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                                                                 EXHIBIT 10.17.3

Silicon Valley Bank

                          Loan and Security Agreement


Borrower:  Natus Medical Incorporated
Address:   1501 Industrial Road
           San Carlos, California  94070

Date:      June 18, 2001


THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK,  COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 Tasman Drive, Santa Clara, California  95054 and the borrower(s) named
above (jointly and severally, the "Borrower"), whose chief executive office is
located at the above address ("Borrower's Address").  The Schedule to this
Agreement (the "Schedule") shall for all purposes be deemed to be a part of this
Agreement, and the same is an integral part of this Agreement.  (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)

1.  LOANS.

  1.1  Loans.  Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its sole discretion, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing, and subject to deduction of any Reserves for accrued
interest and such other Reserves as Silicon deems proper from time to time.

  1.2  Interest.  All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement.  Interest shall be payable monthly, on the last
day of the month.  Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans.  Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.

  1.3  Overadvances.  If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand.  Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.

  1.4  Fees.  Borrower shall pay Silicon the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.

  1.5  Letters of Credit.  At the request of Borrower, Silicon may, in its sole
discretion, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon
in its sole discretion (collectively, "Letters of Credit").  The aggregate face
amount of all outstanding Letters of Credit from time to time shall not exceed
the amount shown on the Schedule (the "Letter of Credit Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder.  Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit.  Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made.  Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date.  Borrower hereby agrees to indemnify, save, and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising
out of or in connection with any Letters of Credit.  Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and

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agrees that Silicon shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that Letters of Credit may require
Silicon to indemnify the issuing bank for certain costs or liabilities arising
out of claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold Silicon harmless with respect to any loss, cost, expense, or
liability incurred by Silicon under any Letter of Credit as a result of
Silicon's indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other present or future
documents or agreements between Borrower and Silicon relating to Letters of
Credit are cumulative.

2.  SECURITY INTEREST.

  2.1  Security Interest.  To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located:  All Inventory, Equipment, Receivables, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Silicon's possession (including claims and credit balances), and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.

  In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:

  3.1  Corporate Existence and Authority.  Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation.  Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower.
The execution, delivery and performance by Borrower of this Agreement, and all
other documents contemplated hereby (i) have been duly and validly authorized,
(ii) are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any  material agreement
or instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.

  3.2  Name; Trade Names and Styles.  The name of Borrower set forth in the
heading to this Agreement is its correct name.  Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name.  Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.

  3.3  Place of Business; Location of Collateral.  The address set forth in the
heading to this Agreement is Borrower's chief executive office.  In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule.  Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.

  3.4  Title to Collateral; Permitted Liens.  Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower.  The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens.  Silicon now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims
of others.  None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or
impair Borrower's right to remove any Collateral from the leased premises.
Whenever any Collateral is located upon premises in which any third party has an
interest (whether as owner, mortgagee, beneficiary under a deed of trust, lien
or otherwise), Borrower shall, whenever requested by Silicon, use its best
efforts to cause such third party to execute and deliver to Silicon, in form
acceptable to Silicon, such waivers and subordinations as Silicon shall specify,
so as to ensure that Silicon's rights in the Collateral are, and will continue
to be, superior to the rights of any such third party.  Borrower will keep in
full force and effect, and will

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comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located.

  3.5  Maintenance of Collateral.  Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose.  Borrower will immediately advise Silicon in writing of any material
loss or damage to the Collateral.

  3.6  Books and Records.  Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.

  3.7  Financial Condition, Statements and Reports.  All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated.  Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no material adverse change in the financial condition or business
of Borrower.  Borrower is now and will continue to be solvent.

  3.8  Tax Returns and Payments; Pension Contributions.  Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower.  Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral.  Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower.  Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.

  3.9  Compliance with Law.  Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.

  3.10  Litigation.  Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted.  Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000  or more in the aggregate.

  3.11  Use of Proceeds.  All proceeds of all Loans shall be used solely for
lawful business purposes.  Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."

4.  RECEIVABLES.

  4.1  Representations Relating to Receivables.  Borrower represents and
warrants to Silicon as follows:  Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in  Section 8 below.

  4.2  Representations Relating to Documents and Legal Compliance.  Borrower
represents and warrants to Silicon as follows:  All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract.  All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations.  All
signatures and endorsements on all documents, instruments, and agreements
relating to all

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Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.

