Exhibit 10.1

EXECUTION VERSION

 

 

 

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

dated as of March 2, 2012

among

NATUS MEDICAL INCORPORATED,

as Borrower,

THE MATERIAL DOMESTIC SUBSIDIARIES OF BORROWER FROM TIME TO TIME PARTY

HERETO,

as Subsidiary Guarantors,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Bank

 

 

 

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TABLE OF CONTENTS

 

          PAGE  

ARTICLE I

   DEFINITIONS      1   

Section 1.1.

   Certain Defined Terms      1   

Section 1.2.

   Certain Rules of Construction      15   

ARTICLE II

   CREDIT TERMS      17   

Section 2.1.

   Revolving Line of Credit      17   

Section 2.1A.

   Liabilities if Revolving Line of Credit Terminated or Cancelled      18   

Section 2.2.

   Procedures For Borrowing      18   

Section 2.3.

   Principal Payments and Prepayments      20   

Section 2.4.

   Interest/Applicable Rates      20   

Section 2.5.

   Fees      21   

Section 2.6.

   Computations of Interest and Fees      22   

Section 2.7.

   Payments Generally; Collection of Payments      22   

Section 2.8.

   Collateral      22   

Section 2.9.

   Guaranties      23   

ARTICLE III

   INCREASED COSTS; TAXES      23   

Section 3.1.

   Increased Costs      23   

Section 3.2.

   Taxes      24   

Section 3.3.

   Inability to Determine Rates      26   

Section 3.4.

   Compensation for Losses      26   

Section 3.5.

   Survival      26   

ARTICLE IV

   REPRESENTATIONS AND WARRANTIES      26   

Section 4.1.

   Legal Status      27   

Section 4.2.

   Authorization and Validity      27   

Section 4.3.

   No Violation      27   

Section 4.4.

   Litigation      27   

Section 4.5.

   Correctness of Financial Statement      27   

Section 4.6.

   Income Tax Returns      27   

Section 4.7.

   No Subordination      27   

Section 4.8.

   Permits, Franchises      28   

Section 4.9.

   ERISA Compliance      28   

Section 4.10.

   Other Obligations      28   

Section 4.11.

   Environmental Matters      28   

ARTICLE V

   CONDITIONS      28   

Section 5.1.

   Conditions of Initial Extension of Credit      28   

Section 5.2.

   Conditions of Each Extension of Credit      29   

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          PAGE  

ARTICLE VI

   AFFIRMATIVE COVENANTS      30   

Section 6.1.

   Punctual Payments      30   

Section 6.2.

   Accounting Records; Collateral Exams      30   

Section 6.3.

   Financial Statements      30   

Section 6.4.

   Compliance      31   

Section 6.5.

   Insurance      31   

Section 6.6.

   Facilities      31   

Section 6.7.

   Taxes and Other Liabilities      31   

Section 6.8.

   Litigation      31   

Section 6.9.

   Financial Condition      32   

Section 6.10.

   Notice to Bank      32   

Section 6.11.

   Maintenance of Accounts with Bank      32   

Section 6.12.

   Subsidiaries      32   

ARTICLE VII

   NEGATIVE COVENANTS      33   

Section 7.1.

   Use of Funds      33   

Section 7.2.

   Capital Expenditures      34   

Section 7.3.

   Lease Expenditures      34   

Section 7.4.

   Other Indebtedness      34   

Section 7.5.

   Merger, Consolidation, Transfer of Assets      34   

Section 7.6.

   Guaranties      34   

Section 7.7.

   Loans, Advances, Investments      34   

Section 7.8.

   Dividends, Distributions      34   

Section 7.9.

   Pledge of Assets      35   

Section 7.10.

   Sale and Leasebacks      35   

Section 7.11.

   Transactions with Affiliates      35   

ARTICLE VIII

   EVENTS OF DEFAULT      35   

Section 8.1.

   Events of Default      35   

Section 8.2.

   Remedies      37   

ARTICLE IX

   MISCELLANEOUS      38   

Section 9.1.

   No Waiver      38   

Section 9.2.

   Notices      38   

Section 9.3.

   Expenses; Indemnity; Damage Waiver      38   

Section 9.4.

   Successors, Assignment      39   

Section 9.5.

   Confidentiality      40   

Section 9.6.

   Guaranty      40   

Section 9.7.

   Entire Agreement; Amendment      47   

Section 9.8.

   No Third Party Beneficiaries      47   

Section 9.9.

   Time      47   

Section 9.10.

   Severability of Provisions      47   

Section 9.11.

   Counterparts      47   

Section 9.12.

   Governing Law      48   

 

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          PAGE  

Section 9.13.

   Arbitration      48   

Section 9.14.

   No Novation      50   

Section 9.15.

   Termination of Agreement      50   

SCHEDULES

 

1.1-A

   Permitted Indebtedness

1.1-B

   Permitted Investments

1.1-C

   Permitted Liens

4.1

   Subsidiaries

4.4

   Litigation

4.11

   Environmental Matters

EXHIBITS

 

A

   Form of Third Amended and Restated Revolving Line of Credit Note

B

   Form of Loan Notice

C

   Form of Financial Covenant Compliance Certificate

 

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THIRD AMENDED AND RESTATED

CREDIT AGREEMENT

THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is entered
into as of March 2, 2012, by and among NATUS MEDICAL INCORPORATED, a Delaware
corporation (“Borrower”), the Material Domestic Subsidiaries from time to time
party hereto, and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

RECITALS

WHEREAS, Borrower and Bank are party to that certain Second Amended and Restated
Credit Agreement, dated as of April 22, 2010 (as amended, restated, modified
and/or supplemented prior to the date hereof, the “Existing Agreement”).

WHEREAS, Borrower has requested that Bank (i) amend and restate the Existing
Agreement and (ii) extend or continue credit to Borrower as described below, and
Bank has agreed to provide such credit to Borrower on the terms and conditions
contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. CERTAIN DEFINED TERMS . As used in this Agreement, the following
terms shall have the meaning set forth below:

“AAA” has the meaning ascribed to such term in Section 9.13(b) hereof.

“Acquired Business” means the entity or assets acquired by Borrower in an
Acquisition, whether before or after the date of this Agreement.

“Acquisition” means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of all
or substantially all of the assets of a Person, or of any business or division
of a Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests, membership interests or equity of any Person, or (c) a
merger or consolidation or any other combination with another Person provided
that Borrower is the surviving entity.

“Agreement” has the meaning ascribed to such term in the introductory paragraph
hereof.

 

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“Applicable Rate” means, from time to time, with respect to any Base Rate Loan,
or LIBOR Loan, or with respect to any Letter of Credit Fees payable pursuant to
Section 2.5(b), as the case may be, the applicable rate per annum set forth
below (expressed in basis points) under the caption “LIBOR Spread,” “Base Rate
Spread” or “Letter of Credit Fee Rate,” as the case may be, based upon, subject
to Section 2.4(d), the Leverage Ratio as set forth in the most recent Compliance
Certificate received by Bank pursuant to Section 6.3(d):

 

Tier

 

Leverage Ratio

   LIBOR
Spread    Base Rate
Spread    Letter of Credit
Fee Rate 1   Greater than or equal to 1.00    175.00    0.00    175.00 2   Less
than 1.00    150.00    0.00    150.00

“ASC 740” means Financial Accounting Standards Board’s Accounting Standards
Codification Topic 740, Income Taxes (formerly SFAS 109, Accounting for Income
Taxes)

“ASC 805” means Financial Accounting Standards Board’s Accounting Standards
Codification Topic 805, Business Combinations (formerly SFAS 141R).

“Attributable Indebtedness” means, on any date of determination: (a) in respect
of any capital lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP; and (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease payments under the relevant lease that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP if such lease were accounted for as a capital lease.

“Availability Period” means the period from the Closing Date to the earlier of
(i) the Revolving Credit Maturity Date and (ii) the date that Bank’s commitment
to make Revolving Credit Loans terminates pursuant to Section 8.2.

“Bank” has the meaning ascribed to such term in the introductory paragraph
hereof.

“Bankruptcy Code” means the Bankruptcy Reform Act, Title 11 of the United States
Code.

“Bankruptcy Laws” means, collectively: (a) the Bankruptcy Code; and (b) all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

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

 

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“Base Rate” means, for any day, a fluctuating rate per annum equal to the higher
of: (a) the Federal Funds Rate plus one-half of one percent per annum; and
(b) the per annum rate of interest in effect for such day as publicly announced
from time to time by Bank as its “Prime Rate,” such rate being the rate of
interest most recently announced within Bank at its principal office as its
“Prime Rate,” with the understanding that Bank’s “Prime Rate” is one of Bank’s
base rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof after its announcement in such internal publication or
publications as Bank may designate. Any change in Bank’s “Prime Rate” as
announced by Bank shall take effect at the opening of business on the day
specified in the public announcement of such change.

“Base Rate Loan” means a Loan that bears interest based upon the Base Rate.

“Borrower” has the meaning ascribed to such term in the introductory paragraph
hereof.

“Business Day” means any day except a Saturday, Sunday or any other day on which
commercial banks in California are authorized or required by law to close;
provided that, if any such day relates to LIBOR or any LIBOR Loan, such day must
also be a day on which dealings in Dollar deposits are conducted by and between
banks in the London interbank offered market.

“Cash Restructuring Charges” means cash based restructuring charges, as defined
under GAAP, for any entity that is the subject of a Permitted Acquisition;
provided that in no event shall Cash Restructuring Charges exceed $5,000,000 in
the aggregate during the term of this Agreement.

“Change in Law” means any of the following occurring after the Closing Date:
(a) the adoption or taking effect of any law, rule, regulation or treaty;
(b) any change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority; or (c) the
making or issuance of any request, guideline or directive (whether or not having
the force of law) by any Governmental Authority; provided that, for purposes
hereof, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, guidelines and directions in connection therewith are deemed to have
been adopted and gone into effect after the Closing Date.

“Change of Control” means an event or series of events by which any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act,
but excluding any employee benefit plan of such person or its subsidiaries, and
any person or entity acting in its capacity as trustee, agent or other fiduciary
or administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of thirty
percent or more of the Equity Interests of Borrower entitled to vote for members
of the board of directors or equivalent governing body of Borrower on a
fully-diluted basis (and taking into account all such securities that such
person or group has the right to acquire pursuant to any option right).

 

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“Closing Date” means March 2, 2012.

“Code” means the Internal Revenue Code of 1986.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit C.

“Confidential Information” means all non-public, confidential and/or proprietary
information of Borrower, its Subsidiaries or any Subsidiary thereof, now or at
any time hereafter provided to Bank by Borrower, or any of Borrower’s officers,
employees, agents or representatives, in connection with Bank’s evaluation of
Borrower’s credit request and/or Bank’s ongoing credit accommodations to
Borrower, and shall include, without limitation, any and all financial,
technical and/or business information relating to Borrower, its Subsidiaries or
any Subsidiary thereof, including trade secrets, research and development test
results, marketing or business plans and strategies, forecasts, budgets,
projections, customer and supplier information, and any other analyses,
computations or studies prepared by or for Borrower, any of its Subsidiaries or
any Subsidiary thereof.

“Consolidated EBITDA” means, for any period and as of any date of determination,
for Borrower and its Subsidiaries on a consolidated basis, an amount equal to
Consolidated Net Income for such period plus (a) the following to the extent
deducted in calculating such Consolidated Net Income: (i) Consolidated Interest
Expense for such period, (ii) Consolidated Provision for Income Taxes for such
period deducted to arrive at Consolidated Net Income, (iii) depreciation and
amortization expense, (iv) all non-cash expenses related to stock-based
compensation deducted to arrive at Consolidated Net Income, (v) other
non-recurring expenses of Borrower and its Subsidiaries reducing such
Consolidated Net Income which do not represent a cash item in such period or any
future period, (vi) Cash Restructuring Charges (provided that the aggregate
amount of Cash Restructuring Charges added to Consolidated Net Income for any
twelve-month period pursuant to this clause (vi) shall not exceed $5,000,000),
and (vii) expenses created by contingent consideration or transaction costs
related to a business combination or acquisition, to the extent required to be
expensed by ASC 805, and minus (b) the following to the extent included in
calculating such Consolidated Net Income: (i) interest income (ii) extraordinary
or non-recurring non-cash income or gains, (iii) all non-cash items increasing
Consolidated Net Income for such period, and (iv) adjustments to income created
by contingent consideration related to a business combination or acquisition, to
the extent required to be recognized by ASC 805.

“Consolidated Funded Indebtedness” means, as of any date of determination, for
Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term,
for borrowed money (including obligations hereunder) and all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (b) all purchase money indebtedness, (c) all direct obligations
arising under letters of credit (including standby and commercial),
reimbursement agreements, bankers’ acceptances, bank guaranties, surety bonds
and similar instruments, (d) all obligations in respect of the deferred purchase
price of property or services (other than trade accounts payable in the ordinary
course of business), (e) Attributable Indebtedness in respect of capital leases
and Synthetic Lease Obligations, (f) without duplication, all guarantees with
respect to outstanding indebtedness of the types specified in clauses
(a) through (e) above of Persons other than Borrower or any Subsidiary, and
(g) all indebtedness of the types referred to in clauses (a) through (f) above
of any partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which Borrower or a Subsidiary is a
general partner or joint venturer, unless such indebtedness is expressly made
non-recourse to Borrower or such Subsidiary.

 

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“Consolidated Interest Expense” means, for any period, for Borrower and its
Subsidiaries on a consolidated basis, an amount equal to the sum of all interest
charges (including imputed interest charges with respect to capitalized lease
obligations and all amortization of debt discount and expense) of such Persons
for such period.

“Consolidated Net Income” means, for any period, for Borrower and its
Subsidiaries on a consolidated basis, the net income of Borrower and its
Subsidiaries from continuing operations (excluding gains or losses from
dispositions of assets) for such period.

“Consolidated Provision for Income Taxes” means, for any period, for Borrower
and its Subsidiaries on a consolidated basis, the provision for income taxes
calculated in accordance with ASC 740.

“Default” means any event or condition that constitutes an Event of Default or
that, with the giving of notice, the passage of time, or both, would constitute
an Event of Default.

