Exhibit 10.1

 

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this “Agreement”) dated as of February 11, 2014 (the
“Effective Date”) between SILICON VALLEY BANK, a California corporation
(“Bank”), and RESPONSE BIOMEDICAL CORP., a British Columbia corporation
(“Borrower”), provides the terms on which Bank shall lend to Borrower and
Borrower shall repay Bank. The parties agree as follows:

 

1.     ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the PPSA to the extent such terms
are defined therein.

 

2.     LOAN AND TERMS OF PAYMENT

 

2.1     Promise to Pay. Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

 

2.1.1     Growth Capital Advances.

 

(a)     Availability. Subject to the terms and conditions of this Agreement,
Bank agrees to make Growth Capital Advances to Borrower during the Draw Period.
The aggregate outstanding amount of the Growth Capital Advances shall not exceed
the Growth Capital Line. The first Growth Capital Advance shall be in the amount
of One Million Five Hundred Thousand Dollars ($1,500,000) on the Effective Date,
or as soon thereafter as is practical, and each subsequent Growth Capital
Advance, if available, must be in an amount equal to the lesser of Five Hundred
Thousand Dollars ($500,000) and integral multiples thereof, or the amount that
has not yet been drawn under the Growth Capital Line. After repayment, no Growth
Capital Advance may be reborrowed.

 

(b)     Repayment. Borrower shall repay the Growth Capital Advances in thirty
two (32) equal installments of principal, plus monthly payments of accrued
interest (each a “Growth Capital Advance Payment”) beginning on October 1, 2014
and continuing on the first (1st) day of each month thereafter through the
Growth Capital Maturity Date, on which date Borrower shall pay to Bank (i) the
final Growth Capital Advance Payment, which shall include all outstanding
principal and accrued and unpaid interest under the Growth Capital
Advances.     

 

(c)     Prepayment.

 

(i)     Mandatory Prepayment Upon an Acceleration. If the Growth Capital
Advances are accelerated following the occurrence of an Event of Default or
otherwise, Borrower shall immediately pay to Bank an amount equal to the sum of
(a) all outstanding principal with respect to the Growth Capital Advances, plus
accrued and unpaid interest thereon, plus (b) all other sums, including Bank
Expenses, if any, that shall have become due and payable hereunder in connection
with the Growth Capital Advances, including interest at the Default Rate with
respect to any past due amounts.

 

(ii)      Voluntary Prepayment. Borrower shall have the option to prepay, in
whole or in part, any of the Growth Capital Advances advanced by Bank under this
Agreement, provided Borrower (i) delivers written notice to Bank of its election
to prepay Growth Capital Advances, in whole or in part, at least ten (10)
Business Days prior to such prepayment, and (ii) pays, on the date of such
prepayment (a) all or such part of the outstanding principal with respect to
such Growth Capital Advances being prepaid, plus accrued and unpaid interest
thereon, plus (b) the Prepayment Fee, plus (c) all other sums, including Bank
Expenses, if any, that shall have become due and payable hereunder in connection
with such Growth Capital Advances.

 

 

 
 

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2.2     Intentionally Omitted.

 

2.3     Payment of Interest on the Credit Extensions.

 

(a)     Interest Rate. Subject to Section 2.3(b), the principal amount
outstanding for each Growth Capital Advance shall accrue interest at a floating
per annum rate equal to two and one half of one percentage points (2.50%) above
the Prime Rate in effect on the applicable Funding Date, which interest shall be
payable monthly in accordance with Section 2.3(d) below.

 

(b)     Default Rate. Immediately upon the occurrence and during the continuance
of an Event of Default, Obligations shall bear interest at a rate per annum
which is five percentage points (5.0%) above the rate that is otherwise
applicable thereto (the “Default Rate”). Fees and expenses which are required to
be paid by Borrower pursuant to the Loan Documents (including, without
limitation, Bank Expenses) but are not paid when due shall bear interest until
paid at a rate equal to the highest rate applicable to the Obligations. Payment
or acceptance of the increased interest rate provided in this Section 2.3(b) is
not a permitted alternative to timely payment and shall not constitute a waiver
of any Event of Default or otherwise prejudice or limit any rights or remedies
of Bank.

 

(c)     Intentionally Omitted.

 

(d)     Payment; Interest Computation. Interest is payable monthly on the first
(1st) calendar day of each month and shall be computed on the basis of a 360-day
year for the actual number of days elapsed. In computing interest, (i) all
payments received after 12:00 p.m. Pacific time on any day shall be deemed
received at the opening of business on the next Business Day, and (ii) the date
of the making of any Credit Extension shall be included and the date of payment
shall be excluded; provided, however, that if any Credit Extension is repaid on
the same day on which it is made, such day shall be included in computing
interest on such Credit Extension.

 

(e)     Interest Act (Canada). For the purpose of the Interest Act (Canada), the
yearly rate of interest to which interest calculated on the basis of a year of
360, 365 or 366 days, as the case may be, is equivalent to the rate of interest
determined as herein provided multiplied by the number of days in such year and
divided by 360, 365 or 366, as the case may be. Further, subject to
subsection (f) below, in this Agreement all interest shall be calculated using
the nominal rate method and not the effective rate method and the “deemed
re-investment principle” shall not apply to such calculations.

 

(f)     Notwithstanding any provisions of this Agreement, in no event shall the
aggregate “interest” (as defined in Section 347 of the Criminal Code (Canada))
payable by Borrower under the Loan Documents exceed the effective annual rate of
interest on the “credit advanced” (as defined in Section 347 of the Criminal
Code (Canada)) under this Agreement lawfully permitted by that Section and, if
any payment, collection or demand pursuant to this Agreement in respect of
“interest” (as defined in Section 347 of the Criminal Code (Canada)) is
determined to be contrary to the provisions of that Section, such payment,
collection or demand shall be deemed to have been made by mutual mistake of
Borrower and Bank and the amount of such payment or collection shall be refunded
to Borrower. For the purposes of this subsection (f) the effective annual rate
of interest shall be determined in accordance with generally accepted actuarial
practices and principles over the relevant term and, in the event of a dispute,
a certificate of a Fellow of the Canadian Institute of Actuaries appointed by
Bank will be prima facie evidence of such rate.

 

2.4     Fees. Borrower shall pay to Bank:

 

(a)     Facility Fee. A fully earned, non-refundable facility fee of Seven
Thousand Five Hundred Dollars ($7,500) (the “Facility Fee”);

 

(b)     Prepayment Fee. The Prepayment Fee, if and when due hereunder; and

 

(c)     Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees
and expenses for documentation and negotiation of this Agreement incurred
through and after the Effective Date), when due (or, if no stated due date, upon
demand by Bank).

 

 

 
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(d)     Fees Fully Earned. Unless otherwise provided in this Agreement or in a
separate writing by Bank, Borrower shall not be entitled to any credit, rebate,
or repayment of any fees earned by Bank pursuant to this Agreement
notwithstanding any termination of this Agreement or the suspension or
termination of Bank’s obligation to make loans and advances hereunder. Bank may
deduct amounts owing by Borrower under the clauses of this Section 2.4 pursuant
to the terms of Section 2.5(c). Bank shall provide Borrower written notice of
deductions made from the Designated Deposit Account pursuant to the terms of the
clauses of this Section 2.4.

 

2.5     Payments; Application of Payments; Debit of Accounts.

 

(a)     All payments to be made by Borrower under any Loan Document shall be
made in immediately available funds in Dollars, without setoff or counterclaim,
before 12:00 p.m. Pacific time on the date when due. Payments of principal
and/or interest received after 12:00 p.m. Pacific time are considered received
at the opening of business on the next Business Day. When a payment is due on a
day that is not a Business Day, the payment shall be due the next Business Day,
and additional fees or interest, as applicable, shall continue to accrue until
paid.

 

(b)     Unless an Event of Default has occurred and is continuing, Bank shall
apply any funds in its possession, whether from Borrower or any Guarantor
account balances, payments, or proceeds realized as the result of any collection
of Accounts or other disposition of the Collateral, first, to Bank Expenses,
including without limitation, the reasonable costs, expenses, liabilities,
obligations and attorneys’ fees incurred by Bank in the exercise of its rights
under this Agreement; second, to the interest due upon any of the Obligations;
and third, to the principal of the Obligations and any applicable fees and other
charges, in such order as Bank shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower and Guarantors shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower or any Guarantor account balances, payments,
proceeds realized as the result of any collection of Accounts or other
disposition of the Collateral, or otherwise, to the Obligations in such order as
Bank shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other Persons legally entitled thereto; Borrower and Guarantors
shall remain liable to Bank for any deficiency.

 

(c)     Bank may debit any of Borrower’s deposit accounts, including the
Designated Deposit Account, for principal and interest payments or any other
amounts Borrower owes Bank when due. These debits shall not constitute a
set-off.

