Medipattern Announces Offer for Settlement of Debt and Corporate Restructuring

TORONTO, ONTARIO--(Marketwire - March 13, 2013) -

Attention: Business/Financial Editors

The Medipattern Corporation ("Medipattern" or the "Company") (TSX VENTURE:MKI), today announced it has received an offer for the settlement of approximately $5,673,876.36 (the "Indebtedness"), which includes principal and interest owning to certain holders (the "Lenders") of notes issued by the Company in December 2012 (the "2012 Notes"), March 2011 (the "2011 Notes") and May 2010 (the "2010 Notes", together with the 2012 Notes and the 2011 Notes, the "Notes").

The 2012 Notes are secured by a general security agreement (the "General Security Agreement"), pursuant to which the Company granted the holders a security interest over all of the assets and intellectual property of the Company. The 2011 Notes are secured by a technology security agreement (the "Technology Security Agreement"), pursuant to which the Company granted the holders a security interest over certain intellectual property of the Company.

On February 17, 2013, the collateral agent under the General Security Agreement and Technology Security Agreement, on behalf of the holders of 2012 Notes, delivered a written demand to the Company for the full redemption of the 2012 Notes, including all accrued interest in connection therewith. Also on February 17, 2013, the collateral agent, on behalf of the holders of the 2011 Notes and the 2010 Notes, delivered written notice to the Company that an Event of Default (as defined in the 2011 Notes and 2010 Notes respectively) had occurred and declared the principal amount and all accrued and unpaid interest in connection therewith immediately due and payable. As part of the demand for payment under the Notes, the Lenders postponed enforcing their rights under the Notes, the General Security Agreement and the Technology Security Agreement for a period of thirty days in hopes of reaching a negotiated settlement with the Company of all Indebtedness.

The Company and the Lenders have entered into a memorandum of understanding (the "MOU") in respect of the settlement of all outstanding Indebtedness owed by the Company to the Lenders (the "Debt Settlement").

The principal terms of the MOU are as follows:

(a) The Company shall establish a wholly-owned subsidiary ("Newco") to be incorporated under the laws of the state of Delaware, United States, or such other state as the parties shall agree;
(b) The board of directors of Newco shall consist of a minimum of three members, with no fewer than two members to be appointed by the collateral agent and one member appointed by the Company;
(c) Following the establishment of Newco, the Company shall effect a transfer to Newco of the entirety of its operations and all of its assets relating to its "Visualize: Vascular™" and "B-CAD®" product/service offerings and the commercial rights associated therewith;
(d) For regulatory purposes, the Company shall maintain an office for Newco in such a location and for the necessary period of time that it takes to provide for a seamless transfer of all FDA, ISO, QSR and related approvals and certifications necessary to operate the "Visualize: Vascular" and "B-CAD" businesses;
(e) Transfer to Newco all of the Indebtedness owed to the Lenders pursuant to the Notes, including the New Notes (as defined below), all additional accrued interest and any other costs or fees owing to the Lenders;
(f) The Company and Newco will enter into a royalty agreement(s) relating to the "Visualize: Vascular" and "B-CAD" businesses, with the principal terms as outlined below:
	"Visualize: Vascular" Royalty
		(i) Newco shall pay to the Company a royalty (the "Visualize Royalty") equal to:
			(1) $1.00 per paid scan over 5,000 paid scans per month; and
			(2) $1.50 per paid scan over 15,000 paid scans per month;
		(ii) Newco shall be granted a perpetual option to purchase the Visualize Royalty (the "Visualize Purchase Option"). The Visualize Purchase Option may not be exercised by Newco prior to the date that is eighteen months from the closing of the restructuring transactions set forth in this Agreement (the "Visualize Purchase Option Start Date");
		(iii) If Newco exercises the Visualize Purchase Option prior to the date that is six (6) months from the Visualize Purchase Option Start Date, then the purchase price for the Visualize Royalty paid by Newco, shall be equal to the greater of three times (3x) the aggregate sum of all royalty payments for the previous twelve (12) month period or $1,000,000; and
		(iv) Following the date that is six (6) months from the Visualize Purchase Option Start Date, the purchase price for the Visualize Royalty paid by Newco, shall be equal to three times (3x) the aggregate sum of all royalty payments for the previous twelve (12) month period.
	"B-CAD" Royalty
		(i) Newco shall pay to the Company a royalty (the "B-CAD Royalty") equal to $150.00 per B-CAD license sold;
		(ii) Newco shall be granted a perpetual option to purchase the B-CAD Royalty (the "B-CAD Purchase Option"). The B-CAD Purchase Option may not be exercised by Newco prior to the date that is eighteen (18) months from the closing of the restructuring transactions set forth in this Agreement (the "B-CAD Purchase Option Start Date");
		(iii) If Newco exercises the B-CAD Purchase Option prior to the date that is six (6) months from the B-CAD Purchase Option Start Date, then the purchase price for the B-CAD Royalty paid by Newco, shall be equal to the greater of three times (3x) the aggregate sum of all royalty payments for the previous twelve (12) month period or $150,000; and
		(iv) Following the date that is six (6) months from the B-CAD Purchase Option Start Date, the purchase price for the B-CAD Royalty paid by Newco, shall be equal to three times (3x) the aggregate sum of all royalty payments for the previous twelve (12) month period.
(g) Upon completion of all of the above referenced transactions and any others necessary to give full effect to the intent of the parties pursuant to the MOU (the "Closing"), the Lenders shall enter into full and final releases with the Company in respect of the total Indebtedness owing to the Lenders in exchange for the issuance of shares of Newco, such number of shares to be determined by the board of directors of Newco in relation to the proportionate amount of the total Indebtedness being settled by each Lender; and
(h) Following Closing, the collateral agent will seek new partners and additional funding, through the issuance of additional equity of Newco, to ensure the long term viability of Newco.