“Default Rate” means a per annum interest rate equal to the sum of: (i) the Base
Rate; plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans; plus
(iii) four hundred basis points per annum; provided that, with respect to a
LIBOR Loan, the Default Rate shall be a per annum interest rate equal to the sum
of: (A) the interest rate (including any Applicable Rate) otherwise applicable
to such Loan; plus (B) four hundred basis points per annum.

“Dollar” and “$” mean lawful money of the United States.

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

“Eligible Line of Business” means any business engaged primarily in the sale of
medical devices and associated supplies.

“Environmental Claims” means all claims, however asserted, by any Governmental
Authority or other Person alleging Environmental Liabilities.

“Environmental Laws” means any and all United States federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

 

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“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Borrower, any Guarantor or any of their respective
Subsidiaries directly or indirectly resulting from or based upon: (a) violation
of any Environmental Law; (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials; (c) exposure to any
Hazardous Materials; (d) the release or threatened release of any Hazardous
Materials into the environment; or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with Borrower or any Subsidiary thereof within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).

“ERISA Event” means any of the following: (a) a Reportable Event with respect to
a Pension Plan; (b) a withdrawal by Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations that is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or
any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under
Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC
to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition
that constitutes grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or Multiemployer
Plan; or (f) the imposition of any liability under Title IV of ERISA, other than
for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
Borrower or any ERISA Affiliate.

“Event of Default” has the meaning ascribed to such term in Article VIII hereof.

“Exchange Act” means the Securities Exchange Act of 1934.

 

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“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight United States federal funds
transactions with members of the Federal Reserve System arranged by United
States federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided that:
(a) if such day is not a Business Day, then the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day; and (b) if no such rate is so
published on such next succeeding Business Day, then the Federal Funds Rate for
such day shall be the average rate (rounded upward, if necessary, to a whole
multiple of one-hundredth of one percent) charged to Bank on such day on such
transactions as determined by Bank.

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

“Foreign Subsidiary” means any Subsidiary organized under the laws of a country
(or political subdivision thereof) other than the United States (or political
subdivision thereof).

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

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

“Guarantor” or “Guarantors” means each Subsidiary Guarantor.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hostile Acquisition” means the acquisition of the capital stock or other equity
interests of a Person through a tender offer or similar solicitation of the
owners of such capital stock or other equity interests which has not been
approved (prior to such acquisition) by resolutions of the board of directors of
such Person or by similar action if such Person is not a corporation, or as to
which such approval has been withdrawn.

 

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“Immaterial Domestic Subsidiary” means, as at any date of determination, any
Domestic Subsidiary whose assets as of the end of the most recent fiscal year
are less than five percent (5%) of the consolidated assets of Borrower and its
Subsidiaries as of the last day of such fiscal year or whose gross revenues for
such fiscal year are less than five percent (5%) of the consolidated gross
revenues of Borrower and its Subsidiaries for such fiscal year.

“Indemnitees” has the meaning ascribed thereto in Section 9.3(b).

“Interest Payment Date” means: (a) with respect to (i) a LIBOR Loan, the last
day of each Interest Period applicable thereto; provided that, if any such
Interest Period exceeds three months, the date that falls three months after the
beginning of such Interest Period shall also be an Interest Payment Date; and
(ii) a Base Rate Loan, the last Business Day of each calendar month; and (b) the
Revolving Credit Maturity Date.

“Interest Period” means, as to each LIBOR Loan, the period commencing on the
date such LIBOR Loan is disbursed or converted to or continued as a LIBOR Loan
and ending on the date one, two, three or six months thereafter, as selected by
Borrower in its related Loan Notice; provided that: (a) any Interest Period that
would otherwise end on a day that is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period for any Revolving Credit Loan shall extend beyond the
Revolving Credit Maturity Date.

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of capital stock or other securities of another Person, (b) a loan,
advance or capital contribution to, guarantee or assumption of debt of, or
purchase or other acquisition of any other debt or equity participation or
interest in, another Person, including any partnership or joint venture interest
in such other Person and any arrangement pursuant to which the investor
guarantees Indebtedness of such other Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of assets of
another Person that constitute a business unit. For purposes of covenant
compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.

“Joinder Agreement” means an agreement entered into by a Material Domestic
Subsidiary of Borrower following the date hereof to join in the Guaranty set
forth in Section 9.6 or in any other form approved by Bank.

“Letter of Credit” has the meaning ascribed thereto in Section 2.1(b).

“Letter of Credit Agreement” means each application and agreement relating to a
Letter of Credit that Bank may require in connection with any request for the
issuance of a Letter of Credit.

 

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“Letter of Credit Fee” has the meaning ascribed thereto in Section 2.5(b).

“Leverage Ratio” means, as of any date of determination, for Borrower and its
Subsidiaries on a consolidated basis, the ratio of: (a) Consolidated Funded
Indebtedness as of such date to (b) Consolidated EBITDA for the four consecutive
fiscal quarters ending on such date.

“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/16 of 1%) and determined pursuant to the following formula:

 

LIBOR =

  

Base LIBOR

   100% - LIBOR Reserve Percentage

“LIBOR Loan” means a Loan that bears interest based upon LIBOR.

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

“Loan” means any Revolving Credit Loan.

“Loan Documents” means this Agreement, the Note, the Security Agreement, the
Pledge Agreement, each Letter of Credit Agreement, any Letter of Credit and each
other contract, instrument and document required by or delivered to Bank in
connection with this Agreement.

“Loan Notice” means a notice, pursuant to Section 2.2(a), of: (a) a borrowing of
Loans; (b) a conversion of Loans from one Type to the other; or (c) a
continuation of LIBOR Loans; which, if in writing, shall be substantially in the
form of Exhibit B.

“Material Adverse Effect” means a material adverse effect on (i) the business
operations or financial condition of Borrower and its Subsidiaries taken as a
whole, (ii) the ability of Borrower to repay all debt, principal, interest,
expenses and other amounts owed to Bank by Borrower pursuant to this Agreement,
the Note and the other Loan Documents, or to otherwise perform its material
obligations under the Loan Documents, or (iii) Borrower’s interest in, or the
value, perfection or priority of Bank’s security interest or lien in, the
collateral described in Section 2.8 hereof.

“Material Domestic Subsidiary” means, as at any date of determination, (i) any
Domestic Subsidiary other than an Immaterial Domestic Subsidiary; provided that
in the event the assets as of the last day of the most recent fiscal year of all
Immaterial Domestic Subsidiaries as of such date that have not become a party to
this Agreement as a Subsidiary Guarantor are in excess of 10% of the
consolidated assets of Borrower and its Subsidiaries as of the last day of such
fiscal year or the gross revenues for the most recent fiscal year of all
Immaterial Domestic Subsidiaries as of such date that have not become a party to
this Agreement as a Subsidiary Guarantor are in excess of 10% of the
consolidated gross revenues of Borrower and its Subsidiaries for such fiscal
year, then Borrower shall designate one or more Immaterial Domestic Subsidiaries
of Borrower as Material Domestic Subsidiaries and (ii) any Immaterial Domestic
Subsidiary of Borrower that has been designated as a Material Domestic
Subsidiary by Borrower.

 

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“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA to which Borrower or any ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

“Note” means the Third Amended and Restated Revolving Line of Credit Note.

“Obligations” means all advances, debts, liabilities, obligations, covenants and
duties of Borrower or any Guarantor under any Loan Document or otherwise,
whether with respect to any Loan or otherwise, whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against Borrower or any Guarantor or
any affiliate thereof of any proceeding under any Bankruptcy Law naming such
Person as the debtor in such proceeding, regardless of whether such interest and
fees are allowed claims in such proceeding.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means any “employee pension benefit plan” (as that term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by Borrower or any
ERISA Affiliate or to which Borrower or any ERISA Affiliate contributes or has
an obligation to contribute, or in the case of a multiple employer or other plan
described in Section 4064(a) of ERISA, has made contributions at any time during
the immediately preceding five plan years.

“Permitted Acquisition” means any Acquisition with respect to which all of the
following conditions shall have been satisfied:

(a) the Acquired Business is in an Eligible Line of Business;

(b) the Acquisition shall not be a Hostile Acquisition;

(c) the financial statements of the Acquired Business shall be in form and
substance satisfactory to Bank and shall have undergone review of a scope
satisfactory to Bank;

(d)(i) with respect to the Acquisition of any Acquired Business, the Total
Consideration for such Acquired Business shall not exceed $30,000,000, and
(iii) the Total Consideration for such Acquisition, when taken together with the
Total Consideration for all Acquired Businesses acquired after the date of this
Agreement, shall not exceed $100,000,000 in the aggregate;

 

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(e) Borrower shall have notified Bank not less than 30 days prior to any such
Acquisition and furnished to Bank at such time reasonable details as to such
Acquisition (including sources and uses of funds therefor), and 3-year
historical financial information and 3-year pro forma financial forecasts of the
Acquired Business on a stand alone basis as well as of Borrower on a
consolidated basis after giving effect to the Acquisition and covenant
compliance calculations reasonably satisfactory to Bank demonstrating
satisfaction of the condition described in clause (f) below;

(f) after giving effect to the Acquisition, no Default or Event of Default shall
exist, including with respect to the financial covenants contained in
Section 6.9 hereof (applicable as of the most recently ended fiscal quarter),
tested on a pro forma basis as of the date of the Acquisition;

(g) Borrower shall demonstrate, in reasonable detail, that the Acquired Business
had positive Consolidated EBITDA (calculated in the same manner as if the
reference to Borrower therein was to such Acquired Business) on a pro forma
basis for the four (4) fiscal quarter period ended immediately prior to the
proposed closing date of such Acquisition for which financial statements are
available; and

(h) the Acquisition shall have been approved by Borrower’s board of directors
and (if necessary) owners, and all necessary legal and regulatory approvals with
respect to the Acquisition shall have been obtained.

“Permitted Indebtedness” means:

(a) the liabilities of Borrower to Bank under this Agreement and the other Loan
Documents;

(b) any other liabilities of Borrower existing as of the Closing Date and listed
on Schedule 1.1-A;

(c) unsecured indebtedness to trade creditors incurred in the ordinary course of
business;

(d) guaranty obligations of Borrower with respect to indebtedness of
Subsidiaries of Borrower permitted under Section 7.6;

(e) indebtedness secured by Permitted Liens identified in paragraphs (d), (e),
(f), (g) (but solely with respect to Permitted Liens permitted under such
paragraph (g) that are related to extensions, renewals or refinancings of
indebtedness secured by liens identified in paragraph (d) of the definition of
Permitted Liens) and (j) of the definition of Permitted Liens; and

(f) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness identified in (a) through (d) above, provided
that the principal amount is not increased nor the terms modified to impose more
burdensome terms upon Borrower or its Subsidiaries, as the case may be.

 

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“Permitted Investments” means:

(a) Investments by Borrower existing as of the Closing Date and listed on
Schedule 1.1-B;

(b) Investments by Borrower in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any state
thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either
Standard & Poor’s Corporation or Moody’s Investors Service, (iii) Bank’s
certificates of deposit maturing no more than one year from the date of
investment therein, (iv) Bank’s money market accounts, and (v) in conformance
with Borrower’s “Investment Policy,” as in effect on the Closing Date (or as
amended from time to time, subject to the approval of Bank), a copy of which has
previously been provided to Bank;

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

(d) Investments by Borrower consisting of deposit accounts in which Bank has a
first priority perfected security interest;

(e) Investments by Borrower constituting Permitted Acquisitions;

(f) Investments by Borrower not to exceed at any time $250,000.00 in the
aggregate consisting of (i) travel advances and employee relocation loans and
other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower pursuant to employee stock purchase plans or
agreements approved by Borrower’s board of directors;

(g) Investments (including debt obligations) by Borrower not to exceed
$50,000.00 in the aggregate outstanding at any time received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; and

(h) Investments by Borrower not to exceed $50,000.00 in the aggregate
outstanding at any time consisting of notes receivable of, or prepaid royalties
and other credit extensions to, customers and suppliers who are not affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not
apply to investments of Borrower in any Subsidiary.

 

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“Permitted Liens” means:

(a) liens and security interests in favor of Bank created under any Loan
Document;

(b) liens and security interests existing as of the Closing Date and listed on
Schedule 1.1-C;

(c) liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which Borrower
maintains adequate reserves in accordance with GAAP;

(d) purchase money liens securing indebtedness not to exceed $2,000,000.00 in
the aggregate incurred after the Closing Date (i) on equipment acquired or held
by Borrower incurred for financing the acquisition of such equipment, or
(ii) existing on equipment when acquired, if the lien is confined to the
property so acquired and improvements thereon, and the proceeds of such
equipment;

(e) statutory liens arising in the ordinary course of business and not overdue
for a period of more than thirty days or being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and for
which Borrower maintains adequate reserves in accordance with GAAP, not to
exceed $500,000.00 in the aggregate, securing claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other persons imposed without
action of such parties;

(f) liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business not delinquent or being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and for
which Borrower maintains adequate reserves in accordance with GAAP;

(g) liens incurred in the extension, renewal or refinancing of the indebtedness
secured by liens identified in paragraphs (b) and (d) of this definition, so
long as such indebtedness is Permitted Indebtedness, provided that any
extension, renewal or replacement lien shall be limited to the property
encumbered by the existing lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase;

(h) leases or subleases of real property entered into as sublessee or lessee in
the ordinary course of business, and leases; and subleases, non-exclusive
licenses or sublicenses of property (other than real property or intellectual
property) entered into as licensee or sublicensee in the ordinary course of
Borrower’s business;

(i) non-exclusive licenses of intellectual property entered into as licensee
with third parties in the ordinary course of business; and

 

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(j) liens in favor of financial institutions other than Bank arising in
connection with Borrower’s deposit and/or securities accounts held at such
institutions, provided that (i) Bank has a first priority perfected security
interest in the amounts held in such deposit and/or securities accounts
(excluding liens identified in the following clause (ii)) and (ii) such liens
secure Borrower’s payment of normal fees and charges related to the maintenance
of such deposit and/or securities accounts and not indebtedness related to
credit extended by such financial institutions to Borrower.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by Borrower or, with respect to any such plan
that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

“Pledge Agreement” means (i) that certain Amended and Restated Pledge Agreement,
dated as of March 2, 2012, executed by Borrower and certain other Loan Parties
pledging capital stock for the benefit of Bank as of the Closing Date and
(ii) any other pledge agreement executed by a Loan Party in favor of Bank.

