Exhibit 10.1

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated
as of the Effective Date between SILICON VALLEY BANK, a California corporation
(“Bank”), and OTIX GLOBAL, INC., a Delaware corporation, formerly known as Sonic
Innovations, Inc., and HEARINGLIFE USA, INC., a Delaware corporation
(collectively “Borrower”), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank.

RECITALS

A. Bank and Borrower are parties to that certain Loan and Security Agreement,
with an Effective Date of April 19, 2007, as amended (collectively, the
“Original Agreement”).

B. Borrower and Bank desire in this Agreement to set forth their agreement with
respect to a revolving loan and to amend and restate in its entirety without
novation the Original Agreement in accordance with the provisions herein.

C. The loan documents executed and delivered on or about the date of the
Original Agreement or in relation to the Original Agreement remain in full force
and effect, except as expressly amended herein, including without limitation the
Security Account Control Agreement and all other control agreements, UCC
financing statements and any Consent to Removal of Personal Property and all
amendments and modifications thereto.

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 Code 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 Revolving Advances.

(a) Availability. The first $1,000,000.00 of Advances (including any Credit
Extensions pursuant to the provisions of Sections 2.1.2, 2.1.3, 2.1.4 and 2.1.5)
shall be non-formula Advances under the Revolving Line (the “Non-Formula
Advances”), and except as otherwise set forth herein, no Borrowing Base
Certificate will be required in connection with the Non-Formula Advances.
Subject to the terms and conditions of this Agreement, after the Non-Formula
Advances have been advanced, Bank shall make Advances not exceeding the
Availability Amount. Amounts borrowed hereunder may be repaid and, prior to the
Revolving Line Maturity Date, reborrowed, subject to the applicable terms and
conditions precedent herein.

(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations relating to the Revolving Line shall be
immediately due and payable.

 

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2.1.2 Letters of Credit Sublimit.

(a) As part of the Revolving Line, Bank shall issue or have issued Letters of
Credit for Borrower’s account. The face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) may not exceed the Availability Amount. Such aggregate amounts utilized
hereunder shall at all times reduce the amount otherwise available for Advances
under the Revolving Line. If, on the Revolving Maturity Date, there are any
outstanding Letters of Credit, then on such date Borrower shall provide to Bank
cash collateral in an amount equal to 105% 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 good faith business judgment),
to secure all of the Obligations relating to said Letters of Credit. All Letters
of Credit shall be in form and substance acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank’s standard
Application and Letter of Credit Agreement (the “Letter of Credit Application”).
Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request. Borrower further agrees to be
bound by the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Bank and opened for Borrower’s account or by Bank’s
interpretations of any Letter of Credit issued by Bank for Borrower’s account,
and Borrower understands and agrees that Bank shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.

(b) The obligation of Borrower to immediately reimburse Bank for drawings made
under Letters of Credit shall be absolute, unconditional, and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.

(c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the equivalent of the
amount thereof (plus fees and charges in connection therewith such as wire,
cable, SWIFT or similar charges) in Dollars at 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.

(d) To guard against fluctuations in currency exchange rates, upon the issuance
of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount
equal to ten percent (10%) of the face amount of such Letter of Credit. The
amount of the Letter of Credit Reserve may be adjusted by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.

2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may
enter into foreign exchange contracts with Bank under which Borrower commits to
purchase from or sell to Bank a specific amount of Foreign Currency (each, a “FX
Forward Contract”) on a specified date (the “Settlement Date”). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to the
Availability Amount (the “FX Reserve”). The aggregate amount of FX Forward
Contracts at any one time may not exceed ten (10) times the amount of the FX
Reserve.

2.1.4 Cash Management Services Sublimit. Borrower may use up to the Availability
Amount (the “Cash Management Services Sublimit”) of the Revolving Line for
Bank’s cash management services which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash
Management Services”). Any amounts Bank pays on behalf of Borrower or any
amounts that are not paid by Borrower for any Cash Management Services will be
treated as Advances under the Revolving Line and will accrue interest at the
interest rate applicable to Advances.

2.1.5 Asset Purchase Sublimit. Borrower may use up to the Availability Amount
(the “Asset Purchase Sublimit”) of the Revolving Line for the sale of Accounts
to Bank on the terms and conditions set forth in the Non-Recourse Receivables
Purchase Agreement attached hereto as Exhibit F. If Borrower exercises its
option to sell Accounts to Bank, the purchase of the Accounts by Bank shall be
subject to Bank’s satisfactory due diligence, Borrower’s execution and delivery
of the Non-Recourse Receivables Purchase Agreement in the form attached as
Exhibit F, and compliance with any other conditions to closing set forth in the
Non-Recourse Receivables Purchase Agreement.

 

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2.2 Overadvances. If, at any time, the Credit Extensions under Sections 2.1.1,
2.1.2, 2.1.3, 2.1.4 and 2.1.5 exceed the Non-Formula Advances and also exceed
the lesser of either (a) the Revolving Line or (b) the Borrowing Base, Borrower
shall immediately pay to Bank in cash such excess.

2.3 General Provisions Relating to the Advances. No further LIBOR Advances shall
be available after the date of this Amended and Restated Loan and Security
Agreement.

2.4 Payment of Interest on the Credit Extensions.

(a) Computation of Interest. Interest on the Credit Extensions and all fees
payable hereunder shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which such interest accrues.
In computing interest on any Credit Extension, the date of the making of such
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.

(b) Advances. Each Advance shall bear interest on the outstanding principal
amount thereof from the date when made, continued or converted until paid in
full at a rate per annum equal to the following: (i) if the Adjusted Quick Ratio
is greater than or equal to 1.25 to 1.0, then the interest rate is the Prime
Rate plus 0.25 percentage point; (ii) if the Adjusted Quick Ratio is less than
1.25 to 1.0, then the interest rate is the Prime Rate plus 0.50 percentage
point.

(c) Default Interest. 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 (5.00%) above the rate that is otherwise
applicable thereto (the “Default Rate”) unless Bank otherwise elects from time
to time in its sole discretion to impose a smaller increase. 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 2.4(c) 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.

(d) Adjustment to Interest Rate. Changes to the interest rate of any Credit
Extension based on changes to the Prime Rate shall be effective on the effective
date of any change to the Prime Rate and to the extent of any such change.

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

(f) Payments. Unless otherwise provided, interest is payable monthly on the
first calendar day of each month. 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 is due the next Business Day and additional fees or interest,
as applicable, shall continue to accrue.

2.5 Fees. Borrower shall pay to Bank:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $5,000.00,
on the Effective Date;

(b) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line
Facility Fee”), payable quarterly, in arrears, on a calendar year basis, in an
amount equal to .375% per annum of the average unused portion of the Revolving
Line, as determined by Bank. Borrower shall not be entitled to any credit,
rebate or repayment of any Unused Revolving Line Facility Fee previously earned
by Bank pursuant to this Section notwithstanding any termination of the
Agreement or the suspension or termination of Bank’s obligation to make loans
and advances hereunder; and

 

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(c) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses, plus expenses, for documentation and negotiation of this Agreement)
incurred through and after the Effective Date, when due.

3 CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Advance. Bank’s obligation to make the
initial Advance is subject to the condition precedent that Borrower shall
consent to or have delivered, 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 to which it is a
party;

(b) a good standing certificate of Borrower certified by the Secretary of State
of the State of Delaware as of a date no earlier than thirty (30) days prior to
the Effective Date;

(c) certified copies, dated as of a recent date, of financing statement
searches, as Bank shall request, accompanied by written evidence (including any
UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Advance, will be terminated or released; and

(d) payment of the fees and Bank Expenses then due as specified in Section 2.5
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:

(a) except as otherwise provided in Section 3.4(a), timely receipt of an
executed Payment/Advance Form;

(b) the representations and warranties in Section 5 shall be true 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 Default or 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 Section 5 remain true 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) in Bank’s sole discretion, there has not been any material impairment in the
general affairs, management, results of operation, financial condition or the
prospect of repayment of the Obligations, or there has not been any material
adverse deviation by Borrower from the most recent business plan of Borrower
presented to and accepted by Bank.

3.3 Covenant to Deliver.

Borrower agrees to deliver to Bank each item required to be delivered to Bank
under this Agreement as a condition to any Credit Extension. Borrower expressly
agrees that the extension of a Credit Extension 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 any such extension in the absence of a required item
shall be in Bank’s sole discretion.

3.4 Procedures for Borrowing.

(a) Advances. Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, to obtain an
Advance (other than Advances under Sections 2.1.2 or 2.1.4), Borrower shall
notify Bank (which notice shall be irrevocable) by electronic mail, facsimile,
or telephone

 

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by 12:00 p.m. Pacific time on the Funding Date of the 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 Advances to the Designated Deposit Account. Bank may
make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due.

4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower represents, warrants, and covenants that the security interest granted
herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may
have superior priority to Bank’s Lien under this Agreement and to the provisions
of Section 7.9 hereof). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the
general details thereof and grant to Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to Bank.

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 and at such time
as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at
Borrower’s sole cost and expense, release its Liens in the Collateral and all
rights therein shall revert to Borrower.

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,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Bank under the Code.

5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization, Authorization; Power and Authority. Borrower is duly
existing and in good standing as a Registered Organization in its jurisdiction
of formation and is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a material adverse effect on
Borrower’s business. In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower, entitled “Perfection
Certificate”. Borrower represents and warrants to Bank that (a) each Borrower’s
exact legal name is that indicated on its Perfection Certificate and on the
signature page hereof; (b) each Borrower is an organization of the type and is
organized in the jurisdiction set forth in its Perfection Certificate; (c) the
Perfection Certificate accurately sets forth each Borrower’s organizational
identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth each Borrower’s place of business,
or, if more than one, its chief executive office as well as each Borrower’s
mailing address (if different than its chief executive office); (e) each
Borrower (and each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to each 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). If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.

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 material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected,

 

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(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
(v) constitute an event of default under any material agreement by which
Borrower is bound. 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 have a material
adverse effect on Borrower’s business.