  4.3  Schedules and Documents relating to Receivables.  Borrower shall deliver
to Silicon transaction reports and loan requests, schedules and assignments of
all Receivables, and schedules of collections, all on Silicon's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Silicon's security interest and other rights in all of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein.  Loan requests received after 12:00 Noon will not be considered by
Silicon until the next Business Day.  Together with each such schedule and
assignment, or later if requested by Silicon, Borrower shall furnish Silicon
with copies (or, at Silicon's request, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing.  Borrower shall also
furnish to Silicon an aged accounts receivable trial balance in such form and at
such intervals as Silicon shall  request.  In addition, Borrower shall deliver
to Silicon the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, immediately upon receipt thereof and in the same form as received,
with all necessary indorsements, all of which shall be with recourse.  Borrower
shall also provide Silicon with copies of all credit memos within two days after
the date issued.

  4.4  Collection of Receivables.  Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine.  Silicon may, in its
discretion, require that all proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify.
Silicon or its designee may, at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.

  4.5.  Remittance of Proceeds.  All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred, Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year).  Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon.  Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.

  4.6  Disputes.  Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables.  Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.  Silicon may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.

  4.7  Returns.  Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon).  In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.

  4.8  Verification.  Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

  4.9  No Liability.  Silicon shall not under any circumstances be responsible
or liable for any shortage or dis-

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crepancy in, damage to, or loss or destruction of, any goods, the sale or other
disposition of which gives rise to a Receivable, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Receivable, or for settling any Receivable
in good faith for less than the full amount thereof, nor shall Silicon be deemed
to be responsible for any of Borrower's obligations under any contract or
agreement giving rise to a Receivable. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.

5.  ADDITIONAL DUTIES OF THE BORROWER.

  5.1  Financial and Other Covenants.  Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.

  5.2  Insurance.  Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect.  All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon.  Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid.  Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used.  If Borrower fails to provide or pay for any insurance, Silicon may, but
is not obligated to, obtain the same at Borrower's expense.  Borrower shall
promptly deliver to Silicon copies of all reports made to insurance companies.

  5.3  Reports.  Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.

  5.4  Access to Collateral, Books and Records.  At reasonable times, and on one
Business Day's notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records.
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process.  The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $650 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses.  Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement.  Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).

  5.5  Negative Covenants.  Except as may be permitted in the Schedule, Borrower
shall not, without Silicon's prior written consent, do any of the following:
(i) merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a sale-
or-return, guaranteed sale, consignment, or other contingent basis; (vii) make
any loans of any money or other assets; (viii) incur any debts, outside the
ordinary course of business, which would have a material, adverse effect on
Borrower or on the prospect of repayment of the Obligations; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or
entity; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make
any change in Borrower's capital structure which would have a material adverse
effect on Borrower or on the prospect of repayment of the Obligations; or (xiii)
* pay total compensation, including salaries, fees, bonuses, commissions, and
all other payments, whether directly or indirectly, in money or otherwise, to
Borrower's executives, officers and directors (or any relative thereof) in an
amount in excess of the amount set forth on the Schedule; or (xiv) dissolve or
elect to dissolve.  Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default would occur as a
result of such transaction.

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             Silicon Valley Bank                     Loan and Security Agreement
        ------------------------------------------------------------------------

  * so long as the common stock of Borrower is not publicly traded on NASDAQ or
the New York Stock Exchange,

  5.6  Litigation Cooperation.  Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.

  5.7  Further Assurances.  Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.

6.   TERM.

  6.1  Maturity Date.  This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.3 below.

  6.2  Early Termination.  This Agreement may be terminated prior to the
Maturity Date as follows:  (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence of an Event of Default, without notice, effective
immediately.  If this Agreement is terminated by Borrower or by Silicon under
this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount
equal to two percent (2.0%) of the Maximum Credit Limit, provided that no
termination fee shall be charged if the credit facility hereunder is replaced
with a new facility from another division of Silicon Valley Bank.  The
termination fee shall be due and payable on the effective date of termination
and thereafter shall bear interest at a rate equal to the highest rate
applicable to any of the Obligations.

  6.3  Payment of Obligations.  On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable.  Without
limiting the generality of the foregoing, if on the Maturity Date,  or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement.  Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination.  No termination shall in any way affect or impair any right
or remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full.  Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Silicon's security interests.

7.  EVENTS OF DEFAULT AND REMEDIES.

  7.1  Events of Default.  The  occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule or shall fail to perform any other non-
monetary Obligation which by its nature cannot be cured; or (e) Borrower shall
fail to perform any other non-monetary Obligation, which failure is not cured
within 5 Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganiza-

                                      -6-
<PAGE>

             Silicon Valley Bank                     Loan and Security Agreement
        ------------------------------------------------------------------------

tion, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 30 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(n) there shall be a change in the record or beneficial ownership of an
aggregate of more than 20% of the outstanding shares of stock of Borrower, in
one or more transactions, compared to the ownership of outstanding shares of
stock of Borrower in effect on the date hereof, without the prior written
consent of Silicon; or (o) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Silicon had no knowledge on the effective date or because
of the occurrence of an event on or subsequent to the effective date. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.

