Exhibit 10.1 to IntriCon Corporation Form 10-Q for quarter ended September 30, 2009



Exhibit 10.1


LOAN AND SECURITY AGREEMENT


          This LOAN
AND SECURITY AGREEMENT dated as of August 13, 2009 (the “Agreement”), is executed by and
among INTRICON CORPORATION, a Pennsylvania corporation (“IntriCon”),
INTRICON, INC. (formerly known as Resistance Technology, Inc.), a Minnesota
corporation (“Inc.”), RTI ELECTRONICS, INC., a Delaware corporation (“RTIE”),
INTRICON TIBBETTS CORPORATION (formerly known as TI Acquisition Corporation), a
Maine corporation (“Tibbetts”), and JON BARRON, INC. (d/b/a Datrix), a
California corporation (“Datrix”) (each, a “Borrower”;
collectively, the “Borrowers”), and THE PRIVATEBANK AND TRUST COMPANY,
an Illinois banking corporation (the “Bank”).


RECITALS:


          A.      The
Borrowers desire to borrow funds and obtain other financial accommodations from
the Bank.


          B.      Pursuant
to the Borrowers’ request, the Bank is willing to extend such financial
accommodations to the Borrowers under the terms and conditions set forth herein.


          NOW
THEREFORE, in consideration of the premises, and the mutual covenants and
agreements set forth herein, the parties agree as follows, subject to and upon
the following terms and conditions:


AGREEMENTS:


Section
1.    DEFINITIONS.


          1.1     Defined
Terms. For the purposes of this
Agreement, the following capitalized words and phrases shall have the meanings
set forth below.


                    “Account
Debtor” means a Person who is obligated on an account.


                    “Acquisition”
shall mean the stock purchase and sale transaction provided for in the
Acquisition Documents, pursuant to which IntriCon will purchase 100% of
Datrix’s capital stock from the Selling Shareholder.


                    “Acquisition
Agreement” shall mean that certain Stock Purchase Agreement dated August
13, 2009 by and between IntriCon and the Selling Shareholder, providing for the
Acquisition.


                    “Acquisition
Documents” means, collectively, the Acquisition Agreement and all other
documents, instruments and agreements evidencing or otherwise relating to the
stock purchase and sale transaction contemplated by the Acquisition Agreement.


                    “Affiliate”
of any Person shall mean (a) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person, (b)
any officer or director of such Person, and (c) with respect to the Bank, any
entity administered or managed by the Bank, or an Affiliate or investment
advisor thereof and which is engaged in making, purchasing, holding or
otherwise investing in commercial loans.
A Person shall be deemed to be “controlled by” any other Person if such
Person possesses, directly or indirectly, power to direct or cause the
direction of the management and 








policies of such Person whether by contract, ownership of voting securities, membership
interests or otherwise.


                    “Applicable
Agreement” shall mean, collectively, any patent license agreement,
strategic license agreement or other agreement, commitment, arrangement or
instrument to which, as of any date, the Borrowers (or any of them) is a party
or by which any Borrower or any of its properties is bound, including any note,
indenture, loan agreement, mortgage, lease, or deed, the performance or
non-performance of which, as of such date, could reasonably be expected to have
a Material Adverse Effect.


                    “Applicable
Base Rate Margin,” “Applicable LIBOR Rate Margin,” “Applicable
LOC Fee” and “Applicable Non-Use Fee” means, as of any date, the applicable
per annum rate shown in the applicable column in the table set forth below
based on the then applicable Leverage Ratio:


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Revolving Loans 



 	
  

 	
 Term Loan 



 	
  

 	
  

 	
  

 	
  

 
	
 Leverage Ratio



 	
  

 	
 Applicable

LIBOR Rate

Margin



 	
  

 	
 Applicable

Base Rate

Margin



 	
  

 	
 Applicable

LIBOR Rate

Margin



 	
  

 	
 Applicable

Base Rate

Margin



 	
  

 	
 Applicable

LOC Fee



 	
  

 	
 Applicable

Non-Use Fee



 
	
  

 
	
 ≥
 3.25 to 1.00

 	
  

 	
 4.00%

 	
  

 	
 1.25%

 	
  

 	
 4.00%

 	
  

 	
 1.25%

 	
  

 	
 4.00%

 	
  

 	
 0.25%

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ≥
 2.75 to 1.00 and 

 < 3.25 to 1.00

 	
  

 	
 3.75%

 	
  

 	
 1.00%

 	
  

 	
 3.75%

 	
  

 	
 1.00%

 	
  

 	
 3.75%

 	
  

 	
 0.25%

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ≥
 2.25 to 1.00 and 

 < 2.75 to 1.00

 	
  

 	
 3.50%

 	
  

 	
 0.75%

 	
  

 	
 3.50%

 	
  

 	
 0.75%

 	
  

 	
 3.50%

 	
  

 	
 0.25%

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 <
 2.25 to 1.00

 	
  

 	
 3.00%

 	
  

 	
 0.25%

 	
  

 	
 3.00%

 	
  

 	
 0.25%

 	
  

 	
 3.00%

 	
  

 	
 0.25%

 



                    For
purposes of determining the Applicable LIBOR Rate Margin, the Applicable Base
Rate Margin, the Applicable LOC Fee, and the Applicable Non-Use Fee, the
Leverage Ratio will be determined as of the end of each calendar quarter
occurring during the term of this Agreement (the end of each calendar quarter
being a “Determination Date”) beginning with the calendar quarter ending
December 31, 2009. On the Bank’s receipt of the financial statements required
to be delivered to the Bank pursuant to Section 8.8, the Applicable
LIBOR Rate Margin, the Applicable Base Rate Margin, the Applicable LOC Fee, and
the Applicable Non-Use Fee will be subject to adjustment in accordance with the
table set forth above based on the then Leverage Ratio so long as no Event of
Default is existing as of applicable Determination Date or as of the effective
date of adjustment. The foregoing adjustment, if applicable, to the Applicable
LIBOR Rate Margin, the Applicable Base Rate Margin, the Applicable LOC Fee, and
the Applicable Non-Use Fee will become effective for LIBOR Rate Loans
requested, the unpaid principal balance of Base Rate Loans outstanding, non-use
fees accruing, and fees due with respect to Letters of Credit issued or
renewed, on and after the first day of the first calendar month following
delivery to the Bank of the financial statements required to be delivered to
the Bank pursuant to Section 8.8 until the next succeeding effective
date of adjustment pursuant to this Agreement. Each of the financial statements
required to be delivered to the Bank must be delivered to the Bank in
compliance with Section 8.8. If the Borrowers, however, have not timely
delivered their financial statements in accordance with Section 8.8,
then, without limiting any of the rights and remedies available to the Bank by
reason of such noncompliance, at the Bank’s option, commencing on the date upon
which such financial statements should have been delivered in accordance with Section
8.8 and continuing until such financial statements are actually delivered
in accordance with Sections 8.8, it shall be assumed for 


2







purposes of
determining the Applicable LIBOR Rate Margin, the Applicable Base Rate Margin,
the Applicable LOC Fee, and the Applicable Non-Use Fee that the Leverage Ratio
was greater than or equal to 3.25 to 1.00 and the pricing associated with a
Leverage Ratio of greater than or equal to 3.25 to 1.00 will be applicable on
the then applicable Determination Date. As of the date hereof, it shall be
assumed for purposes of determining the Applicable LIBOR Rate Margin, the
Applicable Base Rate Margin, the Applicable LOC Fee, and the Applicable Non-Use
Fee that the Leverage Ratio was greater than or equal to 2.75 to 1.00 and less
than 3.25 to 1.00.


                    “Asset
Disposition” shall mean the sale, lease, assignment or other transfer for
value (each a “Disposition”) by any Borrower or any Subsidiary thereof
to any Person (other than another Borrower or any Subsidiary thereof) of any
asset or right of such Borrower or any Subsidiary thereof (including, the loss,
destruction or damage of any thereof or any actual condemnation, confiscation,
requisition, seizure or taking thereof), other than (a) the Disposition of any
asset which is to be replaced, and is in fact replaced, within ninety (90) days
with another asset performing the same or a similar function, (b) the sale or
lease of inventory in the ordinary course of business and (c) Dispositions
permitted under of Section 6.2 excluding clauses (iii) and (ix) thereof.


                    “Bank
Product Agreements” shall mean those certain agreements entered into from
time to time by the Borrowers (or any of them) or any of their respective
Subsidiaries with the Bank or any Affiliate of the Bank concerning Bank
Products.


                    “Bank
Product Obligations” shall mean, collectively, all obligations,
liabilities, contingent reimbursement obligations, fees, and expenses owing by
the Borrowers (or any of them) and their respective Subsidiaries to the Bank or
any Affiliate of the Bank pursuant to or evidenced by the Bank Product
Agreements and irrespective of whether for the payment of money, whether direct
or indirect, and their absolute or contingent, due or to become due, now
existing or hereafter arising.


                    “Bank
Products” shall mean, collectively, any service or facility extended to the
Borrowers (or any of them) and their Subsidiaries by the Bank or any Affiliate
of the Bank, including: (a) credit cards, (b) credit card processing services,
(c) debit cards, (d) purchase cards, (e) ACH transactions, (f) cash management,
including controlled disbursement, accounts or services, or (g) Hedging
Agreements.


                    “Bankruptcy
Code” shall mean the United States Bankruptcy Code, as now existing or
hereafter amended.


                    “Base
Rate” shall mean the higher of (a) the Prime Rate, and (b) the Federal
Funds Rate plus 0.5% per annum.


                    “Base
Rate Loan” or “Base Rate Loans” shall mean that portion, and
collectively, those portions of the aggregate outstanding principal balance of
the Loans that bear interest at the Base Rate plus the applicable margin
(if any) specified in Section 2.1(b) or 2.2(b), as applicable.


                    “Borrowing
Agent” shall mean IntriCon.


                    “Borrowing
Base Amount” shall mean:


          (a)          an
amount equal to eighty percent (80%) of the net amount (after deduction of such
reserves and allowances as the Bank deems proper and necessary in the exercise
of its commercially reasonable judgment) of all Eligible Accounts of all
Borrowers; plus


3







          (b)          the
lesser of (i) an amount equal to fifty percent (50%) of the lower of cost or
market value (after deduction of such reserves and allowances as the Bank deems
proper and necessary in the exercise of its commercially reasonable judgment)
of all Eligible Inventory of all Borrowers, and (ii) Three Million and 00/100
Dollars ($3,000,000.00); plus


          (c)          the
product of the Equipment Advance Rate multiplied by the net orderly liquidation
value of all Eligible Equipment of all Borrowers as such values are set forth
on the April 2009 appraisal prepared by American Appraisal, a true, correct and
complete copy of which has been delivered to the Bank.


                    “Borrowing
Base Certificate” shall mean a certificate to be signed by the Borrowing
Agent certifying to the accuracy of the Borrowing Base Amount in form and
substance satisfactory to the Bank.


                    “Business
Day” shall mean any day other than a Saturday, Sunday or a legal holiday on
which banks are authorized or required to be closed for the conduct of
commercial banking business in Chicago, Illinois.


                    “Capital
Expenditures” shall mean all expenditures (including Capitalized Lease
Obligations) which, in accordance with GAAP, would be required to be
capitalized and shown on the consolidated balance sheet of the Borrowers, but
excluding expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the
assets being replaced or restored, (ii) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being replaced
or (iii) from the proceeds of an Asset Disposition.


                    
“Capital Lease” shall mean, as to any Person, a lease of any interest in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should be, in accordance
with Financial Accounting Standards Board Statement No. 13, as amended from
time to time, or, if such statement is not then in effect, such statement of
GAAP as may be applicable, recorded as a “capital lease” on the financial
statements of such Person prepared in accordance with GAAP.


                    
“Capital Securities” shall mean, with respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such
ownership interest.


                    
“Capitalized Lease Obligations” shall mean, as to any Person, all rental
obligations of such Person, as lessee under a Capital Lease which are or will
be required to be capitalized on the books of such Person.


                    
“Cash Equivalent Investment” shall mean, at any time, (a) any evidence
of Debt, maturing not more than one year after such time, issued or guaranteed
by the United States government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, or corporate demand
notes, in each case (unless issued by the Bank or its holding company) rated at
least A-l by Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc., (c) any
certificate of deposit, time deposit or banker’s acceptance, maturing not more than
one year after such time, or any overnight Federal Funds transaction that is
issued or sold by the Bank or its holding company (or by a commercial banking
institution that is a member of 


4







the Federal
Reserve System and has a combined capital and surplus and undivided profits of
not less than $500,000,000), (d) any repurchase agreement entered into with the
Bank, or other commercial banking institution of the nature referred to in clause
(c), which (i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c)
above, and (ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of the Bank, or
other commercial banking institution, thereunder, (e) money market accounts or
mutual funds which invest exclusively in assets satisfying the foregoing
requirements, and (f) other short term liquid investments approved in writing
by the Bank.


                    “Change
in Control” shall mean the occurrence of any of the following events: 


          (i)          any
Person or “group” (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934) is or becomes the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a Person will be deemed to have “beneficial ownership” of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the voting power of all classes of voting stock
of IntriCon;


          (ii)         IntriCon
shall fail to own, with the power to vote, 100% of all outstanding capital
stock of each other Borrower;


          (iii)        During
any consecutive two-year period, individuals who at the beginning of such
period constituted the board of directors of IntriCon (together with any new
directors whose election to such board of directors, or whose nomination for
election by the owners of IntriCon, was approved by a vote of 66-2/3% of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors of IntriCon then in office; or


          (iv)        Mark
S. Gorder shall cease to maintain his position of Chief Executive Officer of
IntriCon, or shall otherwise cease to actively manage such day-to-day business
activities of IntriCon and a qualified replacement thereof, as reasonably
determined by the Bank, has not been obtained within ninety (90) days
thereafter.


                    “Collateral”
shall have the meaning set forth in Section 6.1 hereof.


                    “Collateral
Access Agreement” shall mean an agreement in form and substance reasonably
satisfactory to the Bank pursuant to which a mortgagee or lessor of real
property on which Collateral is stored or otherwise located, or a warehouseman,
processor or other bailee of Inventory or other property owned by the Borrowers
(or any of them) and their respective Subsidiaries, acknowledge the Liens of
the Bank and waive any Liens held by such Person on such property, and, in the
case of any such agreement with a mortgagee or lessor, permit the Bank
reasonable access to and use of such real property following the occurrence and
during the continuance of an Event of Default to assemble, complete, inspect,
remove and/or sell any collateral stored or otherwise located thereon.


                    “Contingent
Liability” and “Contingent Liabilities” shall mean, respectively,
each obligation and liability of the Borrowers (or any of them) and all such
obligations and liabilities of the Borrowers (or any of them) incurred pursuant
to any agreement, undertaking or arrangement by which any Borrower: (a)
guarantees, endorses or otherwise becomes or is contingently liable upon (by
direct or indirect agreement, contingent or otherwise, to provide funds for payment,
to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure
a creditor against loss) the indebtedness, dividend,


5







obligation or
other liability of any other Person in any manner (other than by endorsement of
instruments in the course of collection), including any indebtedness, dividend
or other obligation which may be issued or incurred at some future time; (b)
guarantees the payment of dividends or other distributions upon the shares or
ownership interest of any other Person; (c) undertakes or agrees (whether
contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire
any indebtedness, obligation or liability of any other Person or any property
or assets constituting security therefor, (ii) to advance or provide funds for
the payment or discharge of any indebtedness, obligation or liability of any
other Person (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of income,
working capital or other financial condition of any other Person, or (iii) to
make payment to any other Person other than for value received; (d) agrees to
lease property or to purchase securities, property or services from such other
Person with the purpose or intent of assuring the owner of such indebtedness or
obligation of the ability of such other Person to make payment of the
indebtedness or obligation; (e) to induce the issuance of, or in connection
with the issuance of, any letter of credit for the benefit of such other
Person; or (f) undertakes or agrees otherwise to assure a creditor against
loss. The amount of any Contingent Liability shall (subject to any limitation
set forth herein) be deemed to be the outstanding principal amount (or maximum
permitted principal amount, if larger) of the indebtedness, obligation or other
liability guaranteed or supported thereby.


                    “Debt” shall mean, as to any Person, without duplication, (a) all
indebtedness of such Person; (b) all borrowed money of such Person (including principal, interest, fees and charges),
whether or not evidenced by bonds, debentures, notes or similar instruments;
(c) all obligations to pay the deferred purchase price of property or services;
(d) all obligations, contingent or
otherwise, with respect to the maximum face
amount of all letters of credit (whether or not drawn), bankers’
acceptances and similar obligations issued for the account of such Person
(including the Letters of Credit), and all
unpaid drawings in respect of such letters of credit, bankers’ acceptances and
similar obligations; (e) all indebtedness secured by any Lien on any property
owned by such Person, whether or not such indebtedness has been assumed by such
Person (provided, however, if such Person has not assumed or otherwise become
liable in respect of such indebtedness, such indebtedness shall be deemed to be
in an amount equal to the fair market value of the property subject to such Lien at the time of
determination); (f) the aggregate amount of
all Capitalized Lease Obligations of such Person; (g) all Contingent
Liabilities of such Person, whether or not reflected on its balance
sheet; (h) all Hedging Obligations
of such Person; (i) all Debt of any
partnership of which such Person is a general partner; (j) all monetary obligations of such Person under
(i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an
agreement for the use or possession of property creating obligations that do
not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of
such Person (without regard to accounting treatment); and (k) as to the
Borrowers, all Foreign Overdraft Debt. Notwithstanding the foregoing, Debt shall not include trade payables and
accrued expenses incurred by such Person in accordance with customary practices
and in the ordinary course of business of such Person.


                    “Default
Rate” shall mean a per annum rate of interest equal to the Prime Rate plus
two percent (2%).


                    “Depreciation”
shall mean the total amounts added to depreciation, amortization, obsolescence,
valuation and other proper reserves, as reflected on a the consolidated
financial statements of the Borrowers and their Subsidiaries and determined in
accordance with GAAP.


                    “Domestic
Subsidiary” means, with respect to any Person, a Subsidiary of such Person,
which Subsidiary is incorporated or otherwise organized under the laws of a
state of the United States of America.


6







                    “EBITDA”
shall mean, for any period, the sum for such period of: (i) Net Income, plus
(ii) Interest Charges, plus (iii) federal and state income taxes, plus
(iv) Depreciation, plus (v) non-cash management compensation expense, plus
(vi) all other non-cash charges, minus (vii) all non-cash income or
gains, in each case to the extent included in determining Net Income for such
period, minus (viii) all cash payments made in such period on account of
non-cash charges expensed in a prior period, in each case determined on a
consolidated basis, plus, to the extent deducted in arriving at Net
Income for such period, the Transaction Costs.


                    “Eligible
Account” and “Eligible Accounts” shall mean, with respect to each
Borrower, each Account and all such Accounts (exclusive of sales, excise or
other similar taxes) owing to each such Borrower which meets each of the
following requirements:


          (a)          it
is genuine in all respects and has arisen in the ordinary course of the
applicable Borrower’s business from (i) the performance of services by the
applicable Borrower, which services have been fully performed, acknowledged and
accepted by the Account Debtor (provided, however, that up to an
aggregate amount of $500,000 of Accounts which are otherwise Eligible Accounts
hereunder but arise from a “progress billing” (i.e., the services and/or goods
giving rise to such Account have not been fully performed or delivered (as
applicable) by the applicable Borrower) shall not be excluded from Eligible
Accounts solely by reason of this clause (a)(i) so long as (A) no Event of
Default has occurred and is continuing and (B) the Account Debtor with respect
to each such Account is Medtronic, Inc., Starkey Laboratories or Smiths
Medical) or (ii) the sale or lease of Goods by the applicable Borrower,
including C.O.D. sales, which Goods have been completed in accordance with the
Account Debtor’s specifications (if any) and delivered to the Account Debtor,
and such Borrower or the applicable Subsidiary thereof has possession of, or
has delivered to the Bank at the Bank’s request, shipping and delivery receipts
evidencing such delivery;


          (b)          it
is subject to a perfected, first priority Lien in favor of the Bank and is not
subject to any other assignment, claim or Lien, subject only to Permitted Liens
that do not have priority over the Lien in favor of the Bank;


          (c)          it
is the valid, legally enforceable and unconditional obligation of the Account
Debtor with respect thereto, and is not subject to the fulfillment of any
condition whatsoever or to any counterclaim or credit (provided that any
Account which is so subject to a counterclaim or credit shall only be deemed
ineligible pursuant to this clause (c) to the extent of such counterclaims or
credit, so long as such counterclaim or credit does not exceed 25% of such
Account and arises in the ordinary course of such Borrower’s business
consistent with past practices), or to any trade or volume discount, allowance,
discount, rebate or adjustment by the Account Debtor with respect thereto
except for any such trade or volume discount, allowance, discount, rebate or
adjustment that does not exceed 25% of the applicable Account and that is
granted in the ordinary course of such Borrower’s business consistent with past
practices and reflected and/or disclosed on the original invoice for such
Account and/or the Borrowing Base Certificates and other collateral reporting
delivered to the Bank, or to any claim by such Account Debtor denying liability
thereunder in whole or in part (provided that any Account which is so subject
to a partial denial of liability shall only be deemed ineligible pursuant to
this clause (c) to the extent of such partial denial, so long as such partial
denial does not exceed 25% of such Account and arises in the ordinary course of
such Borrower’s business consistent with past practices) and the Account Debtor
has not refused to accept and/or has not returned or offered to return any of
the Goods or services which are the subject of such Account; (provided that any
Account which is so subject to any refusal to accept or return or offer to
return some but not all of such Goods or services shall only be deemed
ineligible pursuant to this clause (c) to the extent of 


7







such refused
or returned Goods or services, so long as such to accept or return or offer to
return does not exceed 25% of such Account and arises in the ordinary course of
such Borrower’s business consistent with past practices);


          (d)          the
Account Debtor with respect thereto is a resident or citizen of, and is located
within, the United States or Canada (other than the province of Quebec), unless
(x) such Account is insured pursuant to a policy of credit insurance maintained
by Borrowers and issued by an insurer and with deductibles satisfactory to the
Bank in the exercise of its commercially reasonable judgment or (y) the sale of
goods or services giving rise to such Account is on letter of credit, banker’s
acceptance or other credit support terms satisfactory to the Bank in the
exercise of its commercially reasonable judgment;