5.2 Collateral. Borrower has good title to, has 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 deposit accounts other than the deposit accounts with Bank, the deposit
accounts, if any, described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice and taken such
actions as are necessary to give Bank a perfected security interest therein. 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, unless Borrower has given Bank written
notice of such other locations. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the Collateral to a
bailee, then Borrower will first receive the written consent of Bank and such
bailee must execute and deliver a bailee agreement in form and substance
satisfactory to Bank in its sole discretion.

All Inventory is in all material respects of good and marketable quality, free
from material defects.

Except as described in its Perfection Certificate, Borrower is the sole owner of
its intellectual property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each patent is valid and
enforceable, and no part of the intellectual property has been judged invalid or
unenforceable, in whole or in part, and 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 could 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 bound
by, 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. Borrower shall provide
written notice to Bank within thirty (30) days of entering or becoming bound by
any such license or agreement (other than over-the-counter software that is
commercially available to the public). Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (x) all such licenses or agreements 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 license or
agreement, whether now existing or entered into in the future, and (y) Bank to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

5.3 Accounts Receivable. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
laws and governmental rules and regulations. Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are an Eligible Account in any Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine, and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.

5.4 Litigation. Except as disclosed in its Perfection Certificate, there are no
actions or proceedings pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its Subsidiaries
involving more than Five Hundred Thousand Dollars ($500,000.00).

5.5 No Material Deviation in Financial Statements. 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.

 

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5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill
minus disposition costs) exceeds the fair value of its 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.

5.7 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding
Company Act of 2005. 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 Government Authorities that are necessary to continue their respective
businesses as currently conducted.

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

5.9 Tax Returns and Payments; Pension Contributions. Borrower 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. Borrower may defer payment of any contested taxes, provided that
Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts 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. 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 the
Pension Benefit Guaranty Corporation or its successors or any other governmental
agency.

5.10 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.

5.11 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).

6 AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance.

(a) Maintain its and all its Subsidiaries’ legal 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, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business.

 

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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.

(a) Deliver to Bank: (i) as soon as available, but no later than five (5) days
after filing with the Securities Exchange Commission, Borrower’s 10K, 10Q, and
8K reports; (ii) five (5) days after filing Borrower’s 10K and 10Q reports with
the Securities Exchange Commission, a Compliance Certificate together with
delivery of the 10K and 10Q reports; (iii) as soon as available, but no later
than thirty (30) days after the last day of each quarter, a company prepared
consolidating balance sheet and income statement covering Borrower’s and each of
its Subsidiary’s operations during the period certified by a Responsible Officer
and in a form acceptable to Bank; provided however, if the Credit Extensions at
any time exceed seventy percent (70%) of Eligible Accounts, then as soon as
available, but no later than thirty (30) days after the last day of each month
thereafter, Borrower shall deliver to Bank a company prepared consolidating
balance sheet and income statement covering Borrower’s and each of its
Subsidiary’s operations during the period certified by a Responsible Officer and
in a form acceptable to Bank, together with a Compliance Certificate; (iv) a
prompt report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of $500,000.00 or more; and (v) budgets, sales projections, operating plans or
other financial information Bank reasonably requests.

Borrower’s 10K, 10Q, and 8K reports required to be delivered pursuant to
Section 6.2(a)(i) shall be deemed to have been delivered on the date on which
Borrower posts such report or provides a link thereto on Borrower’s or another
website on the Internet; provided, that Borrower shall provide paper copies to
Bank of the Compliance Certificates required by Section 6.2(a)(ii).

(b) If Advances under the Revolving Line (including any Credit Extensions
pursuant to the provisions of Sections 2.1.2, 2.1.3, 2.1.4 and 2.1.5) exceed
$1,000,000.00 or an Event of Default has occurred, then within twenty (20) days
after the last day of each month, deliver to Bank a duly completed Borrowing
Base Certificate signed by a Responsible Officer, with (i) aged listings of
accounts receivable and accounts payable (by invoice date) and (ii) perpetual
inventory reports for the Inventory valued on a first-in, first-out basis at the
lower of cost or market (in accordance with GAAP) or such other inventory
reports as are requested by Bank in its good faith business judgment. The
requirement to provide monthly a Borrowing Base Certificate, aged listings of
accounts receivable and accounts payable and inventory reports will continue if
the Revolving Line at any time exceeded $1,000,000.00 and is later reduced to be
at or below $1,000,000.00.

(c) Allow Bank to audit Borrower’s Collateral at Borrower’s expense. The initial
Collateral audit shall be conducted if the Credit Extensions at any time exceed
the sum of $1,000,000.00 or a Default or an Event of Default has occurred and is
continuing. Thereafter, such audits shall be conducted no more often than once
every twelve (12) months unless a Default or an Event of Default has occurred
and is continuing.

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).

6.4 Taxes; Pensions. Make, and cause each of its Subsidiaries to make, timely
payment of all foreign, federal, state, and local taxes or assessments (other
than taxes and assessments which Borrower is contesting pursuant to the terms of
Section 5.9 hereof) 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.

6.5 Insurance. 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 companies,
and in amounts that are satisfactory to Bank. All property policies shall have a
lender’s loss payable endorsement showing Bank as a lender loss payee and waive
subrogation against Bank, and all liability

 

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policies shall show, or have endorsements showing, Bank as an additional
insured. All policies (or the loss payable and additional insured endorsements)
shall provide that the insurer shall endeavor to give Bank at least twenty
(20) days notice before canceling, amending, or declining to renew its policy.
At Bank’s request, Borrower shall deliver certified copies of policies and
evidence of all premium payments. Notwithstanding the foregoing, (a) so long as
no Event of Default has occurred and is continuing and so long as all of the
insurance proceeds related to a loss or claim are less than $1,000,000.00,
Borrower shall have the option of applying the proceeds of any casualty policy
up to $999,999.99, in the aggregate, toward the replacement or repair of
destroyed or damaged property; provided 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, (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, and (c) if the insurance proceeds related to a loss or claim are
equal to or greater than $1,000,000.00, all proceeds payable under such casualty
policy shall, at the option of Bank, be payable to Bank on account of the
Obligations. If Borrower fails to obtain insurance as required under this
Section 6.4 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 6.4, and take any action under the
policies Bank deems prudent.

WARNING

Unless Borrower (“you” or “your”) provides Bank (“us”, “we” or “our”) with
evidence of the insurance coverage as required by our contract or loan
agreement, we may purchase insurance at your expense to protect our interest.
This insurance may, but need not, also protect your interest. If the collateral
becomes damaged, the coverage we purchase may not pay any claim you make or any
claim made against you. You may later cancel this coverage by providing evidence
that you have obtained property coverage elsewhere.

You are responsible for the cost of any insurance purchased by us. The cost of
this insurance may be added to your contract or loan balance. If the cost is
added to your contract or loan balance, the interest rate on the underlying
contract or loan will apply to this added amount. The effective date of coverage
may be the date your prior coverage lapsed or the date you failed to provide
proof of coverage.

This coverage we purchased may be considerably more expensive than insurance you
can obtain on your own and may not satisfy any need for property damage coverage
or any mandatory liability insurance requirements imposed by applicable law.

6.6 Operating Accounts.

(a) Maintain all of its primary operating and other deposit accounts and
securities accounts with Bank and Bank’s Affiliates, except for Borrower’s
securities account at Merrill Lynch Pierce, Fenner & Smith Incorporated and
other operating accounts reasonably necessary to support Borrower’s retail
operations. In the event the Revolving Line is terminated at the Borrower’s
request prior to the Revolving Line Maturity Date, Borrower shall continue to
maintain its primary operating account with Bank at least until April 12, 2009.

(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 with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder. 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. In lieu of
providing a Control Agreement with respect to Borrower’s securities account at
Merrill Lynch Pierce, Fenner & Smith Incorporated, Borrower shall provide to
Bank the monthly account statement for such account within twenty (20) days
after the end of each month.

 

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6.7 Financial Covenants.

Borrower shall maintain as of the last day of each quarter, on a consolidated
basis with respect to Borrower and its Subsidiaries; provided however if the
Credit Extensions at any time exceed [the permitted Non-Formula Advances] plus
seventy percent (70%) of Eligible Accounts, Borrower shall thereafter maintain
such covenants as of the last day of each month:

(a) Adjusted Quick Ratio. A ratio of Quick Assets to Current Liabilities minus
Deferred Revenue plus the long-term portion of all Credit Extensions and the
Commerzbank Loan of at least .75 to 1.0.

(b) Maximum Losses. Not suffer any EBITDA loss in excess of $3,000,000.00 on a
cumulative basis for all quarterly or monthly periods, as applicable, in
calendar year 2009, and beginning in 2010, this covenant shall be calculated
based on a rolling twelve-month period.

6.8 Protection of Intellectual Property Rights. Borrower shall: (a) protect,
defend and maintain the validity and enforceability of its intellectual
property; (b) promptly advise Bank in writing of material infringements 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.

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 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.

7 NEGATIVE COVENANTS

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

7.1 Dispositions. Convey, sell, lease, transfer 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:

(a) Transfers in the ordinary course of business for reasonably equivalent
consideration;

(b) Transfers to Borrower or any of its Subsidiaries from Borrower or any of its
Subsidiaries;

(c) Transfers of property in connection with sale-leaseback transactions;

(d) Transfers of property to the extent such property is exchanged for credit
against, or proceeds are promptly applied to, the purchase price of other
property used or useful in the business of Borrower or its Subsidiaries;

(e) Transfers constituting non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business and other non-perpetual licenses that may be exclusive in some
respects other than territory (and/or that may be exclusive as to territory only
in discreet geographical areas outside of the United States), but that could not
result in a legal transfer of Borrower’s title in the licensed property;

(f) Transfers otherwise permitted by the Loan Documents;

(g) sales or discounting of delinquent accounts in the ordinary course of
business;

(h) Transfers associated with the making or disposition of a Permitted
Investment; and

(i) Transfers in connection with a permitted acquisition of a portion of the
assets or rights acquired.

 

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7.2 Changes in Business; Change in Control; Jurisdiction of Formation.