  7.2  Remedies.  Upon the occurrence of any Event of Default, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale.  Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition.  Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition.  Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts

                                      -7-
<PAGE>

             Silicon Valley Bank                     Loan and Security Agreement
        ------------------------------------------------------------------------

with Silicon; and (i) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be due
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Without limiting any of Silicon's rights
and remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
four percent per annum.

  7.3  Standards for Determining Commercial Reasonableness.  Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:  (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general, non-
specific terms; (iii) The sale is conducted at a place designated by Silicon,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m;  (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same.  Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.

  7.4  Power of Attorney.  Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner:  (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements.  Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations.  In no event
shall Silicon's rights under the foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.

  7.5  Application of Proceeds.  All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion.  Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency.  If, Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the

                                      -8-
<PAGE>

             Silicon Valley Bank                     Loan and Security Agreement
        ------------------------------------------------------------------------

Obligations until the actual receipt by Silicon of the cash therefor.

  7.6  Remedies Cumulative.  In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive.  Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies.  The failure or delay of Silicon to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.

8.  DEFINITIONS.  As used in this Agreement, the following terms have the
following meanings:

  "Account Debtor" means the obligor on a Receivable.
   --------------

  "Affiliate" means, with respect to any Person, a relative, partner,
   ---------
shareholder, director, officer, or employee of such Person, or any parent or
Subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

  "Business Day" means a day on which Silicon is open for business.
   ------------

  "Code" means the Uniform Commercial Code as adopted and in effect in the State
   ----
of California  from time to time.

  "Collateral" has the meaning set forth in Section 2.1 above.
   ----------

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

  "Deposit Account" has the meaning set forth in Section 9105 of the Code.
   ---------------

  "Eligible Inventory"  [NOT APPLICABLE].
   ------------------

  "Eligible Receivables" means Receivables arising in the ordinary course of
   --------------------
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate.  Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
                                                                   -------
Eligibility Requirements") are the minimum requirements for a Receivable to be
------------------------
an Eligible Receivable:  (i) the Receivable must not be outstanding for more
than 90 days from its invoice date, (ii) the Receivable must not represent
progress billings, or be due under a fulfillment or requirements contract with
the Account Debtor, (iii) the Receivable must not be subject to any
contingencies (including Receivables arising from sales on consignment,
guaranteed sale or other terms pursuant to which payment by the Account Debtor
may be conditional), (iv) the Receivable must not be owing from an Account
Debtor with whom the Borrower has any dispute (whether or not relating to the
particular Receivable), (v) the Receivable must not be owing from an Affiliate
of Borrower, (vi) the Receivable must not be owing from an Account Debtor which
is subject to any insolvency or bankruptcy proceeding, or whose financial
condition is not acceptable to Silicon, or which, fails or goes out of a
material portion of its business, (vii) the Receivable must not be owing from
the United States or any department, agency or instrumentality thereof (unless
there has been compliance, to Silicon's satisfaction, with the United States
Assignment of Claims Act)*, (viii) the Receivable must not be owing from an
Account Debtor located outside the United States or Canada (unless pre-approved
by Silicon in its discretion in writing, or backed by a letter of credit
satisfactory to Silicon, or FCIA insured satisfactory to Silicon),  (ix) the
Receivable must not be owing from an Account Debtor to whom Borrower is or may
be liable for goods purchased from such Account Debtor or otherwise. Receivables
owing from one Account Debtor will not be deemed Eligible Receivables to the
extent they exceed 25% of the total Receivables outstanding.  In addition, if
more than 50% of the Receivables owing from an Account Debtor are outstanding
more than 90 days from their invoice date (without regard to unapplied credits)
or are otherwise not Eligible Receivables, then all Receivables owing from that
Account Debtor will be deemed ineligible for borrowing.  Silicon may, from time
to time, in its discretion, revise the Minimum Eligibility Requirements, upon
written notice to the Borrower.

  * , provided, however, that, so long as no Event of Default has occurred and
is continuing, Receivables owing from Account Debtors that are federal
government hospitals or federal government medical clinics in an aggregate
amount of up to $200,000 will not be ineligible under this clause (vii),

  "Equipment" means all of Borrower's present and hereafter acquired machinery,
   ---------
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.

