UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 6, 2017
ACTIVECARE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 000-53570 | 87-0578125 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1365 West Business Park Drive
Orem, UT 84058
(Address of principal executive offices)
(877) 219-6050
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
Forbearance Agreements and Lock-Ups
On December 6, 2017 (the “Lock-Up Date”) ActiveCare, Inc. (the “Company”) entered into those certain forbearance and lock up letter agreements (“Forbearance and Lock-Up Agreements”) with four (4) debtors (the “Debt Holders”) which currently hold convertible debentures in the aggregate amount of $ 3,779,879 (the “Existing Loan Documents”), whereby the Debt Holders agreed that, without prior written consent of the Company, the Debt Holders will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Common Stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of Common Stock, whether any such transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) May 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more (the “Lock-Up Period”).
Additionally, the Debt Holders agreed that, that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the Existing Loan Documents (the “Extension Forbearance Period”).
The Forbearance and Lock-Up Agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.
Securities Purchase Agreement, Note, and Warrant.
Effective December 11, 2017 (the “Effective Date”), ActiveCare, Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) with four accredited investors, including the Company’s new Chief Executive Officer, Mark Rosenblum (each an “Investor and together the “Investors") in connection with the closing of a bridge financing (the “Bridge Financing”) in the gross amount of $600,000. Pursuant to the Purchase Agreement, the Investors purchased from the Company (i) Promissory Notes in the aggregate principal amount of $ 631,578.06 (the “Notes”) due and payable six months from the Effective Date and (ii) Common Stock Purchase Warrants (the “Warrant”), exercisable for five years from the date of issuance, to purchase up that certain amount of shares with an aggregate exercise amount equal to $600,000 at an exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in the companies contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the “Private Placement”) (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment hereunder (the “Exercise Price”). The Notes were issued in favor of the Investors with an original issue discount equal to five percent (5%).
Additionally, pursuant to the Purchase Agreement, the Company will issue the Investors Common Stock (the “Origination Shares”) worth 30% of the purchase price paid by each Investor (the “Origination Dollar Amount”) on the 5th trading day after the pricing of the Private Placement, but in no event later than six months from the Effective Date. The Origination Dollar amount will divided by the lowest of (i) $3.00 (subject to adjustment for stock splits), (ii) 80% of the common stock offering price in the Private Placement, (iii) 80% of the offering price of the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement.
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At the closing of the Private Placement the Note shall automatically convert into a subscription into the Private Placement in an amount equal to 125% of the Note balance, subject to certain conditions as outlined therein.
If the Company fails to repay the balance due under the Note on its Maturity the Investors have the right, at any time, at their election, to convert all or part of the outstanding and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of Common Stock of the Company pursuant to the following conversion formula: number of shares receivable upon conversion equals the dollar amount being converted divided by the Conversion Price. The Conversion Price is the lesser of $3.00 (subject to adjustment for stock splits) or 60% of the lowest trade price in the 25 trading days. Further, in the event of any default, the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof through the date of acceleration (the “Note Balance”), shall become, at the Investor’s election, immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the Investor’s choice of (this choice may be made at any time without presentment, demand, or notice of any kind): (i) the Note Balance divided by the Conversion Price on the date of the default multiplied by the closing price on the date of the default; or (ii) the Note Balance divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a lower Conversion Price, multiplied by the closing price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a higher closing price; or (iii) 150% of the Note Balance.
If, at any time the Note is outstanding, the Company issues a Variable Security (as defined therein), then in such event the Investors shall have the right to convert all or any portion of the outstanding balance of the Notes into shares of Common Stock on the same terms as granted in any applicable Variable Security issued by the Company.
The foregoing descriptions of the Forbearance and Lock Up Agreement, Purchase Agreement, the Notes, and the Warrants do not purport to be complete and are qualified in their entirety by the terms and conditions of such documents. Copies of the Form of Forbearance and Lock-Up Agreement, Form Purchase Agreement, the Form Note, and the Form Warrant are attached hereto as Exhibits 10.1, 10.2, 10.3, and 4.1, respectively, and are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of the Registrant.
Item 1.01 is hereby incorporated by reference.
Item 3.02 Unregistered Sales of Equity Securities
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
The securities issued pursuant to the Bridge Financing were not registered under the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section 4(a)(2) of the Securities Act. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since they agreed to, and received, share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors, Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Resignations
Mr. Eric Robinson voluntarily resigned as Chief Financial Officer, Secretary and In-House Counsel, and all other positions with the Company to which he has been assigned regardless of whether he served in such capacity, effective immediately. Mr. Robinson’s resignation was not as a result of any disagreements with the Company.
On the same date, Mr. Jeffrey Peterson voluntarily resigned as Chairman of the Board of Directors (the “Board”), while acknowledging that he will continue to serve the Company as a Director and Executive Vice President.
On the same date, Mr. Robert J. Welgos and Mr. Bradley Robinson voluntarily resigned as members of the Board and all other positions with the Company to which they may have been assigned, regardless of whether they served in such capacity, effective immediately. Mr. Welgos and Mr. Robinson’s resignations were not as a result of any disagreements with the Company.
Appointments
Isaac Onn, age 66, Member of the Board of Directors
In connection with the Bridge Financing, the Investors were able to nominate a director to fill a vacancy on the Company’s Board and nominated Issaac Onn. Effective December 11, 2017, the Company appointed Isaac Onn as a member of the Board of Directors. The Board believes that Mr. Onn’s prior management experience and experience serving on public company boards make him ideally qualified to assist the Company. Below is a description of the professional work experience of Mr. Onn.
Mr. Isaac Onn, B.Sc., LLB, has been the Chief Executive Officer and Treasurer at Ness Energy of Israel Inc. since 2008. Mr. Onn served as the Chief Executive Officer and a partner of Erez Tal Bar - Fueling Services Ltd., from 2001 to 2008. He has been a Director of Intellect Neurosciences Inc., since May 2010. Mr. Onn is also currently an outside director of CYBRA Corporation, a position he has held since December 2011. Mr. Onn served as a Director of Diversified Senior Services, Inc., a developer and manager of low and moderate income senior housing and assisted living facilities. Further, Mr. Onn has served as Director of Erez-Tal-Bar Ltd (Israel), IPA, Fuel Services Ltd (Israel), Diversified Senior Services (USA), Airtrax Inc. (USA), Seeworld, Inc. (USA), Aprecia, Inc. (USA), Ness Energy of Israel Inc. (USA) and Intellect Neurosciences, Inc. (USA). Mr. Onn received his degree in marketing management from the Tel-Aviv College of Management and his LLB, Bachelor of Law degree from Ono Academic Law School in Israel He is a member of the Israel Bar Association.
Appointment of the Chairman of the Board of Directors and Chief Executive Officer
In connection with the Bridge Financing and Mr. Peterson’s resignation, Mr. Mark J. Rosenblum was appointed to serve as the Company’s Chairman of the Board and Chief Executive Officer (“CEO”).
Mark J. Rosenblum, age 64, Chairman of the Board of Directors and Chief Executive Officer
Effective as of December 11, 2017, Mr. Rosenblum joined our Company as Chief Executive Officer and Chairman of the Board, following a one-month consultancy with the Company. Most recently Mr. Rosenblum was the Managing Director of CFO Services with Brio Financial Group, a financial services firm from January 2016 to December 10, 2017. From August 2014 to September 2015 Mr. Rosenblum was the Chief Financial Officer for Urigen Pharmaceuticals, Inc., a public company developing innovative products to ameliorate the cause and symptoms associated with urological ailments. From January 2010 through March 2014, Mr. Rosenblum was the Chief Financial Officer, Senior Vice President and Secretary of Advaxis, Inc., a publicly traded clinical development stage biotechnology company focused on the discovery, development and commercialization of Lm-LLO immunotherapies to treat cancers and infectious diseases. From 2005 until January 2010, Mr. Rosenblum was the Chief Financial Officer of Hemobiotech, Inc., a public company primarily engaged in the commercialization of human blood substitute technology. From August 1985 through June 2003, Mr. Rosenblum was employed by Wellman, Inc. (NYSE:WLM) (now DAK Americas), a public chemical manufacturing company. Between 1996 and 2003, Mr. Rosenblum was the Chief Accounting Officer, Vice President and Controller at Wellman, Inc. Mr. Rosenblum holds both a Masters in Accountancy and a B.S. degree (Accounting) from the University of South Carolina. Mr. Rosenblum is a member of the American Institute of Certified Public Accountants and was a licensed Certified Public Accountant for over 30 years.
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Appointment of the Executive Vice President
As mentioned above, upon his resignation from his positions as Chairman and Chief Executive Officer, Mr. Peterson was appointed to serve as the Company’s Executive Vice President and shall remain on the board of directors.
Item 5.02 (e) Compensatory Arrangements of Certain Officers
In connection with Mr. Rosenblum’s appointment as the Company’s Chief Executive Officer, on December 11, 2017, the Company and Mr. Rosenblum finalized the terms of his employment and entered into an employment agreement (the “Rosenblum Employment Agreement”).Mr. Rosenblum shall have such duties, responsibilities and authority which shall include, but not be limited to the responsibility for the overall management, direction and strategy of the Company.
The Company shall pay Mr. Rosenblum a salary at a rate of Three Hundred Thousand and 00/100 Dollars ($300,000) per year (the “Initial Base Salary”). The Initial Base Salary shall increase to an annual rate of Three Hundred and Sixty Thousand Dollars ($360,000) (the “Base Salary”) upon the Company closing a financing of at least Five Million Dollars ($5,000,000). Mr. Rosenblum shall be eligible for an annual performance-based cash bonus of up to 100% of the Base Salary (as further defined in the Rosenblum Employment Agreement”).