          (e)          it
is not an Account arising from a “sale on approval”, “sale or return”,
“consignment”, “guaranteed sale” or “bill and hold”, and it is not subject to
any other repurchase or return agreement;


          (f)          it
is not an Account with respect to which possession and/or control of the goods
sold giving rise thereto is held, maintained or retained by the applicable
Borrower (or by any agent or custodian of such Borrower) for the account of, or
subject to, further and/or future direction from the Account Debtor with
respect thereto;


          (g)          it
has not arisen out of contracts with the United States or any department,
agency or instrumentality thereof, unless the applicable Borrower has assigned
its right to payment of such Account to the Bank pursuant to the Assignment of
Claims Act of 1940, and evidence (satisfactory to the Bank) of such assignment
has been delivered to the Bank, or any state, county, city or other
governmental body, or any department, agency or instrumentality thereof;


          (h)          if
the applicable Borrower maintains a credit limit for an Account Debtor, the
aggregate dollar amount of Accounts due from such Account Debtor, including
such Account, does not exceed such credit limit as increased by such Borrower
from time to time in the exercise of its commercially reasonable judgment;


          (i)          if
the Account is evidenced by chattel paper or an instrument, the originals of
such chattel paper or instrument shall have been endorsed and/or assigned and
delivered to the Bank or, in the case of electronic chattel paper, shall be in
the control of the Bank, in each case in a manner satisfactory to the Bank;


          (j)          such
Account is evidenced by an invoice delivered to the related Account Debtor and
is not more than (i) sixty (60) days past the due date thereof, or (ii) one
hundred twenty (120) days past the original invoice date thereof, in each case
according to the original terms of sale;


          (k)          it
is not an Account with respect to an Account Debtor that is located in any
jurisdiction which has adopted a statute or other requirement with respect to
which any Person that obtains business from within such jurisdiction must file
a notice of business activities report or make any other required filings in a
timely manner in order to enforce its claims in such jurisdiction’s courts
unless (i) such notice of business activities report has been duly and timely
filed or the applicable Borrower is exempt from filing such report and has
provided the Bank with satisfactory evidence of such exemption or (ii) the
failure to make such filings may be cured retroactively by the applicable
Borrower for a nominal fee;


8







          (l)          the
Account Debtor with respect thereto is not an Affiliate of any such Borrower;


          (m)          such
Account does not arise out of a contract or order which, by its terms, forbids
or makes void or unenforceable the assignment thereof by the applicable
Borrower to the Bank and is not unassignable to the Bank for any other reason;


          (n)          there
is no bankruptcy, insolvency or liquidation proceeding pending by or against
the Account Debtor with respect thereto, nor has the Account Debtor suspended
business, made a general assignment for the benefit of creditors or failed to
pay its debts generally as they come due,
and/or, to Borrower’s knowledge, no
condition or event has occurred that could reasonably be expected to have a
material adverse effect (as determined by the Bank in its commercially
reasonable judgment) on the Account Debtor which would require the Accounts of
such Account Debtor to be deemed uncollectible in accordance with GAAP;


          (o)          it
is not owed by an Account Debtor with respect to which twenty five percent
(25.00%) or more of the aggregate amount of outstanding Accounts owed at such
time by such Account Debtor is classified as ineligible under any other clause
of this definition;


          (p)          if
the aggregate amount of all Accounts owed by the Account Debtor thereon exceeds
twenty five percent (25.00%) of the aggregate amount of all Accounts at such
time, then all Accounts owed by such Account Debtor in excess of such amount
shall be deemed ineligible; and


          (q)          it
does not violate the negative covenants and does satisfy the affirmative
covenants of the applicable Borrower contained in this Agreement, and it is
otherwise not unacceptable to the Bank for any other reason as determined by
the Bank in the exercise of its commercially reasonable judgment.


An Account
which is at any time an Eligible Account, but which subsequently fails to meet
any of the foregoing requirements, shall forthwith cease to be an Eligible
Account. Further, with respect to any Account, if the Bank at any time
hereafter determine in the exercise of its commercially reasonable judgment
that the prospect of payment or performance by the Account Debtor with respect
thereto is materially impaired for any reason whatsoever, such Account shall
cease to be an Eligible Account after notice of such determination is given to
the applicable Borrower.


                    “Eligible
Equipment” shall mean, with respect to each Borrower, all Equipment of the
applicable Borrower which meets each of the following requirements:


          (a)          it
is covered by the appraisal conducted by American Appraisal in April 2009, a
true, correct and complete copy of which has been delivered to the Bank;


          (b)          it
is listed on Schedule 1.1 attached hereto;


          (c)          such
Borrower has good title to such Equipment;


          (d)          such
Borrower has the right to subject such Equipment to a Lien in favor of the
Bank;


          (e)          such
Equipment is subject to a first priority perfected Lien in favor of the Bank
and is free and clear of all other Liens of any nature whatsoever (except for
Permitted Liens which do not have priority over the Lien in favor of the Bank);


9







          (f)          the
full purchase price for such Equipment has been paid by such Borrower; 


          (g)          such
Equipment is located on premises (i) owned by the Borrowers, which premises are
subject to a first priority perfected Lien in favor of the Bank, or (ii) leased
by the Borrowers where (x) the lessor has delivered to the Bank a landlord
waiver in form and substance reasonably satisfactory to the Bank or (y) the
Bank has established reserves with respect to such location as described in Section
3.1(a)(v);


          (h)          such
Equipment is in good working order and condition (ordinary wear and tear
excepted) and is used or held for use by such Borrower in the ordinary course
of business of such Borrower; 


          (i)          such
Equipment is not subject to any agreement which restricts the ability of such
Borrower to use, sell, transport or dispose of such Equipment or which
restricts the Bank’s ability to take possession of, sell or otherwise dispose
of such Equipment; and


          (j)          such
Equipment does not constitute “fixtures” under the applicable laws of the
jurisdiction in which such Equipment is located.


                    “Eligible
Inventory” shall mean, with respect to each Borrower, all Inventory of the
applicable Borrower which meets each of the following requirements:


          (a)          it
is subject to a perfected, first priority Lien in favor of the Bank and is not
subject to any other assignment, claim or Lien, subject only to Permitted Liens
that do not have priority over the Lien in favor of the Bank;


          (b)          it
is salable and not slow-moving, obsolete or discontinued, as determined by the
Bank in the exercise of its commercially reasonable judgment;


          (c)          it
is in the possession and control of the applicable Borrower and it is stored
and held in facilities owned by such Borrower or, if such facilities are not so
owned, the Bank is in possession of a Collateral Access Agreement with respect
thereto (provided that, Inventory maintained at any such facility not owned by
Borrower and for which the Bank does not possess a Collateral Access Agreement
shall not be deemed ineligible under this clause (c) to the extent the value of
such Inventory does not exceed $100,000 at any such facility or $200,000 for
all such facilities in the aggregate or to the extent the Bank has established
reserves with respect to such location as described in Section 3.1(a)(v));


          (d)          it
is not Inventory produced in violation of the Fair Labor Standards Act and
subject to the “hot goods” provisions contained in Title 29 U.S.C. §215;


          (e)          it
is not subject to any agreement or license which would restrict the Bank’s
ability to sell or otherwise dispose of such Inventory; 


          (f)          it
is located in the United States or in any territory or possession of the United
States that has adopted Article 9 of the Uniform Commercial Code;


          (g)          it
is not “in transit” to applicable Borrower or held by such Borrower on
consignment; 


          (h)          it
is not “work-in-progress” Inventory;


10







          (i)          it
is not supply items, packaging or any other similar materials, provided that,
nothing contained in the foregoing shall be deemed to apply to the applicable
Borrower’s raw materials, which shall be Eligible Inventory so long as it
complies with all of the other provisions of this definition;


          (j)          it
is not identified to any purchase order or contract to the extent progress or
advance payments are received with respect to such Inventory; 


          (k)          it
does not breach any of the representations, warranties or covenants pertaining
to Inventory set forth in the Loan Documents; and


          (l)          the
Bank shall not have determined in the exercise of its commercially reasonable
judgment that it is unacceptable due to age, type, category, quality, quantity
and/or any other reason whatsoever.


Inventory
which is at any time Eligible Inventory but which subsequently fails to meet
any of the foregoing requirements shall forthwith cease to be Eligible
Inventory.


                    “Employee
Plan” includes any pension, stock bonus, employee stock ownership plan,
retirement, profit sharing, deferred compensation, stock option, bonus or other
incentive plan, whether qualified or nonqualified, or any disability, medical,
dental or other health plan, life insurance or other death benefit plan,
vacation benefit plan, severance plan or other employee benefit plan or
arrangement, including those pension, profit-sharing and retirement plans of
any Borrower described from time to time in the consolidated financial
statements of Borrowers and any pension plan, welfare plan, Defined Benefit
Pension Plans (as defined in ERISA) or any multi-employer plan, maintained or
administered by such Borrower or to which such Borrower is a party or may have
any liability or by which such Borrower is bound. 


                    “Environmental
Laws” shall mean all present or future federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative or judicial orders, consent agreements, directed
duties, requests, licenses, authorizations and permits of, and agreements with,
any governmental authority, in each case relating to any matter arising out of
or relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, emission, release, threatened release,
control or cleanup of any Hazardous Substance. 


                    “Equipment
Advance Rate” shall mean, for each period set forth in the chart below, the
percentage set forth opposite such period:


	
  

 	
  

 	
  

 
	
 Period 



 	
  

 	
 Equipment Advance Rate 



 
	
 The date hereof through
 and including September 30, 2009

 	
  

 	
 85%

 
	
 October 1, 2009 through
 and including December 31, 2009

 	
  

 	
 77%

 
	
 January 1, 2010 through
 and including March 31, 2010

 	
  

 	
 69%

 
	
 April 1, 2010 through and
 including June 30, 2010

 	
  

 	
 61%

 
	
 July 1, 2010 through and
 including September 30, 2010

 	
  

 	
 53%

 
	
 October 1, 2010 through and
 including December 31, 2010

 	
  

 	
 45%

 
	
 January 1, 2011 through
 and including March 30, 2011

 	
  

 	
 37%

 
	
 April 1, 2011 through and
 including June 30, 2011

 	
  

 	
 29%

 
	
 July 1, 2011 through and
 including September 30, 2011

 	
  

 	
 21%

 
	
 October 1, 2011 through
 and including December 31, 2011

 	
  

 	
 13%

 
	
 January 1, 2012 through
 and including March 31, 2012

 	
  

 	
 5%

 
	
 April 1, 2012 and
 thereafter

 	
  

 	
 0%

 


11







                    “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time.


                    “Event
of Default” shall mean any of the events or conditions which are set forth
in Section 11 hereof.


                    “Existing
Seller Debt” shall mean all indebtedness and other obligations of RTIE
under the promissory note made payable by RTIE in connection with the
acquisition by RTIE of Amecon, Inc.


                    “Federal
Funds Rate” shall mean, for any day, a fluctuating interest rate equal for
each day during such period to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Bank from three Federal funds brokers of recognized standing
selected by the Bank. The Bank’s determination of such rate shall be binding
and conclusive absent manifest error.


                    “Final
Payment” means (a) the indefeasible payment in full in cash of all
outstanding Loans, together with accrued and unpaid interest thereon, (b) the
cancellation and return of all outstanding Letters of Credit (or alternatively,
with respect to each such Letter of Credit, the furnishing to the Bank of a
cash deposit or standby letter(s) of credit in amounts and pursuant to
documentation acceptable to the Bank), (c) the payment in full in cash of the
accrued and unpaid fees, and (d) the payment in full in cash of all
reimbursable expenses and other Obligations (other than contingent
indemnification obligations to the extent no claim giving rise thereto has been
asserted), including without limitation any applicable LIBOR breakage
obligations arising under Section 2.4(a) as a result of any such payment
of the Loans and any related Hedging Obligations.


                    “Fixed
Charge Coverage Ratio” shall have the meaning set forth in Section 10.3
hereof.


                    “Foreign
Overdraft Debt” shall mean all indebtedness and other obligations of one or
more of the Borrowers (and/or any of their respective Subsidiaries) under that
certain senior secured line of credit now or hereafter made available by the
Oversea-Chinese Banking Corporation Ltd. and any replacement thereof.


                    “Foreign
Subsidiary” means, with respect to any Person, a Subsidiary of such Person,
which Subsidiary is not a Domestic Subsidiary.


                    “Funded
Debt” shall mean, as to any Person, all Debt of such Person that matures
more than one year from the date of its creation (or is renewable or
extendible, at the option of such Person, to a date more than one year from
such date). For avoidance of doubt and without limiting the generality of the
foregoing, as to the Borrowers (and/or any of their respective Subsidiaries),
Funded Debt includes Foreign Overdraft Debt, Subordinated Debt evidenced by the
Selling Shareholder Note, and Existing Seller Debt.


                    “GAAP”
shall mean generally accepted accounting principles set forth from time to time
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards 


12







Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of
the date of determination (subject to the provisions of Section 1.2 of
this Agreement below), provided, however, that interim financial statements or
reports shall be deemed in compliance with GAAP despite the absence of
footnotes and fiscal year-end adjustments as required by GAAP.


                    “Hazardous
Substances” shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could reasonably be
expected to become friable, urea formaldehyde foam insulation, dielectric fluid
containing levels of polychlorinated biphenyls, radon gas and mold;
(b) any chemicals, materials, pollutant or substances defined as or
included in the definition of “hazardous substances”, “hazardous waste”,
“hazardous materials”, “extremely hazardous substances”, “restricted hazardous
waste”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or
words of similar import, under any applicable Environmental Law; and
(c) any other chemical, material or substance, the exposure to, or release
of which is prohibited, limited or regulated by any governmental authority or
for which any duty or standard of care is imposed pursuant to, any
Environmental Law. 


                    “Hedging
Agreement” shall mean any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest
rates, currency exchange rates or commodity prices.


                    “Hedging
Obligation” shall mean, with respect to any Person, any liability of such
Person under any Hedging Agreement.


                    “Intellectual
Property” shall mean the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including copyrights,
patents, service marks and trademarks, and all registrations and applications
for registration therefor and all licensees thereof, trade names, domain names,
technology, know-how and processes, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.


                    “Interest
Charges” shall mean, with respect to the Borrowers and their Subsidiaries
on a consolidated basis, for any period, the sum of: (a) all interest, charges
and fees and related expenses payable with respect to that fiscal period to a
lender in connection with borrowed money or the deferred purchase price of
assets that are treated as interest in accordance with GAAP, plus (b)
the portion of Capitalized Lease Obligations with respect to that fiscal period
that should be treated as interest in accordance with GAAP, plus (or minus)
(c) the net amount paid or payable in cash (or received or receivable in cash)
(without duplication) during that period with respect to any Hedging
Agreements.


                    “Interest
Period” shall mean successive one, two or three month periods, beginning
and ending as provided in this Agreement.


                    “Investment”
shall mean, with respect to any Person, any investment in another Person by
acquisition of any debt or equity security, by making any loan or advance or by
becoming obligated with respect to a Contingent Liability in respect of
obligations of such other Person (other than travel and similar advances to
employees in the ordinary course of business).


                    “Letter
of Credit” and “Letters of Credit” shall mean, respectively, a letter
of credit and all such letters of credit issued by the Bank, in its sole
discretion, upon the execution and delivery by the Borrowing Agent and the
acceptance by the Bank of a Master Letter of Credit Agreement and a Letter of
Credit Application, as set forth in Section 2.7 of this Agreement.


13







                    “Letter
of Credit Application” shall mean, with respect to any request for the
issuance of a Letter of Credit, a letter of credit application in the form
being used by the Bank at the time of such request for the type of Letter of
Credit requested.


                    “Letter
of Credit Commitment” shall mean, at any time, an amount equal to the
lesser of (a) the Revolving Loan Commitment minus the aggregate amount
of all Revolving Loans outstanding, (b) the Borrowing Base Amount minus
the aggregate amount of all Revolving Loans outstanding, or (c) Two Hundred
Thousand and 00/100 Dollars ($200,000.00).


                    “Letter
of Credit Maturity Date” shall mean the date that is twenty five (25) days
prior to the Revolving Loan Maturity Date.


                    “Letter
of Credit Obligations” shall mean, at any time, an amount equal to the
aggregate of the original face amounts of all Letters of Credit minus the sum
of (i) the amount of any reductions in the original face amount of any Letter
of Credit which did not result from a draw thereunder, (ii) the amount of any
payments made by the Bank with respect to any draws made under a Letter of
Credit for which the Borrowers have reimbursed the Bank, (iii) the amount of
any payments made by the Bank with respect to any draws made under a Letter of
Credit which have been converted to a Revolving Loan as set forth in Section
2.7, and (iv) the portion of any issued but expired or surrendered Letter
of Credit which has not been drawn by the beneficiary thereunder. For purposes
of determining the outstanding Letter of Credit Obligations at any time, the
Bank’s acceptance of a draft drawn on the Bank pursuant to a Letter of Credit
shall constitute a draw on the applicable Letter of Credit at the time of such
acceptance.


                    “Leverage
Ratio” shall have the meaning set forth in Section 10.2 hereof.


                    “LIBOR”
shall mean a rate of interest equal to (a) the per annum rate of interest at
which United States dollar deposits for a period equal to the relevant Interest
Period are offered in the London Interbank Eurodollar market at 11:00 a.m.
(London time) two Business Days prior to the commencement of such Interest
Period (or three Business Days prior to the commencement of such Interest
Period if banks in London, England were not open and dealing in offshore United
States dollars on such second preceding Business Day), as displayed in the Bloomberg
Financial Markets system (or other authoritative source selected by
the Bank in its sole discretion), divided by (b) a number determined by
subtracting from 1.00 the then stated maximum reserve percentage for
determining reserves to be maintained by member banks of the Federal Reserve System
for Eurocurrency funding or liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D). The Bank’s determination
of LIBOR shall be conclusive, absent manifest error.


                    “LIBOR
Loan” or “LIBOR Loans” shall mean that portion, and collectively
those portions, of the aggregate outstanding principal balance of the Loans
that bear interest at the LIBOR Rate, of which at any time, the Borrowing Agent
may identify no more than six (6) advances of the Revolving Loans and/or the
Term Loan which bear interest at the LIBOR Rate.


                    “LIBOR
Rate” shall mean a per annum rate of interest equal to LIBOR for the
relevant Interest Period, which LIBOR Rate shall remain fixed during such
Interest Period.


                    “Lien”
shall mean, with respect to any Person, any interest granted by such Person in
any real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease)
which secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, title retention lien, charge or other security
interest of any kind, whether arising by contract, as a matter of law, by
judicial process or otherwise.


14







                    “Loan
Documents” shall mean each of the agreements, documents, instruments and
certificates set forth in Section 3.1 hereof, and any and all such other
instruments, documents, certificates and agreements from time to time executed
and delivered by the Borrowers (or any of them), or any of their respective
Subsidiaries for the benefit of the Bank pursuant to any of the foregoing, and
all amendments, restatements, supplements and other modifications thereto.


                    “Loans”
shall mean, collectively, all Revolving Loans and the Term Loan made by the
Bank to the Borrowers, in each case under and pursuant to this Agreement.


                    “Lockbox
Agreement” shall have the meaning set forth in Section 3.1 hereof.


                    “Master
Letter of Credit Agreement” shall have the meaning set forth in Section
2.7 hereof.


                    “Material
Adverse Effect” shall mean (a) a material adverse change in, or a material
adverse effect upon, the assets, business, properties, condition (financial or
otherwise) or results of operations of the Borrowers taken as a whole, (b) a
material impairment of the ability of the Borrowers taken as a whole to perform
any of the Obligations under any of the Loan Documents, or (c) a material
adverse effect on (i) any substantial portion of the Collateral, (ii) the
legality, validity, binding effect or enforceability against the Borrowers (or
any of them) of any of the Loan Documents, (iii) the perfection or priority of the
Liens on any material portion of the Collateral granted to the Bank under any
Loan Document, or (iv) the rights or remedies of the Bank under any Loan
Document.


                    “Net
Cash Proceeds” shall mean:


          (a)          with
respect to any Asset Disposition, the aggregate cash proceeds (including cash
proceeds received pursuant to policies of insurance or by way of deferred
payment of principal pursuant to a note, installment receivable or otherwise,
but only as and when received) received by the Borrowers (or any of them)
pursuant to such Asset Disposition net of (i) the direct costs relating to such
sale, transfer or other disposition (including sales commissions and legal,
accounting and investment banking fees), (ii) taxes paid or reasonably
estimated by the Borrowers (or any of them) to be payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), and (iii) amounts required to be applied to the
repayment of any Debt secured by a Lien on the asset subject to such Asset
Disposition (other than the Loans);


          (b)          with
respect to any issuance of Capital Securities, the aggregate cash proceeds
received by the Borrowers (or any of them) pursuant to such issuance, net of
the direct costs relating to such issuance (including sales and underwriters’
commissions and legal, accounting and investment banking fees); and


          (c)          with
respect to any issuance of Debt, the aggregate cash proceeds received by the
Borrowers (or any of them) pursuant to such issuance, net of the direct costs
of such issuance (including up-front, underwriters’ and placement fees and
legal, accounting and investment banking fees).


                    “Net
Income” shall mean, with respect to the Borrowers and their respective
Subsidiaries for any period, the consolidated net income (or loss) of the
Borrowers and their respective Subsidiaries for such period as determined in
accordance with GAAP, excluding any gains from Asset Dispositions, any
extraordinary gains and any gains from discontinued operations. For avoidance
of doubt, it is understood and agreed that for all periods ending on or prior
to the date on which the Acquisition was


15







consummated,
the term “Net Income” shall consist of the sum of (a) the consolidated net
income (or loss) of the Borrowers other than Datrix, and their respective
Subsidiaries, plus (b) the consolidated net income (or loss) of Datrix
and its Subsidiaries, in each case for such period as determined in accordance
with GAAP, excluding any gains from Asset Dispositions, any
extraordinary gains and any gains from discontinued operations. 


                    “Non-Excluded
Taxes” shall have the meaning set forth in Section 2.8(a) hereof.


                    “Note”
and “Notes” shall mean, respectively, each of and collectively, the
Revolving Note and the Term Note.