  "Event of Default" means any of the events set forth in Section 7.1 of this
   ----------------
Agreement.

  "General Intangibles" means all general intangibles of Borrower, whether now
   -------------------
owned or hereafter created or ac-

                                      -9-
<PAGE>

             Silicon Valley Bank                     Loan and Security Agreement
        ------------------------------------------------------------------------

quired by Borrower, including, without limitation, all choses in action, causes
of action, corporate or other business records, Deposit Accounts, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks and the
goodwill of the business symbolized thereby, names, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer lists,
security and other deposits, rights in all litigation presently or hereafter
pending for any cause or claim (whether in contract, tort or otherwise), and all
judgments now or hereafter arising therefrom, all claims of Borrower against
Silicon, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, proprietary
information, purchase orders, and all insurance policies and claims (including
without limitation life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower, all rights
to indemnification and all other intangible property of every kind and nature
(other than Receivables).

  "Inventory" means all of Borrower's now owned and hereafter acquired goods,
   ---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.

  "Obligations" means all present and future Loans, advances, debts,
   -----------
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.

  "Permitted Liens" means the following:  (i) purchase money security interests
   ---------------
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable; (iv) additional security interests and
liens consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods *.  Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.

  * and (ix) the pledge to Scotts Valley Bank (in Walnut Creek, California) of a
certificate of deposit in an amount not to exceed $400,000

  "Person" means any individual, sole proprietorship, partnership, joint
   ------
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.

  "Receivables" means all of Borrower's now owned and hereafter acquired
   -----------
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.

  "Reserves" means, as of any date of determination, such amounts as Silicon may
   --------
from time to time establish and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule:  (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation

                                      -10-
<PAGE>

any increase in delinquencies of Receivables), (ii) the assets, business or
prospects of Borrower or any Guarantor, or (iii) the security interests and
other rights of Silicon in the Collateral (including the enforceability,
perfection and priority thereof); or (b) to reflect Silicon's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate
or misleading in any material respect; or (c) in respect of any state of facts
which Silicon determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.

    Other Terms.  All accounting terms used in this Agreement, unless otherwise
    -----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied.  All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.

9.  GENERAL PROVISIONS.

  9.1  Interest Computation.  In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations three Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day.  Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.

  9.2  Application of Payments.  All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.

  9.3  Charges to Accounts.  Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans.  Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.

  9.4  Monthly Accountings.  Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement.  Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.

  9.5  Notices.  All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party.  Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager.  All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.

  9.6  Severability.  Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.

  9.7  Integration.  This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement.  There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

  9.8  Waivers.  The failure of Silicon at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Silicon shall not waive or
diminish any right of Silicon later to demand and receive strict compliance
therewith.  Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar.  None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower.  Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by

                                      -11-
<PAGE>

Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.

  9.9  No Liability for Ordinary Negligence.  Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.

  9.10 Amendment.  The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.

  9.11 Time of Essence.  Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.

  9.12 Attorneys Fees and Costs.  Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower.  In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
only Silicon and not Borrower in connection with this Agreement.  If either
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment.  All attorneys' fees
and costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.

  9.13 Benefit of Agreement.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void.  No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.

  9.14 Joint and Several Liability.  If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

  9.15 Limitation of Actions.  Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter.  Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action.  The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Silicon in its sole discretion.  This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.

  9.16 Paragraph Headings; Construction.  Paragraph headings are only used in
this Agreement for convenience.  Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement.  The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)".  This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall

                                      -12-
<PAGE>

be construed strictly against Silicon or Borrower under any rule of construction
or otherwise.

  9.17 Governing Law; Jurisdiction; Venue.  This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California.  As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.

  9.18 Mutual Waiver of Jury Trial.  BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 Borrower:

     NATUS MEDICAL INCORPORATED


     By     /s/ Tim Johnson
       ------------------------------------
            President or Vice President

     By     /s/ William Lawrenson
       ------------------------------------
            Secretary or Ass't Secretary

 Silicon:

     SILICON VALLEY BANK


     By     (Signature illegible)
       ------------------------------
     Title  Account Manager
          -----------------------

                                      -13-
<PAGE>

Silicon Valley Bank

                                  Schedule to

                          Loan and Security Agreement

Borrower: Natus Medical Incorporated
Address:  1501 Industrial Road
          San Carlos, California 94070

Date:     June 18, 2001

This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.

================================================================================

1. CREDIT LIMIT

  (Section 1.1):     An amount not to exceed the lesser of: (i) $3,000,000 at
                     any one time outstanding (the "Maximum Credit Limit"); or
                     (ii) 75% of the amount of Borrower's Eligible Receivables
                     (as defined in Section 8 above).