 

2.6     Currency Indemnity.

 

(a)     Indemnity. If: (i) any amount payable under, or in connection with any
matter relating to or arising out of, the Loan Documents is received by Bank in
a currency (the “Payment Currency”) other than that agreed to be payable
hereunder or thereunder (the “Agreed Currency”), whether voluntarily or pursuant
to an order, judgment or decision of any court, tribunal, arbitration panel or
administrative agency or as a result of any bankruptcy, receivership,
liquidation or other insolvency type proceedings or otherwise; and (ii) the
amount so produced by converting the Payment Currency so received into the
Agreed Currency is less than the relevant amount of the Agreed Currency; then:
(iii) the amount so received shall constitute a discharge of the liability of
Borrower under or in connection any of the Loan Documents only to the extent of
the amount received following the conversion described in paragraph (ii) above;
and (iv) Borrower shall indemnify and save Bank harmless from and against such
deficiency and any loss or damage arising as a result thereof, other than such
loss or damage arising out of Bank’s willful misconduct or gross negligence.

 

Any conversion pursuant to this Section 2.6(a) shall be made at such prevailing
rate of exchange on the date the Payment Currency is received by Bank and in
such market as is reasonably determined by Bank as being the most appropriate
for such conversion. Borrower shall in addition pay the reasonable costs of such
conversion.

 

(b)     Independent Obligation. The indemnity set out in Section 2.6(a): (i) is
an obligation of Borrower which is separate and independent from all other
obligations of Borrower under any of the Loan Documents; (ii) gives rise to a
separate and independent cause of action; (iii) applies irrespective of any
indulgence granted by or on behalf of Bank; and (iv) continues in full force and
effect notwithstanding, and does not merge with, any order, judgment or decision
of any court, tribunal, arbitration panel or administrative agency or as a
result of any bankruptcy, receivership, liquidation or other insolvency type
proceeding or otherwise as to any amount due under this Agreement and the
Security or in connection herewith or therewith.

 

 

 
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3.     CONDITIONS OF LOANS

 

3.1     Conditions Precedent to Initial Credit Extension. Bank’s obligation to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, such
documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:

 

(a)     duly executed original signatures to the Loan Documents;

 

(b)     duly executed original signatures to the Control Agreements, if any;

 

(c)     Borrower’s Operating Documents and a good standing certificate of
Borrower issued by the Registrar of Companies for British Columbia as of a date
no earlier than thirty (30) days prior to the Effective Date;

 

(d)     duly executed original signatures to the completed Borrowing Resolutions
for Borrower;

 

(e)     copies, dated as of a recent date, of PPSA searches, as Bank shall
request, accompanied by satisfactory written evidence or subordination
agreements, if applicable, that the Liens indicated in any such searches either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;

 

(f)     the Perfection Certificates of Borrower and Guarantor, together with the
duly executed original signatures thereto;

 

(g)     consummation by Borrower of the Equity Event;

 

(h)     a landlord’s consent in favor of Bank with respect to 1781 West 75th
Avenue, Vancouver, B.C. V6P 6P2, by the landlord thereof, together with the duly
executed original signatures thereto. Notwithstanding the foregoing, Borrower
shall obtain and deliver to Bank such landlord’s consent on or prior to the date
that is sixty (60) days following the Effective Date;

 

(i)     a bailee’s waiver in favor of Bank for each location where Borrower
maintains property with a third party, by each such third party, together with
the duly executed original signatures thereto. Notwithstanding the foregoing,
Borrower shall obtain and deliver such bailee’s waivers on or prior to the date
that is thirty (30) days following the Effective Date;

 

(j)     the duly executed original signatures to the Secured Guaranty Documents,
together with the duly executed original signatures to the completed Borrowing
Resolutions for Guarantor;

 

(k)     evidence satisfactory to Bank that the insurance policies and
endorsements required by Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing lender loss payable and/or additional
insured clauses or endorsements in favor of Bank; and

 

(l)     payment of the fees and Bank Expenses then due as specified in Section
2.4 hereof.

 

3.2     Conditions Precedent to all Credit Extensions. Bank’s obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following conditions precedent:

 

(a)     timely receipt of an executed Payment/Advance Form;

 

 

 
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(b)     the representations and warranties in this Agreement shall be true,
accurate, and complete in all material respects on the date of the
Payment/Advance Form and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the Credit
Extension. Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties in this Agreement remain true,
accurate, and complete in all material respects; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and

 

(c)     Bank determines in its sole but reasonable discretion that there has not
been a Material Adverse Change.

 

3.3     Intentionally Omitted.

 

3.4     Covenant to Deliver. Borrower agrees to deliver to Bank each item
required to be delivered to Bank under this Agreement as a condition precedent
to any Credit Extension. Borrower expressly agrees that a Credit Extension made
prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.

 

3.5     Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of a Growth Capital Advance set forth in
this Agreement, to obtain a Growth Capital Advance, Borrower shall notify Bank
(which notice shall be irrevocable) by electronic mail, facsimile, or telephone
by 12:00 p.m. Pacific time on the Funding Date of the Growth Capital Advance.
Together with any such electronic or facsimile notification, Borrower shall
deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form
executed by a Responsible Officer or his or her designee. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Bank shall credit Growth Capital Advances to the Designated Deposit
Account. Bank may make Growth Capital Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Growth Capital Advances are necessary to meet Obligations
which have become due.

 

4.     CREATION OF SECURITY INTEREST

 

4.1     Grant of Security Interest. Repayment and performance of the Obligations
of Borrower to Bank will be secured by the Security.

 

Borrower acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank. Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted pursuant to the Security
(subject only to Permitted Liens that are permitted pursuant to the terms of
this Agreement to have superior priority to Bank’s Lien in this Agreement).

 

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations) are repaid in
full in cash. Upon payment in full in cash of the Obligations (other than
inchoate indemnity obligations) and at such time as Bank’s obligation to make
Credit Extensions has terminated, Bank shall, at the sole cost and expense of
Borrower, release its Liens in the Collateral and all rights therein shall
revert to Borrower. In the event (a) all Obligations (other than inchoate
indemnity obligations), except for Bank Services, are satisfied in full, and (b)
this Agreement is terminated, Bank shall terminate the security interest granted
pursuant to the Security upon Borrower providing cash collateral acceptable to
Bank in its good faith business judgment for Bank Services, if any. In the event
such Bank Services consist of outstanding Letters of Credit, Borrower shall
provide to Bank cash collateral in an amount equal to (x) if such Letters of
Credit are denominated in Dollars, then at least one hundred five percent
(105.0%); and (y) if such Letters of Credit are denominated in a Foreign
Currency, then at least one hundred ten percent (110.0%), of the Dollar
Equivalent of the face amount of all such Letters of Credit plus all interest,
fees, and costs due or to become due in connection therewith (as estimated by
Bank in its business judgment), to secure all of the Obligations relating to
such Letters of Credit.

 

 

 
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4.2     Authorization to File Financing Statements. Borrower hereby authorizes
Bank to file financing statements, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Bank’s interest or rights
hereunder. Any such financing statements may indicate the Collateral as “all
assets of the Debtor, other than intellectual property, and fixtures (as such
term is defined in the Personal Property Security Act (British Columbia)), but
including all proceeds thereof” or words of similar effect, or as being of an
equal or lesser scope, or with greater detail, all in Bank’s discretion.

 

4.3     Delivery of Additional Documentation Required. Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all financing
statements and other documents that Bank may reasonably request, in a form
satisfactory to Bank, to perfect and continue the perfection of Bank’s security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.

 

4.4     Conflict with Security. Notwithstanding that any of the Security is
expressed to be payable upon demand, Bank will not make demand under the
Security in respect of any Obligations which are not expressed to be payable on
demand unless an Event of Default has occurred. Further, if there is any
conflict between the provisions of this Agreement and those of any of the
Security then the provisions of this Agreement shall prevail.

 

 

5.     REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows:

 

5.1     Due Organization, Authorization; Power and Authority. Borrower and each
of its Subsidiaries are duly existing and in good standing in their respective
jurisdictions of formation and are qualified and licensed to do business and are
in good standing in any jurisdiction in which the conduct of their respective
business or ownership of property requires that they be qualified except where
the failure to do so could not reasonably be expected to have a Material Adverse
Change. In connection with this Agreement, Borrower has delivered to Bank
completed certificates signed by Borrower and Guarantor, respectively, entitled
“Perfection Certificate”. Borrower represents and warrants to Bank that
(a) Borrower’s exact legal name is that indicated on the Perfection Certificate
and on the signature page hereof; (b) Borrower is an organization of the type
and is organized in the jurisdiction set forth in the Perfection Certificate;
(c) the Perfection Certificate accurately sets forth Borrower’s organizational
identification number or equivalent, or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of
business, or, if more than one, its chief executive office as well as Borrower’s
mailing address (if different than its chief executive office); (e) Borrower
(and each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, corporate structure or organizational type, or any
organizational number or equivalent assigned by its jurisdiction; and (f) all
other information set forth on the Perfection Certificate pertaining to Borrower
and each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement).

 

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any Requirement of Law, the contravention
of, conflict with, or default under which would have or would reasonably be
expected to have a Material Adverse Change, (iii) contravene, conflict or
violate any applicable order, writ, judgment, injunction, decree, determination
or award of any Governmental Authority by which Borrower or any of its
Subsidiaries or any of their property or assets may be bound or affected, the
contravention, conflict, or violation of which would have or would reasonably be
expected to have a Material Adverse Change, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect (or are being obtained pursuant
to Section 6.1(b))) or (v) conflict with, contravene, constitute a default or
breach under, or result in or permit the termination or acceleration of, any
agreement by which Borrower is bound, the contravention of, conflict with, or
default under which would have or would reasonably be expected to have a
Material Adverse Change. Borrower is not in default under any agreement to which
it is a party or by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrower’s business.