                    “Obligations”
shall mean the Loans, as evidenced by any Note, all interest accrued thereon
(including interest which would be payable as post-petition in connection with
any bankruptcy or similar proceeding, whether or not permitted as a claim
thereunder), any fees due the Bank hereunder, any expenses incurred by the Bank
hereunder, including without limitation, all liabilities and obligations under
this Agreement, under any other Loan Document, any reimbursement obligations of
the Borrowers (or any of them) in respect of Letters of Credit, all Hedging
Obligations of the Borrowers (or any of them) which are owed to the Bank or any
Affiliate of the Bank, and all Bank Product Obligations of the Borrowers (or
any of them), and any and all other liabilities and obligations owed by the
Borrowers (or any of them), any of their respective Subsidiaries or any other
Obligor (individually and collectively) to the Bank from time to time,
howsoever created, arising or evidenced, whether direct or indirect, joint or
several, absolute or contingent, now or hereafter existing, or due or to become
due, together with any and all renewals, extensions, restatements or
replacements of any of the foregoing.


                    “Obligor”
shall mean each Borrower, any guarantor, accommodation endorser, third party
pledgor, or any other party liable with respect to all or any portion of the
Obligations.


                    “Organizational
Identification Number” means, with respect to a Borrower, the
organizational identification number assigned to such Borrower by the
applicable governmental unit or agency of the jurisdiction of organization of
such Borrower.


                    “Other
Taxes” shall mean any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from the
execution, delivery, enforcement or registration of, or otherwise with respect
to, this Agreement or any of the other Loan Documents.


                    “Permitted
Liens” shall mean (a) Liens for Taxes, assessments or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings so long as
the applicable Borrower(s) shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP and, such contest proceedings stay the
foreclosure of such Lien or the sale of any portion of the Collateral to
satisfy such claim; (b) Liens arising in the ordinary course of business (such
as (i) Liens of carriers, warehousemen, mechanics and materialmen and other
similar Liens imposed by law, and (ii) Liens in the form of deposits or pledges
incurred in connection with worker’s compensation, unemployment compensation
and other types of social security (excluding Liens arising under ERISA) or in
connection with surety bonds, bids, performance bonds and similar obligations)
for sums not overdue or being contested in good faith by appropriate
proceedings and not involving any advances or borrowed money or the deferred
purchase price of property or services, which do not in the aggregate
materially detract from the value of the property or assets of the Borrowers
(or any of them) or materially impair the use thereof in the operation of such
Borrower’s business and, in each case, so long as the applicable Borrower(s)
shall set aside on its books adequate reserves with respect thereto in accordance
with GAAP and, such contest proceedings stay the foreclosure of such Lien or
the sale of any portion of the Collateral to satisfy such claim; (c) Liens
described on Schedule 9.2 as of 


16







the date
hereof; (d) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding Fifty Thousand and 00/100 Dollars ($50,000.00) in the
aggregate arising in connection with court proceedings, provided the
execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings and to the extent such judgments or awards do not
constitute an Event of Default under Section 11.8 hereof; (e) easements,
rights of way, restrictions, minor defects or irregularities in title and other
similar Liens not interfering in any material respect with the ordinary conduct
of the business of the Borrowers (or any of them); (f) subject to the
limitation set forth in Section 9.1(e), Liens arising in connection with
purchase money Debt and Capitalized Lease Obligations (and attaching only to
the property being purchased or leased); (g) subject to the limitation set
forth in Section 9.1(e), Liens that constitute purchase money security
interests on any property securing Debt incurred for the purpose of financing
all or any part of the cost of acquiring such property, provided that
any such Lien attaches to such property within twenty (20) days of the
acquisition thereof and attaches solely to the property so acquired; and
(h) Liens granted to the Bank hereunder and under the Loan Documents.


                    “Person”
shall mean any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.


                    “Pledged
Entities” means, collectively, Inc., RTIE, Tibbetts and Datrix.


                    “Pledged
Equity Interests” means all of the Capital Securities of the Pledged
Entities, in each case now or hereafter owned by IntriCon, together with the
certificates or other agreements or instruments, if any, representing or
evidencing such Capital Securities, and all options. The term Pledged Equity
Interests shall specifically include, but shall not be limited to:


          (a)          all
capital stock, membership interests, partnership interests, shares or
securities representing a dividend on any of the Pledged Equity Interests, or
representing a distribution or return of capital upon or in respect of the
Pledged Equity Interests, or resulting from a split, revision, reclassification
or other exchange therefor, and any subscriptions, warrants, rights or options
issued to the holder of, or otherwise in respect of, the Pledged Equity
Interests; and


          (b)          without
affecting the obligations of IntriCon or any other Borrower under any provision
prohibiting such action hereunder, in the event of any consolidation or merger
involving the issuer of any Pledged Equity Interests and in which such issuer
is not the surviving entity, all shares of each class of Capital Securities or other equity
interest of the successor entity formed by or resulting from such consolidation
or merger.


                    “Prime
Rate” shall mean the floating per annum rate of interest which at any time,
and from time to time, shall be most recently announced by the Bank as its
Prime Rate, which is not intended to be the Bank’s lowest or most favorable
rate of interest at any one time. The effective date of any change in the Prime
Rate shall for purposes hereof be the date the Prime Rate is changed by the
Bank. The Bank shall not be obligated to give notice of any change in the Prime
Rate.


                    “Regulatory
Change” shall mean the introduction of, or any change in any applicable
law, treaty, rule, regulation or guideline or in the interpretation or
administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over the Bank or
its lending office.


17








                       “Revolving
Interest Rate” shall mean, with respect to any Loan, the Borrowing Agent’s
option from time to time of (i) a per annum rate of interest equal to the LIBOR
Rate plus the Applicable LIBOR Rate Margin for Revolving Loans, or (ii)
a floating per annum rate of interest equal to the Base Rate plus the
Applicable Base Rate Margin for Revolving Loans.


                       “Revolving
Loan” and “Revolving Loans” shall mean, respectively, each direct
advance and the aggregate of all such direct advances made by the Bank to the
Borrowers (or any of them) under and pursuant to this Agreement, as set forth
in Section 2.1 of this Agreement.


                       “Revolving
Loan Availability” shall mean, at any time, an amount equal to the lesser
of (a) the Revolving Loan Commitment minus the Letter of Credit
Obligations, or (b) the Borrowing Base Amount minus the Letter of Credit
Obligations.


                       “Revolving
Loan Commitment” shall mean Eight Million and 00/100 Dollars ($8,000,000.00).


                       “Revolving
Loan Mandatory Prepayment” shall have the meaning set forth in Section
2.1(c)(ii) hereof.


                       “Revolving
Loan Maturity Date” shall mean August 13, 2012, unless extended by the Bank
pursuant to any modification, extension or renewal note executed by the
Borrowers and accepted by the Bank in its sole and absolute discretion in
substitution for the Revolving Note.


                       “Revolving
Note” shall mean a revolving note in the form prepared by and acceptable to
the Bank, dated as of the date hereof, in the amount of the Revolving Loan
Commitment and maturing on the Revolving Loan Maturity Date, duly executed by
the Borrowers and made jointly and severally payable to the order of the Bank,
together with any and all renewal, extension, modification or replacement notes
executed by the Borrowers and delivered to the Bank and given in substitution
therefor.


                       “Selling
Shareholder Note” means that certain promissory note dated as of August 13,
2009 in the original principal amount of $1,050,000.00 made payable by IntriCon
to the Selling Shareholder, as the same may be amended, supplemented, restated
or otherwise modified from time to time.


                       “Selling
Shareholder Subordination Agreement” means that certain Subordination
Agreement made by the Selling Shareholder in favor of the Bank bearing even
date herewith, as the same may be amended, restated, supplemented or otherwise
modified from time to time.


                       “Selling
Shareholder” means, Jon V. Barron, an adult individual.


                       “Senior
Debt” shall mean all Debt of the Borrowers other than Subordinated Debt.


                       “Subject
Agreements” shall mean, collectively, (a) that certain Patent License
Agreement made effective as of January 1, 1997 by and between IntriCon and K/S
HIMPP, a partnership organized and existing under the laws of Denmark, and (b)
that certain Strategic Alliance Agreement dated as of October 1, 2008 by and
between IntriCon and Dynamic Hearing Pty Ltd, a corporation organized and
existing under the laws of Victoria, Australia, in each case as the same may be
amended, restated, supplemented or otherwise modified from time to time.


                       “Subordinated
Debt” shall mean, collectively, (a) the Debt evidenced by the Selling
Shareholder Note and (b) that portion of the other Debt of the Borrowers (or
any of them) which is 


18







subordinated to the Obligations in a manner satisfactory to the Bank,
including subordination of right and time of payment of principal and interest,
priority of collateral security (if any) and remedies enforcement.


                       “Subordinated
Debt Default” means the occurrence of any of the following (or any
combination of the following) other than as a result of the operation of the
applicable subordination agreement or subordination provisions: (i) a default
or breach of or under any of the Subordinated Debt Documents, (ii) any event or
circumstance that would become a default or breach on a Subordinated Creditor’s
election or would become a default or breach after notice, the lapse of time,
or on the satisfaction of any other condition, or all of the foregoing, or
(iii) the maturity of the Subordinated Debt without the Subordinated Debt being
fully paid, performed and satisfied.


                       “Subordinated
Debt Documents” means, collectively, (i) the Selling Shareholder Note, and
(ii) any and all other agreements, instruments, and documents signed or
delivered by or on behalf of any Borrower in connection with the Subordinated
Debt (other than the Acquisition Documents), as any or all of the foregoing
documents, instruments, and agreements are now in effect or, subject to Section
9.16, as at any time after the date of this Agreement amended, modified,
supplemented, restated, renewed, extended, or otherwise changed and any
documents, instruments, or agreements given, subject to Section 9.16, in
substitution of any of them.


                       “Subsidiary”
and “Subsidiaries” shall mean, respectively, with respect to any Person,
each and all such corporations, partnerships, limited partnerships, limited
liability companies, limited liability partnerships, joint ventures or other
entities of which or in which such Person owns, directly or indirectly, such
number of outstanding Capital Securities as have more than fifty percent
(50.00%) of the ordinary voting power for the election of directors or other
managers of such corporation, partnership, limited liability company or other
entity. Unless the context otherwise requires, each reference to Subsidiaries
herein shall be a reference to Subsidiaries of any Borrower.


                       “Tangible
Assets” shall mean the aggregate total of all assets appearing on the
consolidated balance sheets of the Borrowers prepared in accordance with GAAP
(with Inventory being valued at the lower of cost or market), after deducting
all proper reserves (including reserves for Depreciation) minus the sum of (i)
goodwill, patents, trademarks, prepaid expenses, deposits, deferred charges and
other personal property which is classified as intangible property in
accordance with GAAP, and (ii) any amounts due from shareholders, Affiliates,
officers or employees of the Borrowers. 


                       “Taxes”
shall mean any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings, and any and all liabilities
(including interest and penalties and other additions to taxes) with respect to
the foregoing.


                       “Term
Interest Rate” shall mean, with respect to any Loan, the Borrowing Agent’s
option from time to time of (i) a per annum rate of interest equal to the LIBOR
Rate plus the Applicable LIBOR Rate Margin for the Term Loan, or (ii) a
floating per annum rate of interest equal to the Base Rate plus the
Applicable Base Rate Margin for the Term Loan.


                       “Term
Loan” shall mean the direct advance made by the Bank to the Borrowers in
the form of a term loan under and pursuant to this Agreement, as set forth in Section
2.2 of this Agreement.


                       “Term
Loan Commitment” shall mean Three Million Five Hundred Thousand and 00/100
Dollars ($3,500,000.00).


19







                       “Term
Loan Mandatory Prepayment” shall have the meaning set forth in Section
2.2(d) hereof.


                       “Term
Loan Maturity Date” shall mean August 13, 2012, unless extended by the Bank
pursuant to any modification, extension or renewal note executed by the
Borrowers and accepted by the Bank in its sole and absolute discretion in
substitution for the Term Note.


                       “Term
Note” shall mean a term note in the form prepared by and acceptable to the
Bank, dated as of the date hereof, in the amount of the Term Loan Commitment
and maturing on the Term Loan Maturity Date, duly executed by the Borrowers and
made jointly and severally payable to the order of the Bank, together with any
and all renewal, extension, modification or replacement notes executed by the
Borrowers and delivered to the Bank and given in substitution therefor.


                       “Transaction
Costs” means the lesser of (a) $300,000 and (b) the aggregate of all
actual, out-of-pocket costs, fees and other expenses paid or incurred by the
Borrowers between June 1, 2009 and August 31, 2009 relating to the Acquisition
and/or the financing transactions contemplated by this Agreement.


                       “UCC”
shall mean the Uniform Commercial Code in effect in the state of Minnesota from
time to time.


                       “Unmatured
Event of Default” shall mean any event which, with the giving of notice,
the passage of time or both, would constitute an Event of Default.


                       “Voidable
Transfer” shall have the meaning set forth in Section 13.21 hereof. 


          1.2        Accounting
Terms. Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to
amount, in accordance with sound accounting practices and GAAP as used in the
preparation of the consolidated financial statements of the Borrowers on the
date of this Agreement. If any changes in accounting principles or practices
from those used in the preparation of the financial statements are hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or any successor thereto or
agencies with similar functions), which results in a material change in the
method of accounting in the financial statements required to be furnished to
the Bank hereunder or in the calculation of financial covenants, standards or
terms contained in this Agreement, the parties hereto agree to enter into good
faith negotiations to amend such provisions so as equitably to reflect such
changes to the end that the criteria for evaluating the financial condition and
performance of the Borrowers will be the same after such changes as they were before
such changes; and until any such amendment is agreed on and/or if the parties
fail to agree on the amendment of such provisions, Borrowers will furnish
consolidated financial statements in accordance with such changes, but shall
provide calculations for all financial covenants, perform all financial
covenants and otherwise observe all financial standards and terms in accordance
with applicable accounting principles and practices in effect immediately prior
to such changes. 


          1.3        Other
Terms Defined in UCC. All other capitalized words and phrases used herein
and not otherwise specifically defined herein shall have the respective
meanings assigned to such terms in the UCC, to the extent the same are used or
defined therein.


20







          1.4        Other
Interpretive Provisions.


	
  

 	
  

 
	
  

 	
              (a)          The
 meanings of defined terms are equally applicable to the singular and plural
 forms of the defined terms. Whenever the context so requires, the neuter
 gender includes the masculine and feminine, the single number includes the
 plural, and vice versa, and in particular the word “Borrower” shall be so
 construed.

 
	
  

 	
  

 
	
  

 	
              (b)          Section
 and Schedule references are to this Agreement unless otherwise specified. The
 words “hereof”, “herein” and “hereunder” and words of similar import when
 used in this Agreement shall refer to this Agreement as a whole and not to
 any particular provision of this Agreement.

 
	
  

 	
  

 
	
  

 	
              (c)          The
 term “including” is not limiting, and means “including, without limitation”.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
              (e)          Unless
 otherwise expressly provided herein, (i) references to agreements
 (including this Agreement and the other Loan Documents) and other contractual
 instruments shall be deemed to include all subsequent amendments,
 restatements, supplements and other modifications thereto, provided,
 however, that the foregoing provision shall not limit or otherwise adversely
 affect any of the Bank’s rights or remedies in the event any such amendments,
 restatements, supplements or other modifications are prohibited by the terms
 of any Loan Document, and (ii) references to any statute or regulation
 shall be construed as including all statutory and regulatory provisions
 amending, replacing, supplementing or interpreting such statute or
 regulation.

 
	
  

 	
  

 
	
  

 	
              (f)          To
 the extent any of the provisions of the other Loan Documents are inconsistent
 with the terms of this Agreement, the provisions of this Agreement shall
 govern.

 
	
  

 	
  

 
	
  

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

 



Section
2.       COMMITMENT OF
THE BANK.


           2.1        Revolving
 Loans.


	
  

 	
  

 
	
  

 	
              (a)          Revolving
 Loan Commitment. Subject to the terms and conditions of this Agreement
 and the other Loan Documents, and in reliance upon the representations and
 warranties of each Borrowing Agent set forth herein and in the other Loan
 Documents, the Bank agrees to make such Revolving Loans at such times as the
 Borrowing Agent may from time to time request until, but not including, the
 Revolving Loan Maturity Date, and in such amounts as the Borrowing Agent may
 from time to time request, provided, however, that the aggregate principal
 balance of all Revolving Loans outstanding at any time shall not exceed the
 Revolving Loan Availability. Revolving Loans made by the Bank may be repaid
 and, subject to the terms and conditions hereof, borrowed again up to, but
 not including the Revolving Loan Maturity Date unless the Revolving Loans are
 otherwise accelerated, terminated or extended as provided in this Agreement.
 The Revolving Loans shall be used by the Borrowers solely for the purpose of
 (i) 

 


21











	
  

 	
  

 	
  

 
	
  

 	
  

 
	
  

 	
 refinancing certain existing Senior Debt, (ii) financing their
 working capital requirements, (iii) financing certain transaction costs, and
 (iv) for general corporate purposes.

 
	
  

 	
  

 
	
  

 	
           (b)          Revolving
 Loan Interest and Payments. Except as otherwise provided in this Section
 2.1(b), the principal amount of the Revolving Loans outstanding from time
 to time shall bear interest at the applicable Revolving Interest Rate.
 Accrued and unpaid interest on the unpaid principal balance of all Revolving
 Loans outstanding from time to time which are Base Rate Loans, shall be due
 and payable monthly, in arrears, commencing on September 30, 2009 and continuing
 on the last day of each calendar month thereafter, and on the Revolving Loan
 Maturity Date. Accrued and unpaid interest on the unpaid principal balance of
 all Revolving Loans outstanding from time to time which are LIBOR Loans shall
 be payable on the last Business Day of each Interest Period, commencing on
 the first such date to occur after the date hereof, on the date of any
 principal repayment of a LIBOR Loan and on the Revolving Loan Maturity Date.
 From and after maturity, or after the occurrence and during the continuation
 of an Event of Default, interest on the outstanding principal balance of the
 Revolving Loans, at the option of the Bank, may accrue at the Default Rate
 and shall be payable upon demand from the Bank.

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)          Revolving
 Loan Principal Payments.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (i)          Revolving
 Loan Mandatory Payments. All Revolving Loans hereunder shall be repaid by
 the Borrowers on the Revolving Loan Maturity Date, unless payable sooner
 pursuant to the provisions of this Agreement. In the event the aggregate
 outstanding principal balance of all Revolving Loans and Letter of Credit
 Obligations hereunder exceeds the Revolving Loan Availability, the Borrowers
 shall, without notice or demand of any kind, immediately make such repayments
 of the Revolving Loans or take such other actions as are satisfactory to the
 Bank as shall be necessary to eliminate such excess. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (ii)         Optional
 Prepayments. The Borrowers may from time to time prepay the Revolving
 Loans, in whole or in part, without any prepayment penalty whatsoever,
 provided that any prepayment of the entire principal balance of the Base Rate
 Loans shall include accrued interest on such Base Rate Loans to the date of
 such prepayment, and further provided that any prepayment of any LIBOR Rate
 Loans shall include accrued interest on such LIBOR Rate Loans to the date of
 such prepayment together with any applicable LIBOR breakage obligations
 arising under Section 2.4(a) as a result of such LIBOR Rate Loan prepayment.
 

 
	
  

 	
  

 
	
  

 	
 2.2     Term
 Loan.

 
	
  

 	
  

 
	
  

 	
           (a)          Term
 Loan Commitment. Subject to the terms and conditions of this Agreement
 and the other Loan Documents, and in reliance upon the representations and
 warranties of each Borrower set forth herein and in the other Loan Documents,
 the Bank agrees to make a Term Loan equal to the Term Loan Commitment. The
 Term Loan shall be available to the Borrowers in a single principal advance
 on such date as the conditions set forth in Section 3 shall have been
 satisfied. The Term Loan shall be used by the Borrowers solely for the
 purposes of (i) funding the purchase price payable under the Acquisition
 Agreement and the costs and expenses (including legal fees) associated with
 the Acquisition and all related transactions (including the costs and
 expenses of obtaining the credit facilities provided under and the closing on
 the Agreement and the other Loan Documents) and (ii) to the extent of any
 excess proceeds of the Term Loan, financing their working capital
 requirements and general corporate purposes. The Term Loan may be prepaid in
 whole or in part at any time subject to Section 2.2(e), but shall be 

 


22











	
  

 	
  

 
	
  

 	
 due in full on the Term Loan Maturity Date, unless the credit
 extended under the Term Loan is otherwise accelerated, terminated or extended
 as provided in this Agreement.

 
	
  

 	
  

 
	
  

 	
           (b)          Term
 Loan Interest and Payments. Except as otherwise provided in this Section
 2.2(b), the principal amount of the Term Loan outstanding from time to
 time shall bear interest at the applicable Term Interest Rate. Accrued and
 unpaid interest on that portion of the principal balance of the Term Loan
 outstanding from time to time which is a Base Rate Loan, shall be due and
 payable monthly, in arrears, commencing on September 30, 2009 and continuing
 on the last day of each calendar month thereafter, and on the Term Loan
 Maturity Date. Accrued and unpaid interest on those portions of the principal
 balance of the Term Loan outstanding from time to time which are LIBOR Loans
 shall be payable on the last Business Day of each Interest Period, commencing
 on the first such date to occur after the date hereof, on the date of any
 principal repayment of a LIBOR Loan and on the Term Loan Maturity Date. From
 and after maturity, or after the occurrence and during the continuation of an
 Event of Default, interest on the outstanding principal balance of the Term
 Loan, at the option of the Bank, may accrue at the Default Rate and shall be
 payable upon demand from the Bank.

 
	
  

 	
  

 
	
  

 	
           (c)          Term
 Loan Principal Payments. The outstanding principal balance of the Term
 Loan shall be repaid in installments, commencing on September 30, 2009,
 payable on the payment dates set forth below, in the following amounts:

 






	
  

 	
  

 	
  

 	
  

 
	
 Payment Date

 	
  

 	
  

 	
 Installment

 
	
  

 	
  

 	
  

 
	
 September 30, 2009

 	
  

 	
 $100,000

 
	
 December 31, 2009

 	
  

 	
 $150,000

 
	
 March 31, 2010

 	
  

 	
 $175,000

 
	
 June 30, 2010

 	
  

 	
 $175,000

 
	
 September 30, 2010

 	
  

 	
 $168,750

 
	
 December 31, 2010

 	
  

 	
 $168,750

 
	
 March 31, 2011

 	
  

 	
 $168,750

 
	
 June 30, 2011

 	
  

 	
 $168,750

 
	
 September 30, 2011

 	
  

 	
 $187,500

 
	
 December 31, 2011

 	
  

 	
 $187,500

 
	
 March 31, 2012

 	
  

 	
 $187,500

 
	
 June 30, 2012

 	
  

 	
 $187,500

 






	
  

 	
  

 	
  

 
	
  

 	
 Principal amounts repaid on the Term Note may not be borrowed again.
 The remaining unpaid principal of the Term Loan, together with all accrued
 and unpaid interest thereon, shall be due and payable on the Term Loan
 Maturity Date.