                     Cash Management Services and Reserves. Borrower may use up
                     to $500,000 (the "Cash Management Sublimit") of Loans
                     available hereunder for Silicon's Cash Management Services
                     (as defined below) consisting of one or more of merchant
                     services, business credit card, ACH and other services
                     identified in the cash management services agreement
                     related to such service (collectively, the "Cash Management
                     Services"). Silicon may, in its sole discretion, reserve
                     against Loans which would otherwise be available hereunder
                     such sums as Silicon shall determine in connection with the
                     Cash Management Services, and Silicon may charge to
                     Borrower's Loan account any amounts that may become due or
                     owing to Silicon in connection with the Cash Management
                     Services. Borrower agrees to execute and deliver to Silicon
                     all standard form applications and agreements of Silicon in
                     connection with the Cash Management Services, and, without
                     limiting any of the terms of such applications and
                     agreements, Borrower will pay all standard fees and charges
                     of Silicon in connection with the Cash Management Services.
                     All amounts that Silicon pays or expends in respect of any
                     Cash Management Services shall constitute Obligations
                     hereunder. Borrower hereby agrees to indemnify, save, and
                     hold Silicon harmless from any loss, cost, expense, or
                     liability, including payments made by Silicon, expenses,
                     and reasonable attorneys' fees incurred by Silicon arising
                     out of or in connection with

                                      -1-
<PAGE>

                             any Cash Management Services. The Cash Management
                             Services shall terminate on the Maturity Date or
                             any earlier effective date of termination of this
                             Agreement (or such later date requested by Borrower
                             as Silicon may agree in writing in its sole
                             discretion if and to the extent Borrower's
                             reimbursement and indemnity obligations with
                             respect to such Cash Management Services are
                             secured by cash in amounts and on terms and
                             conditions acceptable to Silicon in its sole
                             discretion).

  Letter of Credit Sublimit
  (Section 1.5):                $500,000

================================================================================

2. INTEREST.

     Interest Rate (Section 1.2):

                                   A rate equal to the "Prime Rate" in effect
                                   from time to time, plus 2.25% per annum.
                                   Interest shall be calculated on the basis of
                                   a 360-day year for the actual number of days
                                   elapsed. "Prime Rate" means the rate
                                   announced from time to time by Silicon as its
                                   "prime rate;" it is a base rate upon which
                                   other rates charged by Silicon are based, and
                                   it is not necessarily the best rate available
                                   at Silicon. The interest rate applicable to
                                   the Obligations shall change on each date
                                   there is a change in the Prime Rate.

     Minimum Monthly
     Interest (Section 1.2):        N/A.

================================================================================

3. FEES (Section 1.4):

     Loan Fee:                      $30,000, payable concurrently herewith.

     Supplemental Loan Fee:         $15,000, due and payable on Deember 1, 2001,
                                    unless Borrower shall, on or before such
                                    date, consummate an initial public offering
                                    of its common stock or consummate the sale
                                    of equity securities of the Borrower, in
                                    each case yielding net cash proceeds of not
                                    less than $5,000,000, all of which net cash
                                    proceeds shall be received by Borrower by
                                    such date, and by such date, Borrower shall
                                    provide evidence of the foregoing reasonably
                                    satisfactory to Silicon.

     Collateral Monitoring
     Fee:                           $1,000, per month, payable in arrears
                                    (prorated for any partial month at the
                                    beginning and at termination of this
                                    Agreement).

                                      -2-
<PAGE>

     Unused Line Fee:               In the event, in any calendar month (or
                                    portion thereof at the beginning and end of
                                    the term hereof), the average daily
                                    principal balance of the Loans outstanding
                                    during the month is less than the amount of
                                    the Maximum Credit Limit, Borrower shall pay
                                    Silicon an unused line fee in an amount
                                    equal to 0.125% per month on the difference
                                    between the amount of the Maximum Credit
                                    Limit and the average daily principal
                                    balance of the Loans outstanding during the
                                    month, which unused line fee shall be
                                    computed and paid monthly, in arrears, on
                                    the first day of the following month.

================================================================================

4. MATURITY DATE
    (Section 6.1):                  One year from the date of this Agreement.

================================================================================

5. FINANCIAL COVENANTS
    (Section 5.1):                  Borrower shall comply with each of the
                                    following covenant(s). Compliance shall be
                                    determined as of the end of each month,
                                    except as otherwise specifically provided
                                    below:

     Minimum Tangible
     Net Worth:                     Borrower shall maintain a Tangible Net Worth
                                    of not less than the sum of the TNW Base
                                    Amount plus the TNW Increase (if any).