The Rosenblum Employment Agreement is for a term of three (3) years and will be automatically renewed for one year periods, unless otherwise terminated by the Company or Mr. Rosenblum. Upon execution of the Rosenblum Employment Agreement the Company agreed to issue restricted shares equal to $300,000 valued at the offering price of the next equity offering of the Company (“RSU”) and an option to purchase an aggregate $600,000 valued at the offering price of the next equity offering of the Company at an exercise price equal to the market price for the next equity offering of the Company (the “Options”). One-third of these Options shall vest immediately, another third on the first anniversary of the Rosenblum Employment Agreement, and the final third on the second anniversary of the Rosenblum Employment Agreement. The RSUs shall vest 50% immediately upon issuance and 25% on each of the first and second anniversaries of the Rosenblum Employment Agreement.
If the Company terminates Mr. Rosenblum’s employment without just cause or if Mr. Rosenblum’s employment is terminated due to Disability (as defined therein), Mr. Rosenblum shall be entitled to receive, in addition to any accrued and unpaid Base Salary, plus any accrued but unused vacation time and unpaid expenses that have been earned as of the date of such termination, the following severance payments (the “Severance Payments”):
(i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following such termination and continuing until the later of (A) the expiration of the Term or (B) the expiration of (i) six (6) months following the effective termination date; provided, however, that if the Company terminates the Agreement without Just Cause (as defined in the Rosenblum Employment Agreement) within six (6) months of the effective date, then Mr. Rosenblum will only be entitled to three (3) months of severance instead of six (6) months; and
(ii) during the Severance Period (as defined in the Rosenblum Employment Agreement), health and life insurance benefits substantially similar to those which Mr. Rosenblum was receiving or entitled to receive immediately prior to termination; provided, however, such insurance benefits shall be reduced to the extent comparable benefits during such period following Mr. Rosenblum’s termination, and any benefits actually received shall be reported by Mr. Rosenblum to the Company.
The above description of the Rosenblum Employment Agreement does not purport to be complete and is qualified in its entirety by reference to such Employment Agreement, which is attached hereto as Exhibit 10.4 to this Current Report on Form 8-K.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
*Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ACTIVECARE, INC. | ||
| Date: December 14, 2017 | By: | /s/ Mark J. Rosenblum |
| Name: | Mark J. Rosenblum | |
| Title: | Chief Executive Officer | |
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Exhibit 4.1
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
COMMON STOCK PURCHASE WARRANT
DOCUMENT W-12072017
ACTIVECARE, INC.
| Warrant Shares: __________ | Initial Issue Date: December __, 2017 |
Aggregate Exercise Amount: $_______
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, ___________, or its assigns (the “Investor” or the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five (5) year anniversary of the Initial Exercise Date (as subject to adjustment hereunder, the “Termination Date”), to subscribe for and purchase from ActiveCare, Inc., a Delaware corporation (the “Issuer” or the “Company”), shares of common stock of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1.2. The number of shares of Common Stock purchasable under this Warrant (the “Warrant Shares”) shall be equal to the Aggregate Exercise Amount divided by the Exercise Price.
ARTICLE 1 EXERCISE RIGHTS
The Holder will have the right to exercise this Warrant to purchase shares of Common Stock as set forth below. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement Document SPA-12072017 dated December ___, 2017 between the Company and the Holder (the “Securities Purchase Agreement”).
1.1 Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, from and after the Initial Exercise Date, and then at any time, by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile or emailed copy of the Notice of Exercise form annexed hereto. Within three (3) business days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or check drawn on a United States bank unless the cashless exercise procedure specified in Section 1.3 below is specified in the applicable Notice of Exercise. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise form within 24 hours of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
1.2 Exercise Price. The exercise price per share of Common Stock under this Warrant shall be the lesser of (i) 80% of the per share price of common stock in the Private Placement, (ii) $3.00 per share, (iii) 80% of the unit price offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment hereunder (the “Exercise Price”). The aggregate exercise price is $__________.
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1.3 Cashless Exercise. The Holder may exercise this Warrant, in whole or in part, at any time after the Initial Exercise Date and prior to the Termination Date by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
1.4 Termination. On the Termination Date, if all or any portion of this Warrant remains unexercised, the Termination Date shall be automatically extended for two years.
1.5 Delivery of Warrant Shares. Warrant Shares purchased hereunder will be delivered to Holder by 2:30 pm EST within two (2) business days of Notice of Exercise by “DWAC/FAST” electronic transfer (such date, the “Warrant Share Delivery Date”). For example, if Holder delivers a Notice of Exercise to the Company at 5:15 pm eastern time on Monday January 1st, the Company’s transfer agent must deliver shares to Holder’s broker via “DWAC/FAST” electronic transfer by no later than 2:30 pm eastern time on Wednesday January 3rd. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date of delivery of the Notice of Exercise. The Company will make its best efforts to deliver the Warrant Shares to the Holder the same day or next day.
1.6 Delivery of Warrant. The Holder shall not be required to physically surrender this Warrant to the Company. If the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, this Warrant shall automatically be cancelled without the need to surrender the Warrant to the Company for cancellation. If this Warrant shall have been exercised in part, the Company shall, at the request of Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant and, for purposes of Rule 144, shall tack back to the original date of this Warrant.
1.7 Warrant Exercise Rescission Rights. For any reason in Holder’s sole discretion, including if the Warrant Shares are not delivered by DWAC/FAST electronic transfer or in accordance with the timeframe stated in Section 1.5, or for any other reason, Holder may, at any time prior to selling those Warrant Shares rescind such exercise, in whole or in part, in which case the Company must, within three (3) days of receipt of notice from the Holder, repay to the Holder the portion of the exercise price so rescinded and reinstate the portion of the Warrant and equivalent number of Warrant Shares for which the exercise was rescinded and, for purposes of Rule 144, such reinstated portion of the Warrant and the Warrant Shares shall tack back to the original date of this Warrant. If Warrant Shares were issued to Holder prior to Holder’s rescission notice, upon return of payment from the Company, Holder will, within three (3) days of receipt of payment, commence procedures to return the Warrant Shares to the Company.
1.8 Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder the Warrant Shares on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions and other fees, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either (x) reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded), (y) deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder, or (z) pay in cash to the Holder the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.
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1.9 Make-Whole for Market Loss after Exercise. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the Warrant Shares by DWAC/FAST electronic transfer (such as by delivering a physical certificate) and if the Holder incurs a Market Price Loss, then at any time subsequent to incurring the loss the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Market Price Loss and the Company must make the Holder whole as follows:
Market Price Loss = [(High trade price on the day of exercise) x (Number of Warrant Shares)] – [(Sales price realized by Holder) x (Number of Warrant Shares)]
The Company must pay the Market Price Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
1.10 Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the Warrant Shares by the Warrant Share Delivery Date and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of Warrant Shares)]
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
1.11 Default. Each of the following are an event of default under this Warrant: (i) the Issuer shall fail to deliver shares from any exercise of this Warrant when due and payable thereunder; or (ii) the Issuer shall fail to pay any cash or other amount due under this Warrant when due and payable thereunder; or (iii) the Issuer shall breach or fail to honor any other term of this Warrant, any term under any other document related to this Warrant, or any other term of any of the other Transaction Documents, or (iv) the Issuer shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (v) the Issuer shall make a general assignment for the benefit of creditors; or (vi) the Issuer shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or filed against the Issuer.
1.12. Remedies. For each notice of exercise of a warrant, in the event that shares are not delivered by the third business day (inclusive of the day of exercise), a fee of $2,000 per day will be assessed for each day after the third business day (inclusive of the day of exercise) until share delivery is made; and such fee will be added to the Aggregate Exercise Amount of the Warrant (under the Investor’s and the Issuer’s expectations that any penalty amounts will tack back to the Initial Issue Date of the Warrant). The Issuer will not be subject to any penalties once its transfer agent correctly processes the shares to the DWAC system. The parties acknowledge and agree that upon an event of default, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under this Warrant or any other Transaction Document between the parties are intended by the parties to be, and shall be deemed, liquidated damages. The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Warrant is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in this Warrant and the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Effective Date and are consistent with investments of this type. The liquidated damages provisions shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however, that the liquidated damages are intended to be in lieu of actual damages.
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1.13 Choice of Remedies. Nothing herein, including, but not limited to, Holder’s electing to pursue its rights under Sections 1.9, 1.10 or 1.12 of this Warrant, shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. In this regard, the Company hereby agrees that the Holder will be entitled to obtain specific performance and/or injunctive relief with respect to any default under this Warrant, including, without limitation, with respect to the Issuer’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof, or the Issuer’s obligations regarding the reservation of shares and its transfer agent, including the use, termination, replacement or resignation of the transfer agent and the obligation to deliver an irrevocable instruction and share reservation letter with any subsequent transfer agent. The Issuer agrees that, in such event, all requirements for specific performance and/or preliminary and permanent injunctive relief will be satisfied, including that the Investor would suffer irreparable harm for which there would be no adequate legal remedy. The Issuer further agrees that it will not object to a court or arbitrator granting or ordering specific performance or preliminary and/or permanent injunctive relief in the event the Investor demonstrates that the Issuer has failed to comply with any obligation herein. Such a grant or order may require the Issuer to immediately issue shares to the Investor pursuant to a Notice of Exercise, and/or require the Issuer to immediately satisfy its obligations regarding the reservation of shares and its transfer agent, including the use, termination, replacement or resignation of the Issuer’s transfer agent and the obligation to deliver an irrevocable instruction and share reservation letter with any subsequent transfer agent. The Issuer further expressly waives any right to any bond in connection with any temporary or preliminary injunction.
1.14 Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise.
1.15 Holder’s Exercise Limitations. Unless otherwise agreed in writing by both the Company and the Holder, at no time will the Holder exercise any amount of this Warrant to purchase Common Stock that would result in the Holder owning more than 9.99% of the Common Stock outstanding of the Company (the “Beneficial Ownership Limitation”). Upon the written or oral request of Holder, the Company shall within twenty-four (24) hours confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.