Engage in any material line of business other than those lines of business
conducted by Borrower and its Subsidiaries on the date hereof and any businesses
reasonably related, complementary or incidental thereto or reasonable extensions
thereof; permit or suffer any Change in Control. Borrower will not, without
prior written notice, change its jurisdiction of formation.

7.3 Mergers or Acquisitions.

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any Person other than with Borrower or any Subsidiary, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of a Person other than Borrower or any Subsidiary,
except where no Event of Default has occurred and is continuing or would result
from such action during the term of this Agreement, and (a) (i) Borrower is the
surviving entity or (ii) such merger or consolidation is a Transfer otherwise
permitted pursuant to Section 7.1 hereof, and (b) any Indebtedness incurred by
Borrower to pay the balance of the purchase price or other consideration due in
any merger, consolidation or acquisition is subordinated in right of payment to
this Agreement pursuant to either a Subordination Agreement satisfactory to Bank
or by inserting the subordination language set forth in Exhibit G hereto in the
promissory note or other agreement evidencing such Indebtedness.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness and the
guaranty by Sonic Innovations, Inc. (now known as OTIX Global, Inc.) of the
Commerzbank Loan.

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.

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 other than Permitted
Distributions; or (b) directly or indirectly acquire or own any Person, or make
any Investment in any Person, other than Permitted Investments, or permit any of
its Subsidiaries to do so.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower except for
(a) transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms (when viewed in the context of any series of
transactions of which it may be a part, if applicable); or (b) transactions
among Borrower and its Subsidiaries and among Borrower’s Subsidiaries so long as
no Event of Default could result therefrom.

7.9 Subordinated Debt. Make or permit any payment on or amendments of any
Subordinated Debt, except (a) payments pursuant to the terms of the Subordinated
Debt; provided however that Borrower may prepay any Subordinated Debt so long as
no Default or Event of Default has occurred and is continuing and no Default or
Event of Default would occur after giving effect to such prepayment;
(b) payments made with Borrower’s capital stock or other Subordinated Debt; or
(c) amendments to Subordinated Debt so long as such Subordinated Debt remains
subordinated in right of payment to this Agreement and any Liens securing such
Subordinated Debt remain subordinate in priority to Bank’s Lien hereunder;
provided however that Liens on assets acquired by Borrower or any of its
Subsidiaries in mergers or acquisitions permitted under Section 7.3 hereof to
secure the Borrower’s or Subsidiaries’ Subordinated Debt incurred to finance
such merger or acquisition are not required to be subordinate to Bank’s Lien.
Notwithstanding the foregoing, in no event may Borrower make any payment on any
Subordinated Debt if a Default or Event of Default has occurred and is
continuing.

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940 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 meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act 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 of its Subsidiaries to

 

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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 liability
of Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other 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 on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) day grace period shall not apply to payments due on the
Revolving Line Maturity Date). During the cure period, the failure to cure the
payment default 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) 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). Grace periods provided under this section shall not
apply, among other things, to financial covenants or any other covenants set
forth in subsection (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

8.4 Attachment. (a) Any material portion of Borrower’s assets is attached,
seized, levied on, or comes into possession of a trustee or receiver; (b) the
service of process seeking to attach, by trustee or similar process, any funds
of Borrower or of any entity under control of Borrower (including a Subsidiary)
on deposit with Bank or any Bank Affiliate; (c) Borrower is enjoined,
restrained, or prevented by court order from conducting any part of its
business; or (d) a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency, and the same under clauses
(a) through (d) 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;

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

8.6 Other Agreements. If Borrower fails to (a) make any payment that is due and
payable with respect to any Material Indebtedness and such failure continues
after the applicable grace or notice period, if any, specified in the agreement
or instrument relating thereto, or (b) perform or observe any other condition or
covenant, or any other event shall occur or condition exist under any agreement
or instrument relating to any Material Indebtedness, and such failure continues
after the applicable grace or notice period, if any, specified in the agreement
or instrument relating thereto and the effect of such failure, event or
condition is to cause the holder or holders of such Material Indebtedness to
accelerate the maturity of such Material Indebtedness or cause the mandatory
repurchase of any Material Indebtedness;

 

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8.7 Judgments. One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Fifty Thousand Dollars ($250,000) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided that no
Credit Extensions will be made prior to the satisfaction, vacation, or stay of
such judgment, order, or decree); provided however that the Borrower’s pending
judgment and lawsuits in Germany disclosed in Borrower’s Perfection Certificate
are excluded from this Section 8.7 until all appeals therefrom have been
exhausted or the time for any further appeals has expired;

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; or

8.9 Subordinated Debt. A default or breach occurs under any agreement between
Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement.

9 BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. While an Event of Default occurs and continues 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) deposits cash with Bank in an amount equal to the
aggregate amount of any Letters of Credit remaining undrawn, 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 Forward Contracts;

(e) settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank’s security interest in such funds, and
verify the amount of such account;

(f) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest 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, service marks, 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;

 

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

(k) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (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 Code 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, 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 applicable rate, 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. Borrower shall have no right to
specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrower to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply 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 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 shall remain liable to Bank for any deficiency. If Bank, in its good
faith business judgment, 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 Bank 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 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
(collectively, “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 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 address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

If to Borrower:    OTIX Global, Inc.    2795 E. Cottonwood Parkway    Suite 660
   Salt Lake City, UT 84121    Attn: President and CEO    Fax: 801.365.3002 If
to Bank:    Silicon Valley Bank    8705 SW Nimbus, Suite 240    Beaverton, OR
97008    Attn: Ron Sherman    Fax: 503.526.0818

11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

Oregon law governs the Loan Documents without regard to principles of conflicts
of law. Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in Multnomah County, Oregon; provided, however, that nothing
in this Agreement shall be deemed to operate to preclude Bank from bringing suit
or taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations, or to enforce a judgment
or other court order in favor of Bank. Borrower expressly submits and consents
in advance to such jurisdiction in any action or suit commenced in any such
court, and Borrower hereby waives any objection that it may have based upon lack
of personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12 GENERAL PROVISIONS

12.1 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
right,

 

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without the consent of or notice to Borrower, to sell, transfer, 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. All references to Sonic Innovations, Inc. in the Loan Documents are
amended to replace Sonic Innovations, Inc. with its successor, Otix Global, Inc.

12.2 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 harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or arising from transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by Bank’s gross negligence or willful misconduct.

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

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

12.5 Amendments in Writing; Integration. All amendments to this Agreement must
be in writing and signed by both Bank and Borrower. This Agreement and 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 this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.

12.6 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, are an original, and all taken together, constitute one
Agreement.

12.7 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 (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.

12.8 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; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such 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; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.

12.9 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, including without limitation its reasonable attorneys’ fees and
other costs and expenses incurred at trial, on appeal and in any arbitration or
bankruptcy proceeding.

13 DEFINITIONS

13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

 

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

“Advance” or “Advances” means an advance (or advances) under the Revolving Line.

“Affiliate” of any Person is a 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.

“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the
Borrowing Base minus (b) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) plus an amount equal to the
Letter of Credit Reserves, minus (c) the FX Reserve, minus (d) the outstanding
principal balance of any Advances (including any amounts used for Cash
Management Services), and minus (e) the amount of the Asset Purchase Sublimit
reserved for purchases of Accounts pursuant to an executed Non-Recourse
Receivables Purchase Agreement. Upon the occurrence of a Default or Event of
Default, no Non-Formula Advances will be permitted.

“Bank” is defined in the preamble hereof.

“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.

“Bankruptcy-Related Defaults” is defined in Section 9.1.

“Borrower” is defined in the preamble hereof

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal 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 Base” means (a) 70% of Eligible Accounts plus (b) the lesser of 30%
of the value of Borrower’s Eligible Inventory (valued at the lower of cost or
wholesale fair market value) or $2,000,000.00 (the portion of the Borrowing Base
determined under this subpart (b) may be referred to as the “Inventory Borrowing
Base”), as determined by Bank from Borrower’s most recent Borrowing Base
Certificate; provided, however, that Bank may decrease the foregoing percentages
in its good faith business judgment based on events, conditions, contingencies,
or risks which, as determined by Bank, may adversely affect Collateral. In no
event shall the Inventory Borrowing Base exceed an amount equal to 30% of
Eligible Accounts.

“Borrowing Base Certificate” is that certain certificate in the form attached
hereto as Exhibit C.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors and delivered by such Person to Bank
approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A to such
certificate is a true, correct, and complete copy of the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.

“Business Day” is any day other than a Saturday, Sunday or other day on which
banking institutions in the State of California are authorized or required by
law or other governmental action to close, except that if any determination of a
“Business Day” shall relate to an FX Forward Contract, the term “Business Day”
shall mean a day on which dealings are carried on in the country of settlement
of the foreign (i.e., non-Dollar) currency.

 

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“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.

“Cash Management Services” is defined in Section 2.1.4.

“Change in Control” means any event, transaction, or occurrence as a result of
which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as an amended (the “Exchange Act”)),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of Borrower, is or becomes a beneficial owner (within the meaning
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of Borrower, representing twenty-five percent (25%) or more of the
combined voting power of Borrower’s then outstanding securities; or (b) during
any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by the Board of Directors of
Borrower was approved by a vote of at least two-thirds of the directors then
still in office who either were directions at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason other than death or disability to constitute a majority of the
directors then in office.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of Oregon; 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 Oregon, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes on the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions
relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

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

“Commerzbank Loan” means the loan made by Commerzbank AG to Sonic Innovations
GmbH and which Sonic Innovations, Inc. (now known as OTIX Global, Inc). has
guaranteed or will guaranty, which guaranty shall not exceed €3,000,000.00.

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

“Communication” is defined in Section 10.

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

“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 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.

 

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“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.

“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services or any other extension of credit by Bank
for Borrower’s benefit.

“Current Liabilities” are all obligations and liabilities of Borrower to Bank,
plus, without duplication, the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year.

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

“Default Rate” is defined in Sections 2.4(b) and (c).

“Deferred Revenue” is all amounts received or invoiced in advance of performance
under contracts and not yet recognized as revenue.