                                        For purposes of this Tangible Net Worth
                                        covenant, the term "TNW Base Amount"
                                        means, as of any date of determination:
                                        (a) $3,500,000 on June 30, 2001; (b)
                                        $3,000,000 on July 31, 2001; (c)
                                        $2,700,000 on August 31, 2001; (d)
                                        $3,300,000 on September 30, 2001; (e)
                                        $3,000,000 on October 31, 2001; (f)
                                        $2,800,000 on November 30, 2001; and (g)
                                        $3,800,000 on the last day of each month
                                        thereafter.

                                        For purposes of this Tangible Net Worth
                                        covenant, the term "TNW Increase" means,
                                        as of any date of determination, the
                                        greater of (a) $-0- and (b) 75% of all
                                        consideration (if any) received after
                                        the date of execution and delivery of
                                        this Agreement for equity securities and
                                        subordinated debt of the Borrower. In no
                                        event shall the amount of the TNW
                                        Increase be decreased.

     Definitions.                   For purposes of the foregoing financial
                                    covenants, the following term shall have the
                                    following meaning:

                                    "Current assets", "current liabilities" and
                                    "liabilities" shall have the meaning
                                    ascribed thereto by generally accepted
                                    accounting principles.

                                      -3-
<PAGE>

                    "Tangible Net Worth" shall mean the excess of total assets
                    over total liabilities, determined in accordance with
                    generally accepted accounting principles, with the following
                    adjustments:

                         (A) there shall be excluded from assets: (i) notes,
                         accounts receivable and other obligations owing to the
                         Borrower from its officers or other Affiliates, and
                         (ii) all assets which would be classified as intangible
                         assets under generally accepted accounting principles,
                         including without limitation goodwill, licenses,
                         patents, trademarks, trade names, copyrights,
                         capitalized software and organizational costs, licenses
                         and franchises

                         (B) there shall be excluded from liabilities: all
                         indebtedness which is subordinated to the Obligations
                         under a subordination agreement in form specified by
                         Silicon or by language in the instrument evidencing the
                         indebtedness which is acceptable to Silicon in its
                         discretion.


================================================================================

6. REPORTING.
   (Section 5.3):

                    Borrower shall provide Silicon with the following:

                    1. Monthly Receivable agings, aged by invoice date, within
                       fifteen days after the end of each month.

                    2. Monthly accounts payable agings, aged by invoice date,
                       and outstanding or held check registers, if any, within
                       fifteen days after the end of each month.

                    3. Monthly reconciliations of Receivable agings (aged by
                       invoice date), transaction reports, and general ledger,
                       within fifteen days after the end of each month.

                    4. Such inventory reports (if any) as are reasonably
                       requested by Silicon.

                    5. Monthly unaudited financial statements, as soon as
                       available, and in any event within thirty days after the
                       end of each month.

                    6. Monthly Compliance Certificates, within thirty days after
                       the end of each month, in such form as Silicon shall
                       reasonably specify, signed by the Chief Financial Officer
                       of Borrower, certifying that as of the end of such month
                       Borrower was in full compliance with all of the terms and
                       conditions of this Agreement, and setting forth
                       calculations showing compliance with the financial
                       covenants set forth in this Agreement and such other
                       information as Silicon shall reasonably

                                      -4-
<PAGE>

                               request, including, without limitation, a
                               statement that at the end of such month there
                               were no held checks.

                            7. Quarterly unaudited financial statements, as soon
                               as available, and in any event within forty-five
                               days after the end of each fiscal quarter of
                               Borrower.

                            8. Annual operating budgets (including income
                               statements, balance sheets and cash flow
                               statements, by month) for the upcoming fiscal
                               year of Borrower within thirty days prior to the
                               end of each fiscal year of Borrower.