“Quick Ratio” means, as of any date of determination, for Borrower and its
Subsidiaries on a consolidated basis, the ratio of: (a) the sum of
(i) unrestricted cash plus (ii) unrestricted short-term marketable securities
plus (iii) net accounts receivable to (b) the sum of (i) current liabilities
plus (ii) any currently outstanding Revolving Credit Loans.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the thirty-day notice period has been waived.

“Responsible Officer” means the chief executive officer, the president, the
chief financial officer, any vice president, the general counsel and/or
secretary, the assistant secretary, the controller of Borrower, the director of
finance of Borrower, or any other officer of Borrower having substantially the
same authority and responsibility as any of the foregoing.

“Revolving Credit Borrowing” means a borrowing of a Revolving Credit Loan of a
particular Type.

“Revolving Credit Maturity Date” means March 2, 2015.

“Revolving Line of Credit” has the meaning ascribed to such term in
Section 2.1(a).

“Rules” has the meaning ascribed to such term in Section 9.13(b) hereof.

“Security Agreement” means (i) that certain Third Amended and Restated Security
Agreement, dated as of March 2, 2012, executed by Borrower and certain other
Loan Parties in favor of Bank and (ii) any other security agreement executed by
a Loan Party in favor of Bank.

 

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“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
Borrower.

“Subsidiary Guarantor” has the meaning set forth in Section 9.6(a) hereof.

“Subsidiary Guarantor Subordinated Debt” has the meaning set forth in
Section 9.6(i) hereof.

“Subsidiary Guarantor Subordinated Debt Payments” has the meaning set forth in
Section 9.6(i) hereof.

“Synthetic Lease Obligation” means the monetary obligation of a Person under
either: (a) a so-called synthetic, off-balance sheet or tax retention lease; or
(b) an agreement for the use or possession of property creating obligations that
do not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

“Third Party Obligor” has the meaning ascribed to such term in Section 8.1(d)
hereof.

“Total Consideration” means, with respect to an Acquisition, the sum (but
without duplication) of (a) cash paid in connection with such Acquisition,
(b) indebtedness payable to the seller in connection with such Acquisition,
(c) the fair market value of any equity securities, including any warrants or
options therefor, delivered in connection with such Acquisition, (d) the amount
of contingent consideration or transaction costs related to such Acquisition, to
the extent required to be expensed by ASC 805, (e) the present value of
covenants not to compete entered into in connection with such Acquisition or
other future payments which are required to be made over a period of time and
are not contingent upon Borrower meeting financial performance objectives
(exclusive of salaries paid in the ordinary course of business) (discounted at
the Base Rate in effect on the date of such Acquisition), but only to the extent
not included in clause (a), (b), (c) or (d) above, and (f) the amount of
indebtedness assumed in connection with such Acquisition.

“Type” means, with respect to any Loan, its character as a Base Rate Loan or a
LIBOR Loan.

SECTION 1.2. CERTAIN RULES OF CONSTRUCTION.

(a) Unless the context requires otherwise, the meaning of a defined term is
applicable equally to the singular and plural forms thereof.

 

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(b) The words “hereof,” “herein,” “hereunder” and similar words refer to this
Agreement as a whole and not to any particular provision of this Agreement; and,
unless otherwise specified, Article, Section, subsection, clause, Schedule and
Exhibit references are to this Agreement.

(c)(i) The term “documents” includes instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced.

(ii) The terms “include” and “including” are not limiting.

(iii) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including”; the words “to” and
“until” each mean “to but excluding” and the word “through” means “to and
including.”

(iv) Unless the context clearly requires otherwise, the terms “property,”
“properties,” “asset” and “assets” refer to both personal property (whether
tangible or intangible) and real property.

(d) Unless otherwise expressly provided herein: (i) references to documents
(including this Agreement) shall be deemed to include all subsequent amendments
and other modifications thereto, but only to the extent such amendments and
other modifications are not prohibited by the terms of any Loan Document; and
(ii) references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.

(e) Unless otherwise specified, all references herein to times of day shall be
references to Pacific time (daylight or standard, as applicable).

(f) The captions and headings of this Agreement are for convenience of reference
only and shall not affect the interpretation of this Agreement.

(g) This Agreement and the other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall be performed
in accordance with their respective terms.

(h) This Agreement and the other Loan Documents are the result of negotiations
among, and have been reviewed by counsel to, Borrower, the Guarantors and Bank
and are the products of all parties. Accordingly, they shall not be construed
against Bank merely because of the involvement of any or all of the preceding
Persons in their preparation.

(i) Unless the context otherwise clearly requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP. If at any
time any change in GAAP would affect the computation of any financial ratio or
requirement set forth in any Loan Document, and Bank shall so request, Bank and
Borrower shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP; provided
that, until so amended: (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein; and (ii) Borrower
shall provide to Bank financial statements and other documents required under
this Agreement or as reasonably requested hereunder setting forth a
reconciliation between calculations of such ratio or requirement made before and
after giving effect to such change in GAAP.

 

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(j) References herein to “fiscal year” refer to the fiscal year of Borrower.

(k) Any financial ratios required to be maintained by Borrower pursuant to the
Loan Documents shall be calculated by dividing the appropriate component by the
other component, carrying the result to one place more than the number of places
by which such ratio is expressed herein and rounding the result up or down to
the nearest number using the common – or symmetric arithmetic – method of
rounding (in other words, rounding-up if there is no nearest number).

ARTICLE II

CREDIT TERMS

SECTION 2.1. REVOLVING LINE OF CREDIT.

(a) Revolving Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make loans (each such loan, a “Revolving Credit
Loan”) to Borrower from time to time on any Business Day during the Availability
Period, not to exceed at any time the aggregate principal amount of Fifty
Million Dollars ($50,000,000.00) (the “Revolving Line of Credit”). The proceeds
of the initial advance under the Revolving Line of Credit shall be used to
refinance all outstanding indebtedness owing under the Existing Agreement (with
any such advances having the same characteristics, including, without
limitation, Type and remaining Interest Period, if applicable, as the
indebtedness refinanced thereby) and the proceeds of all other advances under
the Revolving Line of Credit shall be used for working capital and general
corporate purposes. Borrower’s obligation to repay advances under the Revolving
Line of Credit shall be evidenced by a promissory note dated March 2, 2012 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Note”), in the form attached hereto as Exhibit A, all terms of which are
incorporated herein by this reference.

 

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(b) Letter of Credit Subfeature. As a subfeature under the Revolving Line of
Credit, Bank agrees from time to time during the term thereof to issue or cause
an Affiliate to issue standby letters of credit for the account of Borrower or
its Subsidiaries (each, a “Letter of Credit” and collectively, “Letters of
Credit”); provided that the aggregate undrawn amount of all outstanding Letters
of Credit shall not at any time exceed Ten Million Dollars ($10,000,000.00). The
form and substance of each Letter of Credit shall be subject to approval by Bank
in its sole discretion. Each Letter of Credit shall be issued for a term not to
exceed three hundred sixty-five (365) days, as designated by Borrower, or such
longer term as is acceptable to by Bank in its sole discretion; provided
however, that no Letter of Credit shall have an expiration date more than three
hundred sixty five (365) days beyond the Revolving Credit Maturity Date or such
other date that is acceptable to Bank in its sole discretion. The undrawn amount
of all Letters of Credit shall be reserved under the Line of Credit and shall
not be available for borrowings thereunder. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit
Agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit
shall be deemed an advance under the Revolving Line of Credit in accordance with
the provisions of Section 2.2(g) and shall be repaid by Borrower in accordance
with the terms and conditions of this Agreement applicable to advances; provided
that if advances under the Revolving Line of Credit are not available, for any
reason, at the time any drawing is paid, then Borrower shall immediately pay to
Bank the full amount drawn, together with interest thereon from the date such
drawing is paid to the date such amount is fully repaid by Borrower, at the rate
of interest applicable to advances under the Revolving Line of Credit. In such
event Borrower agrees that Bank, in its sole discretion, may debit any account
maintained by Borrower with Bank for the amount of any such drawing.

(c) Borrowing and Repayment. Borrower may from time to time during the
Availability Period, partially or wholly repay its outstanding borrowings under
the Revolving Line of Credit, and reborrow, subject to all of the limitations,
terms and conditions contained herein; provided that, the total outstanding
borrowings under the Revolving Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth above. On the
Revolving Credit Maturity Date, Borrower shall repay to Bank in full the
aggregate outstanding principal balance of all Revolving Credit Loans, together
with all accrued and unpaid interest due thereon.

SECTION 2.1A. LIABILITIES IF REVOLVING LINE OF CREDIT TERMINATED OR CANCELLED.
If, at the time of termination or cancellation of the Revolving Line of Credit,
any contingent liabilities of Borrower in connection with any Letter of Credit
or any other obligations of Borrower to Bank of any nature whatsoever remain
outstanding under any of the other Loan Documents or any other agreement between
Borrower and Bank, Borrower shall deliver and pledge to Bank, cash collateral in
an aggregate amount of, and as security for, all such contingent obligations in
respect of outstanding Letters of Credit. All of the foregoing shall be
evidenced by and subject to the terms of such security agreements, control
agreements, financing statements, and other documents as Bank shall require, all
in form and substance reasonably satisfactory to Bank.

SECTION 2.2. PROCEDURES FOR BORROWING.

(a) Each Revolving Credit Borrowing, each conversion of Loans from one Type to
the other and each continuation of LIBOR Loans shall be made upon Borrower’s
irrevocable notice to Bank, which may be given by telephone or by approved
electronic communications. Each such notice must be received by Bank not later
than 11:00 a.m. on the requested date of any Revolving Credit Borrowing,
conversion or continuation. Notwithstanding anything to the contrary contained
herein, any telephonic notice or other electronic communication by Borrower
pursuant to this Section 2.2(a) may be given by an individual who has been
authorized in writing to do so by an appropriate Responsible Officer of
Borrower. Each such telephonic notice or other electronic communication must be
confirmed promptly by delivery to Bank of a written Loan Notice, appropriately
completed and signed by an appropriate Responsible Officer of Borrower.

 

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(b) Each Revolving Credit Borrowing of, conversion to or continuation of LIBOR
Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$100,000 in excess thereof. Each Revolving Credit Borrowing of or conversion to
Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple
of $100,000 in excess thereof.

(c) Each Loan Notice (whether telephonic or written) shall specify: (i) whether
Borrower is requesting: (A) a Revolving Credit Borrowing; (B) a conversion of
outstanding Loans from one Type to the other; or (C) a continuation of LIBOR
Loans; (ii) the requested date of such Revolving Credit Borrowing, conversion or
continuation, as the case may be (which shall be a Business Day); (iii) the
principal amount of the Loans to be borrowed, converted or continued; (iv) the
Type of Loans to be borrowed or to which existing Loans are to be converted; and
(v) if applicable, the duration of the Interest Period with respect thereto. If
Borrower fails to specify a Type of Loan in a Loan Notice or if Borrower fails
to give a timely notice requesting a conversion or continuation, then the
applicable Loan(s) shall be made as, or converted to, Base Rate Loans. Any such
automatic conversion to Base Rate Loans shall be effective as of the last day of
the Interest Period then in effect with respect to the applicable LIBOR Loans.
If Borrower requests a Revolving Credit Borrowing of, conversion to, or
continuation of LIBOR Loans in any such Loan Notice, but fails to specify an
Interest Period, it will be deemed to have specified an Interest Period of one
month.

(d) Except as otherwise provided herein, a LIBOR Loan may be continued or
converted only on the last day of an Interest Period for such LIBOR Loan. During
the existence of an Event of Default: (i) no Loans may be requested as,
converted to or continued as LIBOR Loans without the consent of Bank; and
(ii) Bank may demand that any or all of the then outstanding Revolving Credit
Loans that are LIBOR Loans be converted immediately to Base Rate Loans,
whereupon Borrower shall pay any amounts due under Section 3.4 in accordance
with the terms thereof due to any such conversion.

(e) Bank shall promptly notify Borrower of the interest rate applicable to any
Interest Period for LIBOR Loans upon determination of such interest rate.

(f) After giving effect to all Revolving Credit Borrowings, all conversions of
Loans from one Type to the other, and all continuations of Loans as the same
Type, there shall not be more than five Interest Periods in effect with respect
to the Revolving Credit Loans.

(g) Upon receipt from the beneficiary of any Letter of Credit of any drawing
under such Letter of Credit (or any notice thereof), Bank shall notify Borrower
thereof. In such event, Borrower shall be deemed to have requested a Revolving
Credit Loan consisting of Base Rate Loans to be disbursed on the date of such
drawing in an amount equal to such drawing, without regard to the minimum and
multiples specified in Section 2.2(b) for the principal amount of Base Rate
Loans but subject to the conditions set forth in Section 5.2. Any notice given
by Bank pursuant to this Section 2.2(g) may be given by telephone if immediately
confirmed in writing; provided that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.

 

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SECTION 2.3. PRINCIPAL PAYMENTS AND PREPAYMENTS. Borrower may, upon notice to
Bank, at any time or from time to time voluntarily prepay Loans in whole or in
part without premium or penalty but subject to Section 3.4; provided that:
(A) such notice must be received by Bank not later than 11:00 a.m.: (1) three
Business Days prior to any date of prepayment of Loans that are LIBOR Loans; and
(2) one Business Day prior to the date of prepayment of Loans that are Base Rate
Loans; and (B) any prepayment of any Loans that are: (1) LIBOR Loans shall be in
a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof, or, if less, the entire principal amount thereof then outstanding; and
(2) Base Rate Loans shall be in a principal amount of $1,000,000 or a whole
multiple of $1,000,000 in excess thereof, or, if less, the entire principal
amount thereof then outstanding. Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid. If Borrower
gives such notice, then Borrower’s prepayment obligation shall be irrevocable,
and Borrower shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein. Any prepayment of
a Loan that is a LIBOR Loan shall be accompanied by all accrued interest on the
amount prepaid, together with any additional amounts required pursuant to
Section 3.4.