 

 

 
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5.2     Collateral. Borrower has good title to, rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
has no Collateral Accounts at or with any bank or financial institution other
than Bank or Bank’s Affiliates except for the Collateral Accounts described in
the Perfection Certificate delivered to Bank in connection herewith and which
Borrower has taken such actions as are necessary to give Bank a perfected
security interest therein, pursuant to the terms of Section 6.6(b). The Accounts
are bona fide, existing obligations of the Account Debtors.

 

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2.

 

Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) non-exclusive licenses granted to its customers
in the ordinary course of business, (b) over-the-counter software that is
commercially available to the public, and (c) material Intellectual Property
licensed to Borrower and noted on the Perfection Certificate. Each Patent which
it owns or purports to own and which is material to Borrower’s business is valid
and, to the best of Borrower’s knowledge, enforceable, and no part of the
Intellectual Property which Borrower owns or purports to own and which is
material to Borrower’s business has been judged invalid or unenforceable, in
whole or in part. To the best of Borrower’s knowledge, no claim has been made
that any part of the Intellectual Property violates the rights of any third
party except to the extent such claim would not reasonably be expected to have a
material adverse effect on Borrower’s business.

 

Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is it bound by, any Restricted License.

 

5.3     Litigation. Other than as disclosed in note 12 to the interim financial
statements of Borrower for the month ended September 30, 2013, there are no
actions or proceedings pending or, to the knowledge of any Responsible Officer,
threatened in writing by or against Borrower or any of its Subsidiaries
involving more than, individually or in the aggregate, Fifty Thousand Dollars
($50,000).

 

5.4     Financial Statements; Financial Condition. All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations. There has not been any material
deterioration in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Bank.

 

5.5     Solvency. The fair salable value of Borrower’s consolidated assets
(including goodwill minus disposition costs) exceeds the fair value of
Borrower’s liabilities; Borrower is not left with unreasonably small capital
after the transactions in this Agreement; and Borrower is able to pay its debts
(including trade debts) as they mature.

 

5.6     Regulatory Compliance. Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company Act
of 1940, as amended. Borrower is not engaged as one of its important activities
in extending credit for margin stock (under Regulations X, T and U of the
Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules, the violation of which could reasonably be
expected to have a material adverse effect on its business. None of Borrower’s
or any of its Subsidiaries’ properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each of its Subsidiaries have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Governmental Authorities that are necessary
to continue their respective businesses as currently conducted.

 

 

 
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5.7     Subsidiaries; Investments. Borrower does not own any stock, partnership,
or other ownership interest or other equity securities except for Permitted
Investments.

 

5.8     Tax Returns and Payments; Pension Contributions. Borrower and each
Subsidiary have timely filed all required tax returns and reports, and Borrower
has timely paid all foreign, federal, state, provincial and local taxes,
assessments, deposits and contributions owed by Borrower and each Subsidiary
except (a) to the extent such taxes are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, or (b) if such taxes,
assessments, deposits and contributions do not, individually or in the
aggregate, exceed Fifty Thousand Dollars ($50,000).

 

To the extent Borrower or any Subsidiary defers payment of any contested taxes,
Borrower shall (i) notify Bank in writing of the commencement of, and any
material development in, the proceedings, and (ii) post bonds or takes any other
steps required to prevent the Governmental Authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a
“Permitted Lien.” Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower in excess of Fifty Thousand Dollars
($50,000). Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower including any liability to any governmental
agency.

 

5.9     Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital, and to fund its general business
requirements and not for personal, family, household or agricultural purposes.

 

5.10     Full Disclosure. No written representation, warranty or other statement
of Borrower in any certificate or written statement given to Bank, as of the
date such representation, warranty, or other statement was made, taken together
with all such written certificates and written statements given to Bank,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).

 

5.11     Definition of “Knowledge.” For purposes of the Loan Documents, whenever
a representation or warranty is made to Borrower’s knowledge or awareness, to
the “best of” Borrower’s knowledge, or with a similar qualification, knowledge
or awareness means the actual knowledge, after reasonable investigation, of any
Responsible Officer.

 

6.     AFFIRMATIVE COVENANTS

 

Borrower shall do all of the following:

 

6.1     Government Compliance.

 

(a)     Maintain its and all its Subsidiaries’ organizational existence and good
standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on Borrower’s business
or operations. Borrower shall comply, and have each Subsidiary comply, in all
material respects, with all laws, ordinances and regulations to which it is
subject.

 

 

 
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(b)     Obtain all of the Governmental Approvals necessary for the performance
by Borrower of its obligations under the Loan Documents to which it is a party
and the grant of a security interest to Bank in all of its property. Borrower
shall promptly provide copies of any such obtained Governmental Approvals to
Bank.

 

6.2     Financial Statements, Reports, Certificates. Provide Bank with the
following, with all such reporting to be calculated and expressed in Canadian
Dollars:

 

(a)     Monthly Financial Statements. As soon as available, but no later than
thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower’s operations
for such month certified by a Responsible Officer and in a form acceptable to
Bank (the “Monthly Financial Statements”);

 

(b)     Monthly Compliance Certificate. Within thirty (30) days after the last
day of each month and together with the Monthly Financial Statements, a duly
completed Compliance Certificate signed by a Responsible Officer, certifying
that as of the end of such month, Borrower was in full compliance with all of
the terms and conditions of this Agreement, and setting forth calculations
showing compliance with the financial covenants set forth in this Agreement and
such other information as Bank may reasonably request;

 

(c)     Annual Operating Budget and Financial Projections. Within forty five
(45) days after the end of each fiscal year of Borrower, (i) annual operating
budgets (including income statements, balance sheets and cash flow statements,
by month) for the upcoming fiscal year of Borrower, and (ii) annual financial
projections for the following fiscal year (on a quarterly basis) as approved by
Borrower’s board of directors, together with any related business forecasts used
in the preparation of such annual financial projections;

 

(d)     Annual Audited Financial Statements. As soon as available, but no later
than one hundred eighty (180) days after the last day of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP (expressed in
Canadian Dollars), consistently applied, together with an unqualified opinion
(other than with respect to a going concern qualification for Borrower’s 2013
and 2014 fiscal years) on the financial statements from an independent audit
firm reasonably acceptable to Bank;

 

(e)     Account Statements. With respect to any operating and other deposit
accounts and securities accounts maintained with financial institutions other
than Bank or its Affiliates, within thirty (30) days after the end of each
month, monthly account statements reasonably acceptable to Bank with respect to
such accounts;

 

(f)     BCSC/SEC Filings. Within five (5) days of filing, copies of all periodic
and other reports, proxy statements and other materials filed by Borrower with
the BCSC, SEC, TSX, any Governmental Authority succeeding to any or all of the
functions of the BCSC, SEC or TSX or with any other securities exchange or
securities commission, or distributed to its shareholders, as the case may be.
Documents required to be delivered pursuant to the terms hereof (to the extent
any such documents are included in materials otherwise filed with the BCSC, SEC
or TSX or any other securities exchange or securities commission) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which Borrower posts such documents, or provides a link
thereto, on Borrower’s website on the Internet at Borrower’s website address or
on EDGAR or SEDAR, as applicable; provided, however, Borrower shall promptly
notify Bank in writing (which may be by electronic mail) of the posting of any
such documents;

 

(g)     Legal Action Notice. A prompt report of any legal actions pending or
threatened in writing against Borrower or any of its Subsidiaries that could
result in damages or costs to Borrower or any of its Subsidiaries of,
individually or in the aggregate, Fifty Thousand Dollars ($50,000) or more; and

 

(h)     Other Financial Information. Other financial information reasonably
requested by Bank.

 

6.3     Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
Account Debtors shall follow Borrower’s customary practices as they exist at the
Effective Date. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims that involve more than One Hundred Thousand Dollars
($100,000).

 

 

 
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6.4     Taxes; Pensions. Timely file, and require each of its Subsidiaries to
timely file, all required tax returns and reports and timely pay, and require
each of its Subsidiaries to timely pay, all foreign, federal, state, provincial
and local taxes, assessments, deposits and contributions owed by Borrower and
each of its Subsidiaries, except (a) for deferred payment of any taxes contested
pursuant to the terms of Section 5.8 hereof and (b) if such taxes, assessments,
deposits and contributions do not, individually or in the aggregate, with
respect to all amounts owing from Borrower and each of its Subsidiaries, exceed
Fifty Thousand Dollars ($50,000), and shall deliver to Bank, on demand,
appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms. Borrower shall notify Bank of any notice
of assessment it, or any Subsidiary, receives from any taxation authority in
excess of Fifty Thousand Dollars ($50,000) within two (2) Business Days of such
receipt, and shall cure such assessment within five (5) Business Days of receipt
of such notice.