                            9. Annual financial statements, as soon as
                               available, and in any event within 120 days
                               following the end of Borrower's fiscal year,
                               certified by independent certified public
                               accountants acceptable to Silicon.
================================================================================

7. COMPENSATION
    (Section 5.5):             So long as Borrower's common stock is not
                               publicly traded on NASDAQ or the New York Stock
                               Exchange, Borrower shall not, without Silicon's
                               prior written consent, pay total compensation,
                               including salaries, withdrawals, fees, bonuses,
                               commissions, drawing accounts and other payments,
                               whether directly or indirectly, in money or
                               otherwise, during any fiscal year to all of
                               Borrower's executives, officers and directors (or
                               any relative thereof) as a group in excess of
                               115% of the total amount thereof in the prior
                               fiscal year.
================================================================================

8. BORROWER INFORMATION:

     Prior Names of
     Borrower
     (Section 3.2):            None

     Prior Trade
     Names of Borrower
     (Section 3.2):            None

     Existing Trade
     Names of Borrower
     (Section 3.2):            None

     Other Locations and

     Addresses (Section 3.3):  (A) Ludlow Sentry Medical Products, 2 Ludlow Park
                               Drive, Chicopee, Massachusetts; provided,
                               however, that no more than $250,000 in the
                               aggregate of Collateral may be located at such
                               location at any time unless Silicon has received
                               a bailee agreement, in form and substance
                               satisfactory to Silicon, relative to the
                               Collateral located at such location and such
                               bailee agreement is in full force and effect; and

                                      -5-
<PAGE>

                                 (B) 15271 Jason Circle, Huntington Beach,
                                 California 92649.

     Material Adverse
     Litigation (Section 3.10):  None


================================================================================

9. OTHER COVENANTS
    (Section 5.1):               Borrower shall at all times comply with all of
                                 the following additional covenants:

                                 (a)  Banking Relationship. Borrower shall at
                                      all times maintain its primary banking
                                      relationship with Silicon.

                                 (b)  Subordination of Inside Debt. All present
                                      and future indebtedness of the Borrower to
                                      its officers, directors and shareholders
                                      ("Inside Debt") shall, at all times, be
                                      subordinated to the Obligations pursuant
                                      to a subordination agreement on Silicon's
                                      standard form. Borrower represents and
                                      warrants that there is no Inside Debt
                                      presently outstanding, except for the
                                      following: NONE. Prior to incurring any
                                      Inside Debt in the future, Borrower shall
                                      cause the person to whom such Inside Debt
                                      will be owed to execute and deliver to
                                      Silicon a subordination agreement on
                                      Silicon's standard form.

                                 (c)  Patents, Trademarks and Copyrights.
                                      Concurrently with the execution of this
                                      Agreement, Borrower shall execute and
                                      deliver to Silicon, on Silicon's standard
                                      form(s), any security agreement(s) and
                                      other documentation which Silicon deems
                                      necessary for filing in the United States
                                      Patent and Trademark Office, the United
                                      States Copyright Office, and any other
                                      governmental office, with respect to
                                      Borrower's copyrights, patents, trademarks
                                      and related collateral. Borrower will
                                      register with the United States Copyright
                                      Office (i) any maskworks and computer
                                      software that generates Receivables from
                                      the sale or licensing thereof or that is
                                      otherwise material to the business of
                                      Borrower (in each case, other than
                                      maskworks or computer software under
                                      development) it has, develops or acquires,
                                      including those in Exhibit A to the
                                      Intellectual Property Security Agreement,
                                      within 60 days of the date of execution
                                      and delivery of this Agreement, and (ii)
                                      any additional maskworks and computer
                                      software rights developed or acquired,
                                      including significant revisions, additions
                                      or improvements to the maskworks or
                                      computer software or revisions, additions
                                      or improvements which significantly
                                      improve the functionality of the maskworks
                                      or computer software, after the date of
                                      execution and delivery of this Agreement
                                      before the sale or licensing to any

                                      -6-
<PAGE>

                                      third party of the maskworks or computer
                                      software or any product based on or
                                      containing any maskworks or computer
                                      software, and Borrower will execute such
                                      additional security agreement(s) and other
                                      documentation which Silicon deems
                                      necessary for filing with respect to such
                                      additional registered copyright(s).
                                      Borrower will promptly notify Silicon upon
                                      Borrower's filing of any application or
                                      registration of any patent or trademark
                                      rights with the United States Patent and
                                      Trademark Office and Borrower will execute
                                      and deliver any and all instruments and
                                      documents as Bank may require to evidence
                                      or perfect Bank's security interest in
                                      such application or registration. Borrower
                                      will: (i) protect, defend and maintain the
                                      validity and enforceability of the
                                      copyrights, patents, and trademarks; (ii)
                                      promptly advise Bank in writing of
                                      material infringements of the copyrights,
                                      patents, or trademarks of which Borrower
                                      is or becomes aware; and (iii) not allow
                                      any material item of copyrights, patents,
                                      or trademarks to be abandoned, forfeited
                                      or dedicated to the public without Bank's
                                      written consent.