 
	
  

 	
  

 
	
  

 	
           (d)          Term
 Loan Mandatory Prepayment. The Borrowers shall make a prepayment (the “Term
 Loan Mandatory Prepayment”) of the outstanding principal amount of the
 Term Loan until paid in full upon the occurrence of any of the following
 events, at the following times and in the following amounts:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (i)          Concurrently
 with the receipt by the Borrowers (or any of them) of any Net Cash Proceeds from
 any Asset Disposition, in an amount equal to 100% of such Net Cash Proceeds.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (ii)         Concurrently
 with the receipt by the Borrowers (or any of them) of any Net Cash Proceeds
 from any issuance of Capital Securities (excluding (A) any issuance 

 


23











	
  

 	
  

 	
  

 
	
  

 	
  

 	
 of Capital Securities pursuant to any employee or director option
 program, benefit plan or compensation program or any issuance of Capital
 Securities as payment of a stock dividend to the holders of the Capital
 Securities of IntriCon, and (B) any issuance by a Subsidiary to a Borrower or
 another Subsidiary), in an amount equal to 100% of such Net Cash Proceeds.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (iii)        Concurrently
 with the receipt by the Borrowers (of any of them) of any Net Cash Proceeds from
 any issuance of Debt (other than Debt permitted under Section 9.1(e))
 in an amount equal to 100% of such net Cash Proceeds.

 
	
  

 	
  

 
	
  

 	
 Any prepayments under this subsection (d) shall be applied against
 the remaining unpaid installments of the Term Loan principal in the inverse
 order of their maturity.

 
	
  

 	
  

 
	
  

 	
           (e)          Optional
 Prepayments. The Borrowers may from time to time prepay the Term Loan, in
 whole or in part, without any prepayment penalty whatsoever, provided that
 any prepayment of the entire principal balance of the Base Rate Loans shall
 include accrued interest on such Base Rate Loans to the date of such
 prepayment, and further provided that any prepayment of any LIBOR Rate Loans
 shall include accrued interest on such LIBOR Rate Loans to the date of such
 prepayment together with any applicable LIBOR breakage obligations arising
 under Section 2.4(a) as a result of such LIBOR Rate Loan prepayment.
 Any prepayments under this subsection (e) shall be applied against the
 remaining unpaid installments of the Term Loan principal in the inverse order
 of their maturity. 

 


          2.3      Termination
of Commitments. The Borrowers may at any time terminate the Revolving Loan
Commitment and the Letter of Credit Commitment upon Final Payment.


          2.4      Additional
LIBOR Loan Provisions.


	
  

 	
  

 
	
  

 	
           (a)          LIBOR
 Loan Prepayments. If, for any reason, a LIBOR Loan is paid prior to the
 last Business Day of any Interest Period, whether voluntary, involuntary, by
 reason of acceleration or otherwise, each such prepayment of a LIBOR Loan
 will be accompanied by the amount of accrued interest on the amount prepaid
 and any and all costs, expenses, penalties and charges incurred by the Bank
 as a result of the early termination or breakage of a LIBOR Loan, plus the
 amount, if any, by which (i) the additional interest which would have been
 payable during the Interest Period on the LIBOR Loan prepaid had it not been
 prepaid, exceeds (ii) the interest which would have been recoverable by the
 Bank by placing the amount prepaid on deposit in the domestic certificate of
 deposit market, the eurodollar deposit market, or other appropriate money
 market selected by the Bank, for a period starting on the date on which it
 was prepaid and ending on the last day of the Interest Period for such LIBOR
 Loan. The amount of any such loss
 or expense payable by the Borrowers (or
 any of them) to the Bank under this Section shall be determined in the
 Bank’s sole discretion based upon the assumption that the Bank funded its loan
 commitment for LIBOR Loans in the London Interbank Eurodollar market and
 using any reasonable attribution or averaging methods which the Bank deems
 appropriate and practical, provided, however, that the Bank is not obligated to accept a deposit in the London
 Interbank Eurodollar market in order to charge interest on a LIBOR Loan at
 the LIBOR Rate.

 
	
  

 	
  

 
	
  

 	
           (b)          LIBOR
 Unavailability. If the Bank determines in its commercially reasonable
 discretion (which determination shall be conclusive, absent manifest error)
 prior to the commencement of any Interest Period that (i) the making or
 maintenance of any LIBOR Loan would violate any applicable law, rule,
 regulation or directive, whether or not having the force of law, (ii) United
 States dollar deposits in the principal amount, and for periods equal to the
 Interest 

 


24











	
  

 	
  

 
	
  

 	
 Period for funding any LIBOR Loan are not available in the London
 Interbank Eurodollar market in the ordinary course of business, (iii) by
 reason of circumstances affecting the London Interbank Eurodollar market,
 adequate and fair means do not exist for ascertaining the LIBOR Rate to be
 applicable to the relevant LIBOR Loan, or (iv) the LIBOR Rate does not
 accurately reflect the cost to the Bank of a LIBOR Loan, the Bank shall promptly
 notify the Borrowing Agent thereof and, so long as the foregoing conditions
 continue, none of the Loans may be advanced as a LIBOR Loan thereafter. In
 addition, at the Borrowing Agent’s option, each existing LIBOR Loan shall be
 (i) converted to a Base Rate Loan on the last Business Day of the then
 existing Interest Period or (ii) due and payable on the last Business Day of
 the then existing Interest Period, without further demand, presentment,
 protest or notice of any kind, all of which are herby waived by each
 Borrower.

 
	
  

 	
  

 
	
  

 	
           (c)          Regulatory
 Change. In addition, if, after the date hereof, a Regulatory Change
 shall, in the commercially reasonable discretion of the Bank, make it
 unlawful for the Bank to make or maintain the LIBOR Loans, then the Bank
 shall promptly notify the Borrowing Agent and none of the Loans may be
 advanced as a LIBOR Loan thereafter. In addition, at the Borrowing Agent’s
 option, each existing LIBOR Loan shall be (i) converted to a Base Rate Loan
 on the last Business Day of the then existing Interest Period or (ii) due and
 payable on the last Business Day of the then existing Interest Period,
 without further demand, presentment, protest or notice of any kind, all of
 which are herby waived by each Borrower.

 
	
  

 	
  

 
	
  

 	
           (d)          LIBOR
 Indemnity. If any Regulatory Change, or compliance by the Bank or any
 Person controlling the Bank with any request or directive of any governmental
 authority, central bank or comparable agency (whether or not having the force
 of law) shall (a) impose, modify or deem applicable any assessment, reserve,
 special deposit or similar requirement against assets held by, or deposits in
 or for the account of or loans by, or any other acquisition of funds or
 disbursements by, the Bank; (b) subject the Bank or any LIBOR Loan to any
 tax, duty, charge, stamp tax or fee or change the basis of taxation of
 payments to the Bank of principal or interest due from the Borrowers to the
 Bank hereunder (other than a change in the taxation of the overall net income
 of the Bank); or (c) impose on the Bank any other condition regarding such
 LIBOR Loan or the Bank’s funding thereof, and the Bank shall determine in its
 commercially reasonable discretion (which determination shall be conclusive,
 absent manifest error) that the result of the foregoing is to increase the
 cost to, or to impose a cost on, the Bank or such controlling Person of
 making or maintaining such LIBOR Loan or to reduce the amount of principal or
 interest received by the Bank hereunder, then the Borrowers shall jointly and
 severally pay to the Bank or such controlling Person, on demand, such
 additional amounts as the Bank shall, from time to time, determine are
 sufficient to compensate and indemnify the Bank for such increased cost or
 reduced amount.

 


          2.5     Interest
and Fee Computation; Collection of Funds. Except as otherwise set forth
herein, all interest and fees shall be calculated on the basis of a year
consisting of 360 days and shall be paid for the actual number of days elapsed.
Principal payments submitted in funds not immediately available shall continue
to bear interest until collected. If any payment to be made by the Borrowers
hereunder or under any Note shall become due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing any interest in respect of
such payment. Notwithstanding anything to the contrary contained herein, the
final payment due under any of the Loans must be made by wire transfer or other
immediately available funds. All payments made by the Borrowers hereunder or
under any of the Loan Documents shall be made without setoff, counterclaim, or
other defense.


25







          2.6     Late
Charge. If any payment of interest or principal due hereunder is not made
within ten (10) days after such payment is due in accordance with the terms
hereof, then, in addition to the payment of the amount so due, the Borrowers
shall pay to the Bank a “late charge” of five cents for each whole dollar so
overdue to defray part of the cost of collection and handling such late
payment. Each Borrower agrees that the damages to be sustained by the Bank for
the detriment caused by any late payment are extremely difficult and impractical
to ascertain, and that the amount of five cents for each one dollar due is a
reasonable estimate of such damages, does not constitute interest, and is not a
penalty.


          2.7     Letters
of Credit. Subject to the terms and conditions of this Agreement and upon
(i) the execution by the Borrowing Agent and the Bank of a Master Letter of
Credit Agreement in form and substance acceptable to the Bank (together with
all amendments, modifications and restatements thereof, the “Master Letter of
Credit Agreement”), and (ii) the execution and delivery by the Borrowing
Agent, and the acceptance by the Bank, in its sole and absolute discretion, of
a Letter of Credit Application, the Bank agrees to issue for the account of the
applicable Borrower such Letters of Credit in the standard form of the Bank and
otherwise in form and substance acceptable to the Bank, from time to time
during the term of this Agreement, provided that the Letter of Credit
Obligations may not at any time exceed the Letter of Credit Commitment and
provided further, that no Letter of Credit shall have an expiration date later
than the Letter of Credit Maturity Date. The amount of any payments made by the
Bank with respect to draws made by a beneficiary under a Letter of Credit for
which the Borrowers have failed to reimburse the Bank upon the earlier of (i)
the Bank’s demand for repayment, or (ii) five (5) days from the date of such
payment to such beneficiary by the Bank, shall be deemed to have been converted
to a Revolving Loan as of the date such payment was made by the Bank to such
beneficiary. Upon the occurrence of an Event of a Default and at the option of
the Bank, all Letter of Credit Obligations shall be converted to Revolving
Loans consisting of Base Rate Loans, all without demand, presentment, protest
or notice of any kind, all of which are hereby waived by each Borrower, for the
purpose of cash collateralizing the Letter of Credit Obligations as
contemplated by Section 12.10 below. To the extent the provisions of the
Master Letter of Credit Agreement differ from, or are inconsistent with, the
terms of this Agreement, the provisions of this Agreement shall govern.


          2.8     Taxes.


	
  

 	
  

 
	
  

 	
           (a)          All
 payments made by the Borrowers (or any of them) under this Agreement shall be
 made free and clear of, and without deduction or withholding for or on
 account of, any present or future income, stamp or other taxes, levies,
 imposts, duties, charges, fees, deductions or withholdings, now or hereafter
 imposed, levied, collected, withheld or assessed by any governmental
 authority, excluding net income taxes and franchise taxes (imposed in lieu of
 net income taxes) imposed on the Bank as a result of a present or former
 connection between the Bank and the jurisdiction of the governmental
 authority imposing such tax or any political subdivision or taxing authority
 thereof or therein (other than any such connection arising solely from the
 Bank having executed, delivered or performed its obligations or received a payment
 under, or enforced, this Agreement or any other Loan Document). If any such
 non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
 withholdings (collectively, “Non-Excluded Taxes”) or Other Taxes are
 required to be withheld from any amounts payable to the Bank hereunder, the
 amounts so payable to the Bank shall be increased to the extent necessary to
 yield to the Bank (after payment of all Non-Excluded Taxes and Other Taxes)
 interest or any such other amounts payable hereunder at the rates or in the
 amounts specified in this Agreement, provided, however, that the
 Borrowers shall not be required to increase any such amounts payable to the
 Bank with respect to any Non-Excluded Taxes that are attributable to the
 Bank’s failure to comply with the requirements of Section 2.8(c).

 


26











	
  

 	
  

 
	
  

 	
           (b)          The
 Borrowers shall pay any Other Taxes to the relevant governmental authority in
 accordance with applicable law.

 
	
  

 	
  

 
	
  

 	
           (c)          At
 the request of the Borrowing Agent and at the Borrowers’ sole cost, the Bank
 shall take reasonable steps to (i) contest its liability for any Non-Excluded
 Taxes or Other Taxes that have not been paid, or (ii) seek a refund of any
 Non-Excluded Taxes or Other Taxes that have been paid.

 
	
  

 	
  

 
	
  

 	
           (d)          Whenever
 any Non-Excluded Taxes or Other Taxes are payable by the Borrowers, as
 promptly as possible thereafter the Borrowing Agent shall send to the Bank a
 certified copy of an original official receipt received by the Borrower showing
 payment thereof. If any Borrower fails to pay any Non-Excluded Taxes or Other
 Taxes when due to the appropriate taxing authority or fails to remit to the
 Bank the required receipts or other required documentary evidence or if any
 governmental authority seeks to collect a Non-Excluded Tax or Other Tax
 directly from the Bank for any other reason, the Borrowers shall jointly and
 severally indemnify the Bank on an after-tax basis for any incremental taxes,
 interest or penalties that may become payable by the Bank.

 
	
  

 	
  

 
	
  

 	
           (e)          The
 agreements in this Section shall survive the satisfaction and payment of the
 Obligations and the termination of this Agreement.

 


          2.9     All
Loans to Constitute Single Obligation. The Loans and other Obligations
shall constitute one general joint and several obligation of the Borrowers, and
shall be secured by Bank’s first priority security interest in and Lien upon
all of the Collateral and by all other security interests, Liens, claims and
encumbrances heretofore, now or at any time or times hereafter granted by the
Borrowers (or any of them) to the Bank, subject only to Permitted Liens.


          2.10   Borrowing
Agency Provisions. Each Borrower hereby irrevocably designates the
Borrowing Agent to be its attorney and agent and in such capacity to borrow,
sign and endorse notes, and execute and deliver all instruments, documents,
writings and further assurances now or hereafter required hereunder, on behalf
of such Borrower, and hereby authorizes the Bank to pay over or credit all Loan
proceeds in accordance with the request of the Borrowing Agent. Although they
are separate legal entities that observe all corporate and organizational
formalities consistent with such separateness, the Borrowers are part of one
consolidated organization constituting a single economic and business
enterprise and share an identity of interests such that any benefit received by
any Borrower benefits the other Borrowers. The handling of this credit facility
as a co-borrowing facility in the manner set forth in this Agreement is solely
as an accommodation to the Borrowers and at their request. The Bank shall not
incur liability to any Borrower or any other Person as a result thereof. To
induce the Bank to do so and in consideration thereof, each Borrower hereby
indemnifies the Bank and holds the Bank harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or injury asserted
against the Bank by any Person arising from or incurred by reason of the
handling of the financing arrangements of the Borrowers as provided herein,
reliance by the Bank on any request or instruction from the Borrowing Agent or
any other action taken by the Bank with respect to this Section 2.10,
except due to willful misconduct or gross negligence of the Bank.


          2.11   Obligations
Joint and Several. All obligations of the Borrowers hereunder and under the
other Loan Documents shall be joint and several. Each Borrower hereby agrees to
make payment upon the maturity of the Obligations, whether by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be impaired or otherwise affected by any act or omission of the Bank
(other than acts or omissions resulting from the gross negligence or willful
misconduct of the Bank) including, without limitation any extension, renewal or
forbearance granted by the Bank to any Borrower, 


27







any failure of the Bank to pursue or preserve its rights against any
Borrower or the release by the Bank of any collateral now or hereafter given as
security for all or any part of such obligations.


          2.12   Waiver
of Subrogation. Subject only to the provisions of Section 2.13
below, each Borrower expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which
such Borrower may now or hereafter have against any other Borrower or any other
Obligor, or against or with respect to any other Borrower’s property
(including, without limitation, any property which is collateral for the
Obligations), arising from the existence or performance of this Agreement,
until repayment in full of the Obligations. In addition, each Borrower hereby
expressly waives: (a) notice of the acceptance by the Bank of this Agreement;
(b) notice of the existence or creation or non-payment of all or any of
the Obligations; (c) presentment, demand, notice of dishonor, protest, and all
other notices whatsoever; (d) all diligence in collection or protection of or
realization upon the Obligations or any thereof, any obligation hereunder, or
any security for or guaranty of any of the foregoing; and (e) any event or
conduct or action of any other Borrower, the Bank or any other party that might
otherwise constitute a legal or equitable discharge of a surety or guarantor
but for this provision, other than payment in full of the Obligations.


          2.13   Contribution
and Indemnification Among the Borrowers. Each Borrower is obligated to repay
the Obligations as joint and several obligors under this Agreement. To the
extent that any Borrower shall, under this Agreement as a joint and several
obligor, repay any of the Obligations constituting Loans made to (or
reimbursement obligations relating to Letters of Credit issued for the account
of) another Borrower (an “Accommodation Payment”), then the Borrower
making such Accommodation Payment shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Borrowers in an
amount, for each of such other Borrowers, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Borrower’s
“Allocable Amount” (as defined below) and the denominator of which the sum of
the Allocable Amounts of all of the Borrowers. As of any date of determination,
the “Allocable Amount” of each Borrower shall be equal to the maximum amount of
liability for Accommodation Payments which could be asserted against such
Borrower hereunder without (a) rendering such Borrower “insolvent” within the
meaning of Section 101(31) of Title 11 of the Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act (the “UFTA”), or Section 2 of the
Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Borrower with
unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 4 of the UFCA, or (c)
leaving such Borrower unable to pay its debts as they become due within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or
Section 5 of the UFCA. All rights and claims of contribution, indemnification
and reimbursement under this Section 2.13 shall be subordinate in right
of payment to the prior payment in full of the Obligations.


Section
3.     CONDITIONS OF
BORROWING.


          3.1     Conditions
of Initial Loan. Notwithstanding any other provision of this Agreement, the
Bank shall not be required to disburse or make the Term Loan or the initial
Revolving Loan, if any of the following conditions shall have occurred:


	
  

 	
  

 	
  

 
	
  

 	
           (a)          Delivery
 of Documents. The Borrowers (or any of them) shall have failed to deliver
 to the Bank any of the following, all of which must be satisfactory to the
 Bank and the Bank’s counsel in form, substance and execution, except to the
 extent waived by Bank in its sole discretion:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (i)          Loan
 Agreement. Two copies of this Agreement duly executed by the Borrowers.

 


28











	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (ii)          Revolving
 Note. A Revolving Note duly executed by the Borrowers, in the form
 prepared by and acceptable to the Bank.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (iii)          Term
 Note. A Term Note duly executed by the Borrowers, in the form prepared by
 and acceptable to the Bank.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (iv)          Master
 Letter of Credit Agreement. A Master Letter of Credit Agreement prepared
 by and acceptable to the Bank, duly executed by the Borrowing Agent in favor
 of the Bank.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (v)          Collateral
 Access Agreement. Collateral Access Agreements dated as of the date of
 this Agreement, from the owner, lessor or mortgagee, as the case may be,
 (other than any Borrower or any of its Subsidiaries) of any real estate
 whereon any Collateral is stored or otherwise located, in the form prepared
 by and reasonably acceptable to the Bank.

 
	
  

 	
  

 
	
  

 	
           (b)          Borrowing
 Base Certificate. A Borrowing Base Certificate in the form prepared by
 the Bank, certified as accurate by the Borrowing Agent, and dated as of the
 Business Day immediately preceding the date such Loan is requested to be
 made. 

 
	
  

 	
  

 
	
  

 	
           (c)          Search
 Results; Lien Terminations. Copies of UCC search reports dated such a
 date as is reasonably acceptable to the Bank, listing all effective financing
 statements which name the Borrowers (or any of them), under their present
 names and any previous names, as debtors, together with (i) copies of such
 financing statements, (ii) payoff letters evidencing repayment in full of all
 existing Debt to be repaid with the Loans, the termination of all agreements
 relating thereto and the release of all Liens granted in connection
 therewith, with UCC or other appropriate termination statements and documents
 effective to evidence the foregoing (other than Permitted Liens), and (iii)
 such other UCC termination statements as the Bank may reasonably request.

 
	
  

 	
  

 
	
  

 	
           (d)          Organizational
 and Authorization Documents. Copies of (i) the Articles of Incorporation
 and Bylaws of each Borrower; (ii) resolutions of the board of directors of
 each Borrower approving and authorizing such Person’s execution, delivery and
 performance of the Loan Documents to which it is party and the transactions
 contemplated thereby; (iii) signature and incumbency certificates of the
 officers of each Borrower, executing any of the Loan Documents, each of which
 such Borrower hereby certifies to be true and complete, and in full force and
 effect without modification, it being understood that the Bank may
 conclusively rely on each such document and certificate until formally
 advised by such Borrower of any changes therein; and (iv) good standing
 certificates in the state of incorporation of each Borrower and in each other
 state requested by the Bank.

 
	
  

 	
  

 
	
  

 	
           (e)          Insurance.
 Evidence satisfactory to the Bank of the existence of insurance required to
 be maintained pursuant to Section 8.6, together with evidence that the
 Bank has been named as a lender’s loss payee and as an additional insured on
 all related insurance policies. 

 
	
  

 	
  

 
	
  

 	
           (f)          Lockbox
 Agreement. The Master Cash Management Service Agreement, duly executed by
 the Borrowers and the Bank (the “Lockbox Agreement”), in the form
 prepared by and acceptable to the Bank. 

 


29











	
  

 	
  

 	
  

 
	
  

 	
           (g)          Subordination
 Agreement. The Selling Shareholder Subordination Agreement, duly executed
 by the Selling Shareholder and acknowledged by IntriCon, in form and
 substance acceptable to the Bank.

 
	
  

 	
  

 	
  

 
	
  

 	
           (h)          Pledged
 Equity Interests. Certificates, instruments, agreements, acknowledgements
 and other documents required by Section 6.12.