SECTION 2.4. INTEREST/APPLICABLE RATES.

(a) Subject to the provisions of subsection Section 2.4(b): (i) each LIBOR Loan
shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to LIBOR for such Interest Period plus
the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Rate.

(b)(i) If any amount of principal of any Loan is not paid when due (without
regard to any applicable grace periods), whether at stated maturity, by
acceleration or otherwise, such amount shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by applicable laws.

(ii) If any amount (other than principal of any Loan) payable by Borrower under
any Loan Document is not paid when due (without regard to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, then such
amount shall thereafter bear interest at a fluctuating interest rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable laws.

(iii) While any Event of Default exists, Borrower shall pay interest on the
principal amount of all outstanding Obligations hereunder at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable laws.

 

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(iv) Accrued and unpaid interest on past due amounts (including interest on past
due interest) shall be due and payable upon demand.

(c) Interest on each Loan shall be due and payable in arrears on each Interest
Payment Date applicable thereto and at such other times as may be specified
herein. Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
proceeding under any Bankruptcy Law.

(d) Any increase or decrease in any Applicable Rate resulting from a change in
the Leverage Ratio shall become effective as of the first day of the month
immediately following the month in which Borrower is required to deliver a
Compliance Certificate in accordance with Section 6.3(d) for a given period
(each such date, a “calculation date”); provided that the Applicable Rate in
effect from the Closing Date to the first day of the month immediately following
receipt by Bank of a timely delivered Compliance Certificate with respect to the
fiscal quarter ending March 31, 2012 shall be determined based upon Tier 2 (as
indicated in the definition of “Applicable Rate”); provided further that, if any
Compliance Certificate required to be delivered in accordance with
Section 6.3(d) for any given period is not delivered to Bank on or before the
related calculation date, then Tier 1 (as indicated in the definition of
“Applicable Rate”) shall apply, effective on the related calculation date until
two Business Days after such Compliance Certificate is actually received by
Bank.

Notwithstanding the foregoing and for the avoidance of doubt, if for any period
and for any reason, the actual Leverage Ratio is higher than that reported in
the Compliance Certificate, Borrower shall immediately, without the requirement
of notice or demand from any Person, pay to Bank an amount equal to the excess
of: (A) the amount of interest or fees that would have accrued had the
Applicable Rates for the relevant period been based upon the actual Leverage
Ratio for the prior period rather than the Leverage Ratio reported in the
Compliance Certificate delivered for such prior period; over (B) the amount of
interest or fees that was actually paid by Borrower based upon the Leverage
Ratio reported in the Compliance Certificate delivered for such period.

SECTION 2.5. FEES.

(a) Unused Commitment Fee. Borrower shall pay to Bank unused commitment fees
(each, an “Unused Commitment Fee”) equal to 0.0125% multiplied by the average
daily unused amount of the Revolving Line of Credit. Unused Commitment Fees
shall accrue at all times during Prior to the Revolving Credit Maturity Date,
and shall be due and payable quarterly in arrears on the last Business Day of
each March, June, September and December, commencing with the first such date to
occur after the Closing Date, and on the Revolving Credit Maturity Date. Unused
Commitment Fees shall be calculated quarterly in arrears.

(b) Letter of Credit Fees. Borrower shall pay to Bank (A) fees upon the issuance
of each standby Letter of Credit (each, a “Letter of Credit Fee”) equal to the
Applicable Rate (computed on the basis of a 360-day year, actual days elapsed)
multiplied by the face amount of such standby Letter of Credit, and (ii) fees
upon the payment or negotiation of each drawing under any standby Letter of
Credit and fees upon the occurrence of any other activity with respect to any
standby Letter of Credit (including without limitation, the transfer, amendment
or cancellation of any standby Letter of Credit) determined in accordance with
Bank’s standard fees and charges then in effect for such activity.

 

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SECTION 2.6. COMPUTATIONS OF INTEREST AND FEES. All computations of interest for
Base Rate Loans shall be made on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed. All other computations of interest and
fees hereunder shall be made on the basis of a year of 360 days and actual days
elapsed. Interest shall accrue on each Loan for the day on which the Loan is
made, and shall not accrue on a Loan, or any portion thereof, for the day on
which the Loan or such portion is paid, provided that any Loan that is repaid on
the same day on which it is made shall bear interest for one day. Each
determination by Bank of an interest rate or fee hereunder shall be conclusive
and binding for all purposes, absent manifest error.

SECTION 2.7. PAYMENTS GENERALLY; COLLECTION OF PAYMENTS.

(a) General. All payments to be made by Borrower shall be made without condition
or deduction for any counterclaim, defense, recoupment or setoff. Except as
otherwise expressly provided herein, all payments by Borrower hereunder shall be
made to Bank in Dollars and in immediately available funds not later than 4:00
p.m. on the date specified herein. All payments received by Bank after 4:00 p.m.
shall be deemed received on the next succeeding Business Day and any applicable
interest or fee shall continue to accrue. If any payment to be made by Borrower
shall come due on a day other than a Business Day, payment shall be made on the
next following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be.

(b) Collection of Payments. Borrower authorizes Bank to collect all principal,
interest and fees due under each credit created by the Loan Documents by
charging Borrower’s deposit account number 4121261853 with Bank, or any other
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

SECTION 2.8. COLLATERAL. As security for all indebtedness of Borrower to Bank
created by the Loan Documents, Borrower hereby grants to Bank security interests
of first priority (except for Permitted Liens that are senior to Bank’s security
interests), and shall cause each Material Domestic Subsidiary to grant to Bank
security interests of first priority, in all of Borrower’s and each such
Material Domestic Subsidiary’s personal property (including, without limitation,
all of Borrower’s ownership interests in Subsidiaries, accounts receivable,
inventory, equipment and intellectual property now owned or hereafter acquired),
but excluding interests as a lessee under real property and personal property
leases and shares of voting stock of each Foreign Subsidiary that represent more
than 65% of the voting stock of such Foreign Subsidiary.

 

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As additional security for all indebtedness of Borrower to Bank created by the
Loan Documents, Borrower shall cause each Material Domestic Subsidiary to grant
to Bank security interests of first priority in all such Material Domestic
Subsidiary’s ownership interest in any Material Domestic Subsidiary or Foreign
Subsidiary, but excluding shares of voting stock of each Foreign Subsidiary that
represent more than 65% of the voting stock of such Foreign Subsidiary and, with
respect to each Foreign Subsidiary, subject to the time frames established in
Section 6.12(b) hereof.

All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds or mortgages, and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
appraisals, audits and title insurance.

SECTION 2.9. GUARANTIES. Subject to the time frames established in
Section 6.12(a) hereof, all Obligations shall be guaranteed jointly and
severally by each Subsidiary Guarantor, as evidenced by and subject to the terms
of this Agreement.

ARTICLE III

INCREASED COSTS; TAXES

SECTION 3.1. INCREASED COSTS.

(a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge
or similar requirement against assets of, deposits with or for the account of,
or advances, loans or other credit extended by, Bank (except any reserve
requirement reflected in the LIBOR); (ii) subject Bank to any tax of any kind
whatsoever with respect to this Agreement or any Loan bearing interest at LIBOR
made by it, or change the basis of taxation of payments to Bank in respect
thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.2 and
the imposition of, or any change in the rate of any Excluded Tax payable by
Bank); or (iii) impose on Bank or the London interbank market any other
condition, cost or expense affecting this Agreement or any Loan bearing interest
at LIBOR made by Bank; and the result of any of the foregoing shall be to
increase the cost to Bank of making or maintaining any Loan bearing interest at
LIBOR (or of maintaining its obligation to make any such Loan), or to reduce the
amount of any sum received or receivable by Bank hereunder (whether of
principal, interest or any other amount) then, upon written request of Bank,
Borrower shall promptly pay to Bank such additional amount or amounts as will
compensate Bank for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If Bank determines (in good faith and in its
reasonable discretion) that any Change in Law affecting Bank or any lending
office of Bank or Bank’s holding company, if any, regarding capital requirements
has or would have the effect of reducing the rate of return on Bank’s capital or
on the capital of Bank’s holding company, if any, as a consequence of this
Agreement, the Line of Credit or the Loans made by Bank, to a level below that
which Bank or Bank’s holding company could have achieved but for such Change in
Law (taking into consideration Bank’s policies and the policies of Bank’s
holding company with respect to capital adequacy), then from time to time upon
written request of Bank, Borrower shall promptly pay to Bank such additional
amount or amounts as will compensate Bank or Bank’s holding company for any such
reduction suffered.

 

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(c) Certificates for Reimbursement. A certificate of Bank setting forth the
amount or amounts necessary to compensate Bank or its holding company, as the
case may be, as specified in paragraph (a) or (b) of this Section 3.1 and
setting forth in reasonable detail the manner in which such amount or amounts
shall have been determined, shall be delivered to Borrower and shall be
conclusive absent manifest error. Borrower shall pay Bank the amount shown as
due on any such certificate within ten (10) days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of Bank to demand
compensation pursuant to this Section shall not constitute a waiver of Bank’s
right to demand such compensation; provided that Borrower shall not be required
to compensate Bank pursuant to this Section for any increased costs incurred or
reductions suffered more than nine (9) months prior to the date that Bank
notifies Borrower of the Change in Law giving rise to such increased costs or
reductions and of Bank’s intention to claim compensation therefor (except that
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the nine-month period referred to above shall be extended to
include the period of retroactive effect thereof).

SECTION 3.2. TAXES.

(a) Any and all payments by Borrower to or for the account of Bank hereunder or
under any other Loan Document shall be made free and clear of and without
deduction or withholding for any and all Taxes, and all liabilities with respect
thereto, now or hereafter imposed, levied, collected, withheld or assessed by
any Governmental Authority, excluding Taxes imposed on its income, receipts,
capital, net worth or items of tax preference and franchise, doing business and
similar Taxes (imposed on it in lieu of net income taxes), that are imposed on
Bank as a result of a present or former connection between Bank and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from Bank having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document) (“Excluded Taxes”). If any such non-Excluded Taxes
(“Indemnified Taxes”) or Other Taxes (as defined below) are required to be
withheld after the date hereof from or in respect of any sum payable under this
Agreement or any other Loan Document to Bank, (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 3.2) Bank
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower
shall timely pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable Laws, and (iv) Borrower shall
furnish to Bank, at its address referred to in Section 9.2, the original or a
certified copy of a receipt evidencing payment thereof or other evidence of
payment reasonably acceptable to Bank; provided that Borrower shall not be
required to increase such amounts payable to Bank with respect to any Taxes
(A) that are attributable to Bank’s failure to comply with the requirements of
paragraph (d) of this Section or (B) that are United States federal withholding
taxes imposed on amounts payable to Bank at the time Bank becomes a party to
this Agreement, or, in the case of an assignment, at the time when the Assignee
becomes a party to this Agreement, except to the extent that Bank’s assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
Borrower with respect to such Taxes pursuant to this paragraph.

 

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(b) In addition, Borrower agrees to timely pay any and all present or future
stamp, property, recording, excise and documentary taxes which arise from the
execution or delivery of this Agreement or any other Loan Document or the
provision of the security interest in any Collateral required hereunder
(hereinafter referred to as “Other Taxes”).

(c) Borrower agrees to indemnify Bank for the full amount of Indemnified Taxes
and Other Taxes (including any Indemnified Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 3.2) paid by
Bank and any liability (including penalties, interest, and reasonable expenses)
arising therefrom or with respect thereto.

(d) Bank, on or prior to the Closing Date, and from time to time thereafter if
requested in writing by Borrower, shall provide Borrower with (i) a complete and
properly executed IRS Form W-8BEN, W-8ECI or W-8IMY (including all required
accompanying information), as appropriate, or any successor form prescribed by
the IRS (including a United States taxpayer identification number), certifying
that Bank is entitled to benefits under an income tax treaty to which the United
States is a party that reduces the rate of withholding tax on payments of
interest, certifying that such Person is eligible for the “portfolio interest
exemption” or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States or (ii) an IRS Form W-9 or any successor form prescribed by the IRS. In
addition, Bank will (A) take all actions reasonably requested in good faith by
Borrower in writing that are consistent with applicable legal and regulatory
restrictions to claim any available reductions or exemptions from Indemnified
Taxes or Other Taxes and (B) otherwise cooperate with Borrower to minimize any
amounts payable by Borrower under this Section 3.2; provided that, in each case,
any out-of-pocket cost relating directly to such action or cooperation requested
by Borrower shall be borne by Borrower, and Bank shall not be required to take
any action that it determines in its sole good faith discretion may be adverse
in any non de minimis respect to it and not indemnified to its satisfaction.

(e) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this
Section 3.2 shall survive the payment in full of all obligations under this
Agreement and the other Loan Documents.

SECTION 3.3. INABILITY TO DETERMINE RATES. If Bank determines in connection with
any request for a Loan or continuation thereof that (a) Dollar deposits are not
being offered to banks in the London interbank offered market for the applicable
amount and Interest Period of such Loan, (b) adequate and reasonable means do
not exist for determining LIBOR for any requested Interest Period with respect
to a proposed Loan, or (c) LIBOR for any requested Interest Period with respect
to a proposed Loan does not adequately and fairly reflect the cost to Bank of
funding such Loan, then Bank will promptly so notify Borrower. Thereafter, the
obligation of Bank to make or maintain Loans shall be suspended until Bank
revokes such notice. Upon receipt of such notice, Borrower may revoke any
pending request for a Revolving Credit Borrowing or continuation of Loans or,
failing that, will be deemed to have converted such request into a request for a
Revolving Credit Borrowing consisting of Base Rate Loans in the amount specified
therein.