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

“Designated Deposit Account” is Borrower’s deposit account, account number
3300240635, maintained with Bank.

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United
States or any state or territory thereof or the District of Columbia.

“EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the
extent deducted in the calculation of Net Income, depreciation expense,
amortization and stock option expense and the impairment charge incurred in the
first quarter of 2009 in the sum of $14,658,000.00, plus (d) income tax expense.

“Effective Amount” means with respect to any Advances on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowing and
prepayments or repayments thereof occurring on such date.

“Effective Date” is the date Bank executes this Agreement as indicated on the
signature page hereof.

“Eligible Accounts” means Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right at any time after the Effective Date to
adjust any of the criteria set forth below and to establish new criteria in its
good faith business judgment. Eligible Accounts shall not include:

(a) Accounts for which the Account Debtor has not been invoiced;

(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date;

(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(d) Accounts with credit balances over ninety (90) days from invoice date;

 

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(e) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five (25%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing;

(f) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States, except for Eligible Foreign Accounts;

(g) Accounts owing from an Account Debtor which is a federal, state or local
government entity or any department, agency, or instrumentality thereof except
for Accounts of the United States if Borrower has assigned its payment rights to
Bank and the assignment has been acknowledged under the Federal Assignment of
Claims Act of 1940, as amended;

(h) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise - sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(i) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
“bill and hold”, or other terms if Account Debtor’s payment may be conditional;

(j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(k) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

(l) Accounts owing from an Account Debtor with respect to which Borrower has
received Deferred Revenue (but only to the extent of such Deferred Revenue);

(m) Accounts subject to Permitted Liens, including, without limitation,
(i) Liens that secure Indebtedness of Borrower or any of its Subsidiaries to
finance mergers or acquisitions permitted under Section 7.3 hereof; and
(ii) preexisting Liens on assets acquired by Borrower or any of its Subsidiaries
in mergers or acquisitions permitted under Section 7.3 hereof; and

(n) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful.

“Eligible Foreign Accounts” are Accounts for which the Account Debtor does not
have its principal place of business in the United States but are otherwise
Eligible Accounts that are (a) covered by credit insurance satisfactory to Bank,
less any deductible; (b) supported by letter(s) of credit acceptable to Bank; or
(c) that Bank approves in writing.

“Eligible Inventory” means, at any time, the aggregate of Borrower’s Inventory
that (a) consists of raw materials and finished goods, in good, new, and salable
condition, which is not perishable, returned, consigned, obsolete, not sellable,
damaged, or defective, and is not comprised of demonstrative or custom
inventory, works in progress, packaging or shipping materials, or supplies;
(b) meets all applicable governmental standards; (c) has been manufactured in
compliance with the Fair Labor Standards Act; (d) is not subject to any Liens,
except the first priority Liens granted or in favor of Bank under this Agreement
or any of the other Loan Documents; (e) is located at the locations identified
by Borrower in the Perfection Certificate where it maintains Inventory (or any
location permitted under Section 7.2); and (f) is otherwise acceptable to Bank
in its good faith business judgment.

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

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

“Event of Default” is defined in Section 8.

 

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

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

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

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

“FX Forward Contract” is defined in Section 2.1.3.

“FX Reserve” is defined in Section 2.1.3.

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

“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 copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, 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.

“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.

“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.

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Interest Expense” means for any fiscal period, interest expense (whether cash
or non-cash) determined in accordance with GAAP for the relevant period ending
on such date, including, in any event, interest expense with respect to any
Credit Extension and other Indebtedness of Borrower and its Subsidiaries,
including, without limitation or duplication, all commissions, discounts, or
related amortization and other fees and charges with respect to letters of
credit and bankers’ acceptance financing and the net costs associated with
interest rate swap, cap, and similar arrangements, and the interest portion of
any deferred payment obligation (including leases of all types).

“Inventory” is all “inventory” 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 merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

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“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.

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.

“Letter of Credit Application” is defined in Section 2.1.2(a).

“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).

“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.

“Loan Documents” are, collectively, this Agreement, the Perfection Certificate,
any note, or notes or guaranties executed by Borrower or any Guarantor, and any
other present or future agreement between Borrower any Guarantor and/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; (c) a material impairment of the prospect
of repayment of any portion of the Obligations or (d) Bank determines, based
upon information available to it and in its reasonable judgment, that there is a
reasonable likelihood that Borrower shall fail to comply with one or more of the
financial covenants in Section 6 during the next succeeding financial reporting
period.

“Net Income” means, as calculated on a consolidated basis for Borrower and its
Subsidiaries for any period as at any date of determination, the net profit (or
loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.

“Non-Formula Advances” are defined in Section 2.1.1(a).

“Obligations” are Borrower’s obligation to pay when due any debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
whether under this Agreement, the Loan Documents, 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 the performance of Borrower’s
duties under the Loan Documents.

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified with the Secretary of State of such Person’s state of formation on a
date that is no earlier than 30 days prior to the Effective Date, and, (a) if
such Person is a corporation, its bylaws in current form, (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.

“Other Equipment” is leasehold improvements, intangible property such as
computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property and soft costs approved by Bank, including taxes,
shipping, warranty charges, freight discounts and installation expenses.

“Perfection Certificate” is defined in Section 5.1.

 

Page 22 – LOAN AND SECURITY AGREEMENT

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“Permitted Distributions” means:

(a) purchases of capital stock from former employees, consultants and directors
pursuant to repurchase agreements or other similar agreements in an aggregate
amount not to exceed $100,000.00 in any fiscal year provided that at the time of
such purchase no Default or Event of Default has occurred and is continuing;

(b) distributions or dividends consisting solely of Borrower’s capital stock;

(c) purchases for value of any rights distributed in connection with any
stockholder rights plan;

(d) purchases of capital stock or options to acquire such capital stock with the
proceeds received from a substantially concurrent issuance of capital stock or
convertible securities;

(e) purchases of capital stock pledged as collateral for loans to employees;

(f) purchases of capital stock in connection with the exercise of stock options
or stock appreciation rights by way of cashless exercise or in connection with
the satisfaction of withholding tax obligations;

(g) purchases of fractional shares of capital stock arising out of stock
dividends, splits or combinations or business combinations; and

(h) the settlement or performance of such Person’s obligations under any equity
derivative transaction, option contract or similar transaction or combination of
transactions.

“Permitted Indebtedness” is:

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

(b) (i) any Indebtedness that does not exceed $100,000.00 in principal amount
existing on the Effective Date, and (ii) any Indebtedness in excess of
$100,000.00 in principal amount existing on the Effective Date and shown on the
Perfection Certificate;

(c) Subordinated Debt;

(d) unsecured Indebtedness to trade creditors and with respect to surety bonds
and similar obligations incurred in the ordinary course of business;

(e) guaranties of Permitted Indebtedness;

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

(g) Indebtedness consisting of interest rate, currency, or commodity swap
agreements, interest rate cap or collar agreements or arrangements designated to
protect Borrower against fluctuations in interest rates, currency exchange
rates, or commodity prices;

(h) Indebtedness between Borrower and any of its Subsidiaries or among any of
Borrower’s Subsidiaries;

(i) Indebtedness with respect to documentary letters of credit;

(j) capitalized leases and purchase money Indebtedness not to exceed $250,000.00
in the aggregate in any fiscal year secured by Permitted Liens;

(k) Indebtedness of entities acquired in any permitted merger or acquisition
transaction;

(l) Indebtedness incurred by Borrower for the balance of the purchase price due
to Audiology and Hearing Clinic, Nu-Sound Hearing Aid Laboratory, Inc. and
Accolade Enterprises Pty Ltd; DBA H.A.S. Hearing Aid Services, and any
additional Indebtedness incurred by Borrower or any of its Subsidiaries in the
acquisition of entities and/or assets in the ordinary course of business as
permitted under Section 7.3 hereof, so long as such additional Indebtedness is
Subordinated Debt.

 

Page 23 – LOAN AND SECURITY AGREEMENT

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(m) refinanced Permitted Indebtedness, provided that the amount of such
Indebtedness is not increased except by an amount equal to a reasonable premium
or other reasonable amount paid in connection with such refinancing and by an
amount equal to any existing, but unutilized, commitment thereunder.

“Permitted Investments” are:

(a) Investments existing on the Effective Date;

(b) (i) marketable direct obligations issued or unconditionally guaranteed by
the United States or its agencies or any State maturing within 18 months from
its acquisition, (ii) commercial paper maturing no more than 2 years after its
creation and having the highest rating from either Standard & Poor’s Corporation
or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of deposit
maturing no more than 2 years after issue;

(c) Investments approved by the Borrower’s Board of Directors or otherwise
pursuant to a Board-approved investment policy;

(d) Investments in or to Borrower or any of its Subsidiaries;

(e) Investments consisting of Collateral Accounts in the name of Borrower or any
Subsidiary so long as Bank has a first priority, perfected security interest in
such Collateral Accounts;

(f) Investments consisting of extensions of credit to Borrower’s or its
Subsidiaries’ customers in the nature of accounts receivable, prepaid royalties
or notes receivable arising from the sale or lease of goods, provision of
services or licensing activities of Borrower;

(g) Investments received in satisfaction or partial satisfaction of obligations
owed by financially troubled obligors;

(h) Investments acquired in exchange for any other Investments in connection
with or as a result of a bankruptcy, workout, reorganization or
recapitalization;

(i) Investments acquired as a result of a foreclosure with respect to any
secured Investment; and

(j) Investments consisting of interest rate, currency, or commodity swap
agreements, interest rate cap or collar agreements or arrangements designated to
protect a Person against fluctuations in interest rates, currency exchange
rates, or commodity prices.

