Exhibit 10.1

 

EXECUTION COPY

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of January 4, 2006,
by and between NATUS MEDICAL INCORPORATED, a Delaware corporation (“Borrower”),
and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of October 16,
2005 (the “Merger Agreement”), among Borrower, Summer Acquisition Corporation, a
Delaware corporation, and Bio-logic Systems Corp., a Delaware corporation
(“Bio-logic”), Borrower has agreed to acquire all of the outstanding stock of
Bio-logic, subject to the terms and conditions contained therein.

 

WHEREAS, Borrower has requested that Bank extend or continue credit to Borrower
to, among other things, provide financing to Borrower for the purpose of
financing Borrower’s acquisition of Bio-logic, as more fully 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

 

As used in this Agreement, the following terms shall have the meaning set forth
below (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

 

“14 Acre Parcel” means that certain unimproved parcel of land which encompasses
approximately 14 acres, is contiguous to the Real Property Collateral and which
Borrower is attempting to sell to a developer, as more particularly described on
Schedule 1 hereto, which is incorporated herein by this reference.

 

“AAA” has the meaning ascribed to such term in Section 8.12(b) hereof.

 

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

 

“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, as amended or recodified from time to time.

 

“Bio-logic” has the meaning ascribed to such term in the Recitals hereof.

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

 

“Closing Date” means January 4, 2006.

 

“Confidential Information” means all non-public, confidential and/or proprietary
information of Borrower, 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, 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.

 

“Domestic Subsidary” means each of Natus Acquisition Corporation, a Delaware
corporation, and Summer Acquisition Corporation, a Delaware corporation.

 

“EBITDA” has the meaning ascribed to such term in Section 5.9(c) hereof.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended or
recodified from time to time.

 

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

 

“Fixed Charge Coverage Ratio” has the meaning ascribed to such term in
Section 5.9(c) hereof.

 

“Foreign Subsidiary” means each of Natus Neonatal, a company organized under the
laws of the United Kingdom, Fischer-Zoth Diagnosesysteme GmbH, a company
organized under the laws of Germany, and Fischer-Zoth, a company organized under
the laws of Austria.

 

“Guarantor” or “Guarantors” have the meanings ascribed to such terms in
Section 2.5 hereof.

 

“Guaranty” or “Guaranties” have the meanings ascribed to such terms in
Section 2.5 hereof.

 

“Loan Documents” means this Agreement, the Term Commitment Note, the Security
Agreement, the Guaranties, and each other contract, instrument and document
required by or delivered to Bank in connection with this Agreement.

 

“Liquidity” has the meaning ascribed to such term in Section 5.9(d) hereof.

 

“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 Term Commitment Note or any other Loan Document,

 

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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, as applicable, in the collateral described in
Section 2.4 hereof or in the Real Property Collateral.

 

“Merger Agreement” has the meaning ascribed to such term in the Recitals hereof.

 

“Permitted Indebtedness” means:

 

(a) the liabilities of Borrower to Bank;

 

(b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the Closing Date;

 

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

 

(d) indebtedness secured by Permitted Liens;

 

(e) guaranty obligations of Borrower with respect to indebtedness of
Subsidiaries of Borrower permitted under Section 6.6;

 

(f) other indebtedness not otherwise described in paragraphs (a) through (e) of
this definition not exceeding in the aggregate $100,000.00 outstanding at any
time; and

 

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

 

“Permitted Investments” means:

 

(a) investments by Borrower existing as of, and disclosed to Bank prior to, the
Closing Date;

 

(b) investments by Borrower in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America 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, and (iv) Bank’s money market accounts;

 

(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;

 

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

 

(e) investments by Borrower in Foreign Subsidiaries not to exceed $250,000.00 in
the aggregate in any fiscal year;

 

(f) investments by Borrower in Domestic Subsidiaries;

 

(g) investments by Borrower not to exceed $100,000.00 in the aggregate in any
fiscal year 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;

 

(h) 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;

 

(i) 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 (i) shall not
apply to investments of Borrower in any Subsidiary; and

 

(j) other investments by Borrower not otherwise described in paragraphs
(a) through (i) above not exceeding $100,000.00 in the aggregate outstanding at
any time.