 

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SECTION 3.4. COMPENSATION FOR LOSSES. Upon demand of Bank from time to time,
Borrower shall promptly compensate Bank for and hold Bank harmless from any
loss, cost or expense incurred by it as a result of:

(a) any continuation, conversion, payment or prepayment of any Loan other than a
Base Rate Loan on a day other than the last day of the Interest Period for such
Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise); or

(b) any failure by Borrower (for a reason other than the failure of Bank to make
a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate
Loan on the date or in the amount notified by Borrower;

including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained.
Borrower shall also pay any customary administrative fees charged by Bank in
connection with the foregoing. For purposes of calculating amounts payable by
Borrower to Bank under this Section 3.4, Bank shall be deemed to have funded
each LIBOR Loan made by it by a matching deposit or other borrowing in the
London interbank offered market for a comparable amount and for a comparable
period, whether or not such LIBOR Loan was in fact so funded.

SECTION 3.5. SURVIVAL. All obligations of Borrower under this Article III shall
survive repayment, satisfaction or discharge of all the Obligations.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank created by
the Loan Documents.

SECTION 4.1. LEGAL STATUS. Borrower and each of its Subsidiaries, and each
Subsidiary of a Subsidiary, is a corporation, partnership or limited liability
company, duly organized and existing and in good standing under the laws of the
jurisdiction of its incorporation, organization or formation, and is qualified
or licensed to do business (and is in good standing as a foreign entity, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed would
reasonably be expected to have a Material Adverse Effect. All of the
Subsidiaries of Borrower in existence as of the Closing Date are listed on
Schedule 4.1 hereto.

 

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SECTION 4.2. AUTHORIZATION AND VALIDITY. This Agreement and each of the Loan
Documents have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

SECTION 4.3. NO VIOLATION. The execution, delivery and performance by Borrower
and the Guarantors of each of the Loan Documents do not violate any provision of
any law or regulation, or contravene any provision of such Person’s
organizational documents, or result in any breach of or default under any
contract, obligation, indenture or other instrument to which any such Person is
a party or may be bound which violation contravention, breach or default would
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.

SECTION 4.4. LITIGATION. There are no pending, or to the best of Borrower’s
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative
agency, against Borrower, any Subsidiary, or any Subsidiary of a Subsidiary,
which would reasonably be expected to have a Material Adverse Effect, other than
those disclosed on Schedule 4.4.

SECTION 4.5. CORRECTNESS OF FINANCIAL STATEMENT. The consolidated financial
statement of Borrower dated December 31, 2010, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under GAAP, whether liquidated or unliquidated, fixed or contingent, and
(c) has been prepared in accordance with GAAP. Since the date of such financial
statement there has been no material adverse change in the financial condition
of Borrower, nor (exclusive of Permitted Liens) has Borrower mortgaged, pledged,
granted a security interest in or otherwise encumbered any of its assets or
properties except in favor of Bank or as otherwise permitted by Bank in writing.

SECTION 4.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 4.7. NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s or any
Guarantor’s obligations created by the Loan Documents to any other obligation of
Borrower or such Guarantor.

 

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SECTION 4.8. PERMITS, FRANCHISES. Borrower and each of its Subsidiaries, and
each Subsidiary of a Subsidiary, possess, and will hereafter possess, all
permits, consents, approvals, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in compliance with
applicable law.

SECTION 4.9. ERISA COMPLIANCE. As of the Closing Date: (a) each Plan is in
compliance with the applicable provisions of ERISA, the Code and other federal
or state law. Each Plan which is intended to qualify under subsection 401(a) of
the Code has received a favorable determination letter from the Internal Revenue
Service and nothing has occurred that would cause the loss of such
qualification. As of the Closing Date, Borrower and each ERISA Affiliate have
made all required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan; (b) there are no pending or, to the best knowledge of Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority. As of the
Closing Date, there has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan; and (c) (i) no ERISA
Event has occurred or is reasonably expected to occur; and (ii) no event or
circumstance has occurred or exists that, if such event or circumstance had
occurred or arisen after the Closing Date, would create an Event of Default
under Section 8.1(j).

SECTION 4.10. OTHER OBLIGATIONS. None of Borrower or any Subsidiary (including
any Subsidiary of a Subsidiary) is in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment,
contract, instrument or obligation.

SECTION 4.11. ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4.11,
Borrower is in compliance in all material respects with all applicable federal
or state environmental, hazardous waste, health and safety statutes, and any
rules or regulations adopted pursuant thereto, which govern or affect any of
Borrower’s operations and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to
time. None of the operations of Borrower is the subject of any federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or substance into
the environment.

ARTICLE V

CONDITIONS

SECTION 5.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank
to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:

 

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(a) Approval of Bank Counsel. All legal matters incidental to the extension of
credit by Bank shall be satisfactory to Bank’s counsel.

(b) Documentation. Bank shall have received, in form and substance satisfactory
to Bank, each of the following, duly executed:

 

  (i) this Agreement and the Note;

 

  (ii) the Security Agreement and the Pledge Agreement duly executed and
delivered and describing the personal property collateral referred to in
Section 2.8 hereof;

 

  (iii) such certificates of resolutions or other action, incumbency
certificates or other certificates of Responsible Officers of each of Borrower
and each Guarantor as Bank may reasonably require evidencing the identity,
authority and capacity of each Responsible Officer thereof authorized to act as
a Responsible Officer in connection with the Loan Documents to which such Person
is a party;

 

  (iv) such documents and certifications as Bank may reasonably require to
evidence that Borrower and each Guarantor is duly organized or formed, and is
validly existing, in good standing and qualified to engage in business in:
(A) the State of California; and (B) each jurisdiction where its ownership,
lease or operation of properties or the conduct of its business requires such
qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;

 

  (v) a duly completed Compliance Certificate as of the last day of the fiscal
quarter of Borrower ended December 31, 2011, signed by an appropriate
Responsible Officer of Borrower;

 

  (vi) a legal opinion of counsel to Borrower in form and substance satisfactory
to Bank;

 

  (vii) such other documents as Bank may require under any other Section of this
Agreement.

(c) Financial Condition. There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower and its
Subsidiaries, nor any material decline, as determined by Bank, in the market
value of any collateral required hereunder or a substantial or material portion
of the assets of Borrower.

(d) Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage on all Borrower’s property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Bank, and where required by Bank, with
loss payable endorsements in favor of Bank.

 

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SECTION 5.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank’s satisfaction of each of the following conditions:

(a) Compliance. The representations and warranties contained herein and in each
of the other Loan Documents shall be true on and as of the date of the signing
of this Agreement and on the date of each extension of credit by Bank pursuant
hereto, with the same effect as though such representations and warranties had
been made on and as of each such date, and on each such date, no Event of
Default as defined herein, and no condition, event or act which with the giving
of notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.

(b) Documentation. Bank shall have received all additional documents that may be
required in connection with such extension of credit, including, in connection
with the issuance of any Letter of Credit, a Letter of Credit Agreement.

ARTICLE VI

AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (other than contingent
indemnification obligations under Section 9.3) of Borrower to Bank under any of
the Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower created by the Loan Documents, Borrower shall, and shall
(except in the case of the covenants set forth in Section 6.3 and Section 6.10)
cause each of its Subsidiaries (including Subsidiaries of Subsidiaries) to,
unless Bank otherwise consents in writing:

SECTION 6.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein.

SECTION 6.2. ACCOUNTING RECORDS; COLLATERAL EXAMS. Maintain adequate books and
records in accordance with GAAP, and permit any representative of Bank, at any
reasonable time, to inspect, audit and examine such books and records, to make
copies of the same, and to inspect its properties. From time to time, as Bank
shall require in the exercise of its reasonable discretion, permit Bank, or its
employees, accountants, attorneys or agents, to conduct, with respect to each
such Person, examinations and inspections of any collateral required hereby or
any other property of Borrower or such Subsidiary, as applicable. Such
examination and inspection shall be conducted during ordinary business hours and
upon one Business Day’s advance notice (unless an Event of Default shall have
occurred and be continuing, in which case no notice shall be required).

SECTION 6.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form
and detail satisfactory to Bank:

 

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(a) not later than 90 days after and as of the end of each fiscal year, audited
annual consolidated and consolidating financial statements of Borrower examined
by, and with the unqualified opinion of, independent certified public
accountants selected by Borrower and acceptable to Bank, which financial
statements shall include Borrower’s balance sheet as of the end of such fiscal
year and the related statements of Borrower’s income, reconciliation of retained
earnings and cash flows for the fiscal year then ended, all in reasonable detail
and prepared in accordance with GAAP;

(b) promptly after the sending or filing thereof, but in no event later than 45
days after the end of each fiscal quarter of Borrower, (other than the fourth
fiscal quarter in each fiscal year) copies of each Form 10-Q report filed by
Borrower with the United States Securities and Exchange Commission or any
successor agency;

(c) not later than 15 days after the beginning of each fiscal year, projected
consolidated and consolidating balance sheets and income statements for each
quarter of such year for Borrower, each in reasonable detail, representing
Borrower’s good faith projections and certified by the chief financial officer
of Borrower as being Borrower’s good faith projections and identical to the
projections to be used by Borrower for internal planning purposes, together with
a statement of underlying assumptions and such supporting schedules and
information as Bank may in its discretion require;

(d) concurrently with the delivery of the financial statements referred to in
subsections (a) and (b) of this Section, a duly completed Compliance Certificate
signed by an appropriate Responsible Officer of Borrower; and

(e) from time to time such other information as Bank may reasonably request.

SECTION 6.4. COMPLIANCE . Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which it is organized and/or which govern its continued existence
and with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to it and/or its business.

SECTION 6.5. INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of such Person,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers’ compensation, with all such insurance carried with
companies and in amounts satisfactory to Bank, and deliver to Bank from time to
time at Bank’s request schedules setting forth all insurance then in effect.

SECTION 6.6. FACILITIES. Keep all properties useful or necessary to such
Person’s business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

 

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SECTION 6.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as such Person may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which such
Person has made provision, to Bank’s satisfaction, for eventual payment thereof
in the event such Person is obligated to make such payment.

SECTION 6.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower or any of its Subsidiaries
with a claim in excess of $250,000.00.

SECTION 6.9. FINANCIAL CONDITION. Maintain Borrower’s financial condition as
follows using GAAP (except to the extent modified by the definitions herein),
with compliance determined commencing with Borrower’s financial statements for
the period ending March 31, 2012:

(a) As of each fiscal quarter end of Borrower, Consolidated EBITDA, determined
on a rolling four-quarter basis, not less than the amounts set forth below:

 

For each fiscal quarter ending on or after March 31, 2012 through and including
June 30, 2012:

   $ 25,000,000   

For each fiscal quarter ending on or after September 30, 2012 through and
including December 31, 2012:

   $ 30,000,000   

For each fiscal quarter ending on or after March 31, 2013 through and including
December 31, 2013:

   $ 36,000,000   

For each fiscal quarter ending on or after March 31, 2014:

   $ 40,000,000   

(b) Quick Ratio not less than 1.00 to 1.00 as of the end of each fiscal quarter.

SECTION 6.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) business days after a Responsible Officer becomes, or should become, aware
of the occurrence of each such event or matter) give written notice to Bank in
reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property in
excess of an aggregate of $250,000.00.

 

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SECTION 6.11. MAINTENANCE OF ACCOUNTS WITH BANK. At all times maintain its
primary depository accounts with Bank pursuant to account agreements and terms
mutually acceptable to such Person and Bank.

SECTION 6.12. SUBSIDIARIES.

(a) Domestic Subsidiaries. By not later than (i) with respect to each Material
Domestic Subsidiary in existence as of the Closing Date, the Closing Date and
(ii) with respect to each Material Domestic Subsidiary formed or acquired on or
after the Closing Date, thirty (30) calendar days after the formation or
acquisition of such Material Domestic Subsidiary, cause such Material Domestic
Subsidiary to execute and deliver to Bank (A) a Joinder Agreement in
satisfaction of the requirements of Section 2.9 hereof, (B) a Security Agreement
(or joinder thereto) and, if pledging ownership interests in another entity, a
Pledge Agreement (or joinder thereto) in satisfaction of the requirements of
Section 2.8 hereof and (C) such other documents as Bank shall reasonably
request, in form and substance satisfactory to Bank, evidencing the authority of
such Material Domestic Subsidiary to execute and deliver such Joinder Agreement,
Security Agreement (or joinder thereto) and Pledge Agreement (or joinder
thereto), and the incumbency of the Persons executing such Joinder, Security
Agreement (or joinder thereto) and Pledge Agreement (or joinder thereto) on
behalf of such Material Domestic Subsidiary.

(b) Foreign Subsidiaries. By not later than (i) with respect to each Foreign
Subsidiary in existence as of the Closing Date and owned, in whole or in part,
by Borrower or a Material Domestic Subsidiary, the Closing Date and (ii) with
respect to each Foreign Subsidiary formed or acquired on or after the Closing
Date and owned, in whole or in part, by Borrower or a Material Domestic
Subsidiary, forty-five (45) calendar days after the formation or acquisition of
such Foreign Subsidiary, execute, or cause to be executed, a Pledge Agreement
and such further agreements, documents or instruments, or take such other
actions, as Bank reasonably deems necessary in order to effectuate the pledge to
Bank of security interests in Borrower’s, and/or Borrower’s Domestic
Subsidiaries’, ownership interest in such Foreign Subsidiary (such pledge
exclusive of shares of voting stock of such Foreign Subsidiary that represent
more than 65% of the voting stock of such Foreign Subsidiary, as described in
Section 2.8 hereof), including, without limitation, (A) executing and delivering
to each such Foreign Subsidiary, a notice of the pledge of Borrower’s and/or
Borrower’s Subsidiaries’ interests therein to Bank, and (B) causing such Foreign
Subsidiary to execute and deliver to Bank an acknowledgment of pledge related to
Borrower’s and/or such Subsidiaries’ pledge of its or their interest in such
Foreign Subsidiary, in each case, in form in substance satisfactory to Bank.

(c) Upon the request of Bank, with respect to Borrower’s ownership interests in
Subsidiaries pledged to Bank as collateral under the Loan Documents, Borrower
shall promptly deliver stock certificates (or other comparable certificates) for
all certificated securities now or at any time constituting such collateral,
duly endorsed in blank for transfer or accompanied by an appropriate assignment
or assignments or an appropriate undated stock power or powers, in every case
sufficient to transfer title thereto.