 

6.5     Insurance.

 

(a)     Keep its business and the Collateral insured for risks and in amounts
standard for companies in Borrower’s industry and location and as Bank may
reasonably request. Insurance policies shall be in a form, with financially
sound and reputable insurance companies that are not Affiliates of Borrower, and
in amounts that are reasonably satisfactory to Bank. All property policies shall
have a lender’s loss payable endorsement showing Bank as lender loss payee. All
liability policies shall show, or have endorsements showing, Bank as an
additional insured. Bank shall be named as lender loss payee and/or additional
insured with respect to any such insurance providing coverage in respect of any
Collateral.

 

(b)     Ensure that proceeds payable under any property policy are, at Bank’s
option, payable to Bank on account of the Obligations. Notwithstanding the
foregoing, (a) so long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
up to One Hundred Thousand Dollars ($100,000) with respect to any loss, but not
exceeding Two Hundred Thousand Dollars ($200,000) in the aggregate for all
losses under all casualty policies in any one year, toward the replacement or
repair of destroyed or damaged property; provided that such limits shall not
apply to the replacement or repair of destroyed or damaged property consisting
of (x) Biodot Reel-to-Reels, (y) KCAS, and (z) molds held at PH Molds Ltd.;
provided further that any such replaced or repaired property (i) shall be of
equal or like value as the replaced or repaired Collateral and (ii) shall be
deemed Collateral in which Bank has been granted a first priority security
interest, and (b) after the occurrence and during the continuance of an Event of
Default, all proceeds payable under such casualty policy shall, at the option of
Bank, be payable to Bank on account of the Obligations.

 

(c)     At Bank’s request, Borrower shall deliver certified copies of insurance
policies and evidence of all premium payments. Each provider of any such
insurance required under this Section 6.5 shall agree, by endorsement upon the
policy or policies issued by it or by independent instruments furnished to Bank,
that it will give Bank thirty (30) days prior written notice before any such
policy or policies shall be canceled. If Borrower fails to obtain insurance as
required under this Section 6.5 or to pay any amount or furnish any required
proof of payment to third persons and Bank, Bank may make all or part of such
payment or obtain such insurance policies required in this Section 6.5, and take
any action under the policies Bank deems prudent.

 

(d)     Borrower shall use commercially reasonable efforts to provide Bank with
thirty (30) days prior written notice before any material alteration is
consummated with respect to any insurance policies required to be maintained by
this Section 6.5.

 

6.6     Operating Accounts.

 

(a)     Other than Borrower’s operating and deposit accounts maintained with The
Toronto-Dominion Bank solely in Canada, maintain all of its and all of its
Subsidiaries’ primary U.S. operating and other deposit accounts and securities
accounts with Bank and Bank’s Affiliates.

 

 

 
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(b)     Provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or Bank’s Affiliates. For each Collateral Account that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument under
applicable Canadian law with respect to such Collateral Account to perfect
Bank’s Lien in such Collateral Account in accordance with the terms hereunder
which Control Agreement may not be terminated without the prior written consent
of Bank. The provisions of the previous sentence shall not apply to deposit
accounts exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of Borrower’s employees and identified to
Bank by Borrower as such.

 

6.7     Financial Covenants. Borrower shall at all times maintain the following
financial ratios and covenants, tested as of the last day of each month, with
all such reporting to be calculated and expressed in Canadian Dollars:

 

(a) Minimum Revenue. Trailing 3-Month Revenue of the following amounts for the
respective measuring period:

 

Measuring Periods

Minimum Revenue

Effective Date through May 31, 2014

$[ ***] 1

June 1, 2014 through August 31, 2014

$[ ***] 2

September 1, 2014 through November 30, 2014

$[ ***] 3

December 1, 2014 through December 31, 2014

$[ ***] 4

January 1, 2015 and thereafter

To be determined by Bank and Borrower

 

(b) Liquidity Ratio. A Liquidity Ratio of at least 1.15 to 1.00.

 

6.8     Protection of Intellectual Property Rights.

 

(a)     Protect, defend and maintain the validity and enforceability of its
Intellectual Property; (b) promptly advise Bank in writing of material
infringements or any other event that could reasonably be expected to materially
and adversely affect the value of its Intellectual Property; and (c) not allow
any Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent.

 

(b)     Provide written notice to Bank within thirty (30) days of entering or
becoming bound by any Restricted License (other than over-the-counter software
that is commercially available to the public) material to Borrower’s business.
Borrower shall take such commercially reasonable steps as Bank requests to
obtain the consent of, or waiver by, any person whose consent or waiver is
necessary for (i) any Restricted License to be deemed “Collateral” and for Bank
to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such Restricted License, whether now
existing or entered into in the future, and (ii) Bank to have the ability in the
event of enforcement against any Collateral to use such Collateral in accordance
with Bank’s rights and remedies under this Agreement and the other Loan
Documents (provided that such use shall not include disposal of such Collateral
in violation of its terms).

 

--------------------------------------------------------------------------------

1 Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

2 Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

3 Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

4 Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

 

 
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6.9     Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

 

6.10     Access to Collateral; Books and Records. Allow Bank, or its agents, at
reasonable times, on one (1) Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), to inspect the
Collateral and audit and copy Borrower’s Books. Such inspections or audits shall
be conducted no more often than once every twelve (12) months unless an Event of
Default has occurred and is continuing in which case such inspections and audits
shall occur as often as Bank shall determine is necessary. The foregoing
inspections and audits shall be at Borrower’s expense, and the charge therefor
shall be Eight Hundred Fifty Dollars ($850) per person per day (or such higher
amount as shall represent Bank’s then-current standard charge for the same),
plus reasonable out-of-pocket expenses. In the event Borrower and Bank schedule
an audit more than ten (10) days in advance, and Borrower cancels or seeks to
reschedule the audit with less than ten (10) days written notice to Bank, then
(without limiting any of Bank’s rights or remedies), Borrower shall pay Bank a
fee of One Thousand Dollars ($1,000) plus any out-of-pocket expenses incurred by
Bank to compensate Bank for the anticipated costs and expenses of the
cancellation or rescheduling.

 

6.11     Formation or Acquisition of Subsidiaries. Notwithstanding and without
limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the
time that Borrower or Guarantor forms any direct or indirect Subsidiary or
acquires any direct or indirect Subsidiary after the Effective Date, Borrower
and Guarantor shall (a) cause such new Subsidiary to provide to Bank a joinder
to the Loan Agreement to cause such Subsidiary to become a co-borrower hereunder
or a Guaranty, together with such appropriate financing statements and/or
Control Agreements, all in form and substance satisfactory to Bank (including
being sufficient to grant Bank a first priority Lien (subject to Permitted
Liens) in and to the assets of such newly formed or acquired Subsidiary), (b)
provide to Bank appropriate certificates and powers and financing statements,
pledging all of the direct or beneficial ownership interest in such new
Subsidiary, in form and substance satisfactory to Bank, and (c) provide to Bank
all other documentation in form and substance satisfactory to Bank, including
one or more opinions of counsel reasonably satisfactory to Bank, which in its
opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above. Any document, agreement, or
instrument executed or issued pursuant to this Section 6.11 shall be a Loan
Document.

 

6.12     Further Assurances. Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement. Deliver to Bank, within
five (5) days after the same are sent or received, copies of all correspondence,
reports, documents and other filings with any Governmental Authority regarding
compliance with or maintenance of Governmental Approvals or Requirements of Law
or that could reasonably be expected to have a material effect on any of the
Governmental Approvals or otherwise on the operations of Borrower or any of its
Subsidiaries.

 

7.     NEGATIVE COVENANTS

 

Borrower shall not do any of the following without Bank’s prior written consent:

 

7.1     Dispositions. Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers
(a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment that is, in the reasonable judgment of Borrower, no longer
economically practicable to maintain or useful in the ordinary course of
business of Borrower; (c) consisting of Permitted Liens and Permitted
Investments; (d) consisting of the sale or issuance of any stock of Borrower
permitted under Section 7.2 of this Agreement; (e) consisting of Borrower’s use
or transfer of money or Cash Equivalents in the ordinary course of its business
for the payment of ordinary course business expenses in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents; and
(f) of non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business and licenses that could not
result in a legal transfer of title of the licensed property but that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discrete geographical areas outside of Canada and the
United States.

 

 

 
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7.2     Changes in Business, Management, Ownership or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve; or
(c) (i) fail to provide notice to Bank of any Key Person departing from or
ceasing to be employed by Borrower within five (5) days after his or her
departure from Borrower; or (ii) enter into any transaction or series of related
transactions in which the stockholders of Borrower who were not stockholders
immediately prior to the first such transaction own more than forty percent
(40%) of the voting stock of Borrower immediately after giving effect to such
transaction or related series of such transactions (other than by the sale of
Borrower’s equity securities in a public offering or to venture capital or
private equity investors so long as Borrower identifies to Bank the venture
capital or private equity investors at least seven (7) Business Days prior to
the closing of the transaction and provides to Bank a description of the
material terms of the transaction).