Pursuant to the terms of the MOU, the Company received $154,000 under the term debt facility (the "Facility") announced on November 7, 2012. Medipattern issued $154,000 of secured notes under the Facility (the "New Notes"). The New Notes mature on June 30, 2013, and will bear interest at the rate of 6% per annum, calculated monthly and payable at maturity. The New Notes are secured by the General Security Agreement and are subject to certain redemption and repayment rights. The New Notes will be repaid as part of the Debt Settlement.

The New Notes are subject to a four month and one day resale restriction. The securities offered in the placement have not been and will not be registered under the United States Securities Act of 1933, as amended, (the "U.S. Securities Act"), and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except in certain transactions exempt from the registration requirements of the U.S. Securities Act.

The Corporation also announced the resignation of one of its directors, Howard Rosen. Mr. Rosen has advised Medipattern that he has decided to spend more time focusing on his other business pursuits. At this time, the Board of Directors would like to express its gratitude to Mr. Rosen for his time and efforts over the many years he has served as a director of Medipattern.

About the Medipattern Corporation:

Medipattern® is an award-winning leader in the development and commercialization of healthcare solutions that positively impact people's lives through the prevention of disease and analysis of medical images and data. Medipattern's Knowledge-based Informatics (MKI) platform enables delivery of these streamlined solutions. Medipattern mHealth uses patented prevention technologies to engage, coach and monitor people in achieving their personalized goals. Medipattern iaHealth uses patented pattern recognition technology to analyze medical data to aid medical practitioners in the assessment of disease and critical anatomy. For more information, please visit the Company's website: www.medipattern.com.

Medipattern® is registered trademarks of The Medipattern Corporation. Visualize:Vascular™ is a registered trademark of Medipattern.

Forward-looking statements

This document contains forward-looking statements relating to Medipattern's performance, operations, or business environment. These statements are based on what we believe are reasonable assumptions given currently available information and our understanding of Medipattern's current activities. We have tried, whenever possible, to identify these forward-looking statements using words such as "anticipates," "believes," "estimates," "expects," "plans," "intends," "potential", and similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict or control. A number of factors could cause actual outcomes and results to differ materially from those expressed in forward-looking statements. These factors include but are not limited to those set forth in the Company's corporate filings, (posted at www.sedar.com). These factors should be considered carefully, and readers should not place undue reliance on Medipattern's forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. The Company disclaims any intention or obligation to update or revise any forward-looking statements for any reason. Readers should not rely on forward-looking statements.