 
	
  

 	
  

 	
  

 
	
  

 	
           (i)          Acquisition.
 Evidence satisfactory to the Bank that each of the following conditions has
 been satisfied:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (i)          The Acquisition Agreement shall have
 been duly executed and delivered by the parties thereto and shall be in full
 force and effect. All material conditions precedent to the Acquisition
 pursuant to the Acquisition Agreement shall have been satisfied (except to
 the extent waived with the written consent of the Bank, which consent shall
 not be unreasonably withheld or delayed). All necessary authorizations,
 consents, approvals, exceptions or other actions by or notices to or filings
 with any court or administrative or governmental body or other Person
 required in connection with the execution, delivery or performance of the
 Acquisition Agreement or the consummation of the transactions contemplated
 thereby shall be final and in full force and effect. The Bank shall have
 received a copy of the Acquisition Agreement and all other Acquisition
 Documents, certified by a duly authorized officer of IntriCon, dated the date
 of closing, as true, correct and complete.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (ii)         The
 Selling Shareholder under the Acquisition Documents has received the Selling
 Shareholder Note in form and substance acceptable to the Bank.

 
	
  

 	
  

 
	
  

 	
           (j)          Closing
 Costs. Evidence that the out-of-pocket costs, expenses and fees
 (including attorneys’ fees) paid or incurred by the Bank in connection with
 the preparation, negotiation and closing of this Agreement and the other Loan
 Documents have been (or shall be simultaneously) paid in full.

 
	
  

 	
  

 
	
  

 	
           (k)          Closing
 Fee. Payment by the Borrowers to the Bank of a wholly earned,
 non-refundable closing fee in the amount of $143,750.

 
	
  

 	
  

 
	
  

 	
           (l)          Opinion.
 A favorable opinion, dated on or about the date hereof, of Blank Rome LLP,
 counsel to Borrowers, covering such matters as the Bank may reasonably
 request (and each Borrower hereby instructs such counsel to deliver such
 opinion to the Bank). 

 
	
  

 	
  

 
	
  

 	
           (m)          Financial
 Statements. (i) Audited consolidated financial statements for the
 Borrowers and their respective Subsidiaries for the fiscal years ending December
 31, 2006, December 31, 2007 and December 31, 2008, and (ii) unaudited interim
 consolidated financial statements for the Borrowers and their respective
 Subsidiaries for each fiscal month ended after December 31, 2008 but at least
 thirty (30) days before the date hereof. 

 
	
  

 	
  

 
	
  

 	
           (n)          Projections.
 Consolidated projected income statements, balance sheets and cash flow
 statements for Borrowers’ fiscal year 2009 prepared by the Borrowers and
 giving effect to the Loans and the use of proceeds therefrom, and giving
 effect to the consummation of the Acquisition.

 
	
  

 	
  

 
	
  

 	
           (o)          EBITDA.
 Evidence that as of June 30, 2009 the Borrowers’ EBITDA (i) for the period of
 twelve (12) consecutive calendar months then-ended shall be not less than
 $2,750,000 

 


30











	
  

 	
  

 
	
  

 	
 and (ii) for the period of six (6) consecutive calendar months
 then-ended shall be not less than $325,000.

 
	
  

 	
  

 
	
  

 	
           (p)          Due
 Diligence. The Bank shall not be satisfied in any respect with the
 results of any legal or business related due diligence. 

 
	
  

 	
  

 
	
  

 	
           (q)          Appraisals.
 The Bank shall not have received a field audit examination and appraisals
 (including appraisals of fixed assets and inventory) requested by the Bank,
 the results of which are satisfactory to the Bank, in its sole and absolute
 discretion.

 
	
  

 	
  

 
	
  

 	
           (r)          Additional
 Documents. Such other certificates, financial statements, schedules,
 resolutions, opinions of counsel, notes and other documents which are
 provided for hereunder or which the Bank shall require.

 
	
  

 	
  

 
	
  

 	
           (s)          Event
 of Default. Any Event of Default, or Unmatured Event of Default shall
 have occurred and be continuing.

 
	
  

 	
  

 
	
  

 	
           (t)          Material
 Adverse Effect. The occurrence of any event having a Material Adverse
 Effect upon any Borrower.

 
	
  

 	
  

 
	
  

 	
           (u)          Litigation.
 Any litigation or governmental proceeding shall have been instituted against
 any Borrower or any of its officers or shareholders having a Materially
 Adverse Effect upon such Borrower.

 
	
  

 	
  

 
	
  

 	
           (v)          Representations
 and Warranties. Any representation or warranty of the Borrowers (or any
 of them) contained herein or in any Loan Document shall be untrue or
 incorrect in any material respect as of the date of any Loan as though made
 on such date, except to the extent such representation or warranty expressly
 relates to an earlier date.

 


          3.2     Conditions
Precedent to all Loans. The obligation of the Bank to make any Loan and/or
issue any Letter of Credit hereunder shall be subject to the following
additional conditions precedent (and any request for a Loan shall be deemed a
representation by the Borrowers that the following are satisfied): 


	
  

 	
  

 
	
  

 	
           (a)          Before
 and after giving effect to such Loan or Letter of Credit, the representation
 and warranties contained in Section 7 shall be true and correct in all
 material respects, as though made on the date of such Loan, except to the
 extent such representation and warranty, by its express terms, relates solely
 to a prior date, and except that the representations and warranties contained
 in Section 7.26 shall be true and correct in all material respects, as
 though made on the date of the financial statements most recently delivered
 to the Bank pursuant to Section 8.8(a) hereof.

 
	
  

 	
  

 
	
  

 	
           (b)          Before
 and after giving effect to such Loan, no Unmatured Event of Default or Event
 of Default shall have occurred and be continuing.

 


Section 4.    NOTES
EVIDENCING LOANS.


          4.1     Revolving
Note. The Revolving Loans and the Letter of Credit Obligations shall be
evidenced by the Revolving Note. At the time of the initial disbursement of a
Revolving Loan and at each time any additional Revolving Loan shall be
requested hereunder or a repayment made in whole or in part thereon, a notation
thereof shall be made on the books and records of the Bank. All amounts
recorded shall be, absent demonstrable error, conclusive and binding evidence
of (i) the principal amount 


31







of the Revolving Loans advanced hereunder and the amount of all Letter
of Credit Obligations, (ii) any accrued and unpaid interest owing on the
Revolving Loans, and (iii) all amounts repaid on the Revolving Loans or the
Letter of Credit Obligations. The failure to record any such amount or any
error in recording such amounts shall not, however, limit or otherwise affect
the joint and several obligations of the Borrowers under the Revolving Note to
repay the principal amount of the Revolving Loans, together with all interest
accruing thereon.


          4.2    Term
Note. The Term Loan shall be evidenced by the Term Note. At the time of the
disbursement of the Term Loan or a repayment made in whole or in part thereon,
a notation thereof shall be made on the books and records of the Bank. All
amounts recorded shall be, absent demonstrable error, conclusive and binding
evidence of (i) the principal amount of the Term Loan advanced hereunder, (ii)
any accrued and unpaid interest owing on the Term Loan and (iii) all amounts
repaid on the Term Loan. The failure to record any such amount or any error in
recording such amounts shall not, however, limit or otherwise affect the joint
and several obligations of the Borrowers under the Term Note to repay the
principal amount of the Term Loan, together with all interest accruing thereon.


Section 5.   MANNER
OF BORROWING.


          5.1    Borrowing
Procedures. Each Revolving Loan and the Term Loan, or any portion of the
Term Loan, may be advanced either as a Base Rate Loan or a LIBOR Loan,
provided, however, that at any time, the Borrowing Agent may identify no more
than six (6) Revolving Loans or portions of the Term Loan which may be LIBOR
Loans. Each Loan shall be made available to the Borrowers upon any written, verbal,
electronic, telephonic or telecopy loan request from the Borrowing Agent which
the Bank in good faith believes to emanate from a properly authorized
representative of such Borrower, whether or not that is in fact the case. Each
such request shall be effective upon receipt by the Bank, shall be irrevocable,
and shall specify the date, amount and type of borrowing and, in the case of a
LIBOR Loan, the initial Interest Period therefor. The Borrowing Agent shall
select Interest Periods so as not to require a payment or prepayment of any
LIBOR Loan during an Interest Period for such LIBOR Loan. The final Interest
Period for any LIBOR Loan must be such that its expiration occurs on or before
the maturity date of such Loan. A request for a Base Rate Loan must be received
by the Bank no later than 11:00 a.m. Chicago, Illinois time, on the day it is
to be funded. A request for a LIBOR Loan must be (i) received by the Bank no
later than 11:00 a.m. Chicago, Illinois time, three days before the day it is
to be funded, and (ii) in an amount equal to One Hundred Thousand and 00/100
Dollars ($100,000.00) or a higher integral multiple of One Hundred Thousand and
00/100 Dollars ($100,000.00). The proceeds of each Loan shall be made available
at the office of the Bank by credit to the account of the Borrowing Agent or by
other means requested by the Borrowing Agent and acceptable to the Bank.
Without limiting the generality of the indemnity provisions set forth in Section
13.20 below, each Borrower does hereby specifically and irrevocably
confirm, ratify and approve all such advances by the Bank and does hereby
indemnify the Bank against losses and expenses (including court costs,
attorneys’ and paralegals’ fees) and shall hold the Bank harmless with respect
thereto. 


          5.2   LIBOR
Conversion and Continuation Procedures. Whenever the last day of any
Interest Period with respect to any LIBOR Loan would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day. Whenever an Interest
Period with respect to any LIBOR Loan would otherwise end on a day of a month
for which there is no numerically corresponding day in the calendar month, such
Interest Period shall end on the last day of such calendar month, unless such
day is not a Business Day, in which event such Interest Period shall be
extended to end on the next Business Day. Upon receipt by the Bank of such
subsequent notice, the Borrowing Agent may, subject to the terms and conditions
of this Agreement, elect, as of the last day of the applicable Interest Period,
to continue any LIBOR Loan having an Interest Period expiring on such day for a
different Interest Period, or to convert any such LIBOR Loan to a Base 


32







Rate Loan. Such notice shall, in the case of a conversion to a Base
Rate Loan, be given before 11:00 a.m., Chicago time, on the proposed date of
such conversion, and in the case of conversion to a LIBOR Loan having a
different Interest Period, be given before 11:00 a.m., Chicago time, at least
three Business Days prior to the proposed date of such conversion, specifying:
(i) the proposed date of conversion; (ii) the aggregate amount of Loans to be
converted; (iii) the type of Loans resulting from the proposed conversion; and
(iv) the duration of the requested Interest Period. Absent timely notice of
continuation or conversion, each LIBOR Loan shall automatically convert into a
Base Rate Loan on the last day of an applicable Interest Period, unless paid in
full on such last day. The Borrowing Agent may not elect a LIBOR Rate, and an
Interest Period for a LIBOR Loan shall not automatically renew, with respect to
any principal amount which is scheduled to be repaid before the last day of the
applicable Interest Period, and any such amounts shall bear interest at the
Base Rate until repaid.


          5.3    Letters
of Credit. All Letters of Credit shall bear such application, issuance,
renewal, negotiation and other fees and charges as charged by the Bank according
to its standard rates as in effect from time to time or otherwise payable
pursuant to the Master Letter of Credit Agreement. In addition to the
foregoing, each standby Letter of Credit issued under and pursuant to this
Agreement shall bear an annual issuance fee equal to the Applicable LOC Fee multiplied
by the undrawn face amount of such standby Letter of Credit, payable by the
Borrowers prior to the issuance by the Bank of such Letter of Credit and
annually thereafter, until (i) such Letter of Credit has expired or has been
returned to the Bank, or (ii) the Bank has paid the beneficiary thereunder the
full face amount of such Letter of Credit.


          5.4    Automatic
Debit. In order to effectuate the timely payment of any of the Obligations when
due, each Borrower hereby authorizes and directs the Bank, at the Bank’s
option, to (a) debit the amount of the Obligations to any ordinary deposit
account of the Borrowing Agent, or (b) make a Revolving Loan hereunder to pay
the amount of the Obligations; provided that, so long as no Unmatured
Event of Default or Event of Default has occurred and is continuing and
sufficiency availability exists under the Borrowing Base, the Bank shall first
make a Revolving Loan under the preceding clause (b) to the extent of such
availability before exercising its rights under the preceding clause (a).


          5.5    Discretionary
Disbursements. The Bank, in its sole and absolute discretion, may
immediately upon notice to the Borrowing Agent, disburse any or all proceeds of
the Loans made or available to the Borrowers pursuant to this Agreement to pay
any fees, costs, expenses or other amounts required to be paid by the Borrowers
hereunder and not so paid. All monies so disbursed shall be a part of the Obligations,
jointly and severally payable by the Borrowers on demand from the Bank.


Section 6.   SECURITY
FOR THE OBLIGATIONS.


          6.1    Security
for Obligations. As security for the payment and performance of the
Obligations, each Borrower does hereby pledge, assign, transfer, deliver and
grant to the Bank, for its own benefit and as agent for its Affiliates, a
continuing and unconditional first priority (subject only to Permitted Liens)
security interest in and to any and all property of such Borrower, of any kind
or description, tangible or intangible, wheresoever located and whether now
existing or hereafter arising or acquired, including the following (all of
which property, along with the products and proceeds therefrom, are individually
and collectively referred to as the “Collateral”):


	
  

 	
  

 	
  

 
	
  

 	
          (a)          all
 property of, or for the account of, such Borrower now or hereafter coming
 into the possession, control or custody of, or in transit to, the Bank or any
 agent or bailee for the Bank or any parent, Affiliate or Subsidiary of the
 Bank or any participant with the Bank in the Loans or other Obligations
 (whether for safekeeping, deposit, collection, custody, pledge, transmission
 or otherwise), including all earnings, dividends, interest, or other rights
 in connection therewith and the products and proceeds therefrom, including
 the proceeds of insurance thereon; and

 



33










	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)          the
 additional property of such Borrower, whether now existing or hereafter
 arising or acquired, and wherever now or hereafter located, together with all
 additions and accessions thereto, substitutions, betterments and replacements
 therefor, products and Proceeds therefrom, and all of such Borrower’s books
 and records and recorded data relating thereto (regardless of the medium of
 recording or storage), together with all of each such Borrower’s right, title
 and interest in and to all computer software required to utilize, create,
 maintain and process any such records or data on electronic media, identified
 and set forth as follows:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (i)          All
 Accounts and all Goods whose sale, lease or other disposition by such
 Borrower has given rise to Accounts and have been returned to, or repossessed
 or stopped in transit by, such Borrower, or rejected or refused by an Account
 Debtor;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (ii)         All
 Inventory, including raw materials, work-in-process and finished goods;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (iii)        All
 Goods (other than Inventory), including embedded software, Equipment,
 vehicles, furniture and Fixtures;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (iv)        All
 Software and computer programs;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (v)         All
 Securities, Investment Property, Financial Assets and Deposit Accounts; provided that, notwithstanding
 anything to the contrary contained in the foregoing or otherwise in this
 Agreement, any Liens created in favor of Bank hereunder and/or under any
 other Loan Document in the Capital Securities of any Subsidiary that is
 organized under the laws of a jurisdiction other than the United States or
 any state thereof or the District of Columbia (an “Excluded Foreign Subsidiary”) shall be limited to a Lien
 on and pledge of no more than 65% of the Capital Securities of such Excluded
 Foreign Subsidiary if a pledge of more than 65% of such Capital Securities of
 such Excluded Foreign Subsidiary would, in the reasonable and good faith
 judgment of Borrower, result in increased tax liability to any Borrower;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (vi)        All Chattel Paper, Electronic Chattel
 Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of
 letters of credit, Health-Care-Insurance Receivables, Supporting
 Obligations, notes secured by real estate, Commercial Tort Claims described
 on Schedule 6.1. and General Intangibles, including Payment
 Intangibles; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (vii)       All
 Pledged Equity Interests;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                (viii)      Without
 limiting the description of the property or any rights or interests in the
 property described above in this definition of Collateral, all of each
 Borrower’s rights, titles and interests in and to (a) all money, cash, and
 other funds; (b) all attachments, accessions, parts and appurtenances to, all
 substitutions for, and all replacements of any and all of each Borrower’s
 equipment, fixtures and other goods; (c) all of each Borrower’s agreements,
 as-extracted collateral, tangible chattel paper, electronic chattel paper,
 health-care-insurance receivables, leases, lease contracts, lease agreements,
 payment intangibles, proceeds of letters of credit, promissory notes,
 records, and software; (d) all of each Borrower’s franchises, customer lists,
 insurance refunds, insurance refund claims, tax refunds, tax refund claims,
 pension plan refunds, pension plan reversions, patents, patent applications,
 service marks, service mark applications, trademarks, trademark applications,
 trade names, domain names (including without 

 



34










	
  

 	
  

 	
  

 
	
  

 	
  

 	
 limitation, www.intricon.com, www.rti-corp.com, www.rtie.com,
www.amecon-magnetics.com and www.ecgrecorder.com) trade secrets, goodwill,
copyrights, copyright applications, and licenses; and (e) all royalty fees,
franchise payments, or licensing fees or other amounts owing at any time and
from time to time to any Borrower pursuant to the franchise agreements or
similar documents to which it is a party from time to time.  

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ix)         All
 supporting obligations; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (x)          All
 Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing
 property, including all insurance policies and proceeds of insurance payable
 by reason of loss or damage to the foregoing property, including unearned
 premiums, and of eminent domain or condemnation awards.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 provided, however, notwithstanding
 anything to the contrary contained in this Agreement or the other Loan
 Documents, no Lien or security interest is hereby granted on any Excluded
 Property and the Collateral shall not include any Excluded Property; provided,
 further, that if and when any property shall cease to be Excluded
 Property, a Lien on and security in such property shall be deemed granted
 therein and such property shall then constitute part of the Collateral.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 For purposes hereof, “Excluded Property” means, collectively,
 (i) any voting Capital Securities in excess of 65% of the outstanding voting
 Capital Securities of any Foreign Subsidiary, (ii) any permit, license,
 contract or agreement entered into by any Borrower (A) that prohibits or
 requires the consent of any Person other than any Borrower or its Affiliates
 which has not been obtained as a condition to the creation by such Borrower
 of a Lien on any right, title or interest in such permit, license, contract
 or agreement or any Capital Securities related thereto or (B) to the extent
 that any requirement of law applicable thereto prohibits the creation of a
 Lien thereon, but only, with respect to the prohibition in (A) and (B), to
 the extent, and for as long as, such prohibition is not terminated or
 rendered unenforceable or otherwise deemed ineffective by the UCC or any other
 applicable law, (iii) property owned by any Borrower that is subject to a
 purchase money Lien or a Capital Lease permitted under this Agreement if the
 contract or agreement pursuant to which such Lien is granted (or in the
 document providing for such Capital Lease) prohibits or requires the consent
 of any Person other than any Borrower or its Affiliates which has not been
 obtained as a condition to the creation of any other Lien on such property,
 and (iv) any “intent to use” trademark applications for which a statement of
 use has not been filed (but only until such statement is filed); provided,
 however, that “Excluded Property” shall not include any proceeds,
 products, substitutions or replacements of Excluded Property (unless such
 proceeds, products, substitutions or replacements would otherwise constitute
 Excluded Property).

 


          6.2     Possession
and Transfer of Collateral; Fixtures. Unless an Event of Default has
occurred and is continuing hereunder, the Borrowers shall be entitled to possession
or use of the Collateral (other than Instruments or Documents, Tangible Chattel
Paper, Investment Property consisting of certificated securities and other
Collateral required to be delivered to the Bank pursuant to this Section 6).
The cancellation or surrender of any Note, upon payment or otherwise, shall not
affect the right of the Bank to retain the Collateral for any other of the
Obligations. No Borrower shall sell, assign (by operation of law or otherwise),
license, lease or otherwise dispose of, or grant any option with respect to any
of the Collateral, except that Borrowers (or any of them) may (i) sell
Inventory in the ordinary course of business; (ii) sell any Cash Equivalent
Investments; (iii) sell Equipment which is obsolete, past its useful working
life or no longer needed in the conduct of Borrowers’ business, so long as (x)
the fair market 


35







value of all Equipment disposed of under this clause (iii) shall not
exceed $50,000 in any fiscal year and (y) all proceeds of any such distribution
of Equipment under this clause (iii), if not earlier used to purchase
replacement or additional Equipment within ninety (90) days following the date
of such disposition, shall be delivered by Borrowers to the Bank to be applied
to the Obligations in accordance with this Agreement; (iv) lease, sublease,
license or sublicense Collateral to third parties in the ordinary course of
business and not interfering with the business of the Borrowers; (v) dispose of
any Account resulting from a compromise or settlement in the ordinary course of
business of such Account for less than the full amount thereof in a manner and
to an extent substantially consistent with past practices; (vi) dispose of
Collateral among Borrowers in the ordinary course of business and for
legitimate and lawful business purposes; (vii) settle, surrender, waive or
release contract rights or litigation claims in the ordinary course of
business; (viii) abandon intellectual property in the ordinary course of
business;. Each Borrower hereby represents, warrants and covenants to the Bank
that no material portion of the Collateral owned by such Borrower is now or
will hereafter become a “fixture” under applicable law; (ix) sell up to
$250,000 of Equipment presently owned by RTIE; and (x) the non-exclusive
license by Datrix to the Selling Shareholder of the trademark “Datrix” on the
terms set forth in the Acquisition Documents.


          6.3          Financing
Statements. Each Borrower shall, at the Bank’s request, at any time and
from time to time, execute and deliver to the Bank such financing statements,
amendments and other documents and do such acts as the Bank deems necessary in
order to establish and maintain valid, attached and perfected first priority
security interests in the Collateral in favor of the Bank, free and clear of
all Liens and claims and rights of third parties whatsoever, except Permitted
Liens. Each Borrower hereby irrevocably authorizes the Bank at any time, and
from time to time, to file in any jurisdiction any initial financing statements
and amendments thereto without the signature of such Borrower that (a) indicate
the Collateral (i) is comprised of all assets of such Borrower or words of
similar effect, regardless of whether any particular asset comprising a part of
the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code of the jurisdiction wherein such financing statement or amendment is
filed, or (ii) as being of an equal or lesser scope or within greater detail as
the grant of the security interest set forth herein, and (b) contain any other
information required by Section 5 of Article 9 of the Uniform Commercial Code
of the jurisdiction wherein such financing statement or amendment is filed
regarding the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether such Borrower is an organization,
the type of organization and any Organizational Identification Number issued to
such Borrower, and (ii) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or timber to be cut,
a sufficient description of the real property to which the Collateral relates.
Each Borrower hereby agrees that a photocopy or other reproduction of this
Agreement is sufficient for filing as a financing statement and each Borrower
authorizes the Bank to file this Agreement as a financing statement in any
jurisdiction. Each Borrower agrees to furnish any such information to the Bank
promptly upon request. Each Borrower further ratifies and affirms its
authorization for any financing statements and/or amendments thereto, executed
and filed by the Bank in any jurisdiction prior to the date of this Agreement.
In addition, each Borrower shall make appropriate entries on its books and
records disclosing the Bank’s security interests in the Collateral.