 

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ARTICLE VII

NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (other than contingent
indemnification obligations under Section 9.3) of Borrower to Bank under any of
the Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower created by the Loan Documents, Borrower will not, and
will not permit any Subsidiary (including Subsidiaries of Subsidiaries) of
Borrower to, without Bank’s prior written consent:

SECTION 7.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article II hereof.

SECTION 7.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year such that, after giving effect to such investment, the
aggregate investments in fixed assets in such year made by Borrower and all
Subsidiaries would exceed $10,000,000.00.

SECTION 7.3. LEASE EXPENDITURES. Incur operating lease expense in any fiscal
year such that, after giving effect to such operating lease expense, the
aggregate operating lease expense incurred by Borrower and all Subsidiaries in
such year is in excess of $4,000,000.00.

SECTION 7.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness resulting from borrowings, loans or advances, whether secured or
unsecured, matured or unmatured, liquidated or unliquidated, joint or several,
other than Permitted Indebtedness.

SECTION 7.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity, other than pursuant to a Permitted
Investment; make any substantial change in the nature of such Person’s business
as conducted as of the date hereof; acquire all or substantially all of the
assets of any other entity, other than pursuant to a Permitted Investment; nor
sell, lease, transfer or otherwise dispose of all or a substantial or material
portion of such Person’s assets except in the ordinary course of its business;
provided that Borrower or any Subsidiary may sell, lease or transfer assets to
Borrower or any wholly-owned Material Domestic Subsidiary of Borrower that is a
Guarantor.

SECTION 7.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of such Person as security
for, any liabilities or obligations of any other person or entity, except
(a) any of the foregoing in favor of Bank, and (b) guaranties by Borrower of
real property lease obligations of its Subsidiaries not exceeding in the
aggregate $500,000.00 outstanding at any time.

 

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SECTION 7.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, other than Permitted Investments; provided
that, so long as no Event of Default shall have occurred and be continuing,
Borrower shall be permitted to make contractually required earn-out payments
related to a Permitted Acquisition if all of the following conditions shall have
been satisfied at the time of any such earn-out payment: (a) Borrower shall have
provided Bank pro forma financial forecasts of Borrower on a consolidated basis
after giving effect to such payment and covenant compliance calculations
reasonably satisfactory to Bank demonstrating satisfaction of the condition
described in Section 7.7(b); and (b) after giving effect to such earn-out
payment, no Default or Event of Default shall exist, including with respect to
the financial covenants contained in Section 6.9 hereof on a pro forma basis.

SECTION 7.8. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on such Person’s stock
now or hereafter outstanding, nor redeem, retire, repurchase or otherwise
acquire any shares of any class of such Person’s stock now or hereafter
outstanding; provided that each Subsidiary may declare or pay dividends or
distributions to Borrower or any wholly-owned Material Domestic Subsidiary of
Borrower that is a Guarantor.

SECTION 7.9. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of such Person’s assets
now owned or hereafter acquired, other than Permitted Liens.

SECTION 7.10. SALE AND LEASEBACKS. Enter into any arrangement, directly or
indirectly, with any other Person whereby Borrower or such Subsidiary, as
applicable, shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which Borrower or such
Subsidiary, as applicable, intends to use for substantially the same purpose or
purposes as the property being sold or transferred.

SECTION 7.11. TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any
kind with any affiliate of Borrower, irrespective of whether in the ordinary
course of business, other than on fair and reasonable terms substantially as
favorable to Borrower or a Subsidiary of Borrower as would be obtainable by such
Person at the time in a comparable arm’s-length transaction with a Person other
than an affiliate, provided that the foregoing restriction shall not apply to
transactions between or among Borrower or any Guarantor or between or among
Guarantors.

 

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ARTICLE VIII

EVENTS OF DEFAULT

Section 8.1. Events of Default Section 8.1. Events of Default. The occurrence of
any of the following shall constitute an “Event of Default” under this
Agreement:

(a) Borrower shall fail to pay when due any principal, interest, fees or other
amounts payable under any of the Loan Documents; or

(b) Any financial statement or certificate furnished to Bank in connection with,
or any representation or warranty made by Borrower, any Subsidiary or any other
party under this Agreement or any other Loan Document, shall prove to be
incorrect, false or misleading in any material respect when furnished or made;
or

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from the date Borrower receives notice
thereof or any Responsible Officer of Borrower becomes aware thereof; provided
that if the default cannot by its nature be cured within the twenty (20) day
period or cannot after diligent attempts by Borrower be cured within such twenty
(20) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed twenty (20) days) to attempt to cure such default; provided,
further, that during such additional reasonable time period the failure to have
cured such default shall not be deemed an Event of Default, however, no further
advances under the Revolving Line of Credit will be made; or

(d) Any default in the payment or performance of any material obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower, any Subsidiary of
Borrower or any general partner or joint venturer in any Borrower or Subsidiary
of Borrower which is a partnership or joint venture (with each such Subsidiary,
general partner and/or joint venturer referred to herein as a “Third Party
Obligor”) has incurred any debt or other material liability to any person or
entity, including Bank, and such default or event shall continue for a period of
time without cure sufficient to permit the acceleration of the maturity of any
such indebtedness or the enforcement of remedies with respect to such liability;
or

(e) The filing of a notice of judgment lien against Borrower or any Third Party
Obligor; or the recording of any abstract of judgment against Borrower or any
Third Party Obligor in any county in which Borrower or such Third Party Obligor
has an interest in real property; or the service of a notice of levy and/or of a
writ of attachment or execution, or other like process, against the assets of
Borrower or any Third Party Obligor; or the entry of a judgment against Borrower
or any Third Party Obligor; and, in any such case, the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of twenty
(20) days after the entry thereof; or

 

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(f) Borrower or any Third Party Obligor shall become insolvent, or shall suffer
or consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Third Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Code, or
under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower or any Third Party Obligor and is not dismissed within 45 days
after its filing, or Borrower or any Third Party Obligor shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition; or Borrower or any Third Party Obligor shall be
adjudicated a bankrupt, or an order for relief shall be entered against Borrower
or any Third Party Obligor by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors; or

(g) There shall exist or occur any event or condition which Bank in good faith
believes would reasonably be expected to have a Material Adverse Effect; or

(h) The dissolution or liquidation of any Borrower or Third Party Obligor which
is a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor, or any of its directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of such Borrower or Third Party Obligor; or

(i) There shall exist a material deficiency in any collateral required
hereunder, as identified by Bank pursuant to one or more of the collateral
examinations and inspections referenced in Section 6.2 hereof; or

(j)(i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer
Plan which has resulted or could reasonably be expected to result in liability
of Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or
the PBGC in an aggregate amount in excess of $1,000,000; or (ii) Borrower or any
ERISA Affiliate fails to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $1,000,000; or

(k) Any Loan Document or any provision thereof, at any time after its execution
and delivery and for any reason other than as expressly permitted hereunder or
thereunder or satisfaction in full of all the Obligations, ceases to be in full
force and effect; or Borrower or any Subsidiary contests in any manner the
validity or enforceability of any Loan Document or any provision thereof; or
Borrower or any Subsidiary denies that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or rescind
any Loan Document or any provision thereof; or

(l) A Change of Control occurs.

SECTION 8.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit created by the Loan Documents and to exercise any or all
of the rights of a beneficiary or secured party pursuant to applicable law. All
rights, powers and remedies of Bank may be exercised at any time by Bank and
from time to time after the occurrence of an Event of Default, are cumulative
and not exclusive, and shall be in addition to any other rights, powers or
remedies provided by law or equity.

 

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ARTICLE IX

MISCELLANEOUS

SECTION 9.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

SECTION 9.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

BORROWER:    NATUS MEDICAL INCORPORATED    1501 Industrial Road    San Carlos,
California 94070    Attention: Steven J. Murphy BANK:    WELLS FARGO BANK,
NATIONAL ASSOCIATION    Peninsula Commercial Banking Office    400 Hamilton
Avenue, Suite 110    Palo Alto, California 94301    Attention: Catherine Hill

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

SECTION 9.3. EXPENSES; INDEMNITY; DAMAGE WAIVER.

(a) Borrower shall pay to Bank immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys’
fees (to include outside counsel fees and all allocated costs of Bank’s in-house
counsel), expended or incurred by Bank in connection with (i) the negotiation
and preparation of this Agreement and the other Loan Documents, Bank’s continued
administration hereof and thereof, and the preparation of any amendments and
waivers hereto and thereto, (ii) the enforcement of Bank’s rights and/or the
collection of any amounts which become due to Bank under any of the Loan
Documents, and (iii) the prosecution or defense of any action in any way related
to any of the Loan Documents, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.

 

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(b) Borrower shall indemnify Bank and Bank’s affiliates and the partners,
members, directors, officers, employees, agents and advisors of Bank and Bank’s
affiliates (each such Person being called an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses (including the fees, charges and disbursements of any
counsel for any Indemnitee), and shall indemnify and hold harmless each
Indemnitee from all fees and time charges and disbursements for attorneys, who
may be employees of any Indemnitee, incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by Borrower or any Guarantor, or
any Subsidiary of Borrower or any Guarantor, arising out of, in connection with,
or as a result of: (i) the execution or delivery of this Agreement, any other
Loan Document or any document contemplated hereby or thereby, the performance by
the parties hereto of their respective obligations hereunder or thereunder or
the consummation of the transactions contemplated hereby or thereby; (ii) any
Loan or the use or proposed use of the proceeds therefrom; (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by Borrower, any Guarantor or any Subsidiary of Borrower or any
Guarantor, or any Environmental Claim or Environmental Liability related in any
way to Borrower, any Guarantor or any Subsidiary of Borrower or any Guarantor;
or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by Borrower, any Guarantor or any
Subsidiary of Borrower or any Guarantor, and regardless of whether any
Indemnitee is a party thereto, in all cases, whether or not caused by or
arising, in whole or in part, out of the comparative, contributory or sole
negligence of the Indemnitee; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses result from the gross negligence or willful
misconduct of such Indemnitee.

(c) To the fullest extent permitted by applicable law, Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any document contemplated hereby,
the transactions contemplated hereby or thereby, any Loan or the use of the
proceeds thereof. No Indemnitee referred to in Section 9.3(b) shall be liable
for any damages arising from the use by unintended recipients of any information
or other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby.

(d) The agreements in this Section 9.3 shall survive the termination of Bank’s
commitment to make Loans and the repayment, satisfaction or discharge of all
other Obligations.

SECTION 9.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided that Borrower
may not assign or transfer its interest hereunder without Bank’s prior written
consent. Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank’s rights and
benefits under each of the Loan Documents.

 

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SECTION 9.5. CONFIDENTIALITY. The Confidential Information will be used by Bank
solely for the purpose of evaluating Borrower’s credit request and/or Bank’s
ongoing credit accommodations to Borrower. Bank will keep all the Confidential
Information confidential, and will not disclose any of the Confidential
Information to any person or entity, except disclosures: (a) to federal and
state bank examiners, and other regulatory officials having jurisdictions over
Bank; (b) to Bank’s legal counsel and auditors; (c) to other professional
advisors to Bank; (d) to Bank’s representatives (which shall include, without
limitation, all other banks and companies affiliated with Wells Fargo & Company)
who need to know the Confidential Information for the purpose of evaluating
Borrower’s credit request and/or Bank’s ongoing credit accommodations to
Borrower, it being expressly understood and agreed that such representatives
shall be informed of the confidential nature of the Confidential Information,
and shall be required by Bank to treat the Confidential Information as
confidential in accordance with the terms and conditions hereof; (e) as
otherwise required by law or legal process; or (f) as otherwise authorized by
Borrower in writing. In the event that Bank or any of its representatives
becomes legally compelled to disclose any of the Confidential Information
pursuant to clause (e) of the preceding sentence, then Bank, except as otherwise
required by law, will provide notice thereof to Borrower so that Borrower, at
its sole option (but without obligation to do so), may attempt to seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. The confidentiality requirement set forth herein
shall not extend to any portion of the Confidential Information that: (x) is or
becomes generally available to the public other than as a result of a disclosure
by Bank or its representatives; (y) is or becomes available to Bank on a
non-confidential basis by Borrower or any officer, employee, agent or
representative of Borrower prior to its disclosure by Bank; or (z) is or becomes
available to Bank on a non-confidential basis from a source other than Borrower.

SECTION 9.6. GUARANTY.

(a)(i) Each Material Domestic Subsidiary of Borrower party hereto, and each
Material Domestic Subsidiary that becomes a guarantor of the Obligations
pursuant to a Joinder Agreement (each, a “Subsidiary Guarantor”) unconditionally
and irrevocably guarantees to Bank the full and prompt payment when due (whether
at stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise) and performance of all indebtedness, liabilities, covenants, duties
and other obligations of Borrower to Bank under this Agreement, the Note and all
other Loan Documents (the “Guaranteed Obligations”). The Guaranteed Obligations
include interest that, but for a proceeding under any Bankruptcy Law, would have
accrued on such Guaranteed Obligations, whether or not a claim is allowed
against Borrower for such interest in any such proceeding.

 

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(ii) Notwithstanding any term or provision of this Agreement or any other Loan
Document to the contrary, the maximum aggregate amount for which any Subsidiary
Guarantor shall be liable under the Loan Documents shall not exceed the maximum
amount for which such Subsidiary Guarantor can be liable without rendering this
Agreement or any other Loan Document, as it relates to such Subsidiary
Guarantor, subject to avoidance under applicable requirements of law relating to
fraudulent conveyance or fraudulent transfer, including the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act and Section 548 of title 11
of the United States Code or any applicable provisions of comparable
Requirements of Law (collectively, “Fraudulent Transfer Laws”). Any analysis of
the provisions of this Agreement or any other Loan Document for purposes of
Fraudulent Transfer Laws shall take into account the right of contribution
established in Section 9.6(a)(iii) and, for purposes of such analysis, give
effect to any discharge of intercompany debt as a result of any payment made by
any Subsidiary Guarantor under any Loan Document.