 

“Permitted Liens” means:

 

(a) liens and security interests in favor of Bank;

 

(b) liens and security interests existing as of, and disclosed to Bank in
writing prior to, the Closing Date;

 

(c) liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for which Borrower
maintains adequate reserves on Borrower’s books;

 

(d) purchase money liens not to exceed $100,000.00 in the aggregate (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;

 

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(e) statutory liens, not to exceed $100,000.00 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;

 

(g) liens incurred in the extension, renewal or refinancing of the indebtedness
secured by liens identified in paragraphs (c) and (d) of this definition,
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 granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower’s business;

 

(i) non-exclusive licenses of intellectual property granted to third parties in
the ordinary course of business; and

 

(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 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.

 

“Plan” has the meaning ascribed to such term in Section 3.9 hereof.

 

“Real Property Collateral” has the meaning ascribed to such term in Section 5.12
hereof.

 

“Responsible Officer” means the chief executive officer, the president, the
chief financial officer, any vice president (including, without limitation, the
vice president, finance), the general counsel and/or secretary, or the
controller of Borrower, or any other officer of Borrower having substantially
the same authority and responsibility as any of the foregoing.

 

“Rules” has the meaning ascribed to such term in Section 8.12(b) hereof.

 

“Security Agreement” means that certain Security Agreement, dated as of
January 4, 2006, executed by Borrower in favor of Bank.

 

“Specified Earn-out Payments” means means payments made by Borrower as follows:
(i) payments made by Borrower pursuant to its July 2003 purchase of
substantially all of the assets of Neometrics, Inc., in an aggregate amount not
to exceed Eight Hundred Thousand United States Dollars (U.S. $800,000.00), and
payable on the anniversary of such purchase

 

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occurring in July 2006, and (ii) payments made by Borrower pursuant to its
September 2004 purchase of all the common stock of privately held Fischer-Zoth
Diagnosesysteme GmbH and affiliated entities (Fischer-Zoth), as well as
intangible assets held individually by the owners of Fischer-Zoth, related to
(A) the annual results of sales of Fischer-Zoth during the three twelve-month
periods ending September 30, 2007, in an aggregate amount not to exceed
1.5 million Euro in total (approximately $2.0 million based on the USD/EUR
exchange rate at December 31, 2004), and (B) in-process research and development
technology, in an aggregate amount not to exceed U.S. $750,000.

 

“Subsidiary” means any Domestic Subsidiary or Foreign Subsidiary.

 

“Tangible Net Worth” has the meaning ascribed to such term in Section 5.9(b)
hereof.

 

“Term Commitment” has the meaning ascribed to such term in Section 2.1(a)
hereof.

 

“Term Commitment Note” means a promissory note executed by Borrower in favor of
Bank to evidence Borrower’s obligation to repay advances under the Term
Commitment, substantially in the form of Exhibit A attached hereto.

 

“Total Liabilities” has the meaning ascribed to such term in Section 5.9(b)
hereof.

 

“Third Party Obligor” has the meaning ascribed to such term in Section 7.1(d)
hereof.

 

“Unpaid Commitment Fee” has the meaning ascribed to such term in Section 2.2(c)
hereof.

 

ARTICLE II

CREDIT TERMS

 

SECTION 2.1. TERM COMMITMENT.

 

(a) Term Commitment. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make a one-time advance to Borrower up to and including
February 28, 2006, in an amount not to exceed Ten Million Dollars
($10,000,000.00), the proceeds of which shall solely be used to finance some or
all of the cost of Borrower’s acquisition of Bio-logic pursuant to the terms and
provisions of the Merger Agreement (the “Term Commitment”). Borrower’s
obligation to repay advances under the Term Commitment shall be evidenced by the
Term Commitment Note, all terms of which are incorporated herein by this
reference. In the event Borrower does not make the one-time advance allowed
pursuant to this paragraph and the Term Commitment Note on or before
February 28, 2006, Bank’s agreement to extend credit to Borrower hereunder and
under the other Loan Documents shall terminate and be of no further force and
effect.