ARTICLE 2 ADJUSTMENTS
2.1 Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2.1 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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2.2 Private Placement Price Reset. If the Company closes on the Private Placement, the Exercise Price shall be reduced and only reduced to equal the Reset Price and consequently the number of Warrant Shares issuable hereunder shall be increased such that the Aggregate Exercise Amount hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Amount prior to such adjustment. The Reset Price is the lesser of (i) 80% of the common stock offering price of the Private Placement, (ii) 80% of the unit price offering price of the Private Placement, or (iii) 80% of the exercise price of any warrants issued in the Private Placement.
2.3 Subsequent Equity Sales. Until such time up to an including the date on which the Company closes on the Private Placement, if the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock (including pursuant to the terms of any outstanding securities issued prior to the issuance of this security (including, but not limited to, warrants, convertible notes, or other agreements)) or any security entitling the holder thereof (including pursuant to sales, grants, conversions, warrant exercises or other issuances to the Holder as a result of these Transaction Documents, prior transaction documents, or future transaction documents) to acquire Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock (a “Common Stock Equivalent”), at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price regardless of whether such holder has received or ever receives shares at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price and consequently the number of Warrant Shares issuable hereunder shall be increased such that the Aggregate Exercise Amount hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Amount prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder, in writing, no later than the business day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 2.3, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). In addition, the Company and/or its transfer agent shall provide the Holder, whenever the Holder requests at any time while this Warrant is outstanding, a schedule of all issuances of Common Stock or Common Stock Equivalents since the date of the Securities Purchase Agreement, including the applicable issuance price, or applicable reset price, exchange price, conversion price, exercise price and other pricing terms. The term issuances shall also include all agreements to issue, or prospectively issue Common Stock or Common Stock Equivalents, regardless of whether the issuance contemplated by such agreement is consummated. The Company shall notify the Holder in writing of any issuances within twenty-four (24) hours of such issuance. For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2.3, upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price.
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2.4 Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 2.1 through 2.3 above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
2.5 Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 2.4), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
2.6 Notice to Holder. Whenever the Exercise Price is adjusted pursuant to any provision of this Article 2, the Company shall promptly notify the Holder (by written notice) setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ARTICLE 3 COMPANY COVENANTS
3.1 Reservation of Shares. As set forth in Section 3.2 of the Securities Purchase Agreement, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Warrant Shares upon the full exercise of this Warrant. The Company represents that upon issuance, such Warrant Shares will be duly and validly issued, fully paid and non-assessable. The Company agrees that its issuance of this Warrant constitutes full authority to its officers, agents and transfer agents who are charged with the duty of executing and issuing shares to execute and issue the necessary Warrant Shares upon the exercise of this Warrant. No further approval or authority of the stockholders of the Board of Directors of the Company is required for the issuance of the Warrant Shares.
3.2 No Adverse Actions. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
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ARTICLE 4 MISCELLANEOUS
4.1 Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
4.2 Transferability. Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, by a written assignment of this Warrant duly executed by the Holder or its agent or attorney. If necessary to obtain a new warrant for any assignee, the Company, upon surrender of this Warrant, shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and such new Warrants, for purposes of Rule 144, shall tack back to the original date of this Warrant. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
4.3 Assignability. The Company may not assign this Warrant. This Warrant will be binding upon the Company and its successors, and will inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder to anyone of its choosing without the Company’s approval.
4.4 Notices. Any notice required or permitted hereunder must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.
4.5 Governing Law, Legal Proceedings, and Arbitration. This Warrant will be governed by, construed and enforced in accordance with the substantive laws of the State of Nevada (including any rights to specific relief provided for under Nevada statutes), without regard to the conflict of laws principles thereof. The parties hereby warrant and represent that the selection of Nevada law as governing under this Warrant (i) has a reasonable nexus to each of the Parties and to the transactions contemplated by the Warrant; and (ii) does not offend any public policy of Nevada, Florida, or of any other state, federal, or other jurisdiction.
Any action brought by either party against the other arising out of or related to this Warrant, or any other agreements between the parties, shall be commenced only in the state or federal courts of general jurisdiction located in Miami-Dade County, in the State of Florida, except that all such disputes between the parties shall be subject to alternative dispute resolution through binding arbitration at the Investor’s sole discretion and election (regardless of which party initiates the legal proceedings). The parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. Both parties and the individuals signing this Note agree to submit to the jurisdiction of such courts or to such arbitration panel, as the case may be.
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If the Investor elects alternative dispute resolution by arbitration, the arbitration proceedings shall be conducted in Miami-Dade County and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Mediation Procedures in effect on the Issue Date of this Warrant, except as modified by this Warrant. The Investor’s demand for arbitration shall be made in writing, delivered to the other party, and filed with the American Arbitration Association. The American Arbitration Association must receive the demand for arbitration prior to the date when the institution of legal or equitable proceedings would be barred by the applicable statute of limitations, unless legal or equitable proceedings between the parties have already commenced, and the receipt by the American Arbitration Association of a written demand for arbitration also shall constitute the institution of legal or equitable proceedings for statute of limitations purposes. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations. The arbitrator(s) shall have the right to award individual relief which he or she deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Warrant. The award and decision of the arbitrator(s) shall be conclusive and binding on all parties, and judgment upon the award may be entered in any court of competent jurisdiction. The Investor reserves the right, but shall have no obligation, to advance the Issuer’s share of the costs, fees and expenses of any arbitration proceeding, including any arbitrator fees, in order for such arbitration proceeding to take place, and by doing so will not be deemed to have waived or relinquished its right to seek the recovery of those amounts from the arbitrator, who shall provide for such relief in the final award, in addition to the costs, fees, and expenses that are otherwise recoverable. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof.
4.6 Delivery of Process by Holder to the Company. In the event of any action or proceeding by Holder against the Company, and only by Holder against the Company, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding may be made by Holder via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the Company at its last known address or to its last known attorney set forth in its most recent SEC filing.
4.7 No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1.1. So long as this Warrant is unexercised, this Warrant carries no voting rights and does not convey to the Holder any “control” over the Company, as such term may be interpreted by the SEC under the Securities Act or the Exchange Act, regardless of whether the price of the Company’s Common Stock exceeds the Exercise Price.
4.8 Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
4.9 Attorney Fees. In the event any attorney is employed by either party to this Warrant with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement of this Warrant or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Warrant, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
4.10 Opinion of Counsel. RESERVED
4.11 Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.
4.12 Amendment Provision. The term “Warrant” and all references thereto, as used throughout this instrument, means this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.13 No Shorting. Holder agrees that so long as this Warrant remains unexercised in whole or in part, Holder will not enter into or effect any “short sale” of the common stock or hedging transaction which establishes a net short position with respect to the common stock of the Company. The Company acknowledges and agrees that as of the date of delivery to the Company of a fully and accurately completed Notice of Exercise, Holder immediately owns the common shares described in the Notice of Exercise and any sale of those shares issuable under such Notice of Exercise would not be considered short sales.
* * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| ACTIVECARE, INC. | ||
| By: | ||
| Jeffrey S. Peterson | ||
| Chief Executive Officer | ||
| HOLDER: | ||
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NOTICE OF EXERCISE
To: ACTIVECARE, INC.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
☐ in lawful money of the United States; or
☐ the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 1.3, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 1.3.
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
| Name: | ||
| Date: |
Exhibit 10.1
LOCK-UP & FORBEARANCE LETTER AGREEMENT
The undersigned understands that ActiveCare, Inc., a Delaware corporation (the “Company”) is raising up to $1,500,000 in a convertible debt security with certain terms and conditions. As such, the undersigned hereby irrevocably agrees to the terms and conditions set forth in this letter agreement relating to a lock-up of common share disposition and forbearance of any defaults which may exist in relation to the debt security held by the undersigned.
LOCK-UP
The undersigned hereby irrevocably agrees that, without the prior written consent, the undersigned will not, directly or indirectly, offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Common Stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of Common Stock, whether any such transaction described in clause or above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, except as provided for below, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or any other securities of the Company, or publicly disclose the intention to do any of the foregoing for a period of the earlier of the date hereof and ending on the 6th month anniversary being that of June 5, 2018 or the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more (the “Lock-Up Period”).
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s securities subject to this Lock-Up Letter Agreement except in compliance with this Lock-Up Letter Agreement.
FORBEARANCE
The undersigned hereby irrevocably agrees that, without the prior written consent, the undersigned will forbear from enforcing its rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the Existing Loan Documents (the “Extension Forbearance Period”).
This Lock-Up and Forbearance Letter Agreement shall automatically terminate upon the earlier of inability to close on a minimum of $550,000 on or before December 31, 2017; June 5, 2018; the consummation of a qualified offering of at least $3,000,000 by the Company.
[Signature page follows]
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up & Forbearance Letter Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the heirs, personal Representative, successors and assigns of the undersigned.
| Very truly yours, | |
| Individual: | |
| Signature | |
| Date: _____________ |
Notice Address:
____________________________
____________________________
____________________________
Attention: ___________________
Email: ______________________
Facsimile: ___________________
Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
DOCUMENT SPA-12072017
This Securities Purchase Agreement (this “Agreement”) is dated as of December __, 2017, between ActiveCare, Inc., a Delaware corporation (the “Issuer”) and ______________________ (the “Investor”) (referred to collectively herein as the “Parties”).