“Permitted Liens” are:

(a) (i) Liens securing Permitted Indebtedness described under clause (b) of the
definition of “Permitted Indebtedness” or (ii) Liens arising under this
Agreement or other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or 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) Liens (including with respect to capital leases) (i) on property (including
accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds thereof) acquired or held by Borrower or
its Subsidiaries incurred for financing such property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto,
and the proceeds thereof) other than Accounts, Inventory, and Financed
Equipment, or (ii) existing on property (and accessions, additions, parts,
replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof) when acquired other than Accounts, Inventory, and Financed Equipment,
if the Lien is confined to such property (including accessions, additions,
parts, replacements, fixtures, improvements and attachments thereto, and the
proceeds thereof);

 

Page 24 – LOAN AND SECURITY AGREEMENT

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(d) 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 it secures may not increase;

(e) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;

(f) non-exclusive license of intellectual property granted to third parties in
the ordinary course of business;

(g) leases or subleases granted in the ordinary course of Borrower’s business,
including in connection with Borrower’s leased premises or leased property;

(h) Liens in favor of custom and revenue authorities arising as a matter of law
to secure the payment of custom duties in connection with the importation of
goods;

(i) Liens on insurance proceeds securing the payment of financed insurance
premiums;

(j) customary Liens granted in favor of a trustee to secure fees and other
amounts owing to such trustee under an indenture or other similar agreement;

(k) Liens on assets acquired in mergers and acquisitions not prohibited by
Section 7 of this Agreement;

(l) Liens consisting of pledges of cash, cash equivalents or government
securities to secure swap or foreign exchange contracts or letters of credit;

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

(n) Liens in favor of other financial institutions arising in connection with
Borrower’s deposit or securities accounts held at such institutions;

(o) 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 $50,000.00 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;

(p) 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); and

(q) deposits to secure the performance of bids, trade contracts (other than for
borrowed money), contracts for the purchase of property, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature, in each case, incurred in the ordinary course of business and not
representing an obligation for borrowed money.

“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.

“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not
Bank’s lowest rate.

“Quick Assets” is, on any date, Borrower’s consolidated, unrestricted cash and
Cash Equivalents with maturities of fewer than 18 months, and net billed
accounts receivable determined according to GAAP.

 

Page 25 – LOAN AND SECURITY AGREEMENT

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

“Regulatory Change” means, with respect to Bank, any change on or after the date
of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

“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, Chief
Financial Officer and Controller of Borrower.

“Revolving Line” is an Advance or Advances in an amount equal to Six Million
Dollars ($6,000,000.00).

“Revolving Line Maturity Date” is April 12, 2010.

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

“Settlement Date” is defined in Section 2.1.3.

“Subordinated Debt” is (a) Indebtedness incurred by Borrower subordinated to
Borrower’s Indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form reasonably acceptable to Bank and approved by
Bank in writing, and (b) to the extent the terms of subordination do not change
adversely to Bank, refinancings, refundings, renewals, amendments or extensions
of any of the foregoing.

“Subsidiary” means, with respect to any Person, any Person of which more than
50.0% of the voting stock or other equity interests (in the case of Persons
other than corporations) is owned or controlled directly or indirectly by such
Person or one or more of Affiliates of such Person.

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.

“Transfer” is defined in Section 7.1.

“Unused Revolving Line Facility Fee” is defined in Section 2.5(b).

UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL FAMILY
OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.

[Signature page follows.]

 

Page 26 – LOAN AND SECURITY AGREEMENT

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

BORROWER:

OTIX GLOBAL, INC.

 

By:  

/s/ Michael Halloran

Name:   Michael Halloran Title:   Vice President and Chief Financial Officer

BANK:

SILICON VALLEY BANK

 

By:  

/s/ Silicon Valley Bank

Name:   Silicon Valley Bank Title:  

 

Effective Date:  

 

[Signature page to Loan and Security Agreement]

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EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as provided below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts, fixtures,
letters of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations,
and financial assets, whether now owned or hereafter acquired, wherever located;
and

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include any of the
following, whether now owned or hereafter acquired (a) more than 65% of the
presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any Foreign Subsidiary which shares entitle
the holder thereof to vote for directors or any other matter, or (b) any
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or
unpublished, any patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing; provided, however, the Collateral shall
include all Accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing.

Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing, without Bank’s prior written consent.

 

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EXHIBIT B – LOAN PAYMENT/ADVANCE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS NOON P.S.T.*

 

Fax To:    Date:                             

 

LOAN PAYMENT:           OTIX GLOBAL, INC. and HEARINGLIFE USA, INC.     From
Account #                                                                     
To Account #                                          
                                                                        
(Deposit Account #)            (Loan Account #)     Principal
$                                                                             
and/or Interest $                                         
                                Authorized Signature:
                                                                  
                Phone Number:                                          
           

Print Name/Title:                                          
                            

 

    

 

LOAN ADVANCE:       Complete Outgoing Wire Request section below if all or a
portion of the funds from this loan advance are for an outgoing wire.     From
Account #                                                                      
  To Account #                                          
                              (Loan Account #)           (Deposit Account #)    
Amount of Advance $                                                            
      All Borrower’s representations and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date of
the request for an advance; 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:  
  Authorized Signature:                                          
                      Phone Number:                                          
                            Print Name/Title:
                                                                                
 

 

OUTGOING WIRE REQUEST:   Complete only if all or a portion of funds from the
loan advance above is to be wired.

Deadline for same day processing is noon, P.S.T.

    Beneficiary Name:                                          
                              Amount of Wire:
$                                                                  Beneficiary
Bank:                                                                         
Account Number:                                          
                         City and State:
                                                                               
    Beneficiary Bank Transit (ABA) #:                                          
  Beneficiary Bank Code (Swift, Sort, Chip, etc.):                     

(For International Wire Only)

    Intermediary Bank:                                          
                             Transit (ABA) #:
                                                                    For Further
Credit to:                                                                      
  Special Instruction:                                          
                                         
                                         
                                                         By signing below, I
(we) acknowledge and agree that my (our) funds transfer request shall be
processed in accordance with and subject to the terms and conditions set forth
in the agreements(s) covering funds transfer service(s), which agreements(s)
were previously received and executed by me (us).     Authorized Signature:
                                                                    2nd
Signature (if required):                                                      
Print Name/Title:                                          
                                 Print Name/Title:
                                                                    Telephone #:
                                                                               
  Telephone #:                                          
                                     

 

* Unless otherwise provided for an Advance bearing interest at LIBOR.

 

1

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EXHIBIT C

BORROWING BASE CERTIFICATE

 

 

Borrower: OTIX Global, Inc. and HEARINGLife USA, Inc.

Lender: Silicon Valley Bank

Commitment Amount: $6,000,000.00

 

ACCOUNTS RECEIVABLE 1.    Accounts Receivable (invoiced) Book Value as of
                                        $                              2.   
Additions (please explain on reverse)    $                              3.   
TOTAL ACCOUNTS RECEIVABLE    $                              ACCOUNTS RECEIVABLE
DEDUCTIONS (without duplication)    4.    Un-invoiced Accounts   
$                              5.    Amounts over 90 days due   
$                              6.    Balance of 50% over 90 day accounts   
$                              7.    Credit balances over 90 days   
$                              8.    Concentration Limits   
$                              9.    Foreign Accounts*   
$                              10.    Governmental Accounts**   
$                              11.    Contra Accounts   
$                              12.    Promotion or Demo Accounts   
$                              13.    Intercompany/Employee Accounts   
$                              14.    Disputed Accounts   
$                              15.    Deferred Revenue   
$                              16.    Accounts subject to Permitted Liens    17.
   Other (please explain on reverse)    $                              18.   
TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS    $                              19.   
Eligible Accounts (#3 minus #18)    $                              20.   
ELIGIBLE AMOUNT OF ACCOUNTS (70% of #19)    $                             

 

  

*       Except for Eligible Foreign Accounts

  

**     Except Government Accounts assigned under the Assignment of Claims Act

   INVENTORY    21.    Eligible Inventory Value as of _______________   
$                              22.    ELIGIBLE AMOUNT OF INVENTORY (Lesser of
(a) 30% of #21; (b)    $                                 $2,000,000.00; or 30%
of #20)    BALANCES    23.    Maximum Loan Amount   
$                              24.    Total Funds Available [Lesser of #23 or
(#20 plus #22 plus permitted Non-Formula Advances)]   
$                              25.    Present balance owing on Line of Credit   
$                              26.    Outstanding under Sublimits or reserved
under the Asset Purchase Sublimit    $                              27.   
RESERVE POSITION (#24 minus #25 and #26)    $                             

The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

 

1

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EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:    SILICON VALLEY BANK    Date:                      FROM:    OTIX GLOBAL,
INC. AND HEARINGLIFE USA, INC.   

The undersigned authorized officer of OTIX Global, Inc. and HEARINGLife USA,
Inc. (collectively “Borrower”) certifies that under the terms and conditions of
the Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(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 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 Covenant

  

Required

  

Complies

Quarterly financial statements with Compliance Certificate*    Quarterly within
30 days*    Yes  No 10-Q, 10-K and 8-K + CC (with 10-Q and 10-K)    Within 5
days after filing with SEC    Yes  No Borrowing Base Certificate A/R and A/P
Agings and Inventory reports    Monthly within 20 days**    Yes  No

 

* If the Credit Extensions at any time exceed the sum of permitted Non-Formula
Advances plus seventy percent (70%) of Eligible Accounts, then Borrower shall
thereafter provide monthly financial statements within 30 days after the end of
each month

** Only if Advances (including any Credit Extensions pursuant to the provisions
of Sections 2.1.2, 2.1.3, 2.1.4 and 2.1.5) exceed permitted Non-Formula Advances
or have exceeded permitted Non-Formula Advances or an Event of Default has
occurred

 

Financial Covenant

  

Required

    

Actual

    

Complies

Maintain on a Quarterly Basis:***

            

Minimum Adjusted Quick Ratio

   .75:1.0                :1.0         Yes  No

Maximum EBITDA Loss****

   $3,000,000      $                  Yes  No

 

*** If the Credit Extensions at any time exceed the sum of permitted Non-Formula
Advances plus seventy percent (70%) of Eligible Accounts, then Borrower shall
thereafter maintain each covenant as of the last day of each month

**** This covenant shall be calculated on a cumulative basis for calendar year
2009, and beginning January 1, 2010, this covenant shall be calculated on a
rolling twelve-month basis

 

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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

Dated:                     

I. Adjusted Quick Ratio (Section 6.7(a))

Required: 0.75:1.00

Actual:

 

A.    Aggregate value of unrestricted cash or Cash Equivalents of Borrower with
maturities of fewer than 18 months    $             B.    Aggregate value of the
net billed accounts receivable of Borrower    $             C.    Quick Assets
(the sum of lines A and B)    $             D.    Aggregate value of Obligations
to Bank that matures within one (1) year    $             E.   