          6.4          Additional
Collateral. Each Borrower shall pledge, assign or transfer to the Bank
immediately upon its demand, such collateral owned by such Borrower which is
other than the collateral addressed in Section 6.1 above, as the Bank
may from time to time request, should the value of the Collateral, in the
Bank’s commercially reasonable discretion, decline, deteriorate, depreciate or
become impaired in any material respect, which collateral, when pledged,
assigned and transferred to the Bank shall be and become part of the
Collateral; provided that, if the additional collateral requested by the
Bank which would require the consent of a third-party that is not an Affiliate of
any Borrower in order to create a Lien therein, Borrowers shall not be deemed
to be in default of this Section 6.4 if such third-party will not grant
such consent so long as Borrowers have used all commercially reasonable efforts
to obtain such 


36







consent. The Bank’s security interests in all of the foregoing
Collateral shall be valid, complete and perfected whether or not covered by a
specific assignment.


          6.5          Preservation
of the Collateral. The Bank may, but is not required, to take such actions
from time to time as the Bank deems appropriate to maintain or protect the
Collateral. The Bank shall have exercised reasonable care in the custody and
preservation of the Collateral if the Bank takes such action as the Borrowing
Agent shall reasonably request in writing which is not inconsistent with the
Bank’s status as a secured party, but the failure of the Bank to comply with
any such request shall not be deemed a failure to exercise reasonable care;
provided, however, the Bank’s responsibility for the safekeeping of the
Collateral shall (i) be deemed reasonable if such Collateral is accorded
treatment substantially equal to that which the Bank accords its own property,
and (ii) not extend to matters beyond the control of the Bank, including acts
of God, war, insurrection, riot or governmental actions. In addition, any
failure of the Bank to preserve or protect any rights with respect to the
Collateral against prior or third parties, or to do any act with respect to
preservation of the Collateral, not so requested by a Borrower, shall not be
deemed a failure to exercise reasonable care in the custody or preservation of
the Collateral. The Borrowers shall have the sole responsibility for taking
such action as may be necessary, from time to time, to preserve all rights of
the Borrowers and the Bank in the Collateral against prior or third parties.
Without limiting the generality of the foregoing, where Collateral consists in
whole or in part of securities, each Borrower represent to, and covenants with,
the Bank that such Borrower has made arrangements for keeping informed of
changes or potential changes affecting the securities (including rights to
convert or subscribe, payment of dividends, reorganization or other exchanges,
tender offers and voting rights), and such Borrower agrees that the Bank shall
have no responsibility or liability for informing such Borrower of any such or
other changes or potential changes or for taking any action or omitting to take
any action with respect thereto.


          6.6          Other
Actions as to any and all Collateral. Each Borrower further agrees to take
any other action reasonably requested by the Bank to ensure the attachment,
perfection and first priority (subject only to Permitted Liens) of, and the ability
of the Bank to enforce, the Bank’s security interest in any and all of the
Collateral, including (a) causing the Bank’s name to be noted as secured party
on any certificate of title for a titled good if such notation is a condition
to attachment, perfection or priority of, or ability of the bank to enforce,
the Bank’s security interest in such Collateral, (b) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of the Bank to enforce, the Bank’s
security interest in such Collateral, (c) using all commercially reasonable
efforts to obtain governmental and other third party consents and approvals, including
any consent of any licensor, lessor or other Person obligated on Collateral, it
being understood and agreed, however, that any failure to obtain such consents
and approvals may (in accordance with clause (e) of the definition of
Eligible Inventory) result in decreased availability under the Borrowing Base,
(d) using all commercially reasonable efforts to obtain waivers from mortgagees
and landlords in form and substance satisfactory to the Bank, it being
understood and agreed, however, that any failure to obtain such waivers may (in
accordance with clause (c) of the definition of Eligible Inventory)
result in decreased availability under the Borrowing Base, and (e) taking all
actions required by the UCC in effect from time to time or by other law, as
applicable in any relevant UCC jurisdiction, or by other law as applicable in
any foreign jurisdiction. Each Borrower further agrees to indemnify and hold
the Bank harmless against claims of any Persons not a party to this Agreement
concerning disputes arising over the Collateral.


          6.7          Collateral
in the Possession of a Warehouseman or Bailee. If any of the Collateral at
any time is in the possession of a warehouseman or bailee, the Borrowing Agent
shall promptly notify the Bank thereof, and, upon request of the Bank,
Borrowers shall use all commercially reasonable efforts to promptly obtain a
Collateral Access Agreement, it being understood and agreed, however, that any
failure to obtain such Collateral Access Agreement may (in accordance with clause
(c) of the definition of 


37







Eligible Inventory) result in decreased availability under the
Borrowing Base. The Bank agrees with the Borrowers that the Bank shall not give
any instructions to such warehouseman or bailee pursuant to such Collateral
Access Agreement unless an Event of Default has occurred and is continuing.


          6.8          Lockbox
Arrangement. Each Borrower shall direct all of its Account Debtors to make
all payments on the Accounts directly to a post office box (the “Lockbox”)
designated by, and under the exclusive control of, the Bank. Pursuant to the
Lockbox Agreement, the Borrowing Agent shall establish the Lockbox and an
account (the “Lockbox Account”) in the Borrowing Agent’s name with the
Bank into which all payments received in the Lockbox shall be deposited, and
into which each Borrower will immediately deposit all payments made for
Inventory sold by such Borrower or the performance of services by such
Borrower, and received by such Borrower in the identical form in which such
payments were made, whether by cash or check. If any Borrower, any of its
Subsidiaries or any director, officer, employee, or agent of any such Borrower
or any such Subsidiary, or any other Person acting for or in concert with such
Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as proceeds of Accounts or other Collateral, such Borrower, such
Subsidiary and each such Person shall receive all such items in trust for, and
as the sole and exclusive property of, the Bank and, immediately upon receipt
thereof, shall remit the same (or cause the same to be remitted) in kind to the
Lockbox Account. The parties agree that all payments made to such Lockbox and
Lockbox Account or otherwise received by the Bank, whether in respect of the
Accounts or as proceeds of other Collateral or otherwise, (a) at all times
following the occurrence and during the continuance of an Event of Default,
will be applied on account of the Revolving Loans in accordance with Section
12.8 of this Agreement, and (b) at all other times, subject to final
collection and the Bank’s availability schedule, will be released to the
Borrowing Agent’s operating account maintained with the Bank. Each Borrower
agrees it shall be jointly and severally liable for all fees, costs and
expenses which the Bank incurs in connection with opening and maintaining the
Lockbox and the Lockbox Account and depositing for collection by the Bank any
check or other item of payment received by the Bank on account of the Obligations.
All of such fees, costs and expenses shall constitute Obligations hereunder,
shall be payable to the Bank by the Borrowers upon demand, and, until paid,
shall bear interest at the Default Rate. All checks, drafts, instruments and
other items of payment or proceeds of Collateral shall be endorsed by the
applicable Borrower or Borrowing Agent to the Bank, and, if that endorsement of
any such item shall not be made for any reason, the Bank is hereby irrevocably
authorized to endorse the same on such Borrower’s behalf. For the purpose of
this Section, each Borrower irrevocably hereby makes, constitutes and appoints
the Bank (and all Persons designated by the Bank for that purpose) as such
Borrower’s true and lawful attorney and agent-in-fact (i) to endorse such
Borrower’s name upon such items of payment and/or proceeds of Collateral and
upon any Chattel Paper, document, instrument, invoice or similar document or
agreement relating to any Account of such Borrower or goods pertaining thereto;
(ii) to take control in any manner of any item of payment or proceeds thereof;
and (iii) to have access to the Lockbox, and also, after the occurrence and
during the continuance of an Event of Default any other lockbox or postal box
into which any of such Borrower’s mail is deposited, and open and process all
mail addressed to such Borrower and deposited therein.


          6.9          Letter-of-Credit
Rights. If any Borrower at any time is a beneficiary under a letter of
credit now or hereafter issued in favor of such Borrower in a face amount of
$10,000 or more, such Borrower shall promptly notify the Bank thereof and, at
the request and option of the Bank, such Borrower shall, pursuant to an
agreement in form and substance satisfactory to the Bank, either (i) arrange
for the issuer and any confirmer of such letter of credit to consent to an
assignment to the Bank of the proceeds of any drawing under the letter of
credit, or (ii) arrange for the Bank to become the transferee beneficiary of
the letter of credit, with the Bank agreeing, in each case, that the proceeds
of any drawing under the letter to credit are to be applied as provided in this
Agreement.


38







          6.10          Commercial
Tort Claims. If any Borrower shall at any time hold or acquire a Commercial
Tort Claim seeking damages of $10,000 or more, the Borrowing Agent or such
Borrower shall immediately notify the Bank in writing signed by the Borrowing
Agent or such Borrower of the details thereof and grant to the Bank in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, in each case in form and substance satisfactory to the
Bank, and shall execute any amendments hereto deemed reasonably necessary by
the Bank to perfect its security interest in such Commercial Tort Claim.


          6.11          Electronic
Chattel Paper and Transferable Records. If any Borrower at any time holds
or acquires an interest in any electronic chattel paper or any “transferable
record”, as that term is defined in Section 201 of the federal Electronic
Signatures in Global and National Commerce Act, or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, the
Borrowing Agent or the Borrower shall promptly notify the Bank thereof and, at
the request of the Bank, shall take such action as the Bank may reasonably
request to vest in the Bank control under Section 9-105 of the UCC of such
electronic chattel paper or control under Section 201 of the federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as so in effect in such
jurisdiction, of such transferable record. The Bank agrees with the Borrowers
that the Bank will arrange, pursuant to procedures satisfactory to the Bank and
so long as such procedures will not result in the Bank’s loss of control, for
the Borrowers to make alterations to the electronic chattel paper or
transferable record permitted under Section 9-105 of the UCC or, as the case
may be, Section 201 of the federal Electronic Signatures in Global and National
Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a
party in control to make without loss of control.


          6.12          Pledged
Equity Interests. With respect to the Pledged Equity Interests, IntriCon
hereby agrees as follows:


	
  

 	
  

 
	
  

 	
                  (a)          IntriCon
 shall deliver to Bank (i) simultaneously with or prior to the execution and
 delivery of this Agreement, all certificates representing the Pledged Equity
 Interests (if any), and (ii) promptly upon the receipt thereof by or on
 behalf of IntriCon, all other certificates and instruments constituting
 Pledged Equity Interests. Prior to delivery to Bank, all such certificates
 and instruments constituting Pledged Equity Interests (or proceeds thereof)
 shall be held in trust by IntriCon for the benefit of Bank pursuant hereto.
 All such certificates shall be delivered in suitable form for transfer by
 delivery or shall be accompanied by duly executed instruments of transfer or
 assignment in blank, substantially in the form provided in Exhibit 6.12(a)
 attached hereto.

 
	
  

 	
  

 
	
  

 	
                  (b)          If
 any issuer of Pledged Equity Interests is organized in a jurisdiction which
 does not permit the use of certificates to evidence equity ownership, or if
 any of the Pledged Equity Interests is at any time not evidenced by
 certificates of ownership, then IntriCon shall (i) to the extent permitted by
 applicable law, record on the equityholder register or the books of the
 issuer the pledge of the Pledged Equity Interests hereunder, (ii) cause the
 issuer to execute and deliver to Bank an acknowledgment of such pledge of the
 Pledged Equity Interests substantially in the form of Exhibit 6.12(b)
 annexed hereto, and (iii) execute any customary pledge forms or other
 documents reasonably necessary or appropriate to complete the pledge and give
 Bank the right and power to transfer such Pledged Equity Interests in
 accordance with the terms hereof.

 
	
  

 	
  

 
	
  

 	
                  (c)          If
 IntriCon shall receive, by virtue of its being or having been the owner of
 any Pledged Equity Interests (or any proceeds thereof), any (i) certificate
 representing Pledged Equity Interests, including without limitation, any
 certificate representing a dividend or distribution in connection with any
 increase or reduction of capital, reclassification, merger, consolidation,
 sale of assets, combination of shares or membership or equity interests,
 stock splits, spin-off or split-

 


39











	
  

 	
  

 
	
  

 	
 off, promissory notes or other instrument; (ii) option or right,
 whether as an addition to, substitution for, or an exchange for, any Pledged
 Equity Interests or otherwise; (iii) dividends payable in securities; or (iv)
 distributions of securities or other equity interests in connection with a
 partial or total liquidation, dissolution or reduction of capital, capital
 surplus or paid-in surplus, then IntriCon shall receive such certificate,
 instrument, option, right or distribution in trust for the benefit of Bank,
 shall segregate it from IntriCon’s other property and shall deliver it
 forthwith to Bank in the exact form received together with any necessary
 endorsement and/or appropriate instruments of transfer or assignment duly
 executed in blank, substantially in the form provided in Exhibit 6.12(a),
 to be held by Bank as Collateral and as further collateral security for the
 Obligations.

 


Section 7.         REPRESENTATIONS
AND WARRANTIES.


          To induce
the Bank to make the Loans and issue the Letters of Credit, each Borrower makes
the following representations and warranties to the Bank, each of which shall
survive the execution and delivery of this Agreement:


          7.1          Corporate
Status. The exact legal name of each Borrower is as set forth in the first
paragraph of this Agreement, and no Borrower currently conducts, nor has it
during the last five (5) years conducted, business under any other name or
trade name, other than those names and trade names listed on Schedule 7.1;
and the organizational identification no. and principal place of business of
each Borrower is set forth on Schedule 7.1. Each Borrower (i) is duly
organized and is and shall remain validly existing and in good standing under
the laws of its state of organization, and is and shall remain qualified to do
business as a foreign corporation under the laws of the jurisdictions listed on
Schedule 7.1 and under the laws of each other jurisdiction in which the
failure to be so qualified and in good standing would have a Material Adverse
Effect, and (ii) has and shall maintain all requisite power and authority,
corporate or otherwise, to conduct its business, to own its property, to
execute, deliver and perform all of its obligations under this Agreement and
each of the other Loan Documents, and to grant the Liens on the Collateral
provided by it. No Borrower is (a) an “investment company”, (b) an “investment
adviser”, or (c) a company “controlled” by an “investment company” as such
terms are defined in the Investment Company Act of 1940, as amended. Other than
IntriCon Pte Ltd and IntriCon GmbH, there are no Subsidiaries of any Borrower
that are not, themselves, a Borrower hereunder. 


          7.2          Authorization.
Each Borrower has full right, power and authority to enter into this Agreement,
to make the borrowings and execute and deliver the Loan Documents as provided
herein and to perform all of its duties and obligations under this Agreement
and the other Loan Documents. IntriCon has the full right, power and authority
to enter into the Acquisition Agreement and all of the other Acquisition
documents and to perform all of its duties and obligations thereunder. The
execution and delivery of this Agreement and the other Loan Documents will not,
nor will the observance or performance of any of the matters and things herein
or therein set forth, violate or contravene any provision of law or of the
organizational documents of any Borrower. All necessary and appropriate action
has been taken on the part of each Borrower to authorize the execution and
delivery of this Agreement and the Loan Documents.


          7.3          Validity
and Binding Nature. This Agreement and the other Loan Documents are the
legal, valid and binding obligations of the each Borrower, enforceable against
each such Borrower in accordance with their terms, subject to bankruptcy,
insolvency and similar laws affecting the enforceability of creditors’ rights
generally and to general principles of equity.


          7.4          Consent;
Absence of Breach. The execution, delivery and performance of this
Agreement, the other Loan Documents and any other documents or instruments to
be executed and 


40







delivered by each Borrower in connection with the Loans and/or the
Letters of Credit, and the borrowings by each Borrower hereunder, do not and
will not (a) require any consent, approval, authorization of, or filings with,
notice to or other act by or in respect of, any governmental authority or any
other Person (other than any consent or approval which has been obtained and is
in full force and effect); (b) conflict with (i) any provision of law or any
applicable regulation, order, writ, injunction or decree of any court or
governmental authority, (ii) the organizational documents of the Borrowers, or
(iii) any material agreement, indenture, instrument or other document, or any
judgment, order or decree, which is binding upon any Borrower or any of its
Subsidiaries or any of their respective properties or assets; or (c) require,
or result in, the creation or imposition of any Lien on any asset of any
Borrower or any of its Subsidiaries, other than Liens in favor of the Bank
created pursuant to this Agreement. Without limiting the generality of the
foregoing, the Borrowers specifically represent and warrant to the Bank that
the stock purchase and sale transaction contemplated by the Acquisition
Documents will be entered into and consummated in accordance with applicable
law.


          7.5          Ownership
of Properties; Liens. No Borrower owns the fee interest in any real
property. Each Borrower is the sole owner all of its properties and assets,
real and personal, tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all Liens, charges and claims, other than Permitted Liens.


          7.6          Equity
Ownership. All issued and outstanding Capital Securities of each Borrower and
each of its Subsidiaries are duly authorized and validly issued, fully paid,
non-assessable, and in the case of Borrowers other than IntriCon, free and
clear of all Liens other than those in favor of the Bank, if any, and all such
securities were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. Except as set forth on Schedule 7.6,
as of the date hereof, there are no pre-emptive or other outstanding rights,
options, warrants, conversion rights or other similar agreements or
understandings for the purchase or acquisition of any Capital Securities of the
Borrowers (or any of them) or any of their respective Subsidiaries. There
exists no “adverse claim” within the meaning of Section 9-102 of the UCC with
respect to any of the Pledged Equity Interests. No Borrower has any outstanding
shares of any class of capital stock or other equity interests which has
priority over any other class of capital stock or other equity interests of
such Borrower as to dividends or distributions or in liquidation.


          7.7          Intellectual
Property. Except as set forth on Schedule 7.7, each Borrower owns
and possesses or has a license or other right to use all Intellectual Property,
as are necessary for the conduct of the businesses of such Borrower as
presently conducted, without any infringement upon rights of others which could
reasonably be expected to have a Material Adverse Effect upon such Borrower,
and no material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property nor does such Borrower know of
any valid basis for any such claim.


          7.8          Financial
Statements. All financial statements submitted to the Bank have been
prepared in accordance with sound accounting practices and GAAP on a basis,
except as otherwise noted therein, consistent with the previous fiscal year and
present fairly in all material respects the financial condition of each
Borrower and the results of the operations for each such Borrower as of such
date and for the periods indicated, subject in the case of interim financial
statements, to the absence of footnotes and to normal year-end accruals. Since
the date of the most recent consolidated financial statement submitted by the
Borrowers to the Bank, there has been no change in the financial condition or
in the assets or liabilities of any Borrower having a Material Adverse Effect
on any such Borrower.


          7.9          Litigation
and Contingent Liabilities. There is no litigation, arbitration proceeding,
demand, charge, claim, petition or governmental investigation or proceeding
pending, or to the knowledge of any Borrower, threatened, against any Borrower,
which, if adversely determined, which


41








might reasonably be expected to have a Material Adverse Effect, except
as set forth in Schedule 7.9. Other than any liability incident to such
litigation or proceedings, and except as permitted by Section 9.1, no
Borrower has any material guarantee obligations, Contingent Liabilities,
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, that are not
fully-reflected or fully reserved for, to the extent required by GAAP, in the
most recent audited financial statements delivered pursuant to Section
8.8(a) or fully-reflected or fully reserved, to the extent required by
GAAP, for in the most recent financial statements delivered pursuant to Section
8.8(b), except for any such obligations or liabilities or transactions
entered into after the date hereof and after the date of the most recent
financial statements delivered under Section 8.8(a) or Section 8.8(b)
and which will be fully reflected or fully reserved for, to the extent required
by GAAP, on the next set of financial statements to be delivered by Borrowers
under Section 8.8(a) or Section 8.8(b).


          7.10         Event
of Default. No Event of Default or Unmatured Event of Default exists or
would result from the incurrence by any Borrower of any of the Obligations
hereunder or under any of the other Loan Document, and no Borrower is in
default (without regard to grace or cure periods) under any other contract or
agreement to which it is a party if the terminations of such contract or
agreement and/or failure of the other party or parties to such contract or
agreement to perform their obligations under such contract or agreement, would
have a Material Adverse Effect.


          7.11         Adverse
Circumstances. No condition, circumstance, event, agreement, document,
instrument, restriction, litigation or proceeding (or threatened litigation or
proceeding or basis therefor) exists which (a) would have a Material Adverse
Effect, or (b) would constitute an Event of Default or an Unmatured Event of
Default. No Borrower is in default under any Applicable Agreement, nor has any
Borrower received any notice of breach, termination or acceleration or demand
for adequate assurances under any Applicable Agreement that has not been
communicated to the Bank.


          7.12         Environmental Laws and Hazardous Substances. Except as set forth on Schedule 7.12,
no Borrower has generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Substances, on or off any of the
premises of any Borrower (whether or not owned by it) in any manner which might
reasonably be expected to have a Material Adverse Effect upon any Borrower.
Each Borrower will comply in all material respects with all Environmental Laws
and will obtain all licenses, permits certificates, approvals and similar
authorizations thereunder. Except as could not reasonably be expected to have a
Material Adverse Effect, there has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other Person, nor is any pending or, to the best of each
Borrower’s knowledge, threatened. Each Borrower shall notify the Bank in
writing in five business days upon receiving actual notice of any
investigation, proceeding, complaint, order, directive, claim, or citation and
shall take prompt and appropriate actions to respond thereto, with respect to
any non-compliance with, or violation of, the requirements of any Environmental
Law by any Borrower or the release, spill or discharge, threatened or actual,
of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which might
reasonably be expected to have a Material Adverse Effect upon any Borrower.
Except as set forth on Schedule 7.12, no Borrower has, to the best of
each Borrower’s knowledge, any material liability, contingent or otherwise, in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Substances or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material. Each Borrower further agrees to allow the Bank or its agent access to
the properties of such Borrower and its respective Subsidiaries to confirm
compliance with all Environmental Laws, and the applicable Borrower shall,
following determination by the Bank that there is non-compliance, or any
condition which requires any action by or on behalf of such Borrower
in order to avoid any non-compliance, with any Environmental Law, at such



42







Borrower’s sole expense, cause an independent environmental engineer acceptable
to the Bank to conduct such tests of the relevant site as are appropriate, and
prepare and deliver a report setting forth the result of such tests, a proposed
plan for remediation as is required under applicable Environmental Laws and an
estimate of the costs thereof. This Section 7.12 shall constitute the
only representations that are made by each Borrower with respect to
Environmental Laws and Hazardous Substances.