WHEREAS, the Issuer intends to conduct a private placement of its securities to raise net proceeds to the Issuer of at least $5,000,000 (the “Private Placement”);
WHEREAS, the Issuer anticipates closing the Private Placement prior to May 5, 2018;
WHEREAS, the Issuer is seeking financing as a bridge until completion of the Private Placement;
WHEREAS, this Agreement is one of a series of Securities Purchase Agreements with investors to provide bridge financing of at least $600,000 in the aggregate (the “Bridge Financing”); and
WHEREAS, the Issuer desires to sell and the Investor desires to purchase a Promissory Note, issued by the Issuer to the Investor, in the form of Exhibit A attached hereto (the “Note”), a Warrant to purchase shares of the Issuer’s common stock for a period of five (5) years from the date hereof, issued by the Issuer to the Investor, in the form of Exhibit B attached hereto (the “Warrant”), and shares of common stock of the Issuer (the “Origination Shares,” and together with the Note and the Warrant, the “Securities”) as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Issuer and the Investor agree as follows:
ARTICLE I PURCHASE AND SALE
1.1 Purchase and Sale. Upon the terms and subject to the conditions set forth herein, the Issuer agrees to sell, and the Investor agrees to purchase the Note, the Warrant, and the Origination Shares.
1.1.1 On or before the Closing, the Investor shall deliver to Lucosky Brookman, counsel to the Issuer, to hold in escrow until Closing:
(a) The Note duly executed by the Investor;
(b) The Warrant duly executed by the Investor;
(c) A wire transfer of immediately available funds in the amount of US $______ (the “Purchase Price”) to Lucosky Brookman’s Attorney Trust Account.
1.1.2 On or before the Closing, the Issuer shall deliver or cause to be delivered to Lucosky Brookman, counsel to the Issuer, to hold in escrow until Closing:
(a) The Note duly executed by the Issuer;
(b) The Warrant duly executed by the Issuer;
(c) An executed agreement terminating the consulting agreement with David Derrick;
(d) The resignation of Jeffery Peterson as Chief Executive Officer of the Issuer;
(e) The resignation of all members of the Board of Directors other than Jeffrey Peterson;
(f) An executed employment agreement with Mark Rosenblum in the form attached hereto as Exhibit C retaining Mr. Rosenblum to serve as the Chief Executive Officer of the Issuer effective upon closing of the Bridge Financing;
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(g) Duly adopted resolutions of the Board of Directors of the Issuer appointing Mr. Rosenblum as Chairman of the Board of Directors and Isaac Onn as a member of the Board of Directors, effective upon closing of the Bridge Financing; and
(h) Wire instructions for a US bank account in the name of the Issuer from which only Mr. Rosenblum has the authority to distribute funds (the “New Bank Account”).
1.1.3 On or before the Closing, the Issuer and the Investor shall deliver all other documents or agreements related to this transaction.
1.2 Closing. The closing of the transactions contemplated by this Agreement shall occur simultaneously with the other Bridge Financing closings, and which shall occur only upon completion of both of the following: (i) Lucosky Brookman’s receipt of all items required to be delivered prior to Closing as set forth in Section 1.1; and (ii) Lucosky Brookman’s receipt of an aggregate of at least $600,000 of Bridge Financing for the Issuer, including the $___________ being provided by the Investor under this Agreement, on terms substantially identical to the terms being provided to the Investor under this Agreement. If the Closing does not occur on or before December 11, 2017, this Agreement shall be cancelled and Lucosky Brookman shall return the Purchase Price to the Investor. At the Closing, Lucosky Brookman shall deliver the funds from the Bridge Financing to the New Bank Account and Lucosky Brookman shall deliver the Note and the Warrant to the Investor.
1.3 Origination Shares. The Issuer shall deliver the Origination Shares to the Investor as follows:
1.3.1 Origination Share Pricing. On the fifth (5th) trading day after the pricing of the Private Placement, but in no event later than no later than six months from the date hereof, the Issuer shall deliver to the Investor such number of duly and validly issued, fully paid and non-assessable Origination Shares as equals 30% of the Purchase Price paid by the Investor under this Agreement (the “Origination Dollar Amount”) divided by the lowest of (i) $3.00 (subject to adjustment for stock splits), (ii) 80% of the common stock offering price in the Private Placement, (iii) 80% of the unit price offering price of the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement. It is the Issuer’s and the Investor’s expectation that the issuance date of the Origination Shares dates back to the effective date of this Agreement for purposes of Rule 144 under the Securities Act of 1933, as amended (“Rule 144”).
1.3.2 Origination Share Pricing Reset. In the event that the Private Placement is not completed within six months from the date hereof, so long as the Investor owns any of the Origination Shares at the time of a subsequent public offering where the pricing terms from paragraph 1.3.1 above would result in a lower Origination Share pricing, the Origination Shares pricing shall be subject to a reset based on the same pricing terms as described in paragraph 1.3.1 above (such that the Origination Shares issuance price would be reduced and the number of Origination Shares issued would be increased to equal the Origination Dollar Amount). It is the Issuer’s and the Investor’s expectation that the issuance date of any repriced Origination Shares dates back to the effective date of this Agreement for purposes of Rule 144.
1.3.3 Origination Share Beneficial Ownership Limitation. Unless otherwise agreed by both Parties, at no time will the Issuer issue to the Investor such number of Origination Shares that would result in the Investor owning more than 9.99% of the number of shares of common stock outstanding of the Issuer immediately after giving effect to the issuance of the Origination Shares (the “Beneficial Ownership Limitation”). In the event that the number of Origination Shares deliverable to the Investor pursuant to Section 1.3.1 or 1.3.2 above would cause the Investor to exceed the Beneficial Ownership Limitation, the Issuer shall deliver to the Investor such lesser number of Origination Shares the Investor requests that would result in the Investor owning less than the Beneficial Ownership Limitation and the Issuer shall deliver to the Investor the remaining number of Origination Shares at such time as the Investor notifies the Issuer that delivery of such remaining Origination Shares would not cause the Investor to exceed the Beneficial Ownership Limitation.”
ARTICLE II BRIDGE LOAN
2.1 Recitals. The Issuer represents and warrants to the Investor that the first five recitals set forth above are true as of the date of this Agreement.
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2.2. Note Conversion into Private Placement. At the closing of the Private Placement the Note shall automatically convert into a subscription into the Private Placement in an amount equal to 125% of the Note balance, subject to the following conditions: (i) 90% of the debt listed on the attached Schedule A must convert into shares of common stock of the Issuer at the Private Placement price per share, including, without limitation, all debt (and preferred stock) held by insiders and affiliates of the Issuer (as indicated by the blue highlighting on Schedule A); (ii) the Private Placement raises at least $5,000,000 of net new money for the Issuer, not including any conversions of the Bridge Financing or conversions of the debt on Schedule A; (iii) no commission is paid to a placement agent in connection with the conversion and subscription into the Private Placement of the Note, the other Bridge Financing, or the conversion of the debt on Schedule A; (iv) the Warrant and the Origination Shares being issued under this Agreement will not be cancelled or converted into the Private Placement; and (v) the Private Placement closes on or before May 5, 2018.
ARTICLE III MISCELLANEOUS
3.1 Successors and Assigns. This Agreement may not be assigned by the Issuer. The Investor may assign any or all of its rights under this Agreement and agreements related to this transaction. The terms and conditions of this Agreement shall inure to the benefit of, and be binding upon, the respective successors and permitted assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
3.2 Reservation of Shares. RESERVED.
3.3 Rule 144 Tacking Back and Registration Rights. Whenever the Note or Warrant or any other document related to this transaction provides that a conversion amount, make-whole amount, penalty, fee, liquidated damage, or any other amount or shares (a “Tack Back Amount”) tacks back to the original date of the Note, Warrant, or document for purposes of Rule 144 or otherwise, in the event that such Tack Back Amount was registered or carried registration rights, then that Tack Back Amount shall have the same registration status or registration rights as were in effect immediately prior to the event that gave rise to such Tack Back Amount tacking back. For example, if the Investor converts a portion of the Note and receives registered shares and the Investor later rescinds that conversion, the conversion amount would be returned to the principal balance of the Note and upon any future conversion of the Note the amount converted would be convertible into shares registered on that registration statement.
3.4 Terms of Future Financings. Until such time as the closing of the Private Placement, upon any issuance by the Issuer or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Investor in the Note or the warrants, such term, at the Investor’s option, shall become a part of the transaction documents with the Investor. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion rights, conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock issuance or sale price pursuant to a stock purchase or stock issuance, and warrant coverage.
In addition, until such time as the closing of the Private Placement, if the Issuer shall issue or sell Common Stock, or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock (including pursuant to the terms of any outstanding securities issued prior to the issuance of this security (including, but not limited to, warrants, convertible notes, or other agreements)) or any security entitling the holder thereof (including pursuant to sales, grants, conversions, warrant exercises or other issuances to the Investor as a result of these Transaction Documents, prior transaction documents, or future transaction documents) to acquire Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Stock (a “Common Stock Equivalent”) at an effective price per share less than that of the Investor, then simultaneously with the consummation of each dilutive issuance the price for the Investor shall be reduced (and only reduced) and consequently the number of Shares issuable to the Investor shall be increased (and only increased). Such adjustment shall be made to the Note, such Warrants, or Origination Shares whenever such Common Stock or Common Stock Equivalents are issued.
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The Issuer shall notify the Investor of such additional or more favorable term, including the applicable issuance price, or applicable reset price, exchange price, conversion price, exercise price and other pricing terms, and, at any time while the Note or any warrant is outstanding, the Investor may request of the Issuer and/or its transfer agent (and they will provide) a schedule of all issuances since the date of this Agreement of shares of common stock or of securities entitling the holder thereof to acquire shares of common stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, shares of common stock of the Issuer.
3.5 One Year Prohibition on Issuances of Securities. For a period of one year after the closing of the Private Placement, the Issuer shall not issue or sell Common Stock, or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock (including pursuant to the terms of any outstanding securities issued prior to the closing of the Public Offering (including, but not limited to, warrants, convertible notes, or other agreements)) or any security entitling the holder thereof to acquire Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Stock (a “Common Stock Equivalent”) at an effective price per share less than the greatest of (i) the Exercise Price then in effect of any Warrant issued to the Investor, (ii) the common stock offering price in the Public Offering, (iii) the unit price offering price in the Public Offering (if applicable), and (iv) the exercise price of any warrants issued in the Public Offering.