Aggregate value of other liabilities of Borrower (including all Indebtedness)

that matures within one (1) year and current portion of Subordinated Debt
permitted by Bank to be paid by Borrower

   $             F.    Current Liabilities (the sum of lines D and E)   
$             G.   

Aggregate value of all amounts received or invoiced by Borrower in advance

of performance under contracts and not yet recognized as revenue

   $             H.    Line F minus Line G    $             I.    Adjusted Quick
Ratio (line C divided by line H)                

Is line I equal to or greater than 0.75:1:00?

             No, not in compliance                                          
                                                                     Yes, in
compliance

 

2

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II. Maximum Losses (Section 6.7(b))

Required: ($3,000,000)

 

A.    Cumulative Net Income of Borrower and its Subsidiaries to date for
calendar year 2009. Beginning January 1, 2010, the Net Income of Borrower and
its Subsidiaries for the twelve (12) month period up and including the most
recent quarter; however, if the Maximum Losses Covenant is reported monthly,
then for the twelve (12) month period up to and including the most recent month
   $             B.    (a) To the extent included in the determination of Net
Income of Borrower and its Subsidiaries to date for calendar year 2009, or (b)
to the extent included in the determination of Net Income of Borrower and its
Subsidiaries, beginning January 1, 2010, for the twelve (12) month period up and
including the most recent quarter or, if the Maximum Losses Covenant is reported
monthly, then for the twelve (12) month period up to and including the most
recent month:       1. The provision for income taxes    $                2.
Depreciation expense    $                3. Amortization expense   
$                4. Net Interest expense    $                5. Stock option
expense    $                6. The impairment charge incurred in the first
quarter of 2009 in the sum of $14,658,000.00    $                7. All non-cash
income    $                8. The sum of lines 1 through 6 minus line 7   
$             C.    EBITDA (line A plus line B.9)                

Is the loss in line C greater than ($3,000,000)?

             Yes, not in compliance                                          
                                                                             No,
in compliance

 

3

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EXHIBIT E

[Intentionally omitted]

 

1

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EXHIBIT F

NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT

This NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT (the “Agreement”), dated as of
            , 200    , is between SILICON VALLEY BANK (“Buyer”) having a place
of business at 3003 Tasman Drive, Santa Clara, California 95054 and OTIX GLOBAL,
INC., a Delaware Corporation, with its chief executive office at 2795 E.
Cottonwood Parkway, Suite 660, Salt Lake City, UT 84121 and HEARINGLIFE USA,
INC., a Delaware Corporation, with its chief executive office at
                     (collectively “Seller”).

1 DEFINITIONS.

When used herein, the following terms have the following meanings.

1.1 “Account Debtor” has the meaning set forth in the California Uniform
Commercial Code and shall include any person liable on any Purchased Receivable,
including without limitation, any guarantor of the Purchased Receivable and any
issuer of a letter of credit or banker’s acceptance.

1.2 “Adjustments” means all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Purchased Receivable.

1.3 “Administrative Fee” means for any Purchase the percentage of the Total
Purchased Receivables Amount set forth in the Schedule for such Purchase.

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

1.5 “Discount Rate” means for any Purchase the “Discount Rate” set forth in the
Schedule for such Purchase.

1.6 “Due Date” means for any Purchase the “Due Date” set forth in the Schedule
for such Purchase.

1.7 “Event of Default” has the meaning set forth in Section 10 hereof.

1.8 “Insolvency Event” means, with respect to any Account Debtor, (a) the
commencement of a case, action or proceeding with respect to such Account Debtor
before any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, (b) such Account Debtor is generally not paying its debts
when due, or (c) the making or commencement of any general assignment for the
benefit of creditors, composition, marshaling of assets for creditors, or other
similar arrangement in respect of the creditors generally or any substantial
portion of the creditors of such Account Debtor.

1.9 “Invoice Amount” means for any Purchase, the “Invoice Amount” set forth in
the Schedule for such Purchase.

1.10 “Late Payment Settlement Fee” has the meaning set forth in Section 2.2.

1.11 “Late Payment Settlement Period” has the meaning set forth in Section 2.2.

1.12 “Open Amount” means the portion of any Purchased Receivable which has been
pre-paid to the Seller.

1.13 “Payment in Full” means for any Purchase that Buyer has received payments
on account of the Purchased Receivables under such Purchase equal to the Total
Purchased Receivables Amount for such Purchase.

1.14 “Prime Rate” means per annum rate of interest from time to time announced
and made effective by Buyer as its Prime Rate (which rate may or may not be the
lowest rate available from Buyer at any given time).

 

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1.15 “Purchase” means the purchase by Buyer from Seller of one or more Purchased
Receivables on a Purchase Date as listed in the Schedule applicable to such
Purchase.

1.16 “Purchase Date” means for any Purchase the date set forth as the “Purchase
Date” in the Schedule for such Purchase.

1.17 “Purchase Price” means for any Purchase the “Purchase Price” set forth on
the Schedule for such Purchase.

1.18 “Purchased Receivables” means for any Purchase all those Receivables
arising out of the invoices and other agreements identified on the Schedule for
such Purchase.

1.19 “Purchased Receivable Amount” means for any Purchased Receivable, the
“Invoice Amount” set forth with respect to such Purchased Receivable on the
applicable Schedule minus the Open Amount.

1.20 “Receivables” means accounts, receivables, chattel paper, instruments,
contract rights, documents, general intangibles, letters of credit, drafts,
bankers acceptances, and other rights to payment, and all proceeds thereof.

1.21 “Related Property” has the meaning as set forth in Section 9 hereof.

1.22 “Repurchase Amount” has the meaning set forth in Section 4.2 hereof.

1.23 “Schedule” means for each Purchase a schedule executed by the parties in
the form of Exhibit A hereto identifying the Purchased Receivables subject to
such Purchase and setting forth financial and other details relating to such
Purchase, all as contemplated by Exhibit A.

1.24 “Settlement Date” has the meaning set forth in Section 3.2 hereof.

1.25 “Total Purchased Receivables Amount” means for any Purchase the total of
the Purchased Receivable Amounts for all Purchased Receivables subject to such
Purchase as set forth on the applicable Schedule.

2 PURCHASE AND SALE OF RECEIVABLES.

2.1 Sale and Purchase. Subject to the terms and conditions of this Agreement,
with respect to each Purchase, effective on each applicable Purchase Date,
Seller agrees to sell to Buyer and Buyer agrees to buy from Seller all right,
title, and interest (but none of the obligations with respect to) of the Seller
to the payment of all sums owing or to be owing from the Account Debtors under
each Purchased Receivable to the extent of the Purchased Receivable Amount for
such Purchased Receivable.

Each purchase and sale hereunder shall be in the sole discretion of Buyer and
Seller. In any event, Buyer will not (i) purchase any Receivables in excess of
an aggregate outstanding amount exceeding the lesser of                     
($        .00), or the Availability Amount (as that term is defined in the Loan
and Security Agreement between Buyer and Seller, including any amendments
thereto), or (ii) purchase any Receivables under this Agreement after
twenty-four months from the date of this Agreement. The purchase of each
Purchased Receivable may be evidenced by an assignment or bill of sale in a form
acceptable to Buyer.

2.2 Purchase Price and Related Matters. With respect to each Purchase:

(a) Payment of Purchase Price. On the Purchase Date, the Purchase Price, less
the Administrative Fee and legal fees, shall be paid by Buyer to Seller.

(b) Late Payment Settlement Fee. If, for any reason, Payment in Full does not
occur on or before the Due Date, then, upon the first to occur of Payment in
Full, 90 days after the Due Date or the filing of a bankruptcy proceeding by or
against the applicable Account Debtor that failed to pay in full by the Due
Date, and in addition to any other obligations of Seller hereunder, Seller shall
pay to Buyer an amount which is equal to (i) the product of the Discount Rate
and the average daily balance of the Total Purchased Receivables Amount
outstanding during the period from the Due Date until the first to occur of
Payment in Full, 90 days after the Due Date or the

 

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filing of a bankruptcy proceeding by or against the applicable Account Debtor
that failed to pay in full by the Due Date (the “Late Payment Settlement
Period”) multiplied by (ii) a fraction the numerator of which is the number of
days in the Late Payment Settlement Period and the denominator of which is 360
(“Late Payment Settlement Fee”).

2.3 Nature of Transaction. It is the intent of the parties hereto that each
purchase and sale of Receivables hereunder is and shall be a true sale of such
Receivables for all purposes and not a loan arrangement. Each such sale shall
be, subject to the terms hereof, absolute and irrevocable, providing Buyer with
the full risks and benefits of ownership of the Purchased Receivables (such that
the Purchased Receivables would not be property of the Seller’s estate in the
event of the Seller’s bankruptcy). The parties agree that appropriate UCC
financing statements have been or shall promptly be filed to reflect that Seller
is the seller and Buyer is the purchaser of Receivables hereunder.

3 COLLECTIONS, CHARGES AND REMITTANCES.

3.1 Application of Payments. All payments in respect of any Purchased
Receivable, whether received from an Account Debtor or any other source and
whether received by Seller or Buyer, shall be the property of Buyer and Seller
shall have no ownership interest therein.