 

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(b) Limitation on Borrowings. Notwithstanding any other provision of this
Agreement, the aggregate amount of all outstanding borrowings under the Term
Commitment shall not at any time exceed a maximum of Ten Million Dollars
($10,000,000.00).

 

(c) Repayment. The principal amount of the Term Commitment shall be amortized
over forty-eight months and shall be repaid on the last day of each month in
equal installments, as set forth in the Term Commitment Note.

 

(d) Prepayment. Borrower may prepay principal on the Term Commitment solely in
accordance with the provisions of the Term Commitment Note.

 

SECTION 2.2. INTEREST/FEES.

 

(a) Interest. The outstanding principal balance of the Term Commitment shall
bear interest at the rate of interest set forth in the Term Commitment Note.

 

(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

 

(c) Commitment Fee. Borrower shall pay to Bank a non-refundable commitment fee
for the Term Commitment equal to One-Hundred Thousand Dollars ($100,000.00),
Twenty-Five Thousand Dollars ($25,000.00) of which has been paid prior to the
date hereof (and which amount is non-refundable, notwithstanding the
effectiveness of this Agreement), and Seventy-Five Thousand Dollars ($75,000.00)
of which (the “Unpaid Commitment Fee”) shall be due and payable in full on the
Closing Date.

 

SECTION 2.3. 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 2.4. 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), in
all Borrower’s personal property (including, without limitation, all Borrower’s
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.

 

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

 

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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 2.5. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed jointly and severally by each Domestic Subsidiary (each a “Guarantor”
and, collectively, the “Guarantors”) in the principal amount of Ten Million
United States Dollars (U.S. $10,000,000.00) each, as evidenced by and subject to
the terms of guaranties (each a “Guaranty” and, collectively, the “Guaranties”)
in form and substance satisfactory to Bank.

 

ARTICLE III

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 3.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Delaware, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, 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
could have a Material Adverse Effect.

 

SECTION 3.2. 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 3.3. NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Certificate of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound which violation contravention, breach or default
could individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.

 

SECTION 3.4. 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
which could reasonably be expected to have a Material Adverse Effect, other than
those disclosed by Borrower to Bank in writing prior to the date hereof.

 

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SECTION 3.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated September 30, 2005, 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 generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. 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 3.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

 

SECTION 3.7. 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 obligations
created by the Loan Documents to any other obligation of Borrower.

 

SECTION 3.8. PERMITS, FRANCHISES. Borrower possesses, 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 3.9. ERISA. Borrower is in compliance in all material respects with all
applicable provisions of ERISA; Borrower has not violated any provision of any
defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrower (each, a “Plan”); no Reportable Event as defined in
ERISA has occurred and is continuing with respect to any Plan initiated by
Borrower; Borrower has met its minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and under
generally accepted accounting principles.

 

SECTION 3.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

 

SECTION 3.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in
writing prior to the date hereof, 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

 

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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.

 

SECTION 3.12. REAL PROPERTY COLLATERAL. Except as disclosed by Borrower to Bank
in writing prior to the date hereof, with respect to any real property
collateral required hereby, including, without limitation, the Real Property
Collateral:

 

(a) All taxes, governmental assessments, insurance premiums, and water, sewer
and municipal charges, and rents (if any) which previously became due and owing
in respect thereof have been paid as of the date hereof.

 

(b) There are no mechanics’ or similar liens or claims which have been filed for
work, labor or material (and no rights are outstanding that under law could give
rise to any such lien) which affect all or any interest in any such real
property and which are or may be prior to or equal to the lien thereon in favor
of Bank.

 

(c) None of the improvements which were included for purpose of determining the
appraised value of any such real property lies outside of the boundaries and/or
building restriction lines thereof, and no improvements on adjoining properties
materially encroach upon any such real property.

 

(d) There is no pending, or to the best of Borrower’s knowledge threatened,
proceeding for the total or partial condemnation of all or any portion of any
such real property, and all such real property is in good repair and free and
clear of any damage that would materially and adversely affect the value thereof
as security and/or the intended use thereof.