3.6 Governing Law, Legal Proceedings, and Arbitration. This Agreement will be governed by, construed and enforced in accordance with the substantive laws of the State of Nevada, without regard to the conflict of laws principles thereof. The parties hereby warrant and represent that the selection of Nevada law as governing under this Agreement (i) has a reasonable nexus to each of the Parties and to the transactions contemplated by the Agreement; and (ii) does not offend any public policy of Nevada, Florida, or of any other state, federal, or other jurisdiction.
Any action brought by either party against the other arising out of or related to this Agreement, or any other agreements between the parties, shall be commenced only in the state or federal courts of general jurisdiction located in Miami-Dade County, in the State of Florida, except that all such disputes between the parties shall be subject to alternative dispute resolution through binding arbitration at the Investor’s sole discretion and election (regardless of which party initiates the legal proceedings). The parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. Both parties and the individuals signing this Note agree to submit to the jurisdiction of such courts or to such arbitration panel, as the case may be.
If the Investor elects alternative dispute resolution by arbitration, the arbitration proceedings shall be conducted in Miami-Dade County and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Mediation Procedures in effect on the date of this Agreement, except as modified by this Agreement. The Investor’s demand for arbitration shall be made in writing, delivered to the other party, and filed with the American Arbitration Association. The American Arbitration Association must receive the demand for arbitration prior to the date when the institution of legal or equitable proceedings would be barred by the applicable statute of limitations, unless legal or equitable proceedings between the parties have already commenced, and the receipt by the American Arbitration Association of a written demand for arbitration also shall constitute the institution of legal or equitable proceedings for statute of limitations purposes. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations. The arbitrator(s) shall have the right to award individual relief which he or she deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Agreement. The award and decision of the arbitrator(s) shall be conclusive and binding on all parties, and judgment upon the award may be entered in any court of competent jurisdiction. The Investor reserves the right, but shall have no obligation, to advance the Issuer’s share of the costs, fees and expenses of any arbitration proceeding, including any arbitrator fees, in order for such arbitration proceeding to take place, and by doing so will not be deemed to have waived or relinquished its right to seek the recovery of those amounts from the arbitrator, who shall provide for such relief in the final award, in addition to the costs, fees, and expenses that are otherwise recoverable. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof.
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3.7 Right to Specific Performance and Injunctive Relief. Nothing herein shall limit the Investor’s right to pursue any remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. In this regard, the Issuer hereby agrees that the Investor will be entitled to obtain specific performance and/or injunctive relief with respect to the Issuer’s failure to timely deliver shares of common stock as required pursuant to the terms of the Note or the Warrant or the Issuer’s obligations regarding the reservation of shares and its transfer agent, including the use, termination, replacement or resignation of the transfer agent and the obligation to deliver an irrevocable instruction and share reservation letter with any subsequent transfer agent. The Issuer agrees that, in such event, all requirements for specific performance and/or preliminary and permanent injunctive relief will be satisfied, including that the Investor would suffer irreparable harm for which there would be no adequate legal remedy. The Issuer further agrees that it will not object to a court or arbitrator granting or ordering specific performance or preliminary and/or permanent injunctive relief in the event the Investor demonstrates that the Issuer has failed to comply with any obligation herein. Such a grant or order may require the Issuer to immediately issue shares to the Investor, and/or require the Issuer to immediately satisfy its obligations regarding the reservation of shares and its transfer agent, including the use, termination, replacement or resignation of the transfer agent and the obligation to deliver an irrevocable instruction and share reservation letter with any subsequent transfer agent. The Issuer further expressly waives any right to any bond in connection with any temporary or preliminary injunction.
3.8 Due Diligence. RESERVED.
3.9 Delivery of Process by Investor to Issuer. In the event of any action or proceeding by the Investor against the Issuer, and only by Investor against the Issuer, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding may be made by Investor via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the Issuer at its last known address or to its last known attorney as set forth in its most recent SEC filing.
3.10 Opinion of Counsel. RESERVED
3.11 Notices. Any notice required or permitted hereunder must be in writing and either be personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.
3.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of this Agreement may be effected by email.
3.13 Entire Agreement. This Agreement and the other Transaction Documents constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, both oral and written, between the Parties with respect to the subject matter hereof and thereof. The “Transaction Documents” means this Agreement, the Note, the Warrant and all schedules and exhibits related thereto.
3.14 Expenses. The Issuer and the Investor shall pay all of their own costs and expenses incurred with respect to the negotiation, execution, delivery and performance of this Agreement. In the event any attorney is employed by either party to this Agreement with respect to legal or equitable action, arbitration or other proceeding brought by such party for the enforcement of this Agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
3.15 No Public Announcement. Except as required by securities law, no public announcement may be made regarding this Agreement, the Note, the Warrant, or the Purchase Price without written permission by both the Issuer and the Investor.
3.16 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of this __th day of December, 2017.
| ISSUER: | ||
| ACTIVECARE, INC. | ||
| By: | ||
| Jeffrey S. Peterson | ||
| Chief Executive Officer | ||
| INVESTOR: | ||
| By: | ||
I, Jeffrey S. Peterson, personally guarantee that, as set forth in Section 3.2 above, in the event of a change in the Issuer’s transfer agent, the Issuer will provide the Investor, within five business days following termination, resignation or replacement of the Issuer’s transfer agent or any subsequent transfer agent, irrevocable instruction letters, executed by the Issuer and the new transfer agent, providing rights to the Investor identical to the rights provided to the Investor in the irrevocable instruction letters between the Issuer, the Investor, and American Stock Transfer & Trust Company. This personal guarantee is limited to and applies only to the terms of this paragraph.
| Jeffrey S. Peterson |
[Securities Purchase Agreement Signature Page]
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SCHEDULE A
(See attached)
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Exhibit A
Note
(see attached)
| 8 |
Exhibit B
Warrant
(See attached)
| 9 |
Exhibit C
Employment Agreement
(See attached)
| 10 |
Exhibit 10.3
ACAR |
CONVERTIBLE NOTE
FOR VALUE RECEIVED, ActiveCare, Inc., a Delaware corporation (the “Issuer” of this Security) with at least 239,000,000 common shares issued and outstanding, issues this Security and promises to pay to __________________., a Cayman Islands company, or its Assignees (the “Investor”) the Principal Sum along with the Interest Rate and any other fees according to the terms herein. This Note will become effective only upon execution by both parties and delivery of the first payment of Consideration by the Investor (the “Effective Date”).
The Principal Sum is $_______ (______________) plus accrued and unpaid interest and any other fees. The Consideration is $_________ (________) payable by wire (there exists a $________ original issue discount (the “OID”)). The Investor shall pay $__________of Consideration upon closing of this Note as the Purchase Price under the Securities Purchase Agreement Document SPA-12072017 of even date herewith between the Issuer and the Investor. Any term not otherwise defined herein shall have the meaning given such term in the Securities Purchase Agreement.
1. Interest and Repayment. No interest shall accrue on this Note. The Maturity Date is six months after the Effective Date and is the date upon which the Principal Sum of this Note, as well as any unpaid interest and other fees, shall be due and payable. The Investor may extend any Maturity Date in its sole discretion in increments of up to three months at any time before or after any Maturity Date. The Issuer may repay this Note at any time on or before its Maturity Date.
2. Note Conversion into Private Placement. At the closing of the Private Placement the Note shall automatically convert into a subscription into the Private Placement in an amount equal to 125% of the Note balance, subject to the following conditions: (i) 90% of the debt listed on Schedule A of the Securities Purchase Agreement must convert into shares of common stock of the Issuer at the Private Placement price per share, including, without limitation, all debt (and preferred stock) held by insiders and affiliates of the Issuer (as indicated by the blue highlighting on Schedule A); (ii) the Private Placement raises at least $5,000,000 of net new money for the Issuer, not including any conversions of the Bridge Financing or conversions of the debt on Schedule A; (iii) no commission is paid to a placement agent in connection with the conversion and subscription into the Private Placement of the Note, the other Bridge Financing, or the conversion of the debt on Schedule A; (iv) the Warrant and the Origination Shares being issued under the Securities Purchase Agreement will not be cancelled or converted into the Private Placement; and (v) the Private Placement closes on or before May 5, 2018.
3. Conversion upon Default on Repayment. In the event the Issuer fails to repay the balance due under this Note on its Maturity Date, the Investor has the right, at any time, at its election, to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Issuer as per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is the lesser of $3.00 (subject to adjustment for stock splits) or 60% of the lowest trade price in the 25 trading days previous to the conversion (In the case that conversion shares are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible for Xclearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15% discount shall apply). Unless otherwise agreed in writing by both parties, at no time will the Investor convert any amount of the Note into common stock that would result in the Investor owning more than 9.99% of the common stock outstanding. Conversion notices may be delivered to the Issuer by method of the Investor’s choice (including but not limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions shall be cashless and not require further payment from the Investor. If no objection is delivered from the Issuer to the Investor regarding any variable or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Issuer shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Issuer shall deliver the shares from any conversion to the Investor (in any name directed by the Investor) within 3 (three) business days of conversion notice delivery. The Investor, at any time prior to selling all of the shares from a conversion, may, for any reason, rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Issuer (under the Investor’s and the Issuer’s expectations that any returned conversion amounts will tack back to the original date of the Note).
4. Conversion Upon Issuance of a Variable Security. If, at any time this Note is outstanding, the Issuer issues a Variable Security, then in such event the Investor shall have the right to convert all or any portion of the outstanding balance of this Note into shares of the Issuer’s common stock on the same terms as granted in any applicable Variable Security issued by the Issuer (including, for the avoidance of doubt, conversion price, conversion discount, conversion lookback period, method and timing of conversion share delivery, etc.). A Variable Security is any security issued by the Issuer that (i) has or may have conversion rights of any kind, contingent, conditional or otherwise in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the common stock; (ii) is or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the common stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition; or (iii) was issued or may be issued in the future in exchange for or in connection with any contract or instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange.