          7.13         Solvency,
etc. As of the date hereof, and immediately prior to and after giving
effect to the payment of the purchase price under the Acquisition Agreement,
the issuance of each Letter of Credit and each Loan hereunder and the use of
the proceeds thereof, (a) the fair value of each Borrower’s assets is greater
than the amount of its liabilities (including disputed, contingent and
unliquidated liabilities) as such value is established and liabilities
evaluated as required under the Section 548 of the Bankruptcy Code, (b) the
present fair saleable value of each Borrower’s assets is not less than the
amount that will be required to pay the probable liability on its debts as they
become absolute and matured, (c) each Borrower is able to realize upon its
assets and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business,
(d) no Borrower intends to, nor believes that it will, incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature, and
(e) no Borrower is engaged in business or a transaction, and is not about to
engage in business or a transaction, for which its property would constitute
unreasonably small capital.


          7.14         ERISA Obligations. All Employee Plans of each Borrower meet the
minimum funding standards of Section 302 of ERISA and 412 of the Internal
Revenue Code where applicable, and each such Employee Plan that is intended to
be qualified within the meaning of Section 401 of the Internal Revenue Code of
1986 is qualified. No withdrawal liability has been incurred under any such
Employee Plans and no “Reportable Event” or “Prohibited Transaction” (as such
terms are defined in ERISA), has occurred with respect to any such Employee
Plans, unless approved by the appropriate governmental agencies. Each Borrower
has promptly paid and discharged all obligations and liabilities arising under ERISA
of a character which if unpaid or unperformed might result in the imposition of
a Lien against any of its properties or assets. 


          7.15         Labor
Relations. Except as could not reasonably be expected to have a Material
Adverse Effect, (i) there are no strikes, lockouts or other labor disputes
against any Borrower or, to the best knowledge of each Borrower, threatened,
(ii) hours worked by and payment made to employees of any Borrower have not
been in violation of the Fair Labor Standards Act or any other applicable law,
and (iii) no unfair labor practice complaint is pending against any Borrower
or, to the best knowledge of each Borrower, threatened before any governmental
authority.


          7.16         Security
Interest. This Agreement creates a valid security interest in favor of the
Bank in the Collateral and, when properly perfected by filing in the
appropriate jurisdictions, or by possession or Control of such Collateral by
the Bank or delivery of such Collateral to the Bank, shall constitute a valid,
perfected, first-priority security interest in such Collateral except for Permitted
Liens.


          7.17         Lending
Relationship. The relationship hereby created between the Borrower and the
Bank is and has been conducted on an open and arm’s length basis in which no
fiduciary relationship exists, and no Borrower has relied and is not relying on
any such fiduciary relationship in executing this Agreement and in consummating
the Loans. The Bank represents that it will receive any Note payable to its
order as evidence of a bank loan.


          7.18         Business
Loan. The Loans and Letters of Credit, including interest rate, fees and
charges as contemplated hereby, (i) are business loans under applicable law,
(ii) are an exempted transaction under the Truth In Lending Act, 12 U.S.C. 1601
et seq., as amended from time to time, and (iii) do not, and when
disbursed shall not, violate the provisions of the Minnesota usury laws, any
consumer credit 


43







laws or the usury laws of any state which may have jurisdiction over
this transaction, any Borrower or any property securing the Loans or other
Obligations.


          7.19         Taxes.
Each Borrower has timely filed all federal, state and local tax returns and
reports required by law to have been filed by it and has paid all taxes,
governmental charges and assessments due and payable with respect to such
returns, except any such taxes or charges which are being diligently contested
in good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books, or are insured against
or bonded over to the satisfaction of the Bank, and the contesting of such
payment does not create a Lien on the Collateral which is not a Permitted Lien.
As of the date hereof, except as set forth on Schedule 7.19, there is no
controversy or objection pending, or to the knowledge of any Borrower,
threatened in respect of any tax returns of any Borrower. Each Borrower has
made adequate reserves on its books and records in accordance with GAAP for all
taxes that have accrued but which are not yet due and payable.


          7.20         Compliance
with Regulations U and X. No portion of the proceeds of the Loans or
Letters of Credit shall be used by any Borrower or any Subsidiary or Affiliate
of any Borrower, either directly or indirectly, for the purpose of purchasing
or carrying any margin stock, within the meaning of Regulation U or Regulation
X as adopted by the Board of Governors of the Federal Reserve System or any
successor thereto.


          7.21         Governmental
Regulation. No Borrower, nor any of its Subsidiaries or any other Obligors
are, or after giving effect to any loan, will be, (a) subject to regulation
under the ICC Termination Act of 1995 or the Investment Company Act of 1940 or
to any federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money; (b) a “holding company” or a “subsidiary
company” or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company”, within the meaning of the Energy Policy Act of 2005 or (c)
a “public utility” within the meaning of the Federal Power Act, as amended.


          7.22         Bank
Accounts. All Deposit Accounts and operating bank accounts of each Borrower
are located at the Bank and no Borrower has other Deposit Accounts except those
listed on Schedule 7.22 attached hereto and those opened after the date
hereof in accordance with Section 9.12 of this Agreement below.


          7.23         Place
of Business. The principal places of business and books and records of each
Borrower is set forth on Schedule 7.1, and the location of all
Collateral, if other than at such principal places of business, is as set forth
on Schedule 7.23 attached hereto and made a part hereof, and as updated
from time to time pursuant to the following sentence. Each Borrower or the
Borrowing Agent shall promptly notify the Bank of any change in such locations.
No Borrower will remove or permit the Collateral to be removed from such
locations without at least sixth (60) days prior written notice to the Bank in
connection with the establishment of a new business location by Borrowers
within the United States as contemplated by and in accordance with the previous
sentence, except for transfers from one Collateral location of Borrowers
disclosed to the Bank to another disclosed Collateral location of Borrowers and
for Collateral sold in compliance with Section 6.2 of this Agreement, it
being understood and agreed, however, that any such relocation may (in
accordance with clause (c) of the definition of Eligible Inventory)
result in decreased availability under the Borrowing Base unless the Borrowers
have delivered to the Bank a Collateral Access Agreement covering such new
location. 


          7.24         Complete
Information. This Agreement and all financial statements, schedules,
certificates, confirmations, agreements, contracts, and other materials and
information heretofore or contemporaneously herewith furnished in writing by
the Borrowers (or any of them) to the Bank for purposes of, or in connection
with, this Agreement and the transactions contemplated hereby is, and all 


44







written information hereafter furnished by or on behalf of the
Borrowers (or any of them) to the Bank pursuant hereto or in connection
herewith will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and none of such information is
or will be incomplete by omitting to state any material fact necessary to make
such information not misleading in light of the circumstances under which made
(it being recognized by the Bank that any projections and forecasts provided by
the Borrowers (or any of them) are based on good faith estimates and
assumptions believed by the Borrowers to be reasonable as of the date of the
applicable projections or assumptions and that actual results during the period
or periods covered by any such projections and forecasts may differ from
projected or forecasted results).


          7.25         [RESERVED]


          7.26         Internal
Controls.


	
  

 	
  

 
	
  

 	
                 (a)          IntriCon
 has established and maintains disclosure controls and procedures (as such
 term is defined in Rule 13a-15(e) under the U.S. Securities Exchange Act of
 1934, as amended (the “Exchange Act”)), which (i) are designed to
 ensure that material information relating to the Borrowers is made known to
 IntriCon’s principal executive officer and its principal financial officer or
 persons performing similar functions by others within those entities,
 particularly during the periods in which the periodic reports required under
 the Exchange Act are being prepared; (ii) have been evaluated for
 effectiveness as a date within ninety (90) days prior to the filing of such
 Borrower’s most recent annual or quarterly report filed with the Securities
 Exchange Commission; and (iii) are effective in all material respects to
 perform the functions for which they were established;

 
	
  

 	
  

 
	
  

 	
                 (b)          Based
 on the evaluation of its internal control over financial reporting, as
 defined in Exchange Act Rule 13a-15(f), such Borrower is not aware of (i) any
 material weakness in the design or operation of internal control over
 financial reporting which are reasonably likely to have a material adverse
 effect on IntriCon’s ability to record, process, summarize and report
 financial data or (ii) any fraud, whether or not material, that involves
 management or other employees who have a significant role in such Borrower’s
 internal control over financial reporting; and

 
	
  

 	
  

 
	
  

 	
                 (c)          Since
 the date of the most recent evaluation of its internal control over financial
 reporting, as defined above, there have been no changes in internal controls
 over financial reporting that have materially affected, or are reasonably
 likely to materially affect, internal controls over financial reporting,
 including any corrective actions with regard to significant deficiencies and
 material weaknesses.

 


          7.27         Insurance.
Schedule 7.27 correctly describes all of the insurance policies
maintained by Borrowers as of the date hereof, including the carriers thereof,
and the types of coverage and insured amounts covered thereby.


          7.28         Pledged
Equity Interests. All of the Pledged Equity Interests are duly authorized
and validly issued capital stock or membership interests (as applicable) of the
applicable Pledged Entity, are fully paid and nonassessable and are not subject
to the preemptive rights of any Person. All of the Pledged Equity Interests
were issued pursuant to a valid exemption from the registration requirements of
the Securities Act of 1933, as amended, and fully comply with any and all
applicable state securities laws. No authorization, approval or action by, and
no notice or filing with any governmental authority or with the issuer of any
Pledged Equity Interests is required either (i) for the pledge of the Pledged
Equity Interests made by IntriCon hereunder or for the granting of the security
interest therein by IntriCon 


45







pursuant to this Agreement, or (ii) for the exercise by Bank of its
rights and remedies hereunder with respect to the Pledged Equity Interests
(except as may be
required by laws affecting the offering and sale of securities). This Agreement
creates a valid security interest in favor of Bank in the Pledged Equity
Interests. The taking of possession by Bank of the certificates (if any)
evidencing the Pledged Equity Interests will perfect and establish the first
priority of Bank’s security interest in such certificated Pledged Equity
Interests. The filing of a UCC Financing Statement describing the Pledged
Equity Interests with the Secretary of State of Pennsylvania will perfect the
Bank’s security interest in any uncertificated Pledged Equity Interests, and
furthermore, the execution of a written agreement by the issuer of each such
uncertificated Pledged Equity Interest that it will comply with instructions
originated by the Bank with respect to any such uncertificated Pledged Equity
Interests issued by it without further consent by IntriCon will establish
“control” (as defined in the UCC) by the Bank over any such uncertificated
Pledged Equity Interest and perfect and establish the first priority of Bank’s
security interest in such uncertificated Pledged Equity Interests. No action
other than obtaining possession of the certificates representing all
certificated Pledged Equity Interests and obtaining “control” over all
uncertificated Pledged Equity Interests as described in the foregoing sentences
is necessary to perfect or otherwise protect the Bank’s security interest in
the Pledged Equity Interests. Schedule 7.28 attached hereto sets forth a
statement of the authorized, issued and outstanding capital stock of the
Pledged Entities and, the owners of such capital stock. None of the issued and
outstanding capital stock of the Pledged Entities that are owned by
IntirCon are subject to any vesting, redemption, or repurchase agreement, and
there are no warrants or options outstanding with respect to such capital
stock.


          7.29         Acquisition.
Set forth on Schedule 7.29 is an accurate and complete list of all of
the material Acquisition Documents. Except as set forth on Schedule 7.29,
as of the date hereof, the Acquisition Documents have not been amended,
modified, revoked or rescinded since their respective dates of execution, and
none of the conditions to the obligations of the respective parties to the
Acquisition Documents have been waived by any such party. As of the date
hereof, subject to the qualifications contained therein (including knowledge
qualifiers), the representations and warranties of IntriCon, and, to the best
of IntriCon’s knowledge, of each other party contained in the Acquisition
Documents are true and correct in all material respects. All transactions
described in the Acquisition Documents that are to occur prior to the date
hereof have been consummated in all material respects in accordance with the
terms and provisions thereof, and, except as set forth in Schedule 7.29,
the only condition to the consummation of the contemplated stock purchase and
sale transaction in accordance with the Acquisition Documents remaining to be
satisfied thereunder (which condition will be satisfied contemporaneously with
the funding of the initial Revolving Loan and Term Loan hereunder) is the
delivery of funds sufficient to pay the purchase price required to be paid
under the Acquisition Documents. The aggregate purchase price that is payable
under the Acquisition Agreement does not exceed $2,575,000, of which $1,225,000
is payable in cash.


Section 8.         AFFIRMATIVE
COVENANTS.


          8.1          Compliance
with Bank Regulatory Requirements; Increased Costs. If the Bank shall
reasonably determine that any Regulatory Change, or compliance by the Bank or
any Person controlling the Bank with any request or directive (whether or not
having the force of law) of any governmental authority, central bank or
comparable agency has or would have the effect of reducing the rate of return
on the Bank’s or such controlling Person’s capital as a consequence of the Bank’s
obligations hereunder or under any Letter of Credit to a level below that which
the Bank or such controlling Person could have achieved but for such Regulatory
Change or compliance (taking into consideration the Bank’s or such controlling
Person’s policies with respect to capital adequacy) by an amount deemed by the
Bank or such controlling Person to be material or would otherwise reduce the
amount of any sum received or receivable by the Bank under this Agreement or
under any Note with respect thereto, then from time to time, upon demand by the
Bank (which demand shall be accompanied by a statement setting forth the basis
for such 


46







demand and a calculation of the amount thereof in reasonable detail),
the Borrowers shall pay directly to the Bank or such controlling Person such
additional amount as will compensate the Bank for such increased cost or such
reduction, so long as such amounts have accrued on or after the day which is
one hundred eighty days (180) days prior to the date on which the Bank first
made demand therefor.


          8.2          Borrowers’
Existence. Each Borrower shall at all times (a) preserve and maintain its
existence and good standing in the jurisdiction of its organization, (b)
preserve and maintain its qualification to do business and good standing in
each jurisdiction where the nature of its business makes such qualification
necessary (other than such jurisdictions in which the failure to be qualified
or in good standing could not reasonably be expected to have a Material Adverse
Effect), and (c) continue as a going concern in the business which such
Borrower is presently conducting. If any Borrower does not have an
Organizational Identification Number and later obtains one, such Borrower shall
promptly notify the Bank of such Organizational Identification Number. No
Borrower shall form or otherwise acquire a new Subsidiary without the prior
written consent of the Bank.


          8.3          Compliance
With Laws. Each Borrower shall use the proceeds of the Loans and Letter of
Credit for the purposes permitted in Sections 2.1(a) and 2.2(a)
(as applicable) and not in contravention of any requirements of law (except to
the extent no Material Adverse Effect would result from any such contravention)
and not in violation of this Agreement, and shall comply, and cause each
Subsidiary to comply, in all respects, including the conduct of its business
and operations and the use of its properties and assets, with all applicable
laws, rules, regulations, decrees, orders, judgments, licenses and permits,
except where failure to comply could not reasonably be expected to have a
Material Adverse Effect. In addition, and without limiting the foregoing sentence, each Borrower shall (a) ensure,
and cause each Subsidiary to ensure, that no Person who owns a controlling
interest in or otherwise controls any Borrower or any Subsidiary is or shall be
listed on the Specially Designated Nationals and Blocked Person List or other
similar lists maintained by the Office of Foreign Assets Control (“OFAC”),
the Department of the Treasury or included in any Executive Orders, (b) not use
or permit the use of the proceeds of the Loans or Letters of Credit to violate
any of the foreign asset control regulations of OFAC or any enabling statute or
Executive Order relating thereto, and (c) comply, and cause each Subsidiary to
comply, with all applicable Bank Secrecy Act (“BSA”) laws and
regulations, as amended. The Acquisition shall be consummated in accordance
with the terms and conditions of the Acquisition Documents and all applicable
laws.


          8.4          Payment
of Taxes and Liabilities. The Borrowers jointly and severally agree to pay,
and cause each Subsidiary to pay, and discharge, prior to delinquency and
before penalties accrue thereon, all property and other taxes, and all
governmental charges or levies against it or any of the Collateral, as well as
claims of any kind which, if unpaid, could become a Lien on any of its property
other than Permitted Liens; provided that the foregoing shall not require the
Borrowers (or any of them) or any respective Subsidiary to pay any such tax or
charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP and, in the case of a claim which could
become a Lien on any of the Collateral, such contest proceedings stay the
foreclosure of such Lien or the sale of any portion of the Collateral to
satisfy such claim.


          8.5          Maintain
Property. Each Borrower shall at all times maintain, preserve and keep its
plant, properties and Equipment, including any Collateral, in good repair,
working order and condition, normal wear and tear excepted, and shall from time
to time make all needful and proper repairs, renewals, replacements, and
additions thereto so that at all times the efficiency thereof shall be fully
preserved and maintained.


47







          8.6          Maintain
Insurance. Each Borrower shall at all times maintain, and cause each
Subsidiary to maintain, with insurance companies reasonably acceptable to the
Bank, such insurance coverage as may be required by any law or governmental
regulation or court decree or order applicable to it and such other insurance,
to such extent and against such hazards and liabilities, including employers’,
public and professional liability risks and business interruption, as is
customarily maintained by companies similarly situated, and shall have insured
amounts no less than, and deductibles no higher than, are reasonably acceptable
to the Bank. Each Borrower shall furnish to the Bank a certificate setting
forth in reasonable detail the nature and extent of all insurance maintained by
such Borrower, which shall be reasonably acceptable in all respects to the
Bank. Each Borrower shall cause each issuer of an insurance policy to provide
the Bank with an endorsement (i) showing the Bank as mortgagee and loss payee
with respect to each policy of property or casualty insurance and naming the
Bank as an additional insured with respect to each policy of liability
insurance; and (ii) providing that thirty (30) days notice will be given to the
Bank prior to any cancellation of, material reduction or change in coverage
provided by or other material modification to such policy. Each Borrower shall
execute and deliver to the Bank a collateral assignment, in form and substance
satisfactory to the Bank, of each business interruption insurance policy
maintained by such Borrower.


          In the
event any Borrower either fails to provide the Bank with evidence of the
insurance coverage required by this Section or at any time hereafter shall fail
to obtain or maintain any of the policies of insurance required above, or to
pay any premium in whole or in part relating thereto, then the Bank, without
waiving or releasing any obligation or default by such Borrower hereunder, may
at any time (but shall be under no obligation to so act), obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto, which the Bank deems advisable. This insurance coverage (a)
may, but need not, protect such Borrower’s interests in such property,
including the Collateral, and (b) may not pay any claim made by, or against,
such Borrower in connection with such property, including the Collateral. Such
Borrower may later cancel any such insurance purchased by the Bank, but only
after providing the Bank with evidence that such Borrower has obtained the
insurance coverage required by this Section. If the Bank purchases insurance
for the Collateral, such Borrower will be responsible for the costs of that
insurance, including interest and any other charges that may be imposed with
the placement of the insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance may be added to the
principal amount of the Loans owing hereunder. The costs of the insurance may
be more than the cost of the insurance such Borrower may be able to obtain on
its own.


          8.7          ERISA Liabilities; Employee Plans. Each Borrower shall (i) keep in full force and
effect any and all Employee Plans which are presently in existence or may, from
time to time, come into existence under ERISA, and not withdraw from any such
Employee Plans, unless such withdrawal can be effected or such Employee Plans
can be terminated without material liability to such Borrower; (ii) make
contributions to all of such Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA; including the minimum
funding standards of ERISA; (iii) comply with all material requirements of
ERISA which relate to such Employee Plans; (iv) notify the Bank immediately
upon receipt by such Borrower of any notice concerning the imposition of any
withdrawal liability or of the institution of any proceeding or other action
which may result in the termination of any such Employee Plans or the
appointment of a trustee to administer such Employee Plans; (v) promptly advise
the Bank of the occurrence of any “Reportable Event” or “Prohibited
Transaction” (as such terms are defined in ERISA), with respect to any such
Employee Plans; and (vi) amend any Employee Plan that is intended to be
qualified within the meaning of Section 401 of the Internal Revenue Code of
1986 to the extent necessary to keep the Employee Plan qualified, and to cause
the Employee Plan to be administered and operated in a manner that does not
cause the Employee Plan to lose its qualified status.


48







          8.8          Financial
Statements. Each Borrower shall at all times maintain a standard and modern
system of accounting, on the accrual basis of accounting and in all respects in
accordance with GAAP, and shall furnish to the Bank or its authorized
representatives such information regarding the business affairs, operations and
financial condition of such Borrower, including:


	
  

 	
  

 
	
  

 	
                (a)          promptly
 when available, and in any event, within ninety (90) days after the close of
 each of its fiscal years, a copy of (i) the annual audited consolidated
 financial statements of Borrowers and their Subsidiaries, including
 consolidated balance sheet, statement of income and retained earnings,
 statement of cash flows for the fiscal year then ended, in reasonable detail,
 prepared and certified, without adverse reference to going concern value and
 without qualification, by Baker Tilly Virchow Krause LLP, or another
 independent auditor of recognized standing selected by the Borrowers and
 reasonably acceptable to the Bank and (ii) a consolidating balance sheet of
 the Borrowers and their Subsidiaries as of the end of each of its fiscal
 years and consolidating statements of earnings and cash flows for the
 Borrowers and their Subsidiaries for each of its fiscal years, certified by
 each Borrower’s treasurer or chief financial officer on behalf of such
 Borrower as fairly presenting in all material respects the financial
 condition and results of operation of the Borrowers and their consolidated
 Subsidiaries for the period covered thereby;

 
	
  

 	
  

 
	
  

 	
                (b)          promptly
 when available, and in any event, within thirty (30) days following the end
 of each calendar month (or in the case of any month that is the last month in
 a fiscal quarter, forty-five (45) days), other than the last fiscal month in
 any fiscal year, a copy of the consolidated and consolidating balance sheets,
 income statement and cash flow statement of the Borrowers and their
 respective Subsidiaries for the calendar month then ended and such other
 information (including nonfinancial information) as the Bank may reasonably
 request, in reasonable detail, prepared and certified by each Borrower’s
 treasurer or chief financial officer on behalf of such Borrower as fairly
 presenting in all material respects the financial condition and results of
 operation of the Borrowers and their consolidated Subsidiaries for the period
 covered thereby;

 
	
  

 	
  

 
	
  

 	
                (c)          within
 ten (10) days after the filing due date (as such date may be extended in
 accordance with properly granted extensions) each year, a signed copy of the
 complete federal and state income tax returns filed with the Internal Revenue
 Service and applicable state taxing authorities by each Borrower; and

 
	
  

 	
  

 
	
  

 	
                (d)          promptly
 after the sending or filing thereof, copies of all regular and periodic
 reports which any Borrower shall file with the Securities and Exchange
 Commission or any national securities exchange.