 

SECTION 3.13. CIT FINANCIAL LOAN. There is no outstanding balance under that
certain Loan Agreement #007473897-001, dated June 2, 2005 (the “CIT Loan
Agreement”), and referenced in the UCC Financing Statement filed with the
Delaware Secretary of State on June 7, 2005 and bearing initial filing number
51736173 (as amended by the UCC Financing Statement Amendment filed with the
Delaware Secretary of State on November 9, 2005 and bearing amendment number
53487031, the “CIT Financing Statement”).

 

ARTICLE IV

CONDITIONS

 

SECTION 4.1. 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:

 

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

 

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

 

  (i) this Agreement and each promissory note or other instrument or document
required hereby;

 

  (ii) the Security Agreement duly executed and delivered by the Borrower and
describing the personal property collateral referred to in Section 2.4 hereof;

 

  (iii) each of the Guaranties required pursuant to Section 2.5 hereof;

 

  (iv) a Corporate Resolution: Borrowing from Borrower, and a Corporate
Resolution; Continuing Guaranty from each Guarantor;

 

  (v) an Incumbency Certificate from Borrower and each Guarantor;

 

  (vi) a certificate of good standing with respect to Borrower and each
Guarantor from the appropriate governmental agency of the jurisdiction of each
such entity’s formation, dated no earlier than 15 days prior to the date of this
Agreement;

 

  (vii) a certificate of the secretary or assistant secretary of Borrower and
each Guarantor, attaching and certifying as to (A) the directors’ resolutions in
respect of the execution, delivery and performance by Borrower or such
Guarantor, as applicable, of each Loan Document to which it is a party, (B) its
charter documents and (C) its by-laws; and

 

  (viii) 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, 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, including without limitation,
policies of fire and extended coverage insurance covering all real property
collateral required hereby, with replacement cost and mortgagee loss payable
endorsements, and such policies of insurance against specific hazards affecting
any such real property as may be required by governmental regulation or Bank.

 

(e) Appraisals. Bank shall have obtained, at Borrower’s cost, an appraisal of
all real property collateral required hereby, and all improvements thereon,
issued by an appraiser acceptable to Bank and in form, substance and reflecting
values satisfactory to Bank, in its discretion.

 

(f) Unpaid Commitment Fee. The Unpaid Commitment Fee shall have been paid in
full to Bank in immediately available funds.

 

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SECTION 4.2. 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 which may
be required in connection with such extension of credit.

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) 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, unless Bank otherwise consents in
writing:

 

SECTION 5.1. 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 5.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
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
the properties of Borrower.

 

SECTION 5.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form
and detail satisfactory to Bank:

 

(a) not later than 90 days after and as of the end of each fiscal year, audited
financial statements with the unqualified opinion of independent certified
public accountants selected by Borrower and acceptable to Bank, which annual
financial statements shall include Borrower’s balance sheet as at 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 generally accepted accounting
principles;

 

(b) not later than 45 days after and as of the end of each fiscal quarter, a
financial statement of Borrower, prepared by Borrower, to include balance sheet,
income statement and statement of cash flows;

 

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(c) not later than 10 days prior to the beginning of each fiscal year, projected
balance sheets and income statements for each month of such year for Borrower,
each in reasonable detail, representing Borrower’s good faith projections and
certified by the chief financial officer (or, if Borrower does not have a chief
financial officer, the vice president, finance) 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) not later than 30 days after and as of each of June 30 and December 31 of
each fiscal year of Borrower, a list of the names and addresses of all
Borrower’s account debtors; and

 

(e) from time to time such other information as Bank may reasonably request,
including without limitation, copies of rent rolls and other information with
respect to any real property collateral required hereby.

 

SECTION 5.4. 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 Borrower is organized and/or which govern Borrower’s continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

 

SECTION 5.5. INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
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 5.6. FACILITIES. Keep all properties useful or necessary to Borrower’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.

 

SECTION 5.7. 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 Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank’s satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

 

SECTION 5.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$250,000.00.

 

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SECTION 5.9. FINANCIAL CONDITION. Maintain Borrower’s financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):

 

(a) Tangible Net Worth not less than, (i) on the Closing Date and as of each
fiscal quarter end on or before March 31, 2006, $12,000,000.00, and (ii) as of
each fiscal quarter end following March 31, 2006, $12,000,000.00 plus, on a
cumulative basis, 75% of quarterly net profit (only if positive) for each fiscal
quarter of Borrower commencing with the first fiscal quarter end occurring after
March 31, 2006.