5. Reservation of Shares. The Issuer will reserve for the Investor from its authorized and unissued Common Stock a number of shares of not less than five times the number of shares necessary to provide for the issuance of Common Stock upon the full conversion of this Note.
6. Terms of Future Financings. Until such time as the closing of the Private Placement, upon any issuance by the Issuer of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Investor in this Note, such term, at the Investor’s option, shall become a part of the transaction documents with the Investor. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion rights, conversion discounts, conversion lookback periods, interest rates, original issue discounts, and warrant coverage.
In addition, until such time as the closing of the Private Placement, if the Issuer shall issue or sell Common Stock, or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock (including pursuant to the terms of any outstanding securities issued prior to the issuance of this security (including, but not limited to, warrants, convertible notes, or other agreements)) or any security entitling the holder thereof (including pursuant to sales, grants, conversions, warrant exercises or other issuances to the Investor as a result of these Transaction Documents (as defined below), prior transaction documents, or future transaction documents) to acquire Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Stock (a “Common Stock Equivalent”) at an effective price per share less than the Conversion Price, then simultaneously with the consummation of each dilutive issuance the Conversion Price for the Investor shall be reduced (and only reduced) and consequently the number of Shares issuable to the Investor shall be increased (and only increased). Such adjustment shall be made to the Conversion Price whenever such Common Stock or Common Stock Equivalents are issued.
The Issuer shall notify the Investor of such additional or more favorable term, including the applicable issuance price, or applicable reset price, exchange price, conversion price, exercise price and other pricing terms, and, at any time while this Note is outstanding, the Investor may request of the Issuer and/or its transfer agent (and they will provide) a schedule of all issuances since the Effective Date of this Note of shares of common stock or of securities entitling the holder thereof to acquire shares of common stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, shares of common stock of the Issuer.
7. Default. Each of the following are an event of default under this Note: (i) the Issuer shall fail to pay any principal under the Note when due and payable (or payable by conversion) thereunder; or (ii) the Issuer shall fail to pay any interest or any other amount under the Note when due and payable (or payable by conversion) thereunder; or (iii) the Issuer shall breach or fail to honor any other term of this Note, any term under any other document related to this Note, or any term of any of the other Transaction Documents; or (iv) the Issuer shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (v) the Issuer shall make a general assignment for the benefit of creditors; or (vi) the Issuer shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or filed against the Issuer.
8. Remedies. For each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a fee of $2,000 per day will be assessed for each day after the third business day (inclusive of the day of the conversion) until share delivery is made; and such fee will be added to the Principal Sum of the Note (under the Investor’s and the Issuer’s expectations that any penalty amounts will tack back to the original date of the Note). The parties agree that the fee shall be applied to the balance of the Note and shall tack back to the Effective Date of the Note for purposes of Rule 144. The parties acknowledge and agree that upon an event of default, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under this Note or any other Transaction Document between the parties are intended by the parties to be, and shall be deemed, liquidated damages. The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Note is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in this Note and the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Effective Date and are consistent with investments of this type. The liquidated damages provisions shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however, that the liquidated damages are intended to be in lieu of actual damages.
9. Acceleration. In the event of any default, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof through the date of acceleration (the “Note Balance”), shall become, at the Investor’s election, immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the Investor’s choice of (this choice may be made at any time without presentment, demand, or notice of any kind): (i) the Note Balance divided by the Conversion Price on the date of the default multiplied by the closing price on the date of the default; or (ii) the Note Balance divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a lower Conversion Price, multiplied by the closing price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a higher closing price; or (iii) 150% of the Note Balance. In connection with such acceleration described herein, the Investor need not provide, and the Issuer hereby waives, any presentment, demand, protest or other notice of any kind, and the Investor may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the Investor at any time prior to payment hereunder and the Investor shall have all rights as a holder of the note until such time, if any, as the Investor receives full payment pursuant to this Section 9. No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon.
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10. Right to Specific Performance and Injunctive Relief. Nothing herein shall limit the Investor’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. In this regard, the Issuer hereby agrees that the Investor will be entitled to obtain specific performance and/or injunctive relief with respect to the Issuer’s failure to timely deliver shares of Common Stock upon conversion of the Note as required pursuant to the terms hereof or the Issuer’s obligations regarding the reservation of shares and its transfer agent, including the use, termination, replacement or resignation of the transfer agent and the obligation to deliver an irrevocable instruction and share reservation letter with any subsequent transfer agent. The Issuer agrees that, in such event, all requirements for specific performance and/or preliminary and permanent injunctive relief will be satisfied, including that the Investor would suffer irreparable harm for which there would be no adequate legal remedy. The Issuer further agrees that it will not object to a court or arbitrator granting or ordering specific performance or preliminary and/or permanent injunctive relief in the event the Investor demonstrates that the Issuer has failed to comply with any obligation herein. Such a grant or order may require the Issuer to immediately issue shares to the Investor pursuant to a Conversion Notice and/or require the Issuer to immediately satisfy its obligations regarding the reservation of shares and its transfer agent, including the use, termination, replacement or resignation of the Issuer’s transfer agent and the obligation to deliver an irrevocable instruction and share reservation letter with any subsequent transfer agent. The Issuer further expressly waives any right to any bond in connection with any temporary or preliminary injunction.
11. No Shorting. The Investor agrees that so long as this Note from the Issuer to the Investor remains outstanding, the Investor will not enter into or effect “short sales” of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock of the Issuer. The Issuer acknowledges and agrees that upon delivery of a conversion notice by the Investor, the Investor immediately owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such conversion notice would not be considered short sales.
12. Assignability. The Issuer may not assign this Note. This Note will be binding upon the Issuer and its successors and will inure to the benefit of the Investor and its successors and assigns and may be assigned by the Investor to anyone without the Issuer’s approval.
13. Governing Law, Legal Proceedings, and Arbitration. This Note will be governed by, construed and enforced in accordance with the substantive laws of the State of Nevada (including any rights to specific relief provided for under Nevada statutes), without regard to the conflict of laws principles thereof. The parties hereby warrant and represent that the selection of Nevada law as governing under this Note (i) has a reasonable nexus to each of the Parties and to the transactions contemplated by the Note; and (ii) does not offend any public policy of Nevada, Florida, or of any other state, federal, or other jurisdiction.
Any action brought by either party against the other arising out of or related to this Note, or any other agreements between the parties, shall be commenced only in the state or federal courts of general jurisdiction located in Miami-Dade County, in the State of Florida, except that all such disputes between the parties shall be subject to alternative dispute resolution through binding arbitration at the Investor’s sole discretion and election (regardless of which party initiates the legal proceedings). The parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. Both parties and the individuals signing this Note agree to submit to the jurisdiction of such courts or to such arbitration panel, as the case may be.
If the Investor elects alternative dispute resolution by arbitration, the arbitration proceedings shall be conducted in Miami-Dade County and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Mediation Procedures in effect on the Effective Date of this Note, except as modified by this agreement. The Investor’s election to arbitrate shall be made in writing, delivered to the other party, and filed with the American Arbitration Association. The American Arbitration Association must receive the demand for arbitration prior to the date when the institution of legal or equitable proceedings would be barred by the applicable statute of limitations, unless legal or equitable proceedings between the parties have already commenced, and the receipt by the American Arbitration Association of a written demand for arbitration also shall constitute the institution of legal or equitable proceedings for statute of limitations purposes. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations. The arbitrator(s) shall have the right to award individual relief which he or she deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Note. The award and decision of the arbitrator(s) shall be conclusive and binding on all parties, and judgment upon the award may be entered in any court of competent jurisdiction. The Investor reserves the right, but shall have no obligation, to advance the Issuer’s share of the costs, fees and expenses of any arbitration proceeding, including any arbitrator fees, in order for such arbitration proceeding to take place, and by doing so will not be deemed to have waived or relinquished its right to seek the recovery of those amounts from the arbitrator, who shall provide for such relief in the final award, in addition to the costs, fees, and expenses that are otherwise recoverable. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof.
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14. Delivery of Process by the Investor to the Issuer. In the event of any action or proceeding by the Investor against the Issuer, and only by the Investor against the Issuer, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding may be made by the Investor via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the Issuer at its last known attorney as set forth in its most recent SEC filing.
15. Attorney Fees. If any attorney is employed by either party with regard to any legal or equitable action, arbitration or other proceeding brought by such party for enforcement of this Note or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Note, the prevailing party will be entitled to recover from the other party reasonable attorneys' fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
16. Opinion of Counsel. RESERVED
17. Notices. Any notice required or permitted hereunder (including Conversion Notices and demands for arbitration) must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.
* * *
| Issuer: | Investor: | |||
| Jeffrey S. Peterson | ||||
| ActiveCare, Inc. | ||||
| Chief Executive Officer | ||||
| Date: | Date: | |||
[Convertible Note Signature Page]
4
Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is effective as of December 7, 2017, by and between ACTIVECARE, INC., a Delaware corporation (the “Company”), and Mark J. Rosenblum (the “Executive”).
WHEREAS, the Company and Executive desire to enter into this Agreement pursuant to which the Company will employ Executive in the capacity of Chief Executive Officer, for the period and on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the parties hereby agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby employs Executive and Executive hereby accepts such employment in the capacity of Chief Executive Officer (“CEO”) of the Company to act in accordance with the terms and conditions hereinafter set forth. During the Term (as defined below), Executive agrees that he will devote his full time, attention and skills to the operation of the Business (as defined below) of the Company and that he will perform such duties, functions, responsibilities and authority in connection with the foregoing as are from time to time delegated to Executive by the Board of Directors of the Company (the “Board”), which duties shall include but shall not be limited to the responsibility for the overall management, direction and strategy of the Company. For purposes of this Agreement, the Business of the Company shall be defined as an advanced diabetes monitoring and communication device company. Executive is not bound by the terms of any agreement with any previous employer or other party which would limit his abilities to perform his duties and obligations hereunder.
