Exhibit 10.2

 

Execution Copy

 

TERM COMMITMENT NOTE

 

$10,000,000.00   Palo Alto, California     January 4, 2006

 

FOR VALUE RECEIVED, the undersigned NATUS MEDICAL INCORPORATED (“Borrower”)
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)
at its office at 400 Hamilton Avenue, Palo Alto, California, or at such other
place as the holder hereof may designate, in lawful money of the United States
of America and in immediately available funds, the principal sum of Ten Million
Dollars ($10,000,000.00), with interest thereon as set forth herein.

 

DEFINITIONS:

 

As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

 

(a) “Business Day” means any day except a Saturday, Sunday or any other day on
which commercial banks in California are authorized or required by law to close.

 

(b) “Fixed Rate Term” means a period commencing on a Business Day and continuing
for one (1) month, two (2) months or three (3) months, as designated by
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however, that
no Fixed Rate Term may be selected for a principal amount less than One Million
Dollars ($1,000,000.00); and provided further, that no Fixed Rate Term shall
extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would
end on a day which is not a Business Day, then such Fixed Rate Term shall be
extended to the next succeeding Business Day.

 

(c) “LIBOR” means the rate per annum determined pursuant to the following
formula:

 

LIBOR =

  

Base LIBOR

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     100% - LIBOR Reserve Percentage

 

(i) “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the number of days in such Fixed Rate Term and in an amount approximately
equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

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(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.

 

(d) “Prime Rate” means at any time the rate of interest most recently announced
within Bank at its principal office as its Prime Rate, with the understanding
that the Prime Rate is one of Bank’s base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

 

INTEREST:

 

(a) Interest. The outstanding principal balance of this Note shall bear interest
(computed on the basis of a 360-day year, actual days elapsed) either (i) at a
fluctuating rate per annum one-quarter percent (0.25%) above the Prime Rate in
effect from time to time, or (ii) at a fixed rate per annum determined by Bank
to be two and one-half percent (2.50%) above LIBOR in effect on the first day of
the applicable Fixed Rate Term. When interest is determined in relation to the
Prime Rate, each change in the rate of interest hereunder shall become effective
on the date each Prime Rate change is announced within Bank. With respect to
each LIBOR selection hereunder, Bank is hereby authorized to note the date,
principal amount, interest rate and Fixed Rate Term applicable thereto and any
payments made thereon on Bank’s books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.

 

(b) Selection of Interest Rate Options. At any time any portion of this Note
bears interest determined in relation to LIBOR, it may be continued by Borrower
at the end the Fixed Rate Term applicable thereto so that all or a portion
thereof bears interest determined in relation to the Prime Rate or to LIBOR for
a new Fixed Rate Term designated by Borrower. At any time any portion of this
Note bears interest determined in relation to the Prime Rate, Borrower may
convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
Bank may permit) so long as, with respect to each LIBOR selection, (A) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it’s sole option
but without obligation to do so, accepts Borrower’s notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time this Note
is disbursed or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Prime Rate interest selection for this Note or the principal amount
to which such Fixed Rate Term applied.

 

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(c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage
(without duplication), assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR. In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.

 

(d) Payment of Interest. Interest accrued on this Note shall be payable on the
last day of each month, commencing January 31, 2006.

 

(e) Default Interest. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.

 

BORROWING, REPAYMENT AND PREPAYMENT:

 

(a) Borrowing. From the date of this Note up to and including January 30, 2006,
Borrower may borrow, pursuant to a one-time advance, an amount not to exceed the
principal amount stated above, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note. The unpaid principal balance of this obligation at any time
shall be the total amounts advanced hereunder by the holder hereof less the
amount of principal payments made hereon by or for Borrower, which balance may
be endorsed hereon from time to time by the holder.

 

(b) Required Principal Payments. The outstanding principal balance of this Note
as of the close of business on January 30, 2006 shall be amortized over
forty-eight (48) months, and thereafter principal shall be payable on the last
day of each month in equal successive installments over said amortization term,
commencing January 31, 2006, and continuing up to and including November 30,
2009, with a final installment consisting of all remaining unpaid principal due
and payable in full on December 31, 2009.

 

(c) One-Time Advance. The one-time advance allowed hereunder, which advance
shall not exceed the total amount of the principal sum stated above and can be
made up to and including the final advance date set forth above, may be made by
the holder at the oral or written request of (i) James B. Hawkins or Steven J.
Murphy, any one acting alone, who are authorized to request such advance and
direct the disposition of such advance until written notice of the revocation of
such authority is received by the holder at the office designated above, or
(ii) any person, if such advance is deposited to the credit of any deposit
account of Borrower, which

 

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advance, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of Borrower regardless of the fact that persons other than
those authorized to request an advance may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by Borrower.

 

(d) Application of Payments. Each payment made on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof. All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation to the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to LIBOR, with
such payments applied to the oldest Fixed Rate Term first.

 

(e) Prepayment.

 

Prime Rate. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to the Prime Rate at any time, in any
amount and without penalty.

 

LIBOR. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to LIBOR at any time and in the minimum amount
of One Hundred Thousand Dollars ($100,000.00); provided however, that if the
outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto by
acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a
fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month:

 

  (i) Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.

 

  (ii) Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.

 

  (iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.

 

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum four percent (4.00%) above the
Prime Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed).

 

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All prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.

 

EVENTS OF DEFAULT:

 

This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of January 4, 2006,
as amended from time to time (the “Credit Agreement”). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an “Event of Default”
under this Note.

 

MISCELLANEOUS:

 

(a) Remedies. Upon the sale, transfer, hypothecation, assignment or other
encumbrance, whether voluntary, involuntary or by operation of law, of all or
any interest in any real property securing this Note, or upon the occurrence of
any Event of Default, the holder of this Note, at the holder’s option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of
nonperformance, notice of protest, protest or notice of dishonor, all of which
are expressly waived by Borrower, and the obligation, if any, of the holder to
extend any further credit hereunder shall immediately cease and terminate.
Borrower shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys’
fees (to include outside counsel fees and all allocated costs of the holder’s
in-house counsel), expended or incurred by the holder in connection with the
enforcement of the holder’s rights and/or the collection of any amounts which
become due to the holder under this Note, and the prosecution or defense of any
action in any way related to this Note, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Borrower or any other person or entity.

 

(b) Obligations Joint and Several. Should more than one person or entity sign
this Note as a Borrower, the obligations of each such Borrower shall be joint
and several.

 

(c) Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California.

 

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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

 

NATUS MEDICAL INCORPORATED

 

By:

 

 

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Name:

 

 

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Title:

 

 

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