Note shall not bear cash interest of any kind. In lieu of interest being paid on this Note, the Initial Principal Amount set forth above shall increase by the amount of $3333.34 each month until the Stated Maturity Date, on which date the principal amount of $300,000 (the "Final Principal Amount") shall be due and payable.

	
2.

	
            Prepayment. This Note may be prepaid in whole only at any time by payment of the Final Principal Amount.

	
3.

	
Maturity. Prior to the Stated Maturity Date, this Note shall become immediately due and payable upon the earliest to occur of (a) the breach of any representation or warranty made to Holder by the Company or its representatives, or (b) the dissolution, termination of existence or insolvency of the Company or the Company fails to meet its debts as they mature; or the appointment of a receiver, trustee or custodian for all or any material part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by or against the Company under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, or (c) a merger, consolidation, sale of all or substantially all of the Company's assets or other "Fundamental Transaction" as defined in the Company's Amended and Restated Certificate of Incorporation (as amended to the date of this Note), or (d) any redemption of the Company's preferred stock (each, a "Maturity Event").

7. Representations of the Company. Representations and Warranties of the Company.  The Company hereby represents and warrants to the Warrant Holders as follows:

	
(a)

	
the Company has the corporate power and authority to execute, deliver and perform its obligations under this Note;

	
(b)

	
the certificate of incorporation, bylaws and other organizational documents of the Company as delivered to PFG are true, accurate and complete;

	
(c)

	
the execution and delivery by the Company of this Note and the performance by the Company of its obligations under this Note (including the Note), have been duly authorized by all necessary corporate action on the part of the Company;

	
(d)

	
this Note has been duly executed and delivered by the Company and is the binding obligation of the Company, enforceable against it in accordance with the terms of this Note, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights.

	
4.

	
Assignment. This Note shall inure to the benefit of and be binding upon each of the parties hereto and their respective successors and assigns.

6

	
5.

	
Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Holder of the Note.

	
6.

	
Notices. Any notice, request or other communication required or permitted hereunder will be in writing and shall be deemed to have been duly given if personally delivered or if sent by overnight courier or sent by electronic mail and also by registered or certified mail to the other party at its respective address of the Company and Holder. Any party hereto may by notice so give change its address for future notice hereunder.

	
7.

	
Governing law; Jurisdiction. This Note shall be governed by and construed in accordance with the laws of the State of California, excluding that body of law relating to conflict of laws. The Company agrees that any legal action or proceeding arising out of or relating to this Note may be brought in the federal and state courts of Northern California and the Company irrevocably submits to the non-exclusive jurisdiction of such courts.

	
8.

	
Headings; References. All headings used herein are used for convenience only and will not be used to construe or interpret this Note. Except where otherwise indicated, all references herein to Sections refer to Sections hereof.

	
9.

	
Attorneys' Fees and Costs. If any legal action, arbitration or other proceeding is brought to enforce or interpret this Note or matters relating to it, the substantially prevailing party will be entitled to recover reasonable attorneys' fees and other costs incurred in such action, arbitration or proceeding from the other party, in addition to any other relief to which such substantially prevailing party is entitled.

	
10.

	
Additional Documents and Acts. Each party will execute and deliver such additional documents and instruments, and perform such additional acts, as are commercially reasonable and necessary to carry out and perform its obligations in this Note.

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IN WITNESS WHEREOF, the parties have caused this Note to be issued on September     , 2016.

Borrower: ActiveCare, Inc.

		By	CEO or President

		By	Secretary or CFO

PFG:

PARTNERS FOR GROWTH IV, L.P.

By                                                                

Name:                                                                  

Title: Manager, Partners for Growth IV, LLC, its G

8

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