                                 (e)  Subsidiaries. From and after the date of
                                      execution and delivery of this Agreement,
                                      Borrower shall not transfer any cash or
                                      assets to its Subsidiaries in excess of
                                      $500,000 in the aggregate. Borrower hereby
                                      represents and warrants to Silicon that,
                                      during the period commencing on January 1,
                                      2001 and ending immediately prior to the
                                      date of execution and delivery of this
                                      Agreement, Borrower transferred cash and
                                      assets to its Subsidiaries in the
                                      aggregate amount of $500,000.

[Signature page immediately follows]

                                      -7-
<PAGE>

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

Borrower:                                    Silicon:

 NATUS MEDICAL INCORPORATED                  SILICON VALLEY BANK


 By /s/ Tim Johnson                          By     (signature illegible)
   ---------------------------------           ---------------------------------
       President or Vice President           Title  Account Manager
                                                  ------------------------------

 By /s/ William Lawrenson
   ---------------------------------
      Secretary or Ass't Secretary

                                      -8-
<PAGE>

Silicon Valley Bank

Certified Resolution and Incumbency Certificate


Borrower:  Natus Medical Incorporated,
           a corporation organized under the
           laws of the State of Delaware

Date:      June 18, 2001

I, the undersigned, Secretary or Assistant Secretary of the above-named
borrower, a corporation organized under the laws of the state set forth above,
do hereby certify that the following is a full, true and correct copy of
resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and that
said resolutions are still in full force and effect and have not been in any way
modified, repealed, rescinded, amended or revoked.

  RESOLVED, that this corporation borrow from Silicon Valley Bank ("Silicon"),
  from time to time, such sum or sums of money as, in the judgment of the
  officer or officers hereinafter authorized hereby, this corporation may
  require.

  RESOLVED FURTHER, that any officer of this corporation be, and he or she is
  hereby authorized, directed and empowered, in the name of this corporation, to
  execute and deliver to Silicon, and Silicon is requested to accept, the loan
  agreements, security agreements, notes, financing statements, and other
  documents and instruments providing for such loans and evidencing and/or
  securing such loans, with interest thereon, and said authorized officers are
  authorized from time to time to execute renewals, extensions and/or amendments
  of said loan agreements, security agreements, and other documents and
  instruments.

  RESOLVED FURTHER, that said authorized officers be and they are hereby
  authorized, directed and empowered, as security for any and all indebtedness
  of this corporation to Silicon, whether arising pursuant to this resolution or
  otherwise, to grant, transfer, pledge, mortgage, assign, or otherwise
  hypothecate to Silicon, or deed in trust for its benefit, any property of any
  and every kind, belonging to this corporation, including, but not limited to,
  any and all real property, accounts, inventory, equipment, general
  intangibles, instruments, documents, chattel paper, notes, money, deposit
  accounts, furniture, fixtures, goods, and other property of every kind, and to
  execute and deliver to Silicon any and all grants, transfers, trust receipts,
  loan or credit agreements, pledge agreements, mortgages, deeds of trust,
  financing statements, security agreements and other hypothecation agreements,
  which said instruments and the note or notes and other instruments referred to
  in the preceding paragraph may contain such provisions, covenants, recitals
  and agreements as Silicon may require and said authorized officers may
  approve, and the execution thereof by said authorized officers shall be
  conclusive evidence of such approval.

  RESOLVED FURTHER, that Silicon may conclusively rely upon a certified copy of
  these resolutions and a certificate of the Secretary or Ass't Secretary of
  this corporation as to the officers of this corporation and their offices and
  signatures, and continue to conclusively rely on such certified copy of these
  resolutions and said certificate for all past, present and future transactions
  until written notice of any change hereto or thereto is given to Silicon by
  this corporation by certified mail, return receipt requested.

                                      -1-
<PAGE>

  The undersigned further hereby certifies that the following persons are the
duly elected and acting officers of the corporation named above as borrower and
that the following are their actual signatures:

<TABLE>
<CAPTION>
NAMES                          OFFICE(S)                ACTUAL SIGNATURES
-----                          ---------                -----------------
<S>                  <C>                             <C>
Tim C. Johnson        President and CEO              x   /s/ Tim C. Johnson
-------------------  ------------------------------     ---------------------
William Lawrenson     CFO and Assistant Secretary    x  /s/ William Lawrenson
-------------------  ------------------------------     ---------------------

-------------------  ------------------------------  x  ---------------------

-------------------  ------------------------------  x  ---------------------
</TABLE>

  IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or Assistant
Secretary on the date set forth above.

                                      /s/ William Lawrenson
                                    ----------------------------------
                                     Secretary or Assistant Secretary

                                      -2-