 

Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Fifty Thousand
Dollars ($50,000) in Borrower’s assets or property) or deliver any portion of
the Collateral valued, individually or in the aggregate, in excess of Fifty
Thousand Dollars ($50,000) to a bailee at a location other than to a bailee and
at a location already disclosed in the Perfection Certificate, (2) change its
jurisdiction of organization, (3) change its organizational structure or type,
(4) change its legal name, or (5) change any organizational number or equivalent
(if any) assigned by its jurisdiction of organization. If Borrower intends to
deliver any portion of the Collateral valued, individually or in the aggregate,
in excess of Fifty Thousand Dollars ($50,000) to a bailee, and Bank and such
bailee are not already parties to a bailee agreement governing both the
Collateral and the location to which Borrower intends to deliver the Collateral,
then Borrower will first receive the written consent of Bank, and such bailee
shall execute and deliver a bailee agreement in form and substance satisfactory
to Bank.

 

7.3     Mergers, Amalgamations or Acquisitions. Merge, amalgamate or
consolidate, or except as permitted by the immediately succeeding sentence,
permit any of its Subsidiaries to merge, amalgamate or consolidate, with any
other Person, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person; provided
that Borrower or any Subsidiary thereof may form any new Subsidiary, so long as
such new Subsidiary has executed and delivered Bank the Security contemplated by
this Agreement to Bank’s satisfaction. A Subsidiary may merge, amalgamate or
consolidate into another Subsidiary or into Borrower.

 

7.4     Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5     Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s
Intellectual Property, except as is otherwise permitted in Section 7.1 hereof
and the definition of “Permitted Liens” herein.

 

7.6     Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.6(b) hereof.

 

7.7     Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock provided
that (i) Borrower may convert any of its convertible securities into other
securities pursuant to the terms of such convertible securities or rights
granted under any equity compensation plan into other securities pursuant to the
terms of such convertible securities or rights, or otherwise in exchange
thereof, (ii) Borrower may redeem, retire, or repurchase capital stock (x) owned
by any employee stock ownership or employee compensation plan of Borrower or (y)
deemed to occur upon the exercise of stock options or warrants, and (iii)
Borrower may pay dividends solely in common stock.

 

 

 
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7.8     Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9     Subordinated Debt. (a) Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor, or other
similar agreement to which such Subordinated Debt is subject, or (b) amend any
provision in any document relating to the Subordinated Debt which would increase
the amount thereof, provide for earlier or greater principal, interest, or other
payments thereon, or adversely affect the subordination thereof to Obligations
owed to Bank.

 

7.10     Compliance. Become an “investment company” or a company controlled by
an “investment company”, under the Investment Company Act of 1940, as amended,
or undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent
a Reportable Event or Prohibited Transaction as defined in ERISA, or (c) comply
with the Federal Labor Standards Act, the failure of any of the conditions in
clauses (a) through (c) which could reasonably be expected to have a material
adverse effect on Borrower’s business, or violate any other law or regulation,
if the violation could reasonably be expected to have a material adverse effect
on Borrower’s business or permit any Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any material liability of Borrower,
including any material liability to any governmental agency.

 

8.     EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

 

8.1     Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension when due, or (b) pay any other Obligations
within three (3) Business Days after such Obligations are due and payable (which
three (3) Business Day cure period shall not apply to payments due on the Growth
Capital Maturity Date). During the cure period, the failure to make or pay any
payment specified under clause (b) hereunder is not an Event of Default (but no
Credit Extension will be made during the cure period);

 

8.2     Covenant Default.

 

(a)     Borrower fails or neglects to perform any obligation in Sections 6.2,
6.4, 6.5, 6.6, or 6.7 or violates any covenant in Section 7; or

 

(b)     Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) additional days) to attempt to
cure such default, and within such reasonable time period the failure to cure
the default shall not be deemed an Event of Default (but no Credit Extensions
shall be made during such cure period). Cure periods provided under this section
shall not apply, among other things, to financial covenants or any other
covenants set forth in clause (a) above;

 

 

 
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8.3     Material Adverse Change. A Material Adverse Change occurs;

 

8.4     Attachment; Levy; Restraint on Business.

 

(a)     (i) The service of process seeking to attach, by trustee or similar
process, any funds of Borrower or of any entity under the control of Borrower
(including a Subsidiary) in excess of Fifty Thousand Dollars ($50,000), or (ii)
a notice of lien or levy is filed against any of Borrower’s assets by any
Governmental Authority, and the same under subclauses (i) and (ii) hereof are
not, within ten (10) days after the occurrence thereof, discharged or stayed
(whether through the posting of a bond or otherwise); provided, however, no
Credit Extensions shall be made during any ten (10) day cure period; or

 

(b)     (i) any material portion of Borrower’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver, or (ii) any court
order enjoins, restrains, or prevents Borrower from conducting all or any
material part of its business;

 

8.5     Insolvency. (a) Borrower or any of its Subsidiaries is unable to pay its
debts (including trade debts) as they become due or otherwise becomes insolvent;
(b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or
(c) an Insolvency Proceeding is begun against Borrower or any of its
Subsidiaries and is not dismissed or stayed within thirty (30) days (but no
Credit Extensions shall be made while any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);

 

8.6     Other Agreements. There is, under any agreement to which Borrower or any
Guarantor is a party with a third party or parties, (a) any default resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount individually or in the aggregate
in excess of Fifty Thousand Dollars ($50,000); or (b) any breach or default by
Borrower or Guarantor, the result of which could have a Material Adverse Change;

 

8.7     Judgments; Penalties. One or more fines, penalties or final judgments,
orders or decrees for the payment of money in an amount, individually or in the
aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by
independent third-party insurance as to which liability has been accepted by
such insurance carrier) shall be rendered against Borrower by any Governmental
Authority, and the same are not, within ten (10) days after the entry,
assessment or issuance thereof, discharged, satisfied, or paid, or after
execution thereof, stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the satisfaction, payment, discharge, stay, or
bonding of such fine, penalty, judgment, order or decree);

 

8.8     Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;

 

8.9     Subordinated Debt. Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or otherwise
cease to be in full force and effect, any Person shall be in breach thereof or
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this
Agreement; or

 

8.10     Guaranty. (a) Any guaranty of any Obligations terminates or ceases for
any reason to be in full force and effect; (b) any Guarantor does not perform
any obligation or covenant under any guaranty of the Obligations; (c) any
circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with
respect to any Guarantor, or (d) the liquidation, winding up, or termination of
existence of any Guarantor other than as permitted by this Agreement; or
(e) (i) a material impairment in the perfection or priority of Bank’s Lien in
the collateral provided by Guarantor or in the value of such collateral or
(ii) a material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of
the Obligations occurs with respect to any Guarantor.

 

 

 
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9.     BANK’S RIGHTS AND REMEDIES

 

9.1     Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, without notice or demand, do any or all of the
following:

 

(a)     declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

 

(b)     stop advancing money or extending credit for Borrower’s benefit under
this Agreement or under any other agreement between Borrower and Bank;

 

(c)     demand that Borrower (i) deposit cash with Bank in an amount equal to
one hundred five percent (105%) if the Dollar Equivalent is denominated in U.S.
dollars or one hundred ten percent (110%) if the Dollar Equivalent is
denominated in Foreign Currency of the Dollar Equivalent of the aggregate face
amount of all Letters of Credit remaining undrawn (plus all interest, fees, and
costs due or to become due in connection therewith (as estimated by Bank in its
good faith business judgment)), to secure all of the Obligations relating to
such Letters of Credit, as collateral security for the repayment of any future
drawings under such Letters of Credit, and Borrower shall forthwith deposit and
pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to
be paid or payable over the remaining term of any Letters of Credit;

 

(d)     terminate any FX Contracts;

 

(e)     verify the amount of, demand payment of and performance under, and
collect any Accounts and General Intangibles (excluding, however, all
Intellectual Property), settle or adjust disputes and claims directly with
Account Debtors for amounts on terms and in any order that Bank considers
advisable, and notify any Person owing Borrower money of Bank’s security
interest in such funds;

 

(f)     make any payments and do any acts it considers necessary or reasonable
to protect the Collateral and/or its Lien in the Collateral. Borrower shall
assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

 

(g)     apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;

 

(h)     ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;

 

(i)     place a “hold” on any account maintained with Bank and/or deliver a
notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;

 

(j)     apply for the appointment of a receiver, trustee, liquidator or
conservator of the Collateral, without notice and without regard to the adequacy
of the security for the Obligations and without regard to the solvency of
Borrower, any guarantor or any other Person liable for any of the obligations;

 

(k)     demand and receive possession of Borrower’s Books; and

 

 

 
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(l)     exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the PPSA
(including disposal of the Collateral pursuant to the terms thereof).

 

9.2     Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower’s insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the PPSA permits. Borrower hereby appoints Bank
as its lawful attorney-in-fact to sign Borrower’s name on any documents
necessary to perfect or continue the perfection of Bank’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.

 

9.3     Protective Payments. If Borrower fails to obtain the insurance called
for by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document or which may be required to preserve the Collateral, Bank may obtain
such insurance or make such payment, and all amounts so paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then highest
rate applicable to the Obligations, and secured by the Collateral. Bank will
make reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time thereafter. No
payments by Bank are deemed an agreement to make similar payments in the future
or Bank’s waiver of any Event of Default.