 

(b) Total Liabilities divided by Tangible Net Worth not greater than, (i) on or
before September 30, 2006, 1.50 to 1.00, and (ii) after September 30, 2006, 1.00
to 1.00, in all cases as of each fiscal quarter end of Borrower, with “Total
Liabilities” defined as the aggregate of current liabilities and non-current
liabilities, and with “Tangible Net Worth” defined as the aggregate of total
stockholders’ equity less any intangible assets.

 

(c) Fixed Charge Coverage Ratio not less than, (i) on or before September 30,
2006, 3.00 to 1.00, and (ii) after September 30, 2006, 3.50 to 1.00, in all
cases as of each fiscal quarter end of Borrower, determined on a rolling
4-quarter basis, with “EBITDA” defined as net profit after tax (excluding
one-time restructuring charges related to Borrower’s acquisition of Bio-logic
(the aggregate of such one-time restructuring charges not to exceed
$1,500,000.00) and write-offs of in-process research and development expenses of
Bio-logic associated with Borrower’s acquisition of Bio-logic) plus depreciation
expense and amortization expense, and with “Fixed Charge Coverage Ratio” defined
as EBITDA divided by the aggregate of total interest expense plus the prior
period current maturity of long-term debt and capitalized lease payments.

 

(d) Liquidity not less than $8,000,000.00 as of the Closing Date and each fiscal
quarter end of Borrower, with “Liquidity” defined as the sum of Borrower’s
unencumbered cash and short-term marketable securities.

 

SECTION 5.10. 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.

 

SECTION 5.11. MAINTENANCE OF ACCOUNTS WITH BANK. Borrower shall at all times
maintain its primary depository accounts with Bank pursuant to account
agreements and terms mutually acceptable to Borrower and Bank.

 

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SECTION 5.12. BIO-LOGIC PLAZA PROPERTY. By not later than fourteen (14) calendar
days after the Closing Date, Borrower shall (i) execute and deliver to Bank a
mortgage in form and substance satisfactory to Bank, pursuant to which Borrower
grants to Bank a lien on that certain real property located at One Bio-logic
Plaza, Mundelein, IL 60060 (the “Real Property Collateral”), as security for all
indebtedness of Borrower to Bank created by the Loan Documents, (ii) have caused
Bank to have received an ALTA Policy of Title Insurance, with such endorsements
as Bank may require, issued by a company and in form and substance satisfactory
to Bank, in such amount as Bank shall reasonably require, insuring Bank’s lien
on the Real Property Collateral to be of first priority, subject only to such
exceptions as Bank shall approve in its discretion, with all costs thereof to be
paid by Borrower, and (iii) have procured and delivered to Bank, at Borrower’s
cost, such tax service contract as Bank shall require for the Real Property
Collateral, to remain in effect as long as such real property secures any
obligations of Borrower to Bank under the Loan Documents. Bank acknowledges and
agrees that the Real Property Collateral includes the 14 Acre Parcel and that,
pursuant to the consummation of the sale of the 14 Acre Parcel pursuant to the
terms and conditions of that certain Real Estate Purchase Agreement, dated
April 15, 2005, between Avis Investments, Inc., and Bio-logic, a copy of which
was provided to Bank prior to the date hereof, and payment in immediately
available funds of the proceeds thereof to Borrower, Bank shall reconvey its
interest in the 14 Acre Parcel arising pursuant to the mortgage executed by
Borrower pursuant to the terms of this Section 5.12.

 

SECTION 5.13. FOREIGN SUBSIDIARIES. By not later than forty-five (45) calendar
days after the Closing Date, Borrower shall execute such further agreements,
documents or instruments, or take such other actions, as Bank reasonably deems
necessary in connection with the pledge by Borrower to Bank of security
interests in Borrower’s ownership interest in each Foreign Subsidiary (such
pledge exclusive of shares of voting stock of each Foreign Subsidiary that
represent more than 65% of the voting stock of such Foreign Subsidiary, as
described in Section 2.4 hereof), including, without limitation, (i) executing
and delivering to each Foreign Subsidiary, a notice of the pledge of Borrower’s
interests therein to Bank, (ii) causing such Foreign Subsidiary to execute and
deliver to Bank an acknowledgment of pledge related to Borrower’s pledge of its
interest in such Foreign Subsidiary, and (iii) delivering to Bank stock
certificates (or comparable certificates of ownership) evidencing Borrower’s
ownership interest in such Foreign Subsidiary, accompanied by appropriate
assignments separate from stock certificates, in each case, in form in substance
satisfactory to Bank.