3.2 Collection by Seller. In order to facilitate the collection of the Purchased
Receivables in the ordinary course of business, Seller agrees to act as Buyer’s
agent for collection of the Purchased Receivables. Accordingly, Buyer hereby
appoints the Seller its attorney-in-fact to ask for, demand, take, collect, sue
for and receive all payments made in respect of the Purchased Receivables and to
enforce all rights and remedies thereunder and designates Seller as Buyer’s
assignee for collection; provided that such appointment of Seller as such
attorney-in-fact or assignee for collection may be revoked by Buyer at any time.
Seller, as such attorney-in-fact, shall use due diligence and commercially
reasonable lawful efforts in accordance with its usual policies and practices to
collect all amounts owed by the Account Debtors on each Purchased Receivable
when the same become due. In the enforcement or the collection of Purchased
Receivables, Seller shall commence any legal proceedings only in its own name as
an assignee for collection or on behalf of Buyer or, with Buyer’s prior written
consent, in Buyer’s name. Seller shall have no obligation to commence any such
legal proceedings unless Buyer has agreed to share the legal fees and other
expenses to be incurred in such proceedings on a basis which is acceptable to
Seller. In no event shall Seller take any action which would make Buyer a party
to any litigation or arbitration proceeding without Buyer’s prior written
consent. Until Buyer has received Payment in Full as to any Purchase, Seller
shall (i) hold in trust for Buyer and turn over to Buyer forthwith upon receipt
all payments made to Seller by Account Debtors with respect to the Purchased
Receivables subject to such Purchase and (ii) turn over to Buyer forthwith on
receipt all instruments, chattel paper and other proceeds of the Purchased
Receivables; provided that unless an Event of Default has occurred and is
continuing, Seller shall remit amounts received by Seller and due to Buyer on a
weekly basis on Friday of each week (each a “Settlement Date”), commencing on
the last business day of the second week after the Purchase Date. On each
Settlement Date, Seller shall deliver to Buyer a report, in form and substance
acceptable to Buyer, of the account activity (including dates and amounts of
payments) and changes in account status for each Purchased Receivable.

3.3 No Obligation to Take Action. Buyer shall have no obligation to perform any
of Seller’s obligations under any Purchased Receivables or to take any action or
commence any proceedings to realize upon any Purchased Receivables (including
without limitation any defaulted Purchased Receivables), or to enforce any of
its rights or remedies with respect thereto.

4 NON-RECOURSE; REPURCHASE OBLIGATIONS.

4.1 Non-Recourse. Except as otherwise set forth in this Agreement, Buyer’s
acquisition of Purchased Receivables from Seller hereunder shall be without
recourse against Seller.

4.2 Seller’s Agreement to Repurchase. Seller agrees to pay to Buyer on demand,
the full face amount, or any unpaid portion, of any Purchased Receivable:
(A) with respect to such Purchase Receivable there has been any breach of
warranty or representation set forth in Section 6.1 hereof (except for breaches
of warranty or representations which are permitted to be, and have been, cured
pursuant to Section 7 hereof) or any breach of any covenant contained in this
Agreement with respect to such Purchased Receivable; or (B) with respect to such
Purchased Receivable the Account Debtor asserts any discount, allowance, return,
dispute, counterclaim, offset, defense, right of recoupment, right of return,
warranty claim, or short payment (except for such matters as are permitted to
be, and have been, cured pursuant to Section 7 hereof); together with, in the
case of (A) or (B), all

 

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reasonable attorneys’ and professional fees and expenses and all court costs
incurred by Buyer in collecting such Purchased Receivable and/or enforcing its
rights under, or collecting amounts owed by Seller in connection with this
Agreement (collectively, the “Repurchase Amount”). Upon such payment, the
respective Purchased Receivables shall be deemed property of and owned solely by
the Seller (and shall not be deemed to be a Purchased Receivable hereunder).

4.3 Seller’s Payment of the Amounts Due Buyer. All amounts due from Seller to
Buyer shall be paid by Seller to Buyer in immediately available funds by fedwire
to Buyer’s address for notices.

5 POWER OF ATTORNEY.

Seller does hereby irrevocably appoint Buyer and its successors and assigns as
Seller’s true and lawful attorney-in-fact, and hereby authorizes Buyer: (a) to
sell, assign, transfer, pledge, compromise, or discharge the whole or any part
of the Purchased Receivables; (b) to demand, collect, receive, sue, and give
releases to any Account Debtor for the monies due or which may become due upon
or with respect to the Purchased Receivables and to compromise, prosecute, or
defend any action, claim, case or proceeding relating to the Purchased
Receivables, including the filing of a claim or the voting of such claims in any
bankruptcy case, all in Buyer’s name or Seller’s name, as Buyer may choose;
(c) to prepare, file and sign Seller’s name on any notice, claim, assignment,
demand, draft, or notice of or satisfaction of lien or mechanics’ lien or
similar document with respect to Purchased Receivables; (d) to notify all
Account Debtors with respect to the Purchased Receivables to pay Buyer directly;
(e) to receive, open, and dispose of all mail addressed to Seller for the
purpose of collecting the Purchased Receivables; (f) to endorse Seller’s name on
any checks or other forms of payment on the Purchased Receivables; (g) to
execute on behalf of Seller any and all instruments, documents, financing
statements and the like to perfect Buyer’s interests in the Purchased
Receivables; and (h) to do all acts and things necessary or expedient, in
furtherance of any such purposes.

6 REPRESENTATIONS, WARRANTIES AND COVENANTS.

6.1 Receivables’ Warranties, Representations and Covenants. To induce Buyer to
purchase the Purchased Receivables and to render its services to Seller, and
with full knowledge that the truth and accuracy of the following are being
relied upon by the Buyer in determining whether to accept receivables as
Purchased Receivables, Seller represents, warrants, covenants and agrees, with
respect to each Purchased Receivable, that, as of the date of the applicable
Purchase pertaining to such Purchased Receivable:

(a) Seller is the absolute owner of each of the Purchased Receivables and has
full legal right to sell, transfer and assign such receivables;

(b) The correct amount of each Purchased Receivable is as set forth on the
applicable Schedule and is not in dispute;

(c) The payment of each Purchased Receivable is not contingent upon the
fulfillment of any obligation or contract, and any and all obligations required
of the Seller have been fulfilled as of the applicable Purchase Date;

(d) Such Purchased Receivable is based on an actual sale and delivery of goods
and/or services actually rendered, is due no later than the applicable Due Date
and is owing to Seller, is not past due or in default, has not been previously
sold, assigned, transferred, or pledged, and is free of any and all liens,
security interests and encumbrances other than liens, security interests or
encumbrances in favor of Buyer or any other division or affiliate of Silicon
Valley Bank;

(e) There are no defenses, offsets, or counterclaims against such Purchased
Receivable, and no agreement has been made under which the Account Debtor may
claim any deduction or discount, except as otherwise stated on the applicable
Schedule;

(f) Seller and, to Seller’s knowledge, each Account Debtor set forth on the
applicable Schedule with respect to such Purchased Receivable, is not insolvent
as that term is defined in the United States Bankruptcy Code and the California
Uniform Commercial Code, and no such Account Debtor, to the knowledge of Seller,
has filed or had filed against it a voluntary or involuntary petition for relief
under the United States Bankruptcy Code; and

 

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(g) No Account Debtor set forth on the applicable Schedule with respect to such
Purchased Receivable has objected to the payment for, or the quality or the
quantity of the subject matter of, the Purchased Receivable, each such Account
Debtor is liable for the amount set forth on such Schedule.

6.2 Additional Warranties, Representations and Covenants. In addition to the
foregoing warranties, representations and covenants, to induce Buyer to buy the
Purchased Receivables, Seller hereby represents, warrants, covenants and agrees
that:

(a) Seller will not assign, transfer, sell, or grant, or permit any lien or
security interest in any interest the Seller may have in any Purchased
Receivables to or in favor of any other party, without Buyer’s prior written
consent.

(b) Each Seller’s name, form of organization, chief executive office, and the
place where the records concerning all Purchased Receivables are kept is set
forth at the beginning of this Agreement or, if located at any additional
location, as set forth on a schedule attached to this Agreement, and Seller will
give Buyer at least 10 days prior written notice if such name, organization,
chief executive office or records concerning Purchased Receivables is changed or
added and shall execute any documents necessary to perfect Buyer’s interest in
the Purchased Receivables.

(c) Seller shall (i) pay all of its normal gross payroll for employees, and all
federal and state taxes, as and when due, including without limitation all
payroll and withholding taxes and state sales taxes; (ii) deliver at any time
and from time to time at Buyer’s request, evidence satisfactory to Buyer that
all such amounts have been paid to the proper taxing authorities.

(d) Seller has not filed a voluntary petition for relief under the United States
Bankruptcy Code or had filed against it an involuntary petition for relief and
is not contemplating or anticipating any such filing.

(e) If Payment in Full of any Purchased Receivable has not occurred by the
applicable Due Date, then Seller shall within 10 days of such date provide a
written report to Buyer setting forth the reasons for such delay in payment.

(f) So long as any Purchased Receivable is outstanding, Seller shall deliver to
Buyer [financial reporting].

7 ADJUSTMENTS.

In the event any Adjustment or dispute is asserted by any Account Debtor, Seller
shall promptly advise Buyer and Seller shall, subject to the Buyer’s approval,
resolve such disputes and advise Buyer of any Adjustments and promptly remit to
Buyer the difference between the Invoice Amount on the Purchase Date and the
Invoice Amount after such Adjustment. Unless Buyer has otherwise elected to
exercise its rights under Section 4.2 hereof, Buyer shall remain the absolute
owner of any Purchased Receivable which is subject to Adjustment, and, until the
amount of such adjustment (as set forth above) is paid by Seller to Buyer, any
rejected, returned, or recovered personal property, with the right to take
possession thereof at any time, and if such possession is not taken by Buyer,
Seller agrees to resell it for Buyer’s account at Seller’s expense with the
proceeds made payable to Buyer. While Seller retains possession of said returned
goods and such goods are the property of Buyer, Seller shall segregate said
goods and mark them “property of Silicon Valley Bank.”

8 INDEMNIFICATION.

(a) Seller hereby agrees that in the event any Account Debtor is released from
all or any part of its payment obligations with respect to any Purchased
Receivable by reason of: (1) any act or omission of Seller not permitted by this
Agreement or consented to in writing by Buyer; or (2) the operation of any of
the provisions of the documentation pertaining to such Purchased Receivables,
which result in the termination of the Account Debtor’s obligation to pay all of
any part of the Purchased Receivables, then, upon the happening of any such
event, Seller shall thereafter pay to Buyer on the date when the Account Debtor
would otherwise have paid the Purchased Receivable to Buyer an amount equal to
the lesser of (a) the amount of the Purchased Receivable not payable by the
Account Debtor as a result of such event and (b) the unpaid portion of the
Purchased Receivable Amount for such Purchased Receivable.