 

9.4     Application of Payments and Proceeds Upon Default. If an Event of
Default has occurred and is continuing, Bank shall have the right to apply in
any order any funds in its possession, whether from Borrower account balances,
payments, proceeds realized as the result of any collection of Accounts or other
disposition of the Collateral, or otherwise, to the Obligations. Bank shall pay
any surplus to Borrower by credit to the Designated Deposit Account or to other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency. If Bank, directly or indirectly, enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.

 

9.5     Bank’s Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.

 

9.6     No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by the party granting the
waiver and then is only effective for the specific instance and purpose for
which it is given. Bank’s rights and remedies under this Agreement and the other
Loan Documents are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an
election and shall not preclude Bank from exercising any other remedy under this
Agreement or other remedy available at law or in equity, and Bank’s waiver of
any Event of Default is not a continuing waiver. Bank’s delay in exercising any
remedy is not a waiver, election, or acquiescence.

 

 

 
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9.7     Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

 

10.     NOTICES

 

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

 

If to Borrower:

RESPONSE BIOMEDICAL CORP.
1781 West 75th Ave.
Vancouver, B.C. V6P 6P2
Attn: William Adams – CFO
Fax: (604) 456- 6066
Email: badams@responsebio.com

 

 

If to Bank:

Silicon Valley Bank
901 5th Avenue, Suite 3900
Seattle, WA 98164
Attn: Dave Sanders – Vice President
Fax: (206) 624-0374
Email: dsanders@svb.com

 

11.     CHOICE OF LAW AND VENUE

 

This Agreement shall be governed by, and construed in accordance with, the
internal laws of the Province of British Columbia and the federal laws of Canada
applicable therein, without regard to principles of conflicts of law. Each of
Borrower and Bank hereby submits to the non-exclusive jurisdiction of the courts
of British Columbia.

 

12.     GENERAL PROVISIONS

 

12.1     Termination Prior to Growth Capital Maturity Date; Survival. All
covenants, representations and warranties made in this Agreement continue in
full force until this Agreement has terminated pursuant to its terms and all
Obligations have been satisfied. So long as Borrower has satisfied the
Obligations (other than inchoate indemnity obligations, and any other
obligations which, by their terms, are to survive the termination of this
Agreement, and any Obligations under Bank Services Agreements that are cash
collateralized in accordance with Section 4.1 of this Agreement), this Agreement
may be terminated prior to the Growth Capital Maturity Date by Borrower,
effective three (3) Business Days after written notice of termination is given
to Bank. Those obligations that are expressly specified in this Agreement as
surviving this Agreement’s termination shall continue to survive notwithstanding
this Agreement’s termination.

 

12.2     Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has the
limited right, without the consent of Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents (other than the Warrant, as to which assignment, transfer and other
such actions are governed by the terms thereof) solely to Qualified Assignees.

 

 

 
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12.3     Indemnification. Borrower agrees to indemnify, defend and hold Bank and
its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against: (i) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (ii) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.

 

12.4     Right of Set-Off. Borrower hereby grants to Bank, a lien, security
interest and right of setoff as security for all Obligations to Bank, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED TO THE EXTENT PERMITTED BY
APPLICABLE LAW.

 

12.5     Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

 

12.6     Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

 

12.7     Correction of Loan Documents. Bank may correct patent errors and fill
in any blanks in the Loan Documents consistent with the agreement of the
parties.

 

12.8     Amendments in Writing; Waiver; Integration. No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought. Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document. Any waiver granted shall be limited to the specific
circumstance expressly described in it, and shall not apply to any subsequent or
other circumstance, whether similar or dissimilar, or give rise to, or evidence,
any obligation or commitment to grant any further waiver. The Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of the Loan Documents merge into the Loan Documents.

 

12.9     Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Agreement.

 

12.10     Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with
Bank, collectively, “Bank Entities”); (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, Bank
shall use its best efforts to obtain any prospective transferee’s or purchaser’s
agreement to the terms of this provision); (c) as required by law, regulation,
subpoena, or other order; (d) to Bank’s regulators or as otherwise required in
connection with Bank’s examination or audit; (e) as Bank considers appropriate
in exercising remedies under the Loan Documents; and (f) to third-party service
providers of Bank so long as such service providers have executed a
confidentiality agreement with Bank with terms no less restrictive than those
contained herein. Confidential information does not include information that is
either: (i) in the public domain or in Bank’s possession when disclosed to Bank,
or becomes part of the public domain (other than as a result of its disclosure
by Bank in violation of this Agreement) after disclosure to Bank; or
(ii) disclosed to Bank by a third party, if Bank does not know that the third
party is prohibited from disclosing the information.

 

 

 
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Bank Entities may use anonymous forms of confidential information for aggregate
datasets, for analyses or reporting, and for any other uses not expressly
prohibited in writing by Borrower. The provisions of the immediately preceding
sentence shall survive termination of this Agreement.

 

12.11     Attorneys’ Fees, Costs and Expenses. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.

 

12.12     Electronic Execution of Documents. The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

 

12.13     Captions. The headings used in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.

 

12.14     Construction of Agreement. The parties mutually acknowledge that they
and their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.

 

12.15     Relationship. The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement. The parties do not intend
to create any agency, partnership, joint venture, trust, fiduciary or other
relationship with duties or incidents different from those of parties to an
arm’s-length contract.

 

12.16     Third Parties. Nothing in this Agreement, whether express or implied,
is intended to: (a) confer any benefits, rights or remedies under or by reason
of this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

 

12.17     Purchaser Certificate. To ensure that the Warrant is issued in
compliance with applicable Requirements of Law, including applicable securities
laws, on the date hereof, Bank has delivered to Borrower a duly executed
purchaser certificate in the form attached hereto as Exhibit D.

 

13.     DEFINITIONS

 

13.1     Definitions. As used in the Loan Documents, the word “shall” is
mandatory, the word “may” is permissive, the word “or” is not exclusive, the
words “includes” and “including” are not limiting, the singular includes the
plural, and numbers denoting amounts that are set off in brackets are negative.
As used in this Agreement, the following capitalized terms have the following
meanings:

 

“Account” has the meaning set forth in the Security Agreement.

 

“Account Debtor” is any person who owes funds to Borrower.

 

 

 
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“Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution
who is authorized to execute the Loan Documents, including any Advance request,
on behalf of Borrower.

 

“Bank” is defined in the preamble hereof.

 

“Bank Entities” is defined in Section 12.10.

 

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower or any Guarantor.

 

“Bank Services”  are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

 

“BCSC” shall mean the British Columbia Securities Commission, any successor
thereto, and any analogous Governmental Authority.

 

“Borrower” is defined in the preamble hereof.

 

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal, provincial and state tax returns, records regarding Borrower’s assets
or liabilities, the Collateral, business operations or financial condition, and
all computer programs or storage or any equipment containing such information.

 

“Borrowing Resolutions” are, with respect to any Person, those resolutions
substantially in the form attached hereto as Exhibit C.

 

“Business Day” is any day that is not a Saturday, Sunday, a day on which Bank is
closed or a day on which banks are not open for business in Vancouver, British
Columbia, and if any determination of a “Business Day” shall relate to an FX
Contract, the term “Business Day” shall mean a day on which dealings are carried
on in the country of settlement of the Foreign Currency.

 

“Canadian Cash Equivalents” means obligations (a) issued by the Government of
Canada or an instrumentality or agency thereof and guaranteed fully as to
principal, premium, if any, and interest by the Government of Canada; (b) issued
by a province of Canada, or an instrumentality or agency thereof, which has a
long term debt rating of at least A by Standard & Poor’s Ratings Group, A2 by
Moody’s Investors Service, Inc., or A by Dominion Bond Rating Service Limited;
(c) term deposits, guaranteed investment certificates, certificates of deposit,
bankers’ acceptances or bearer deposit notes, in each case, of any Canadian
chartered bank or other Canadian financial institution which has a long term
debt rating of at least A+ by Standard & Poor’s Ratings Group, A1 by Moody’s
Investors Service, Inc., or A (high) by Dominion Bond Rating Service Limited;
and (d) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from Standard & Poor’s Ratings Group, at least P-1 from Moody’s Investors
Service, Inc., or at least R-1(high) from Dominion Bond Rating Service Limited.

 

 

 
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“Canadian Dollars” means the lawful money of Canada.

 

“Capital Lease” means, at any time, any lease of property, real or personal,
moveable or immoveable (whether or not such lease is intended as security) in
respect of which the present value of the minimum rental commitment would, in
accordance with GAAP, be capitalized on a balance sheet of the lessee.

 

“Cash Equivalents” means US Cash Equivalents and Canadian Cash Equivalents, as
applicable.

 

“Claims” is defined in Section 12.3.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of California, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

 

“Collateral” has the meaning set forth in the Security Agreement.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

 

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit A.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation, in each
case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold
with recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

 

“Copyrights” has the meaning set forth in the Security Agreement.

 

“Credit Extension” is any Growth Capital Advance or any other extension of
credit by Bank for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.3(b).

 

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made, and includes without limitation
any operating account, current account or other deposit account of Borrower
maintained with a Canadian bank, but for certainty, shall not include any
restricted deposits described in note 7 to the interim financial statements of
Borrower for the month ended September 30, 2013.