 

SECTION 5.14. CIT LOAN AGREEMENT. Borrower will not request any advances or
otherwise incur any indebtedness under the CIT Loan Agreement and agrees to
execute such further agreements, documents or instruments, or take such other
commercially reasonable actions, to terminate the CIT Loan Agreement and the CIT
Financing Statement.

 

ARTICLE VI

NEGATIVE COVENANTS

 

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or

 

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unliquidated) 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 without Bank’s prior written consent:

 

SECTION 6.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article II hereof.

 

SECTION 6.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $3,000,000.00.

 

SECTION 6.3. LEASE EXPENDITURES. Incur operating lease expense in any fiscal
year in excess of an aggregate of $2,000,000.00.

 

SECTION 6.4. 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 6.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower’s business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower’s
assets except in the ordinary course of its business; provided that,
notwithstanding the foregoing, Borrower may sell the 14 Acre Parcel as described
in Section 5.12 hereof.

 

SECTION 6.6. 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 Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank and guaranties by Borrower of real property lease
obligations of its Subsidiaries not exceeding in the aggregate $100,000.00
outstanding at any time.

 

SECTION 6.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, other than Permitted Investments; provided
that Borrower shall not be prohibited from making Specified Earn-out Payments.

 

SECTION 6.8. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower’s stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower’s stock now or hereafter outstanding.

 

SECTION 6.9. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower’s assets now
owned or hereafter acquired, other than Permitted Liens.

 

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ARTICLE VII

EVENTS OF DEFAULT

 

SECTION 7.1. 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.

 

(b) Any financial statement or certificate furnished to Bank in connection with,
or any representation or warranty made by Borrower 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.

 

(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, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default but no advances under the Term Commitment will be
made;

 

(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 guarantor
hereunder or any general partner or joint venturer in any Borrower which is a
partnership or joint venture (with each such guarantor, 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.

 

(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.

 

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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.

 

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

 

(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.

 

(i) The sale, transfer, hypothecation, assignment or encumbrance, whether
voluntary, involuntary or by operation of law, without Bank’s prior written
consent, of all or any part of or interest in any real property collateral
required hereby.

 

(j) The failure of the Closing (as such term is defined in the Merger Agreement)
to occur on or before February 28, 2006.

 

SECTION 7.2. 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 VIII

MISCELLANEOUS

 

SECTION 8.1. 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 8.2. 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 BANK:    WELLS FARGO BANK, NATIONAL ASSOCIATION     
Peninsula Commercial Banking Office      400 Hamilton Avenue, P.O. Box 150     
Palo Alto, California 94302      Attention: Michelle Proehl

 

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 8.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. 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 (a) 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, (b) 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 (c) 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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SECTION 8.4. 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.

 

SECTION 8.5. 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 8.6. 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 8.7. 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 8.8. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

 

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SECTION 8.9. 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 8.10. 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.

 

SECTION 8.11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.

 

SECTION 8.12. 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 arising out of or relating to in
any way (i) the loan and related Loan Documents which are the subject of this
Agreement and its 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, 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

 

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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.

 

(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 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 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 and within 180 days of the filing of the
dispute with the AAA. 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. The resolution of any dispute arising
pursuant to the terms of this Agreement shall be determined by a separate
arbitration proceeding and such dispute shall not be consolidated with other
disputes or included in any class proceeding.

 

(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

 

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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.

 

(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.

 

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

 

NATUS MEDICAL
INCORPORATED

     

WELLS FARGO BANK,
NATIONAL ASSOCIATION

By:  

 

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      By:  

 

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Name:  

 

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      Name:  

 

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Title:  

 

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      Title:  

 

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CREDIT AGREEMENT