 

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(b) Seller hereby agrees to pay, and to indemnify and hold harmless Buyer from
and against, any taxes which may at any time be asserted in respect of this
transaction or the subject matter thereof (including, without limitation, any
sales, occupational, excise, gross receipts, general corporation, personal
property, privilege or license taxes, but not including taxes imposed upon the
Buyer with respect to its income arising out of this transaction) and costs,
expenses and reasonable counsel fees in defending against the same, whether
arising by reason of the acts to be performed by Seller hereunder or imposed
against Buyer, Seller, the property involved or otherwise; provided that with
respect to any of the foregoing for which Seller shall be liable, Seller shall
receive reasonably prompt notice from Buyer of this assertion of any such taxes
on Buyer of which Buyer has notice.

9 ADDITIONAL RIGHTS.

To secure the prompt payment and performance to Buyer of all of the Purchased
Receivables and the obligations of Seller hereunder, Seller hereby grants to
Buyer a continuing lien upon and security interest in all of Seller’s now
existing or hereafter arising rights and interest in the following, whether now
owned or existing or hereafter created, acquired, or arising, and wherever
located (the “Related Property”): (A) Seller’s rights to any returned or
rejected goods in respect of the Purchased Receivables, with respect to which
Buyer has all the rights of any unpaid seller, including the rights of replevin,
claim and delivery, reclamation, and stoppage in transit; (B) All books and
records pertaining to the Purchased Receivables or the foregoing goods; and
(C) All proceeds of the foregoing, whether due to voluntary or involuntary
disposition, including insurance proceeds. Seller is not authorized to sell,
assign, transfer or otherwise convey any interest in any Related Property
without Buyer’s prior written consent. Seller agrees to sign UCC financing
statements, in a form acceptable to Buyer, and any other instruments and
documents requested by Buyer to evidence, perfect, or protect the interests of
Buyer in the Purchased Receivables and the Related Property. Seller agrees to
deliver to Buyer the originals of all instruments, chattel paper and documents
evidencing or related to Purchased Receivables and Related Property.

10 DEFAULT.

The occurrence of any one or more of the following shall constitute an Event of
Default hereunder:

(a) Seller fails to pay any amount owed to Buyer as and when due;

(b) There shall be commenced by or against Seller any voluntary or involuntary
case under the United States Bankruptcy Code, or any assignment for the benefit
of creditors, or appointment of a receiver or custodian for any of its assets;

(c) Seller shall become insolvent in that its debts are greater than the fair
value of its assets, or Seller is generally not paying its debts as they become
due or is left with unreasonably small capital;

(d) Any involuntary lien, garnishment, attachment or the like is issued against
or attaches to the Purchased Receivables or any Related Property;

(e) Seller shall breach any covenant, agreement, warranty, or representation set
forth herein, and the same is not cured (whether pursuant to the provisions of
Section 6 hereof, if applicable, or otherwise) to Buyer’s satisfaction within 10
days after Buyer has given Seller oral or written notice thereof; provided, that
if such breach is incapable of being cured it shall constitute an immediate
default hereunder;

(f) Seller is not in compliance with, or otherwise is in default under, any term
of any document, instrument or agreement evidencing a debt, obligation or
liability of any kind or character of Seller, now or hereafter existing, in
favor of Buyer or any division or affiliate of Silicon Valley Bank, regardless
of whether such debt, obligation or liability is direct or indirect, primary or
secondary, joint, several or joint and several, or fixed or contingent, together
with any and all renewals and extensions of such debts, obligations and
liabilities, or any part thereof; or

 

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(g) An event of default shall occur under any guaranty executed by any guarantor
of the obligations of Seller to Buyer under this Agreement, or any material
provision of any such guaranty shall for any reason cease to be valid or
enforceable or any such guaranty shall be repudiated or terminated, including by
operation of law.

11 REMEDIES UPON DEFAULT.

Upon the occurrence of an Event of Default, Buyer has and may exercise all the
rights and remedies under this Agreement and under applicable law, including the
rights and remedies of a secured party under the California Uniform Commercial
Code, all the power of attorney rights described in Section 5 with respect to
all Purchased Receivables and Related Property, and the right to collect,
dispose of, sell, lease, use, and realize upon all Purchased Receivables and all
Related Property.

12 ACCRUAL OF INTEREST.

If any amount owed by Seller to Buyer hereunder is not paid when due, such
amount shall bear interest from such date until paid at a per annum rate equal
to the Prime Rate plus 5.0%.

13 FEES, COSTS AND EXPENSES.

The Seller will pay to Buyer immediately upon demand all reasonable fees, costs
and expenses (including reasonable fees of attorneys and professionals and their
costs and expenses) that Buyer incurs with any of the following: (a) preparing,
negotiating, and administering, and enforcing this Agreement or any other
agreement executed by Buyer and Seller in connection herewith, including any
amendments, waivers or consents in connection with any of the foregoing,
(b) enforcing Buyer’s rights under, or collecting amounts owed by Seller to
Buyer in connection with this Agreement, including, without limitation, to
enforce (i) Seller’s agreement to repurchase as set forth in Section 4.2,
(ii) Seller’s payment of any amounts owing by Seller pursuant to Section 7
hereof, or (iii) Seller’s payment of any amounts owing by Seller pursuant to
Section 8 hereof, (c) enforcing any other rights against Seller or any
guarantor, (d) protecting or enforcing its title to the Purchased Receivables or
its security interest in the Related Property, and (e) the representation of
Buyer in connection with any bankruptcy case or insolvency proceeding involving
Seller or any guarantor. Seller shall indemnify and hold Buyer harmless from and
against any and all claims, actions, damages, costs, expenses, and liabilities
of any nature whatsoever arising in connection with any of the foregoing, except
to the extent arising as a result of Buyer’s own gross negligence or willful
misconduct.

14 SEVERABILITY, WAIVER, AND CHOICE OF LAW.

In the event that any provision of this Agreement is deemed invalid by reason of
law, this Agreement will be construed as not containing such provision and the
remainder of the Agreement shall remain in full force and effect. If Buyer
waives a default it may enforce a later default. Any consent or waiver under, or
amendment of, this Agreement must be in writing. Nothing contained herein, or
any action taken or not taken by Buyer at any time, shall be construed at any
time to be indicative of any obligation or willingness on the part of Buyer to
amend this Agreement or to grant to Seller any waivers or consents. This
Agreement has been transmitted by Seller to Buyer at Buyer’s office in the state
of California and has been executed and accepted by Buyer in the state of
California. This Agreement shall be governed by and interpreted in accordance
with the internal laws of the state of California.

15 NOTICES.

All notices shall be given to Buyer and Seller at the addresses or faxes set
forth on the first page of this Agreement and shall be deemed to have been
delivered and received: (a) if mailed, three calendar days after deposited in
the United States mail, first class, postage pre-paid, (b) one calendar day
after deposit with an overnight mail or messenger service; or (c) on the same
date of confirmed transmission if sent by hand delivery, telecopy, telefax or
telex.

16 JURY TRIAL.

SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY
RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR

 

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THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND
WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE
NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND
VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.

17 TITLES AND SECTION HEADINGS.

The titles and section headings used herein are for convenience only and shall
not be used in interpreting this Agreement.

IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement under seal as
of the date first written above.

SELLER:

OTIX GLOBAL, INC.

 

By  

 

Title  

 

HEARINGLIFE USA, INC.

 

By  

 

Title  

 

BUYER:

SILICON VALLEY BANK

 

By  

 

Title  

 

 

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SCHEDULE DATED                     

TO

NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT

DATED AS OF <insert date of agreement>

 

Seller:    OTIX Global, Inc. and HEARINGLife USA, Inc. Buyer:    Silicon Valley
Bank Purchase Date:                                 Due Date:         days from
Purchase Date Total Purchased Receivables:    $         (List of Receivables
total) Discount Rate:        %

Purchase Price: $         (is     % of the Total Purchased Receivables which is
the straight discount of the Total Purchased Receivables discounted from the Due
Date to the Purchase Date at the Discount Rate).

Administrative Fee: .50% multiplied by the Total Purchased Receivables that have
Account Debtors with their principal places of business in the United States and
.75% multiplied by the Total Purchased Receivables that have Account Debtors
with their principal places of business outside of the United States.

Interest: If Payment is not paid to Buyer by or before the Due Date with respect
to any Purchased Receivable, Seller will reimburse Buyer for past-due interest
expense on the outstanding balance of the Purchased Receivable at the Prime Rate
plus the applicable percentage set forth in the Amended and Restated Loan and
Security Agreement between Seller and Buyer, including any amendments thereto
from the Due Date through the earlier of payment in full of the Purchased
Receivable or ninety (90) days after the Due Date.

Seller warrants and represents that (a) its warranties and representations in
the Agreement are true and correct as of the date of this Schedule and (b) no
Event of Default has occurred under the Agreement.

SELLER: OTIX GLOBAL, INC.

 

By:  

 

Title:  

 

SELLER: HEARINGLIFE USA, INC.

 

By:  

 

Title:  

 

BUYER: SILICON VALLEY BANK

 

By:  

 

Title:  

 

 

Page 9 – NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT

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EXHIBIT G

SUBORDINATION INSERT

All payments due under this Note are subordinated to all of Borrower’s loans and
other obligations to Silicon Valley Bank (“Bank”) existing now or later. Lender
may receive regularly scheduled payments of interest and/or principal due under
this Note only if the Lender has not received written notice from the Borrower
that an Event of Default (defined in the Borrower’s loan documents with Bank)
has occurred, and is continuing. Neither this paragraph nor the payment terms of
this Note may be amended or modified without the prior written consent of the
Bank, which consent shall not be unreasonably withheld.

 

Page 1 – SUBORDINATION INSERT