 

 

 
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“Designated Deposit Account” is Borrower’s deposit account number _____________,
maintained by Borrower with Bank; the multicurrency account denominated in
Euros, account number _____________, maintained by Borrower.

 

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.

 

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

 

“Draw Period” is the period of time from the Effective Date through the earlier
to occur of September 30, 2014 or (b) an Event of Default.

 

“Effective Date” is defined in the preamble hereof.

 

“Equipment” has the meaning set forth in the Security Agreement.

 

“Equity Event” means Borrower’s receipt of net cash proceeds after October 3,
2013, but no later than November 15, 2013, of not less than Three Million
Dollars ($3,000,000) from (a) the sale of Borrower’s equity securities or (b)
the incurrence of Subordinated Debt on terms and to investors satisfactory to
Bank.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.

 

“Event of Default” is defined in Section 8.

 

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower which shall be a Business Day.

 

“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

 

“GAAP” means those accounting principles which are recognized as being generally
accepted in the United States from time to time.

 

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

 

 

 
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“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

 

“Growth Capital Advance” or “Growth Capital Advances” is defined in Section
2.1.1(a).

 

“Growth Capital Advance Payment” is defined in Section 2.1.1(b).

 

“Growth Capital Line” is a Growth Capital Advance or Growth Capital Advances in
an initial aggregate amount of up to One Million Five Hundred Thousand Dollars
($1,500,000), provided however, that such aggregate amount shall be increased to
Two Million Five Hundred Thousand Dollars ($2,500,000) in the event that
Borrower’s net revenue for fiscal 2014 is equal to or greater than [***] 5
Canadian Dollars ($[***]6) on or before July 31, 2014.

 

“Growth Capital Maturity Date” is May 1, 2017.

 

“Guarantor” is RESPONSE POINT OF CARE INC., a Delaware corporation.

 

“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.3.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada) or the
Companies’ Creditors Agreement Act (Canada), each as amended, or any other
bankruptcy or insolvency law of any jurisdiction, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

“Intellectual Property” has the meaning set forth in the Security Agreement.

 

“Inventory” has the meaning set forth in the Security Agreement.

 

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

 

“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Jeffrey
L. Purvin as of the Effective Date, and (b) Chief Financial Officer, who is
William J. Adams as of the Effective Date.

 

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

 

 

--------------------------------------------------------------------------------

5 Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

6 Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

 

 
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“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

 

“Liquidity Ratio” means, as of any date of determination, the ratio of (i)
Borrower’s unrestricted cash plus net Accounts receivable to (ii) the aggregate
outstanding amount of all Obligations owing from Borrower to Bank as of such
date that are not cash secured.

 

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits,
certificates, notices, and any other documents related to this Agreement, the
Warrant, the Perfection Certificates, any Bank Services Agreement, the Security
Agreement, the Secured Guaranty Documents, the Borrowing Resolutions, any
subordination agreement, any note, or notes or guaranties executed by Borrower
or any Guarantor, and any other present or future agreement by Borrower and/or
any Guarantor with or for the benefit of Bank in connection with this Agreement,
all as amended, restated, or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.

 

“Monthly Financial Statements” is defined in Section 6.2(a).

 

“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or
later, whether under this Agreement, the other Loan Documents (other than the
Warrant), or otherwise, including, without limitation, all obligations relating
to letters of credit (including reimbursement obligations for drawn and undrawn
letters of credit), cash management services, and foreign exchange contracts, if
any, and including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower assigned to Bank, and to perform
Borrower’s duties under the Loan Documents (other than the Warrant).

 

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified (if possible) by the Secretary of State (or equivalent agency) of such
Person’s state or other jurisdiction of formation on a date that is no earlier
than thirty (30) days prior to the Effective Date, if applicable, and, (a) if
such Person is a corporation, its bylaws in current form, if applicable, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.

 

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

“Payment/Advance Form” is that certain form attached hereto as Exhibit B.

 

“Perfection Certificate” is defined in Section 5.1.

 

“Permitted Indebtedness” is:

 

(a)     Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

 

(b)     Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

 

(c)     Subordinated Debt;

 

(d)     Unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;

 

(e)     Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

 

 

 
-25-

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(f)     Indebtedness secured by Liens permitted under clauses (a) and (c) of the
definition of “Permitted Liens” hereunder;

 

(g)     Indebtedness consisting of obligations under Capital Leases; and

 

(h)     extensions, refinancings, modifications, amendments and restatements of
any items of Permitted Indebtedness (a) through (g) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.

 

“Permitted Investments” are:

 

(a)     Investments (including, without limitation, Subsidiaries) existing on
the Effective Date and shown on the Perfection Certificate;

 

(b)     Investments consisting of Cash Equivalents;

 

(c)     Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

 

(d)     Investments consisting of Deposit Accounts in which Bank has a perfected
security interest;

 

(e)     Investments accepted in connection with Transfers permitted by Section
7.1;

 

(f)     Investments consisting of the creation of a Subsidiary for the purpose
of consummating a merger transaction permitted by Section 7.3 of this Agreement,
which is otherwise a Permitted Investment;

 

(i)     Investments (i) by Borrower in Subsidiaries not to exceed Fifty Thousand
Dollars ($50,000) in the aggregate in any fiscal year and (ii) by Subsidiaries
in other Subsidiaries not to exceed Fifty Thousand Dollars ($50,000) in the
aggregate in any fiscal year or in Borrower;

 

(j)     Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors;

 

(k)     Investments consisting of (i) payroll payments made to employees of
Subsidiaries of Borrower, and (ii) reimbursements of reasonable out-of-pocket
expenses of employees of Subsidiaries of Borrower, in each case in the ordinary
course of business.

 

(l)     Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; and

 

(m)     Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business; provided that this paragraph (m) shall not
apply to Investments of Borrower in any Subsidiary.

 

“Permitted Liens” are:

 

(a)     Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;

 

 

 
-26-

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(b)     Liens for taxes, fees, assessments or other government charges or
levies, either (i) not due and payable or (ii) being contested in good faith and
for which Borrower maintains adequate reserves on its Books, provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)     (i) (x) purchase money Liens on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment and (y) Liens in respect
of obligations under Capital Leases, so long as such Liens attach only to the
property subject to such Capital Leases; provided that such Liens described in
clauses (x) and (y) shall not secure more than (a) One Million Five Hundred
Thousand Dollars ($1,500,000) in the aggregate in Borrower’s 2014, 2015 and 2016
fiscal years, collectively (provided that such Liens shall not secure more than
Five Hundred Thousand Dollars ($500,000) in the aggregate in Borrower’s 2014
fiscal year) and (b) One Million Six Hundred Thousand Dollars ($1,600,000) in
the aggregate in Borrower’s 2017 fiscal year, and (ii) purchase money Liens
existing on Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;

 

(d)     Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Fifty Thousand Dollars ($50,000) and which are not delinquent or
remain payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;

 

(e)     Liens of ARE-BC No. 2 Holdings Inc. in respect of cash collateral
provided by Borrower for “Tenant Improvements” and “Building Base Work”, each as
defined in the lease dated as of April 24, 2007, by and between ARE-BC No. 2
Holdings Inc., as landlord, and Borrower, as tenant, securing liabilities in the
aggregate amount not to exceed Eight Hundred and Seventy Thousand Six Hundred
Dollars ($870,600);

 

(f)     Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

 

(g)     Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

 

(h)     leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Bank a security interest
therein;

 

(i)     to the extent not included in clause (g) above, Liens arising out of
leases entered into in the ordinary course of business and having a term of
greater than one year;

 

(j)     non-exclusive license of Intellectual Property granted to third parties
in the ordinary course of business, and licenses of Intellectual Property that
could not result in a legal transfer of title of the licensed property that may
be exclusive in respects other than territory and that may be exclusive as to
territory only as to discreet geographical areas outside of the United States;

 

(k)     the reservation in any original grants from the Crown of any land or
interests therein and statutory exceptions and reservations to title;

 

(l)     Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
and

 

 

 
-27-

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(m)     Liens in favor of other financial institutions arising in connection
with Borrower’s (i) Collateral Accounts held at such institutions, provided that
Bank has a perfected security interest in the amounts held in such Collateral
Accounts and (ii) credit card agreements and arrangements with such institutions
in an aggregate amount not to exceed Forty Thousand Dollars ($40,000), subject
in both cases (i) and (ii) to such subordination agreements as Bank deems
necessary to limit such Liens to the amounts set out herein.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“PPSA” means the Personal Property Security Act, (British Columbia) in force
from time to time, including and all amendments thereto or replacements thereof,
and regulations thereunder as may from time to time be amended or replaced.

 

“Prepayment Fee” means a fee equal to (i) three percent (3.00%) of the amount of
the Growth Capital Advance prepaid on the date of prepayment if such prepayment
occurs on or prior to the first anniversary of the Effective Date, (ii) two
percent (2.00%) of the amount of the Growth Capital Advance prepaid on the date
of prepayment if such prepayment occurs after the first anniversary of the
Effective Date but on or prior to the second anniversary of the Effective Date.
For certainty, no prepayment fee shall apply to prepayments of Growth Capital
Advances occurring after the second anniversary of the Effective Date.