(iii) To the extent that any Subsidiary Guarantor shall be required under any
Loan Document to pay any portion of any indebtedness under any Loan Document
exceeding the greater of (x) the amount of the economic benefit actually
received by such Subsidiary Guarantor from the loans and other obligations under
the Loan Documents and (y) the amount such Subsidiary Guarantor would otherwise
have paid if such Subsidiary Guarantor had paid the aggregate amount of the
indebtedness and other liabilities under the Loan Documents (excluding the
amount thereof repaid by Borrower) in the same proportion as such Subsidiary
Guarantor’s net worth on the date enforcement is sought hereunder bears to the
aggregate net worth of all the Subsidiary Guarantors on such date, then such
Subsidiary Guarantor shall be reimbursed by such other Subsidiary Guarantors for
the amount of such excess, pro rata, based on the respective net worth of such
other Subsidiary Guarantors on such date.

(b) Each Subsidiary Guarantor acknowledges and agrees that: (i) the Guaranteed
Obligations are separate and distinct from any debt arising under or in
connection with any other document, including under any provision of this
Agreement other than this Section 9.6, executed at any time by such Subsidiary
Guarantor in favor of Bank; and (ii) such Subsidiary Guarantor shall pay and
perform all of the Guaranteed Obligations as required under this Section 9.6,
and Bank may enforce any and all of its respective rights and remedies
hereunder, without regard to any other document, including any provision of this
Agreement other than this Section 9.6, at any time executed by such Subsidiary
Guarantor in favor of Bank, irrespective of whether any such other document, or
any provision thereof or hereof, shall for any reason become unenforceable or
any of the debt thereunder shall have been discharged, whether by performance,
avoidance or otherwise (other than the indefeasible payment and performance in
full of all Guaranteed Obligations). Each Subsidiary Guarantor acknowledges
that, in providing benefits to Borrower, Bank is relying upon the
enforceability of this Section 9.6 and the Guaranteed Obligations as separate
and distinct debt of such Subsidiary Guarantor, and each Subsidiary Guarantor
agrees that Bank would be denied the full benefit of its bargain if at any time
this Section 9.6 or the Guaranteed Obligations were treated any differently. The
fact that the guaranty is set forth in this Agreement rather than in a separate
guaranty document is for the convenience of Borrower and Subsidiary Guarantors
and shall in no way impair or adversely affect the rights or benefits of Bank
under this Section 9.6. Each Subsidiary Guarantor agrees to execute and deliver
a separate document, immediately upon request at any time of Bank, evidencing
such Subsidiary Guarantor’s obligations under this Section 9.6. Upon the
occurrence of any Event of Default, a separate action or actions may be brought
against any Subsidiary Guarantor, whether or not Borrower, any other Subsidiary
Guarantor or any other Person is joined therein or a separate action or actions
are brought against Borrower, any such other Subsidiary Guarantor or any such
other Person.

 

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(c) To the extent that any court of competent jurisdiction shall impose by final
judgment under applicable law (including the California Uniform Fraudulent
Transfer Act and Sections 544 and 548 of the Bankruptcy Code) any limitations on
the amount of any Subsidiary Guarantor’s liability with respect to the
Guaranteed Obligations that Bank can enforce under this Section 9.6, Bank by its
acceptance hereof accepts such limitation on the amount of such Subsidiary
Guarantor’s liability hereunder to the extent needed to make this Section 9.6
fully enforceable and nonavoidable.

(d) The liability of any Subsidiary Guarantor under this Section 9.6 shall be
irrevocable, absolute, independent and unconditional, and shall not be affected
by any circumstance that might constitute a discharge of a surety or guarantor
other than the indefeasible payment and performance in full of all Guaranteed
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, each Subsidiary Guarantor agrees as follows:

(i) such Subsidiary Guarantor’s liability hereunder shall be the immediate,
direct, and primary obligation of such Subsidiary Guarantor and shall not be
contingent upon Bank’s exercise or enforcement of any remedy it may have against
Borrower or any other Person, or against any collateral or other security for
any Guaranteed Obligations;

(ii) this guaranty is a guaranty of payment when due and not merely of
collectibility;

(iii) Bank may enforce this Section 9.6 upon the occurrence of an Event of
Default notwithstanding the existence of any dispute among Bank, on the one
hand, and Borrower or any other Person, on the other hand, with respect to the
existence of such Event of Default;

(iv) such Subsidiary Guarantor’s payment of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge such
Subsidiary Guarantor’s liability for any portion of the Guaranteed Obligations
remaining unsatisfied; and

(v) such Subsidiary Guarantor’s liability with respect to the Guaranteed
Obligations shall remain in full force and effect without regard to, and shall
not be impaired or affected by, nor shall such Subsidiary Guarantor be
exonerated or discharged by, any of the following events:

(A) any proceeding under any Bankruptcy Law;

(B) any limitation, discharge, or cessation of the liability of Borrower or any
other Person for any Guaranteed Obligations due to any statute, regulation or
rule of law, or any invalidity or unenforceability in whole or in part of any of
the Guaranteed Obligations or the Loan Documents;

 

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(C) any merger, acquisition, consolidation or change in structure of Borrower or
any other guarantor or Person, or any sale, lease, transfer or other disposition
of any or all of the assets or shares of Borrower or any other Person;

(D) any assignment or other transfer, in whole or in part, of Bank’s interests
in and rights under this Agreement (including this Section 9.6) or the other
Loan Documents;

(E) any claim, defense, counterclaim or setoff, other than that of prior
performance, that Borrower, such Subsidiary Guarantor, any other guarantor or
any other Person may have or assert, including any defense of incapacity or lack
of corporate or other authority to execute any of the Loan Documents;

(F) Bank’s amendment, modification, renewal, extension, cancellation or
surrender of any Loan Document or any Guaranteed Obligations;

(G) Bank’s exercise or non-exercise of any power, right or remedy with respect
to any Guaranteed Obligations or any collateral therefor;

(H) Bank’s vote, claim, distribution, election, acceptance, action or inaction
in any proceeding under any Bankruptcy Law; or

(I) any other guaranty, whether by such Subsidiary Guarantor or any other
Person, of all or any part of the Guaranteed Obligations or any other
indebtedness, obligations or liabilities of Borrower to Bank.

(e) Each Subsidiary Guarantor hereby unconditionally consents and agrees that,
without notice to or further assent from such Subsidiary Guarantor:

(i) the principal amount of the Guaranteed Obligations may be increased or
decreased and additional indebtedness or obligations of Borrower under the Loan
Documents may be incurred and the time, manner, place or terms of any payment
under any Loan Document may be extended or changed, by one or more amendments,
modifications, renewals or extensions of any Loan Document or otherwise;

(ii) the time for Borrower’s (or any other Person’s) performance of or
compliance with any term, covenant or agreement on its part to be performed or
observed under any Loan Document may be extended, or such performance or
compliance waived, or failure in or departure from such performance or
compliance consented to, all in such manner and upon such terms as Bank (as
applicable under the relevant Loan Documents) may deem proper;

(iii) Bank may request and accept other guaranties and may take and hold
security as collateral for the Guaranteed Obligations, and may, from time to
time, in whole or in part, exchange, sell, surrender, release, subordinate,
modify, waive, rescind, compromise or extend such other guaranties or security
and may permit or consent to any such action or the result of any such action,
and may apply such security and direct the order or manner of sale thereof; and

 

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(iv) Bank may exercise, or waive or otherwise refrain from exercising, any other
right, remedy, power or privilege even if the exercise thereof affects or
eliminates any right of subrogation or any other right of such Subsidiary
Guarantor against Borrower.

(f) Each Subsidiary Guarantor waives and agrees not to assert:

(i) any right to require Bank to proceed against Borrower, any other guarantor
or any other Person, or to pursue any other right, remedy, power or privilege of
Bank whatsoever;

(ii) the defense by Borrower of the statute of limitations in any action
hereunder or for the collection or performance of the Guaranteed Obligations;

(iii) any defense arising by reason of any lack of corporate or other authority
or any other defense of Borrower, such Subsidiary Guarantor or any other Person;

(iv) any defense based upon Bank’s errors or omissions in the administration of
the Guaranteed Obligations;

(v) any rights to set-offs and counterclaims;

(vi) without limiting the generality of the foregoing, to the fullest extent
permitted by law, any defenses or benefits that may be derived from or afforded
by applicable law limiting the liability of or exonerating guarantors or
sureties, or that may conflict with the terms of this Section 9.6, including any
and all benefits that otherwise might be available to such Subsidiary Guarantor
under any of California Civil Code Sections 1432, 2809, 2810, 2815, 2819, 2839,
2845, 2848, 2849, 2850, 2899 and 3433; and

(vii) any and all notice of the acceptance of this guaranty, and any and all
notice of the creation, renewal, modification, extension or accrual of the
Guaranteed Obligations, or the reliance by Bank upon this guaranty, or the
exercise of any right, power or privilege hereunder. The Guaranteed Obligations
shall conclusively be deemed to have been created, contracted, incurred and
permitted to exist in reliance upon this guaranty. Each Subsidiary Guarantor
waives promptness, diligence, presentment, protest, demand for payment, notice
of default, dishonor or nonpayment and all other notices to or upon Borrower,
each Subsidiary Guarantor or any other Person with respect to the Guaranteed
Obligations.

 

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(g) No Subsidiary Guarantor shall have any right to require Bank to obtain or
disclose any information with respect to: the financial condition or character
of Borrower or the ability of Borrower to pay and perform the Guaranteed
Obligations; the Guaranteed Obligations; any collateral or other security for
any or all of the Guaranteed Obligations; the existence or nonexistence of any
other guarantees of all or any part of the Guaranteed Obligations; any action or
inaction on the part of Bank or any other Person; or any other matter, fact or
occurrence whatsoever. Each Subsidiary Guarantor hereby acknowledges that it has
undertaken its own independent investigation of the financial condition of
Borrower and all other matters pertaining to this guaranty and further
acknowledges that it is not relying in any manner upon any representation or
statement of Bank with respect thereto.

(h) Until the Guaranteed Obligations shall be satisfied in full and all
commitments to extend credit by Bank to Borrower shall be terminated, each
Subsidiary Guarantor shall not have, and shall not directly or indirectly
exercise: (i) any rights that it may acquire by way of subrogation under this
Section 9.6, by any payment hereunder or otherwise; (ii) any rights of
contribution, indemnification, reimbursement or similar suretyship claims
arising out of this Section 9.6; or (iii) any other right that it might
otherwise have or acquire (in any way whatsoever) that could entitle it at any
time to share or participate in any right, remedy or security of Bank as against
any Borrower or other guarantors or any other Person, whether in connection with
this Section 9.6, any of the other Loan Documents or otherwise. If any amount
shall be paid to any Subsidiary Guarantor on account of the foregoing rights at
any time when all the Guaranteed Obligations shall not have been paid in full,
such amount shall be held in trust for the benefit of Bank and shall forthwith
be paid to Bank to be credited and applied to the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Documents.

(i) All payments on account of all indebtedness, liabilities and other
obligations of Borrower to any Subsidiary Guarantor or to any other Subordinated
Guarantor, whether now existing or hereafter arising, and whether due or to
become due, absolute or contingent, liquidated or unliquidated, determined or
undetermined (the “Subsidiary Guarantor Subordinated Debt”) shall be subject,
subordinate and junior in right of payment and exercise of remedies, to the
extent and in the manner set forth herein, to the prior payment in full in cash
or cash equivalents of the Guaranteed Obligations. As long as any of the
Guaranteed Obligations (other than unasserted contingent indemnification
obligations) shall remain outstanding and unpaid, each Subsidiary Guarantor
shall not accept or receive any payment or distribution by or on behalf of
Borrower or any other Subsidiary Guarantor, directly or indirectly, or assets of
Borrower or any other Subsidiary Guarantor, of any kind or character, whether in
cash, property or securities, including on account of the purchase, redemption
or other acquisition of Subsidiary Guarantor Subordinated Debt, as a result of
any collection, sale or other disposition of collateral, or by setoff, exchange
or in any other manner, for or on account of the Subsidiary Guarantor
Subordinated Debt (“Subsidiary Guarantor Subordinated Debt Payments”).
Notwithstanding anything to the contrary contained herein, unless an Event of
Default has occurred and is continuing, any Subsidiary Guarantor may accept
payments by or on behalf of Borrower or any other Subsidiary Guarantor made in
the ordinary course of business and consistent with past practices of Borrower
and the Subsidiary Guarantors.

 

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If any Subsidiary Guarantor Subordinated Debt Payments shall be received in
contravention of this Section 9.6, such Subsidiary Guarantor Subordinated Debt
Payments shall be held in trust for the benefit of Bank and shall be paid over
or delivered to Bank for application to the payment in full in cash or cash
equivalents of all Guaranteed Obligations remaining unpaid to the extent
necessary to give effect to this Section 9.6 after giving effect to any
concurrent payments or distributions to Bank in respect of the Guaranteed
Obligations.

(j) This guaranty is a continuing guaranty and agreement of subordination and
shall continue in effect and be binding upon each Subsidiary Guarantor until all
commitments to extend credit by Bank to Borrower shall be terminated and payment
and performance in full of the Guaranteed Obligations, including Guaranteed
Obligations which may exist continuously or which may arise from time to time
under successive transactions, and each Subsidiary Guarantor expressly
acknowledges that this guaranty shall remain in full force and effect
notwithstanding that there may be periods in which no Guaranteed Obligations
exist. This guaranty shall continue in effect and be binding upon each
Subsidiary Guarantor until actual receipt by Bank of written notice from such
Subsidiary Guarantor of its intention to discontinue this guaranty as to future
transactions (which notice shall not be effective until noon on the day that is
five Business Days following such receipt); provided that no revocation or
termination of this guaranty shall affect in any way any rights of Bank
hereunder with respect to any Guaranteed Obligations arising or outstanding on
the date of receipt of such notice, including any subsequent continuation,
extension, or renewal thereof, or change in the terms or conditions thereof, or
any Guaranteed Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of Bank in existence as of the
date of such revocation (collectively, “Existing Guaranteed Obligations”), and
the sole effect of such notice shall be to exclude from this guaranty Guaranteed
Obligations thereafter arising which are unconnected to any Existing Guaranteed
Obligations.