2. TERM. The term of this Agreement shall commence on the date hereof and shall continue for a period of three (3) years. Thereafter, this Agreement shall be automatically renewed for one year periods, unless otherwise terminated by the Company or Executive upon written notice to the other given not less than ninety (90) days prior to the next anniversary of the Agreement. ‘The initial three year term may terminate as provided for in Section 6 below. The initial term and any renewals thereof shall be referred to herein as the “Term.”
3. COMPENSATION. In consideration of all the services to be rendered by Executive to the Company hereunder, the Company hereby agrees to pay or otherwise provide Executive the following compensation and benefits. It is furthermore understood that the Company shall have the right to deduct or withhold under any provision of applicable law (including but not limited to Social Security payments, income tax withholding and other required deductions not in effect or which may become effective by law any time during the Term) from:
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| (a) | Salary. Executive shall receive an initial annual salary of Three Hundred Thousand Dollars ($300,000) (“Initial Base Salary”). The Initial Base Salary shall increase to an annual rate of Three Hundred Sixty Thousand Dollars ($360,000) upon the Company closing a financing of at least Five Million Dollars ($5,000,000). The applicable Base Salary will be paid in equal installments not less frequently than bi-weekly in accordance with the Company’s salary payment practices in effect from time to time for senior executives of the Company. | |
| (b) | Bonus Payment. At the end of each fiscal year of the Company, in addition to the Base Salary then in effect, Executive shall be eligible to receive a bonus payment (the “Bonus Payment”) up to One Hundred Percent (100%) of the then applicable Base Salary (or such other Base Salary as shall be in effect at such time) (the “Bonus Percentage”) up to 50% of the Bonus Payment may be paid in equity of the Company valued at the time of payment thereof The Bonus Payment will be paid in accordance with the Company’s bonus payment practices in effect from, time to time for senior executives of the Company. The Board of Directors of the Company (the “Board”) shall review the Executive’s Bonus Percentage annually and may, in the Board’s sole discretion, increase the Bonus Percentage based upon the Company’s and Executive’s performance. The Bonus Payment shall be calculated based upon Company’s overall performance as set by the Board of Directors annually including achievement of an equity investment in the Company and increase in revenues. An Incentive Bonus Payment in an amount equal to the Executive’s then current Base Salary (but in no event less than Three Hundred Thousand Dollars ($300,000.00)), will be paid to Executive in cash upon closing of a Qualified Financing during the Initial Term on the date of the closing of such Qualified Financing. A “Qualified Financing” shall mean a financing with gross proceeds of at least Ten Million Dollars ($10,000,000). All annual Bonus Payments shall be paid to Executive 50% in cash and 50% in shares of the Company with such shares valued as of the closing price on the date that the bonus payment is determined to be earned or awarded. | |
| (c) | Benefit Plans. Executive shall be covered by health, accident, disability and life insurance programs and other fringe benefit program which the Company currently has for the benefit of the Company’s executives. Upon execution and delivery of this Agreement, the Company agrees to issue restricted shares equal to $300,000 valued at the offering price of the next equity offering of the Company (“RSU”) and an option to purchase an aggregate of $600,000 valued at the offering price of the next equity offering of the Company (“Options) of the Company’s common stock, par value $.001 per share (the “Common Stock”) at an exercise price equal to the market price for the next equity offering of the Company. One-third of these Options shall vest immediately, another third on the first anniversary of this Agreement and the final third on the second anniversary of this agreement. The RSUs shall vest 50% shall vest immediately and 25% on each of the first and second anniversaries of this Agreement. In the event of a termination of this Agreement other than pursuant to Section 6(b), the Options and RSUs shall vest 100% upon such termination; provided, however, if the Agreement is terminated within the first twelve months after the date of this Agreement the only 50% of the Options and RSUs shall vest upon such termination. |
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| (d) | Expenses. Executive shall be entitled to be reimbursed for all reasonable business expenses incurred by him in connection with the fulfillment of his duties hereunder, including all previously expended monies on behalf of the Company. | |
| (e) | Vacations and Sick Leave. Executive shall be entitled to four (4) weeks paid vacation annually to be taken in accordance with the Company’s vacation policy in effect from time to time and at such time or times as may be mutually agreed upon by the Company and Executive: provided, that if for any reason Executive does not take the full allotted vacation in any given year, Executive shall be entitled to accrue and carry over such vacation time according to the policy established by the Company. Executive shall also be entitled to sick leave according to the sick leave policy which the Company many adopt from time to time. | |
| (f) | Relocation Expense Reimbursement. In addition to the compensation set forth above, the Company shall reimburse Executive for all reasonable relocation expenses incurred by the Executive to move from Texas to Utah, including temporary housing in the Orem area and twice monthly transportation between Texas and Utah. |
| 4. | INDEMNIFICATION. |
(a) Company’s Obligation to Indemnify. The Company shall at all times during the Term and thereafter, indemnify and defend and hold Executive harmless from and against all liability, loss, costs, claims, damages, expenses, judgments, awards, and settlements as well as attorneys’ fees and expenses, personal or otherwise, whether in tort or in contract, law or equity, that the Company or the Executive may incur by reason of or arising out of any claim made by any third party (together, the “Losses”), with respect to Executive’s employment with Company in accordance with this Agreement: provided, however, that the Company’s foregoing indemnification obligations shall not apply to Losses incurred by the Company as a result of the Executive’s willful misconduct, gross negligence, conviction of a felony (including entry of a plea of nolo contendere) for illegal or criminal, behavior or engagement in activities beyond the scope of his employment hereunder. Indemnification shall include all costs, including actual attorneys’ fees and expenses reasonably incurred in pursuing indemnity claims under or enforcement of this Agreement.
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(b) Executive’s Obligation to Indemnify. Executive shall also at all times during the term of this Agreement and thereafter, indemnify and defend and hold Company, its founders, owners, directors, officers, employees, advisors, agents, partners, service providers and affiliates harmless from and against all Losses with respect to the Executive’s willful misconduct, gross negligence, conviction of a felony (including entry, of a plea of nolo contendere) for illegal or criminal behavior or engagement in activities beyond the scope of his employment hereunder during the Executive’s employment with Company in accordance with this Agreement. Indemnification shall include all costs, including actual attorneys’ fees and expenses reasonably incurred in pursuing indemnity claims under or enforcement of this Agreement.
5. DISPUTE RESOLUTION. Except for the right of either party to apply to a court of competent jurisdiction for a temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm, any and all claims, disputes or controversies arising under, out of, or in connection with the Agreement, including any dispute relating to production, use or commercialization, which the parties shall be unable to resolve within sixty (60) days shall be mediated in good faith. The party raising such dispute shall promptly advise the other party of such claim, dispute or controversy in a writing, Which describes in reasonable detail the nature of such dispute. By not later than five (5) business days after the recipient has received such notice of dispute, each party shall have selected for itself a representative who shall have the authority to bind such party and shall additionally have advised the other party in writing of the name and title of such representative. By not later than ten (10) business days after the date of such notice of dispute, the party against whom the dispute shall be raised shall select a mediation firm in New York and such representatives shall schedule a date with such firm for a mediation hearing. The parties shall enter into good faith mediation and shall share the costs equally. If the representatives of the parties have not been able to resolve the dispute within fifteen (15) business days after such mediation hearing, the parties shall have the right to pursue any other remedies legally available to resolve such dispute in either the Courts of the State of New York or in the United States District Court for the District of New York, to whose jurisdiction for such purposes Company and Executive each hereby irrevocably consents and submits.
6. TERMINATION. (a) Events of Termination. This Agreement shall terminate on the earliest to occur of the following events:
| (i) | the expiration of the Term; |
| (ii) | the mutual agreement of the Company and the Executive; |
| (iii) | termination of Executive by the Company without just cause; |
| (iv) | the voluntary termination of the Executive other then as a result of a Constructive Termination Event (as defined herein); |
| (v) | the death of Executive or Executive’s retirement; |
| (vi) | Executive becoming completely unable to perform his duties as described herein due to injury, illness or disability (mental or physical), as determined by an independent physician selected with the approval of the Company and Executive, for a period of three (3) consecutive months (“Disability”); or |
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| (vii) | the termination of the Executive by the Company for “just cause” (as defined herein) upon giving written notice to Executive |
For the purposes hereof, the Company shall have “just cause” to terminate Executive’s employment hereunder as a result of Executive’s gross negligence, willful misconduct, conviction of a felony (including the entry of a plea of nolo contendere) for illegal or criminal behavior in carrying out his duties as required pursuant to the terms of the Agreement. Notwithstanding any other provision contained herein, the Company shall have the right to terminate the agreement and Executive’s employment without just cause, and Executive’s remedies hereunder in the event of such termination shall be limited to the Severance Payments set forth in Section 6(c) hereof.
(b) Termination For Just Cause or Voluntary Termination. If Executive’s employment is terminated prior to the expiration of the Term for just cause or if Executive’s employment is terminated as set forth in Section 6(a) (ii) or (iii) hereof, Executive shall not be entitled to receive any Severance Payments (as defined in Section 7 below) and will only be entitled to receive any accrued but unpaid portion of the applicable Base Salary, plus any accrued but unused vacation time and unpaid expenses (in accordance with Sections 3(d) and (e) hereof) that have been earned by the Executive as the date of such termination.