 

“Prime Rate” is the rate of interest per annum from time to time published in
the money rates section of The Wall Street Journal or any successor publication
thereto as the “prime rate” then in effect; provided that if such rate of
interest, as set forth from time to time in the money rates section of The Wall
Street Journal, becomes unavailable for any reason as determined by Bank, the
“Prime Rate” shall mean the rate of interest per annum announced by Bank as its
prime rate in effect at its principal office in the State of California (such
Bank announced Prime Rate not being intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to debtors). The Wall
Street Journal prime rate as of the Effective Date is 3.25%.

 

“Qualified Assignee” is any Person which is a commercial bank, savings and
loan/savings bank, or other entity known to be an “accredited investor” under
applicable securities laws which extends credit or buys loans, including
insurance companies, mutual funds, leasing companies, commercial financing
companies with a BBB or Baa2 or higher rating but, for the purposes hereof,
excludes vulture funds, distressed debt purchasers and any Person that holds an
Investment (including Subordinated Debt) in Borrower.

 

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

 

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the Chief Executive Officer, President, Vice
President, Chief Financial Officer and Controller of Borrower.

 

“Restricted License” is any material license or other agreement with respect to
which Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default under or
termination of could interfere with the Bank’s right to sell any Collateral.

 

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.

 

 

 
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“Secured Guaranty Documents” means that certain Unconditional Guaranty and that
certain security agreement, dated as of the Effective Date, executed by
Guarantor in favor of Bank, as the same may be renewed, amended, extended or
restated from time to time.

 

“Securities Account” is any “securities account” as defined in the Code or in
the PPSA with such additions to such term as may hereafter be made.

 

“Security” means the Security Agreement and all other present and future
security from time to time held by or on behalf of Bank from Borrower or any
other Person as security for the Obligations.

 

“Security Agreement” means the security agreement given by Borrower in favor of
Bank on or about the date hereof as the same may be renewed, amended, extended
or restated from time to time.

 

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

 

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or
Guarantor.

 

“Trademarks” has the meaning set out in the Security Agreement.

 

“Trailing 3-Month Revenue” means the total net revenue of Borrower, expressed in
Canadian Dollars, on a trailing three (3) month basis.

 

“Transfer” is defined in Section 7.1.

 

“TSX” shall mean the Toronto Stock Exchange, any successor thereto, and any
analogous Governmental Authority.

 

“US Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.

 

“Warrant” is that certain Warrant to Purchase Stock dated as of the Effective
Date executed by Borrower in favor of Bank.

 

[Signature page follows.]

 

 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

 

BORROWER:

         

RESPONSE BIOMEDICAL CORP.

         

By /s/ William J. Adams

   

Name: William J. Adams

   

Title: Chief Financial Officer

         

BANK:

         

SILICON VALLEY BANK

         

By /s/ David Sanders

   

Name: David Sanders

   

Title: VP

   

 

 

 

 

[Signature Page to Loan Agreement]

 

 

 

 

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EXHIBIT A

COMPLIANCE CERTIFICATE

 

TO:        SILICON VALLEY BANK

Date:                                             

FROM:  RESPONSE BIOMEDICAL CORP.

 

                                             

The undersigned authorized officer of RESPONSE BIOMEDICAL CORP. (“Borrower”)
certifies that under the terms and conditions of the Loan Agreement between
Borrower and Bank (the “Agreement”), as at the date hereof:

 

(1) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date; (4)
Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement;
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank.

 

Attached are the required documents supporting the certification. The
undersigned certifies that these are prepared in accordance with GAAP (expressed
in Canadian Dollars) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The undersigned acknowledges
that no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

 

Reporting Covenants

Required

Complies

     

Monthly financial statements with Compliance Certificate

Monthly within 30 days

Yes No

Monthly account statements from other financial institutions

Monthly within 30 days

Yes No

Annual financial statement (Audited) + CC

FYE within 180 days

Yes No

10-Q, 10-K and 8-K

Within 5 days after filing with SEC

Yes No

Board-approved financial projections

FYE within 45 days

Yes No

 

 

Other Matters

 

Have there been any amendments of or other changes to the capitalization table
of Borrower and to the Operating Documents of Borrower or any of its
Subsidiaries? If yes, provide copies of any such amendments or changes with this
Compliance Certificate.

Yes

No

 

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

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1

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RESPONSE BIOMEDICAL CORP.

 

 

BANK USE ONLY

         

Received by: _______________________________________

By: _____________________________________________

   

AUTHORIZED SIGNER

Name: ___________________________________________

 

Date: _____________________________________________

Title: ____________________________________________

       

Verified: ___________________________________________

     

AUTHORIZED SIGNER

   

Date: ______________________________________________

         

Compliance Status:

Yes

No

 

 

 
2

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EXHIBIT B – LOAN PAYMENT/ADVANCE REQUEST FORM

 

DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME*

[a1.jpg]

 
3 

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EXHIBIT C

BORROWING RESOLUTIONS

 

 [logo.jpg]

  

CORPORATE BORROWING certificatE

 

 

Borrower: RESPONSE BIOMEDICAL CORP.

Date: February __, 2014

Bank:     SILICON VALLEY BANK

 

            

I hereby certify as follows, as of the date set forth above:

 

 

1.     I am the Secretary, Assistant Secretary or other officer of Borrower. My
title is as set forth below.

 

2.     Borrower’s exact legal name is set forth above. Borrower is a British
Columbia corporation.

 

3.     Attached hereto are true, correct and complete copies of Borrower’s
Notice of Articles and Articles (including amendments), as filed with the B.C.
Registrar of Companies. Such Notice of Articles and Articles have not been
amended, annulled, rescinded, revoked or supplemented, and remain in full force
and effect as of the date hereof.

 

4.     The following resolutions were duly and validly adopted by Borrower’s
Board of Directors at a duly held meeting of such directors (or pursuant to a
unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and Silicon Valley
Bank (“Bank”) may rely on them until Bank receives written notice of revocation
from Borrower.

 

Resolved, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name

 

Title

 

Signature

 

Authorized to Add or Remove Signatories

                         

☐

           

☐

           

☐

           

☐

 

Resolved Further, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

 

 

 
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Resolved Further, that such individuals may, on behalf of Borrower:

 

Borrow Money. Borrow money from Bank.

Execute Loan Documents. Execute any loan documents Bank requires.

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

Apply for Letters of Credit. Apply for letters of credit from Bank.

Enter Derivative Transactions. Execute spot or forward foreign exchange
contracts, interest rate swap agreements, or other derivative transactions.

Issue Warrants. Issue warrants for Borrower’s capital stock.

Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effect these resolutions.

 

Resolved Further, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

 

5.     The persons listed above are Borrower's officers or employees with their
titles and signatures shown next to their names.

 

 

By:                                                              

Name:                                                         

Title:                                                           

 

 

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

 

 

I, the __________________________ of Borrower, hereby certify as to paragraphs 1
through 5 above, as of the date set forth above.

 

 

By:                                                              

Name:                                                         

Title:                                                           

 

 

 
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EXHIBIT D

 

PURCHASER CERTIFICATE

 

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1 

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2 

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1.

“Canadian financial institution” means (a) an association governed by the
Cooperative Credit Associations Act (Canada) or a central cooperative credit
society for which an order has been made under section 473(1) of that Act, or
(b) a bank, loan corporation, trust company, trust corporation, insurance
company, treasury branch, credit union, caisse populaire, financial services
cooperative, or league that, in each case, is authorized by an enactment of
Canada or a jurisdiction of Canada to carry on business in Canada or a
jurisdiction of Canada.

 

 

2.

For the purposes of National Instrument 45-106, and this Certificate the term
“person” includes (a) an individual, (b) a corporation, (c) a partnership,
trust, fund and an association, syndicate, organization or other organized group
of persons, whether incorporated or not, and (d) an individual or other person
in that person’s capacity as a trustee, executor, administrator or personal or
other legal representative.

 

 

3.

For the purposes of National Instrument 45-106 and this Certificate the term
“financial assets” means (a) cash, (b) securities, or (c) a contract of
insurance, a deposit or an evidence of a deposit that is not a security for the
purposes of securities legislation.

 

 

4.

For the purposes of National Instrument 45-106 and this Certificate the term
“related liabilities” means (a) liabilities incurred or assumed for the purpose
of financing the acquisition or ownership of financial assets, or (b)
liabilities that are secured by financial assets.

 

 

5.

For the purposes of National Instrument 45-106, and this Certificate the term
“investment fund” means a mutual fund or a non-redeemable investment fund, and,
for greater certainty in British Columbia, includes an EVCC and a VCC.

 

 

6.

For the purposes of National Instrument 45-106, and this Certificate the term
“fully managed account” means an account of a client for which a person makes
the investment decisions if that person has full discretion to trade in
securities for the account without requiring the client’s express consent to a
transaction.

 

 

 

 

The statements made in this Certificate are true.

 

DATED _______________________________, 2014.

 

 

 

 

     

Authorized signatory

          Name of Entity           Name of authorized signatory (please print)  
        Official capacity of authorized signatory (please print)

 

 

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