(k) This guaranty shall continue to be effective or shall be reinstated and
revived, as the case may be, if, for any reason, any payment of the Guaranteed
Obligations by or on behalf of Borrower (or receipt of any proceeds of
collateral) shall be rescinded, invalidated, declared to be fraudulent or
preferential, set aside, voided or otherwise required to be repaid to Borrower,
its estate, trustee, receiver or any other Person (including under any
Bankruptcy Law), or must otherwise be restored by Bank, whether as a result of
proceedings under any Bankruptcy Law or otherwise. All losses, damages, costs
and expenses that Bank may suffer or incur as a result of any voided or
otherwise set aside payments shall be specifically covered by the indemnity in
favor of Bank contained in Section 9.3.

(l) The extensions of credit provided to or for the benefit of Borrower
hereunder by Bank have been and are to be contemporaneously used for the benefit
of Borrower and each Subsidiary Guarantor. It is the position, intent and
expectation of the parties that Borrower and each Subsidiary Guarantor have
derived and will derive significant and substantial benefits from the extensions
of credit to be made available by Bank under the Loan Documents. Each Subsidiary
Guarantor has received at least “reasonably equivalent value” (as such phrase is
used in Section 548 of the Bankruptcy Code, in Section 3439.04 of the California
Uniform Fraudulent Transfer Act and in comparable provisions of other applicable
law) and more than sufficient consideration to support its obligations hereunder
in respect of the Guaranteed Obligations. Immediately prior to and after and
giving effect to the incurrence of each Subsidiary Guarantor’s obligations under
this guaranty, such Subsidiary Guarantor will be solvent.

 

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(m) Each Subsidiary Guarantor acknowledges that it either has obtained the
advice of legal counsel or has had the opportunity to obtain such advice in
connection with the terms and provisions of this Section 9.6. Each Subsidiary
Guarantor acknowledges and agrees that each of the waivers and consents set
forth herein is made with full knowledge of its significance and consequences,
that all such waivers and consents herein are explicit and knowing and that each
Subsidiary Guarantor expects such waivers and consents to be fully enforceable.

If, while any Subsidiary Guarantor Subordinated Debt is outstanding, any
proceeding under any Bankruptcy Law is commenced by or against Borrower or its
property, Bank, is hereby irrevocably authorized and empowered (in its own the
name or in the name of any Subsidiary Guarantor or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution in respect of all Subsidiary Guarantor Subordinated Debt and give
acquittances therefor and to file claims and proofs of claim and take such other
action (including voting the Subsidiary Guarantor Subordinated Debt) as it may
deem necessary or advisable for the exercise or enforcement of any its the
rights or interests; and each Subsidiary Guarantor shall promptly take such
action as Bank may reasonably request: (A) to collect the Subsidiary Guarantor
Subordinated Debt for the account of Bank and to file appropriate claims or
proofs of claim in respect of the Subsidiary Guarantor Subordinated Debt; (B) to
execute and deliver to Bank such powers of attorney, assignments and other
instruments as it may request to enable it to enforce any and all claims with
respect to the Subsidiary Guarantor Subordinated Debt; and (C) to collect and
receive any and all Subsidiary Guarantor Subordinated Debt Payments.

SECTION 9.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit created by the Loan Documents and supersede all prior
negotiations, communications, discussions and correspondence concerning the
subject matter hereof. This Agreement may be amended or modified only in writing
signed by each party hereto.

SECTION 9.8. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 9.9. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

SECTION 9.10. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

SECTION 9.11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

 

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SECTION 9.12. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.

SECTION 9.13. ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other
agents), whether in tort, contract or otherwise in any way arising out of or
relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location
in California selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

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(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided, however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the United States
federal Rules of Civil Procedure, the California Rules of Civil Procedure or
other applicable law. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party’s presentation and that no alternative means for
obtaining information is available.

(f) Class Proceedings and Consolidations. No party hereto shall be entitled to
join or consolidate disputes by or against others in any arbitration, except
parties who have executed any Loan Document, or to include in any arbitration
any dispute as a representative or member of a class, or to act in any
arbitration in the interest of the general public or in a private attorney
general capacity.

(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs
and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

 

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(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the dispute with the AAA. No
arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

(j) Small Claims Court. Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction. Further, this arbitration provision shall apply only to
disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

SECTION 9.14. NO NOVATION. This Agreement amends and restates the Existing
Agreement in its entirety, effective as of the Closing Date, and is not intended
to constitute a novation of the obligations thereunder. Nothing contained herein
shall terminate any security interests, liens, guaranties or subordinations in
favor of Bank and all such security interests, guaranties and subordinations
shall continue in full force and effect.

SECTION 9.15. TERMINATION OF AGREEMENT. This Agreement shall terminate (other
than with respect to contingent indemnification obligations under Section 9.3)
when all monetary Obligations (including, without limitation, the repayment of
all Loans) have been satisfied in full and Bank has no further commitment to
make credit extensions or accommodations under this Agreement.

[Continues with Signatures on Next Page]

 

- 50 -

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IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and
Restated Credit Agreement to be executed as of the day and year first written
above.

 

BORROWER:   BANK: NATUS MEDICAL INCORPORATED   WELLS FARGO BANK, NATIONAL    
ASSOCIATION By:  

 

  By:  

 

  Steven J. Murphy     Catherine Hill   Vice President Finance and Chief
Financial Officer     Assistant Vice President SUBSIDIARY GUARANTORS:     EMBLA
SYSTEMS, LLC     By:  

 

      Steven J. Murphy       Chief Financial Officer    

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

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

EXHIBIT A

FORM OF THIRD AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE

[See attached]

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

EXHIBIT B

FORM OF LOAN NOTICE

Date:             ,             

 

To: WELLS FARGO BANK, NATIONAL ASSOCIATION

Ladies and Gentlemen:

Reference is hereby made to that certain Third Amended and Restated Credit
Agreement, dated as of March 2, 2012 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
“Agreement”), between NATUS MEDICAL INCORPORATED (“Borrower”) and WELLS FARGO
BANK, NATIONAL ASSOCIATION. Unless otherwise defined herein, each capitalized
term used herein has the meaning ascribed thereto in the Agreement.

The undersigned Borrower hereby requests (select one):

 

                       A Revolving Credit Borrowing of Base Rate Loans   
                  A conversion of LIBOR Loans                      A Revolving
Credit Borrowing of LIBOR Loans                      A continuation of LIBOR
Loans 1.    On              (a Business Day). 2.    In the amount of
$            . 3.    [Insert for LIBOR Loans: With an Interest Period of
             months.]

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

The Revolving Credit Borrowing, if any, requested herein complies with
Section 2.1 of the Agreement.

 

NATUS MEDICAL INCORPORATED

By:

 

 

Name:

 

 

Title:

 

 

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

EXHIBIT C

FORM OF FINANCIAL COVENANT COMPLIANCE CERTIFICATE

 

TO: WELLS FARGO BANK, NATIONAL ASSOCIATION (“BANK”) under that certain Third
Amended and Restated Credit Agreement, dated as of February 15, 2012 (as
amended, restated, modified and/or supplemented from time to time, the “Credit
Agreement”), between NATUS MEDICAL INCORPORATED, a Delaware corporation
(“Borrower”), and Bank.

This Compliance Certificate is delivered this             day of             ,
20    , by the undersigned, as a senior financial officer of Borrower to Bank in
accordance with Section 6.3(d) of the Credit Agreement.

The undersigned hereby certifies that:

1. Attached hereto are the consolidated and consolidating annual audited or
consolidated quarterly unaudited financial statements of Borrower, as
applicable, presented fairly in accordance with GAAP that are required to be
delivered pursuant to Section 6.3(a) or 6.3(b) of the Credit Agreement for the
period ending             , 20            (the “End Date”).

2. As of the date of this Compliance Certificate, no Default or Event of Default
had occurred and was continuing.

3. The financial condition covenants and other compliance calculations and
information set forth on Schedule 1 attached hereto are true, complete and
accurate on and as of the date of this Compliance Certificate.

The foregoing certifications, together with the computations set forth in
Schedule 1 hereto, are made and delivered, and the financial statements
referenced above are made or posted, as applicable, this             day of
            , 201_, pursuant to the provisions of the Credit Agreement.

 

By:  

 

  Steven J. Murphy   Vice President and Chief Financial Officer   of NATUS
MEDICAL INCORPORATED

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

SCHEDULE 1

TO COMPLIANCE CERTIFICATE

 

  A. As of each fiscal quarter end of Borrower, Consolidated EBITDA, determined
on a rolling four-quarter basis, not less than: (i) for each fiscal quarter
ending on or after March 31, 2012 through and including June 30, 2012,
$25,000,000; (ii) for each fiscal quarter ending on or after September 30, 2012
through and including December 31, 2012, $30,000,000; (iii) for each fiscal
quarter ending on or after March 31, 2013 through and including December 31,
2013, $36,000,000; and (iv) for each fiscal quarter ending on or after March 31,
2014, $40,000,000.

 

1.    Consolidated EBITDA:                        

a.      consolidated net income

   $ ___________            

b.      plus consolidated interest expense

   $ ___________            

c.      plus consolidated provision for income taxes

   $ ___________            

d.      plus depreciation and amortization expense

   $ ___________            

e.      plus non-cash expenses related to stock-based compensation

   $ ___________            

f.       plus non-recurring non-cash expense or loss

   $ ___________            

g.      plus Cash Restructuring Charges (when combined with Alpine Cash
Restructuring Charges, not to exceed $5,000,000 in the aggregate for any
twelve-month period)

   $ ___________            

h.      plus expenses created by contingent consideration or transaction costs
related to a business combination or acquisition, to the extent required to be
expensed by ASC 805

   $ ___________             Minus to the extent included in net income the sum
of:            

i.       Interest income

      $ ___________         

j.       plus extraordinary or non-recurring non-cash income or gains

      $ ___________         

k.      plus any other non-cash income

      $ ___________         

l.       plus adjustments to income created by contingent consideration related
to a business combination or acquisition, to the extent required to be
recognized by ASC 805

      $ ___________       2.    Consolidated EBITDA (1a+1b+1c+1d+1e+1f+1g+1h) –
(1i+1j+1k+1l):          $ ___________    3.    In compliance (yes / no)?      
     ___________       B.            Quick Ratio at each fiscal quarter of
1.0:1.0.              

1.     Quick Ratio:

                       

a. unrestricted cash

      $ ___________         

b. unrestricted short-tem marketable securities

      $ ___________         

c. net accounts receivable

      $ ___________         

d. current liabilities

      $ ___________         

e. currently outstanding Revolving Credit Loans

      $ ___________         

2.     Quick Ratio ((1a+1b+1c)/(1d+1e)):

           ___________      

3.     In compliance (yes / no)?

           ___________   

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

    C.            Leverage Ratio – Consolidated Funded Debt to Consolidated
EBITDA (based on the prior four quarters then ended).1                          

1.     Consolidated Funded Indebtedness

   $___________           

2.     Consolidated EBITDA (See A2 above)

   $ ___________        

3.     Consolidated Funded Debt to Consolidated EBITDA (1/2):

        ___________   

 

1 

Reported solely for purposes of determining the Applicable Rate.

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

SCHEDULE 1.1-A2

PERMITTED INDEBTEDNESS

 

  •  

Term loan, $2.9 million Canadian (“CAD”), interest at cost of funds plus 2.5%,
due September 15, 2014 with principle repayable in monthly installments of
$16,000 until August 15, 2014, and one final payment of $404,000 collateralized
by a first lien on the land and building owned by Excel Tech Limited (“Xltek”).

 

  •  

Term loan, CAD $300,000, interest at cost of funds plus 2.5%, due November 15,
2010 with principle repayable in monthly installments of $2,000 until
October 10, 2010 and one final payment of $36,000 collateralized by various
assets of Xltek.

 

2 

All schedules to be updated by Natus.

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

SCHEDULE 1.1-B

PERMITTED INVESTMENTS

 

  •  

Borrower’s cash and cash equivalents are held in bank deposit accounts,
investment accounts, or discrete investments in compliance with Borrower’s
“Investment Policy,” a copy of which has been provided to Bank.

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

SCHEDULE 1.1-C

PERMITTED LIENS

 

  •  

Term loan, $2.9 million Canadian (“CAD”), interest at cost of funds plus 2.5%,
due September 15, 2014 with principle repayable in monthly installments of
$16,000 until August 15, 2014, and one final payment of $404,000 collateralized
by a first lien on the land and building owned by Excel Tech Ltd. (“Xltek”).

 

  •  

Term loan, CAD $300,000, interest at cost of funds plus 2.5%, due November 15,
2010 with principle repayable in monthly installments of $2,000 until
October 10, 2010 and one final payment of $36,000 collateralized by various
assets of Xltek.

 

  •  

Lien in favor of CIT Financial USA, Inc. (“CIT”) for all computer equipment and
peripherals (the “Equipment”), wherever located, and all substitutions,
additions, accessions and replacements to the Equipment, now or hereafter
installed in, affixed to, or used in, conjunction with the Equipment and the
proceeds thereof together with all payments, other proceeds and payments due and
to become due and arising from or relating to a loan from CIT, which loan from
CIT has been paid off and terminated prior to the date hereof and which lien is
currently in the process of being terminated.

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

SCHEDULE 4.1

SCHEDULE 4.1

SUBSIDIARIES

 

1.      Domestic Subsidiaries   

•    Natus Acquisition II Corporation

  

•    Embla Systems LLC

  

•    Enterprise LLC

 

2.      Foreign Subsidiaries   

•    Alpine Biomed ApS

  

•    Deltamed SA

  

•    Excel-Tech Limited

  

•    Natus Europe GmbH

  

•    Stellate Systems Incorporated

  

•    Embla Systems BV

  

•    Embla Systems GmbH

  

•    Embla Systems, Ltd.

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

SCHEDULE 4.4

LITIGATION

None

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

SCHEDULE 4.11

ENVIRONMENTAL MATTERS

None