(c) Termination Without Just Cause. If Executive’s employment is terminated by the Company upon at least 30 days prior written notice without just cause or as a result of the Executive’s Disability, Executive shall be entitled to receive the Severance Payments described in Section 7 hereof For purposes of the Agreement, termination without just cause shall include termination by Executive of his employment with the Company within one hundred and twenty (120) days after the occurrence of any of the following events (collectively herein referred to as “Constructive Termination Events”) which are not remedied within ten (10) business days after written notice to the Company by Executive of such event:
| (i) | failure to maintain Executive in the office of the position of CEO or a substantially equivalent office or position, of or with the Company; | |
| (ii) | a significant adverse change in the nature or scope of the authority, powers, functions, responsibilities or duties attached to the position of Executive with the Company as set forth herein or a reduction in Executive’s then-applicable Base Salary and benefits as set forth herein;: | |
| (iii) | the liquidation, dissolution, merger, consolidation or reorganization of the Company or transfer of all or a significant portion of its business and/or assets, unless the successor or successors shall have assumed all duties and obligations of the Company under the Agreement; and | |
| (iv) | any material breach of the Agreement by the Company or its successors. |
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(d) Insurance. The Company may secure, in its own name, or otherwise, and at its own expense, life, health, accident and other insurance covering Executive or Executive and others. Executive agrees to assist the Company in procuring such insurance by submitting to the usual and customary medical and other examinations and by signing, as the insured, such applications and other instruments in writing as may be reasonably requires by the insurance companies to which application is made pursuant to such insurance. Executive agrees that he shall have no right, title, or interest in or to any insurance policies or to the proceeds thereof which the Company many so elect to take out or to continue on the Executive’s life.
7. SEVERANCE PAYMENT. (a) If the Company terminates Executive’s employment without just cause or if Executive’s employment is terminated due to Disability, Executive shall be entitled to receive, in addition to any accrued and unpaid Base Salary, plus any accrued but unused vacation time and unpaid expenses (in accordance with Sections 3(d) and (e) hereof) that have been earned by the Executive as of the date of such termination, the following severance payments (the “Severance Payments”):
| (i) | equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following such termination and continuing until the later of (A) the expiration of the Term or (B) the expiration of (i) six (6) months following the effective termination date; provided, however, that if the Company terminates this Agreement without Just Cause within six (6) months of the effective date of this Agreement, then the Executive will only be entitled to three (3) months of severance instead of six (6) months; and | |
| (ii) | during the Severance Period, health and life insurance benefits substantially similar to those which Executive was receiving or entitled to receive immediately prior to termination; provided, however, such insurance benefits shall be reduced to the extent comparable benefits during such period following Executive’s termination, and any benefits actually received by Executive shall be reported by Executive to the Company. |
(b) Disability. Whenever Severance Payments are payable to Executive hereunder during a time when Executive is partially or totally disabled and such Disability would entitle him to disability income payments according to the terms of any plan or policy now or hereafter provided by the Company, the Severance Payments payable to Executive hereunder shall be inclusive of any such disability income and shall not be in addition thereto even if such disability income if payable directly to Executive by an insurance company under instance policy paid for by the Company
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8. RESTRICTIVE COVENANTS. Executive and the Company agree that the Company would suffer irreparable harm and incur substantial damage if Executive were to enter into Competition (as defined herein) with the Company. Therefore, in order for the Company to protect its legitimate business interests, Executive agrees as follows:
(a) Without the prior written consent of the Company, Executive shall not, during the period of employment with the Company, directly or indirectly, invest or engage in any business that is Competitive (as defined herein) with the Business of the Company or accept employment or render services to a Competitor (as defined herein) of the Company as a director, officer, agent, employee or consultant or solicit or attempt to solicit or accept business that is Competitive with the Business of the Company, except that Executive may own up to five percent (5%) of any outstanding class of securities of any company registered under Section 12 of the Securities Exchange Act of 1934, as amended.
(b) Without the prior written consent of the Company and upon any termination of Executive’s employment with the Company and for a period of twelve (12) months thereafter, Executive shall not, either directly or indirectly, (i) invest or engage in any business that is Competitive (as defined herein) with the Business of the Company, except that Executive may own up to five percent (5%) of any outstanding class of securities of any company registered under Section 12 of the Securities Exchange Act of 1934, as amended, (ii) accept employment with or render services to a Competitor of the Company as a director, officer, agent, employee or consultant unless he is serving in a capacity that has no relationship to that portion of the Competitor’s business that is Competitive with the Business of the Company, or (iii) solicit, attempt to solicit or accept business Competitive with the Business of the Company from any of the customers of the Company at the time of his termination or within twelve (12) months prior thereto or from any person or entity whose business the Company was soliciting at such time.
(c) Upon termination of his employment with the Company, and for a period of twelve (12) months thereafter, Executive shall not, either directly or indirectly, engage, hire, employ or solicit in any manner whatsoever the employment of an employee of the Company.
(d) For purposes of this Agreement, a business or activity is in “Competition” or “Competitive” with the Business of the Company if it involves, and a person or entity is a “Competitor”, if that person or entity is engaged in, or about to become engaged in, the research, development, design, manufacturing, marketing or selling of a specific product or technology that resembles, competes, or is designed to compete, with, or has applications similar to any product or technology for which the Company has obtained or applied for a patent or made disclosures, or any product or technology involving any other proprietary research or development engaged in or conducted by the Company during the term of Executive’s employment with the Company.
9. DISCOVERIES AND INVENTIONS. Executive hereby assigns to the Company all his right, title, and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs and data related to live Listeria monocytogene vaccines which Executive conceives of, reduces to practice, or otherwise creates, either alone or jointly with others, in the course of his employment hereunder and in which the law recognizes any protectable interest.
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10. CONFIDENTIALITY. Executive shall not use, or disclose any of the Confidential Information and Trade Secrets, either during the Term of his employment or at anytime thereafter, except as required in the course of his employment. For purposes of this Agreement, “Confidential Information and Trade Secrets” shall mean all information, know how, trade secrets, processes, computer software or programs and related documentation, methods, practices, fabricated techniques, marketing plans, and other compilations of information which relate to the Business of, and are owned by the Company which were not known generally to others engaged in the Business of the Company and which the Company has taken affirmative actions to protect from public disclosure or which do not exist in the public domain. All information, data and similar items and documentation relating to the Business of the Company, shall remain the exclusive property of the Company unless owned by Executive.
11. NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and deemed to have been given when delivered in person or when dispatched by telegram, electronic mail, or electronic facsimile transfer (confirmed in writing by mail, registered or certified, return receipt requested, postage prepaid, simultaneously dispatched) to the addressees at the addresses specified below.
If to Executive:
With a copy to:
If to the Company: |
Mark J. Rosenblum 9200 Santa Fe Trail Celina, Texas 75009 Telephone: (214) 385-0062
Locke Lord LLP 2800 Financial Plaza Providence, RI 02903 ATTN.: Douglas G. Gray, Esq. Fax: 888.325.9018 Email: douglas.gray@lockelord.com
Active Care, Inc. 1365 West Business Park Drive Suite 100 Orem, Utah 84058 Telephone: 1 (877) 219-6050 Fax: |
or to such other address or fax number as either party may from time to time designate in writing to the other.
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12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto relating to the subject matter hereof, and supersedes all prior agreements and understandings, whether oral or written, with respect to the same. No modification, alteration, amendment or revision of or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by both parties hereto.
13. GOVERNING LAW. This Agreement and the rights and duties of the parties hereunder shall be governed by, construed under and enforced in accordance with the laws of the State of Delaware.
14. ASSIGNMENT. The rights and obligations of the parties under this Agreement shall not be assignable without written permission of the other party.
15. SEVERABILITY. The invalidity of any provision of this Agreement under the applicable laws of the State of New Jersey or any other jurisdiction, shall not affect the other provisions hereby declared to be severable from all other provisions. The intention of the parties, as expressed in any provision held to be void or ineffective, shall be given such full force and effect as may be permitted by law.
16. SURVIVAL. The obligations of the Company or its successor to pay any Severance Payments required hereunder subsequent to the termination of this Agreement and the obligations of Executive under Sections 6, 7 and 8 hereof shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
| ACTIVECARE, INC. | ||
| By: | /s/ Jeffrey Peterson | |
| Name: | Jeffrey Peterson | |
| Title: | CEO & Chairman | |
| By: | /s/ Mark J. Rosenblum | |
| Mark J. Rosenblum | ||
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Exhibit 17.1
December 11, 2017
To the Members of the Board of Directors of
ActiveCare, Inc.
This letter shall serve as formal notice of my resignation, effective immediately, from my position as a member of the board of directors of ActiveCare, Inc. (the “Company”), and all other positions with the Company to which I have been assigned, regardless of whether I served in such capacity. The resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Sincerely,
| /s/ Bradley Robinson | |
| Bradley Robinson |
Exhibit 17.2
December 11, 2017
To the Members of the Board of Directors of
ActiveCare, Inc.
This letter shall serve as formal notice of my resignation, effective immediately, from my position as a member of the board of directors of ActiveCare, Inc. (the “Company”), and all other positions with the Company to which I have been assigned, regardless of whether I served in such capacity. The resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Sincerely,
| /s/ Robert J. Welgos | |
| Robert J. Welgos |
Exhibit 17.3
December 11, 2017
To the Members of the Board of Directors of
ActiveCare, Inc.
I have not been employed or engaged in any way (officer, employee, consultant, etc.) by ActiveCare, Inc. (the “Company”) since June 1, 2017. To the extent this has not already occurred, this letter shall serve as formal notice of my resignation, effective immediately, from my position as Chief Financial Officer, Secretary and in-house counsel of the Company and all other positions with the Company to which I have been assigned, regardless of whether I served in such capacity. The resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Sincerely,
| /s/ Eric Robinson | |
| Eric Robinson |
Exhibit 17.4
December 11, 2017
To the Members of the Board of Directors of
ActiveCare, Inc.
This letter shall serve as formal notice of my resignation, effective immediately, from my position as Executive Chairman of the Board of ActiveCare, Inc. (the “Company”) while acknowledging that I will continue to serve the Company as a director and Executive Vice President. The resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Sincerely,
| /s/ Jeffrey Peterson | |
| Jeffrey Peterson |