 


No change with respect to such accounting principles shall be made by
the Borrowers (or any of them) without giving prior notification to the Bank.
Each Borrower represents and warrants to the Bank that the financial statements
delivered to the Bank at or prior to the execution and delivery of this
Agreement and to be delivered at all times thereafter fairly present in all
material respects and will fairly present in all material respects the
financial condition of such Borrower in accordance with GAAP, subject in the
case of interim statements to the absence of footnotes and to normal year-end
adjustments.


          8.9          Management
Letters; Supplemental Financial Statements. Each Borrower shall immediately
upon receipt thereof, provide to the Bank copies of management letters and
other interim and supplemental reports if any, submitted to such Borrower by
independent accountants in connection with any annual, interim or special audit
or review of the books of such Borrower.


          8.10        Borrowing
Base Certificate. The Borrowing Agent shall, within thirty (30) days after
the end of each month, deliver to the Bank a Borrowing Base Certificate dated
as of the last Business Day of 


49







such month, certified as true and correct by an authorized
representative of the Borrowing Agent and acceptable to the Bank in its sole
and absolute discretion; provided, however, at any time an Event of
Default exists, the Bank may require the Borrowing Agent to deliver Borrowing
Base Certificates more frequently.


          8.11         Aged
Accounts Schedule. The Borrowing Agent shall, within thirty (30) days after
the end of each month, deliver to the Bank a consolidated aged schedule of the
Accounts of each Borrower, listing the name and amount due from each Account
Debtor and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60
days, (c) 61-90 days and (d) more than 90 days, and certified as accurate by
such Borrower’s treasurer or chief financial officer.


          8.12         Inventory
Reports. The Borrowing Agent shall, within thirty (30) days after the end
of each month, deliver to the Bank a consolidated inventory report, certified
as accurate by each Borrower’s treasurer or chief financial officer, and within
each such time as the Bank may reasonably specify, such other schedules and
reports as the Bank may require.


          8.13         Covenant
Compliance Certificate. The Borrowers shall, contemporaneously with the
furnishing of the financial statements pursuant to Section 8.8, deliver
to the Bank a duly completed compliance certificate (in substantially the form
attached hereto as Exhibit 8.13), dated the date of such financial
statements and certified as true and correct by an appropriate officer of each
Borrower, containing a computation of each of the financial covenants set forth
in Section 10 and stating that no Borrower has become aware of any Event
of Default or Unmatured Event of Default that has occurred and is continuing
or, if there is any such Event of Default or Unmatured Event of Default
describing it and the steps, if any, being taken to cure it.


          8.14         Collateral
Inspections; Field Audits. Each Borrower shall permit the Bank to inspect
the Inventory, other Tangible Assets and/or other business operations of such
Borrower and each Subsidiary, to perform appraisals of the Equipment of such
Borrower and each Subsidiary, and to inspect, audit, check and make copies of,
and extracts from, the books, records, computer data, computer programs,
journals, orders, receipts, correspondence and other data relating to
Inventory, Accounts and any other Collateral, the results of which must
disclose compliance by Borrowers with all of the terms and provisions of this
Agreement and not disclose the existence of any Event of Default. All such
inspections or audits by the Bank shall be at such Borrower’s sole expense,
provided, however, that so long as no Event of Default or Unmatured Event of
Default exists, such Borrower shall not be required to reimburse the Bank for
more than one (1) inspection or audit each fiscal year.


          8.15         Other
Reports. Each Borrower shall, within such period of time as the Bank may
specify, deliver to the Bank such other schedules and reports as the Bank may
reasonably require.


          8.16         Collateral
Records. Each Borrower shall keep full and accurate books and records
relating to the Collateral and place a legend, in form and content acceptable
to the Bank, on all Chattel Paper created by such Borrower indicating that the
Bank has a Lien in such Chattel Paper. IntriCon shall cause each issuer of Pledged
Equity Interests to mark its books and records to reflect the security interest
granted to the Bank pursuant to this Agreement.


          8.17         Intellectual
Property. Each Borrower shall maintain, preserve and renew all Intellectual
Property necessary for the conduct of its business as and where the same is
currently located as heretofore or as hereafter conducted by it.


          8.18         Notice
of Proceedings. Each Borrower, promptly upon becoming aware, shall give
written notice to the Bank of any litigation, arbitration or governmental
investigation or proceeding not 


50







previously disclosed by such Borrower to the Bank which has been
instituted or, to the knowledge of such Borrower, is threatened against such
Borrower or any of its Subsidiaries or to which any of their respective
properties is subject which might reasonably be expected to have a Material
Adverse Effect.


          8.19         Notice
of Event of Default or Material Adverse Effect. Each Borrower shall,
immediately after the commencement thereof, give notice to the Bank in writing
of the occurrence of any Event of Default or any Unmatured Event of Default, or
the occurrence of any condition or event having a Material Adverse Effect.
Without limiting the generality of the foregoing, each Borrower specifically
agrees that is will notify Bank in writing, within five (5) Business Days after
the earlier of when a Borrower learns, or is notified of the occurrence, of any
material breach by such Borrower of, a notice of termination or acceleration,
or any demand for adequate assurances under, any Applicable Agreement to which
such Borrower is a party.


          8.20         Environmental Matters. If any release or threatened release or
other disposal, in each case not in compliance with applicable Environmental
Laws of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of any Borrower or any of its Subsidiaries, the
applicable Borrower shall, or shall cause the applicable Subsidiary to, comply
with applicable Environmental Laws with respect to any non-compliance. Without
limiting the generality of the foregoing, each Borrower shall, and shall cause
each Subsidiary to, comply with any Federal or state judicial or administrative
order requiring the performance at any real property of such Borrower or any
respective Subsidiary of activities in response to the release or threatened
release of a Hazardous Substance. To the extent that the transportation of
Hazardous Substances is permitted by this Agreement, each Borrower shall, and
shall cause its Subsidiaries to, dispose of such Hazardous Substances, or of
any other wastes, only at licensed disposal facilities operating in compliance
with Environmental Laws. 


          8.21         [RESERVED]



          8.22         Banking
Relationship. Each Borrower covenants and agrees, at all times during the
term of this Agreement, to utilize the Bank as its primary bank of account and
depository for all financial services, including all receipts, disbursements,
cash management and related service.


          8.23         Non-Use
Fee. Each Borrower jointly and severally agrees to pay to the Bank a
non-use fee equal to the Applicable Non-Use Fee multiplied by the total
of (a) the Revolving Loan Commitment, minus (b) the sum of (i) the daily
average of the aggregate principal amount of all Revolving Loans outstanding, plus
(ii) the daily average of the aggregate amount of the Letter of Credit
Obligations, which non-use fee shall be (A) calculated on the basis of a year
consisting of 360 days, (B) paid for the actual number of days elapsed, and (C)
payable quarterly in arrears on the last day of each calendar quarter,
commencing on September 30, 2009, and on the Revolving Loan Maturity Date.


          8.24         Interest
Rate Protection. Each Borrower agrees to enter into, not later than
forty-five (45) days after the date hereof, a Hedging Agreement with a term of
at least three (3) years on an ISDA standard form to hedge the interest rate
with respect to not less than $1,000,000 of the Loans, in form and substance
reasonably satisfactory to the Bank.


          8.25         Annual
Projections. Promptly when available and in any event not later than thirty
(30) days prior to the end of the fiscal year of Borrowers, IntriCon shall
furnish to Bank detailed projections for the next fiscal year setting forth
projected income and cash flow for each month, the monthly operating budget,
the monthly balance sheet, and the monthly borrowing availability of Borrowers,
all on a consolidated basis, accompanied by a certificate of IntriCon’s chief
financial officer, countersigned by such Borrower’s chief executive officer,
stating (a) the assumptions on which the projections were prepared, (b) that
the assumptions, except as otherwise noted, were prepared on a consistent basis
with the 


51







operation of Borrowers’ business during the immediately preceding
fiscal year and with factors known to exist as of the date of the certificate
or reasonably anticipated to exist during the periods covered by the
projections, and (c) that the officers signing the certificate have no reason
to believe that the projections are incorrect or misleading in any material
respect. 


          8.26         [RESERVED]



Section 9.         NEGATIVE
COVENANTS.


          9.1          Debt.
No Borrower shall, either directly or indirectly, create, assume, incur or have
outstanding any Debt (including purchase money indebtedness), or become liable,
whether as endorser, guarantor, surety or otherwise, for any debt or obligation
of any other Person, except:


	
  

 	
  

 
	
  

 	
                (a)          the
 Obligations under this Agreement and the other Loan Documents;

 
	
  

 	
  

 
	
  

 	
                (b)          obligations
 of the Borrowers (or any of them) for Taxes, assessments, municipal or other
 governmental charges;

 
	
  

 	
  

 
	
  

 	
                (c)          obligations
 of the Borrowers (or any of them) for accounts payable, other than for money
 borrowed, incurred in the ordinary course of business;

 
	
  

 	
  

 
	
  

 	
                (d)          Hedging
 Obligations incurred in favor of the Bank or an Affiliate thereof for bona
 fide hedging purposes and not for speculation;

 
	
  

 	
  

 
	
  

 	
                (e)          purchase
 money Debt and Capitalized
 Lease Obligations incurred to acquire Equipment or other fixed assets,
 whether payable currently or in the future, provided that the amount of such
 Debt incurred shall not exceed Two Million Five Hundred Thousand and 00/100
 Dollars ($2,500,000.00) in the aggregate for any calendar year;

 
	
  

 	
  

 
	
  

 	
                (f)          Debt
 described on Schedule 9.1 and any extension, renewal or refinancing
 thereof so long as the principal amount thereof is not increased; 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                (h)          guarantees
 by any Borrower(s) in respect of the Debt or other obligations of any other
 Borrower(s) so long as, in the case of Debt, such Debt so guaranteed is
 otherwise permitted under this Section 9.1; and 

 
	
  

 	
  

 
	
  

 	
                (i)          Subordinated
 Debt. 

 


          9.2          Encumbrances.
No Borrower shall, either directly or indirectly, create, assume, incur or
suffer or permit to exist any Lien or charge of any kind or character upon any
asset of any Borrower, whether owned at the date hereof or hereafter acquired,
except for Permitted Liens and Liens in favor of Bank to secure the
Obligations. Without limiting the generality of the foregoing, each Borrower
specifically agrees that it will not pledge to any Person other than the Bank,
or otherwise permit to exist any Lien against, any of its capital stock or
other equity interests (if any) in IntriCon Pte Ltd or IntriCon GmbH.
Notwithstanding the foregoing, no Lien (other than in favor of the Bank) may at
any time attach to any Borrower’s (1) Accounts, other than those permitted
under clauses (a) and (d) of the definition of Permitted Liens, or (2)
Inventory, other than those permitted under clauses (a), (b) and (d) of the
definition of Permitted Liens.


52







          9.3          Investments.
No Borrower shall, either directly or indirectly, make or have outstanding any
Investment, except:


	
  

 	
  

 
	
  

 	
                (a)          equity
 Investments by any Borrower in any other Borrower;

 
	
  

 	
  

 
	
  

 	
                (b)          guarantees
 by Borrower(s) of the Debts or other obligations of other Borrower(s) permitted under Section
 9.1(h) above;

 
	
  

 	
  

 
	
  

 	
                (c)          Cash
 Equivalent Investments;

 
	
  

 	
  

 
	
  

 	
                (d)          Equity
 and/or debt securities issued by any Account Debtors of Borrowers in the
 settlement of delinquent Accounts in the ordinary course of business
 consistent with past practices or in the course of any proceedings regarding
 such Account Debtors under the Bankruptcy Code in satisfaction of Borrowers’
 claims against such Account Debtors;

 
	
  

 	
  

 
	
  

 	
                (e)          Investments
 listed on Schedule 9.3 as of the date hereof, including Investments in
 the Foreign Subsidiaries of Borrowers;

 
	
  

 	
  

 
	
  

 	
                (f)          Investments
 permitted under Section 9.7; and

 
	
  

 	
  

 
	
  

 	
                (g)          Investments
 of up to $100,000 in the aggregate in any fiscal year in respect of capital
 calls related to IntriCon’s 50% interest in the joint venture Global Coils;

 


provided, however, that any Investment
which when made complies with the requirements of the definition of the term
“Cash Equivalent Investment” may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such requirements.


          9.4          Transfer;
Merger; Sales. No Borrower shall, nor permit any Subsidiary to, whether in
one transaction or a series of related transactions, (a) be a party to any
merger or consolidation, or purchase or otherwise acquire all or substantially
all of the assets or any Capital Securities of any class of, or any partnership
or joint venture interest in, any other Person, except for (i) any such merger,
consolidation, sale, transfer, conveyance, lease or assignment of or by any
Borrower into any other Borrower; and (ii) any such purchase or other
acquisition by any Borrower of the assets or equity interests of any other
Borrower, (b) sell, transfer, convey or lease all or any substantial part of
its assets or Capital Securities (including the sale of Capital Securities of
any Subsidiary), except for asset dispositions permitted pursuant to Section
6.2, or (c) sell or assign, with or without recourse, any receivables.


          9.5          Issuance
of Capital Securities. No Borrower shall and shall not permit any
Subsidiary to, issue any Capital Securities other than (a) any issuance of
shares of the such Borrower’s common Capital Securities pursuant to any
employee or director option program, benefit plan or compensation program, (b)
any issuance of Capital Securities by a Subsidiary to the applicable Borrower
or another Subsidiary to such Borrower in accordance with Section 9.6
and (c) any issuance of common stock by IntriCon provided that a mandatory
prepayment in the amount of the Net Cash Proceeds of such common stock is made
if and to the extent required by Section 2.2(d).


          9.6          Distributions.
No Borrower shall and shall not permit any Subsidiary to, (a) make any
distribution or dividend (other than stock dividends), whether in cash or otherwise,
to any of its equityholders, (b) purchase or redeem any of its equity interests
or any warrants, options or other rights in respect thereof, (c) pay any
management fees or similar fees to any of its equityholders or any Affiliate
thereof, (d) pay or prepay interest on, principal of, premium, if any,
redemption, conversion, exchange, purchase, retirement, defeasance, sinking
fund or any other payment in respect of any Subordinated Debt 


53







except if, as and to the extent permitted by the applicable subordination
agreement or subordination provisions governing the subordination of such
Subordinated Debt in favor of the Obligations, or (e) set aside funds for any
of the foregoing. Notwithstanding the foregoing, any Subsidiary may pay
dividends or make other distributions to the applicable Borrower.


          9.7          Transactions
with Affiliates. Except as set forth on Schedule 9.7, no Borrower
shall, directly or indirectly, enter into or permit to exist any transaction
with any of its Affiliates or with any director, officer or employee of any
Borrower other than (i) programs relating to the Capital Securities of IntriCon
established for the employees, officers and/or directors of Borrowers and their
Subsidiaries which are approved by IntriCon’s board of directors and fully
disclosed to the Bank, (ii) payment of salaries, bonuses and other compensation
to the employees, directors and officers of Borrowers and their Subsidiaries in
the ordinary course of business consistent with past practices, (iii) loans and
advances to employees and officers in an aggregate principal amount of $25,000
outstanding at any one time, (iv) in the case of IntriCon, director fees in an
aggregate amount not to exceed $200,000 in any fiscal year and (v) any other
transactions in the ordinary course of, and pursuant to the reasonable
requirements of, the business of any such Borrower and upon fair and reasonable
terms which are fully disclosed to the Bank and are no less favorable to such
Borrower than would be obtained in a comparable arm’s length transaction with a
Person that is not an Affiliate of such Borrower. Notwithstanding anything to
the contrary contained in this Section or otherwise in this Agreement or any
other Loan Document, nothing contained herein or therein shall be deemed to
prohibit Borrowers from accepting collections from the Account Debtors of its
non-Borrower Foreign Subsidiaries and remitting such collections (but only such
collections) to such non-Borrower Foreign Subsidiaries for the purposes of facilitating
payment by and collection from such Account Debtors obligated to such
non-Borrower Foreign Subsidiaries, which transactions shall be reflected on the
books and records of Borrowers and their Subsidiaries as the creation of
intercompany Accounts owing from Borrowers to the applicable non-Borrower
Foreign Subsidiaries and the subsequent satisfaction and payment of such
intercompany Accounts, all in the ordinary course of business consistent with
the past practices of Borrowers and their non-Borrower Foreign Subsidiaries
with respect to such matters.


          9.8          Unconditional
Purchase Obligations. No Borrower shall and shall not permit any Subsidiary
to, enter into or be a party to any contract for the purchase of materials,
supplies or other property or services if such contract requires that payment
be made by it regardless of whether delivery is ever made of such materials,
supplies or other property or services.


          9.9          Cancellation
of Debt. No Borrower shall and shall not permit any Subsidiary to, cancel
any claim or debt owing to it, except for (i) trade or volume discount,
allowance, discount, rebate or adjustment granted to Account Debtors in the
ordinary course of such Borrower’s business consistent with past practices and
(ii) other cancellations for reasonable consideration or in the ordinary course
of business.


          9.10        Inconsistent
Agreements. No Borrower shall and shall not permit any Subsidiary to, enter
into any agreement containing any provision which would (a) be violated or
breached by any borrowing by any Borrower hereunder or by the performance by
any Borrower or any Subsidiary of any of its Obligations hereunder or under any
other Loan Document, (b) prohibit any Borrower or any Subsidiary from granting
to the Bank a Lien on any of its assets or (c) create or permit to exist or
become effective any encumbrance or restriction on the ability of any
Subsidiary to (i) pay dividends or make other distributions to any Borrower or
any other Subsidiary, or pay any Debt owed to any Borrower or any other
Subsidiary, (ii) make loans or advances to any Borrower or any other
Subsidiary, or (iii) transfer any of its assets or properties to any Borrower
or any other Subsidiary, other than (A) customary restrictions and conditions
contained in agreements relating to the sale of all or a substantial part of
the assets of any Subsidiary pending such sale, provided that such restrictions
and conditions apply only to 


54







the Subsidiary to be sold and such sale is permitted hereunder,
(B) restrictions or conditions imposed by any agreement relating to
purchase money Debt, Capital Leases and other secured Debt permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Debt, (C) customary provisions in leases and other
contracts restricting the assignment thereof, and (D) customary restrictions
and conditions with respect to any Foreign Subsidiary or its assets contained
in agreements relating to Debt incurred by such Foreign Subsidiary.


          9.11         Use
of Proceeds. Neither the Borrowers nor any of their respective Subsidiaries
or Affiliates shall use any portion of the proceeds of the Loans or Letters of
Credit, either directly or indirectly, for the purpose of purchasing any
securities underwritten by any Affiliate of the Bank.


          9.12         Bank
Accounts. No Borrower shall establish any new Deposit Accounts or other
bank accounts, other than Deposit Accounts or other bank accounts established
at or with the Bank, without the prior written consent of the Bank; provided,
however, that the Borrowers may maintain Deposit Accounts or other bank
accounts without the prior written consent of the Bank and without obtaining
control agreement therefor so long as the aggregate amount maintained in such
accounts does not exceed $70,000 at any time.


          9.13         Business
Activities; Change of Legal Status and Organizational Documents. No
Borrower shall and shall not permit any Subsidiary to, (a) engage in any line
of business other than the businesses engaged in on the date hereof and
businesses reasonably related thereto, (b) change its name, its Organizational
Identification Number, if it has one, its type of organization, or its
jurisdiction of organization without giving at least sixty (60) days prior
notice of such change to the Bank (provided, however, that Datrix may
change its name to IntriCon Datrix Corporation on or before five (5) days from
the date hereof provided that upon such name change the Borrowers promptly
deliver to the Bank true and correct copies of the documents effecting such
name change), or (c) permit its charter, bylaws or other organizational
documents to be amended or modified in any way which could reasonably be
expected to materially adversely affect the interests of the Bank.


          9.14         Modification
of Applicable Agreements. Promptly upon execution thereof, each Borrower
will deliver to the Bank a true and correct copy of any and all amendments,
restatements, replacements, extensions, supplements or other modifications of
any Applicable Agreement, provided, however, each Borrower agrees that it will
not amend, restate, replace, extend, supplement or otherwise modify any of the
Applicable Agreements set forth on Schedule 9.14 in any way which could
reasonably be expected to materially adversely affect the interests of the Bank
without providing prior written notice of the same to the Bank. Other than as
set forth on Schedule 9.14, as of the date hereof, no Borrower is a
party to any Applicable Agreement.


          9.15         Amendments
to Acquisition Agreement. Each Borrower covenants that it will not enter
into any material amendment or modification of, or waive, or consent to any
waiver of, any of the material provisions of, the Acquisition Agreement or any
other Acquisition Document without the consent of the Bank, not to be
unreasonably withheld or delayed.


          9.16         Payments
on and Changes to Subordinated Debt.


	
  

 	
  

 
	
  

 	
                 (a)          Payments
 on Subordinated Debt. Each Borrower covenants that it will not (i) make
 any payment (including any principal, premium, interest, fee or charge) with
 respect to any Subordinated Debt except, in each instance, to the extent, and
 in the manner, expressly permitted by the Selling Shareholder Subordination
 Agreement or other subordination agreement relating to such Subordinated
 Debt, or (ii) repurchase, redeem, defease, acquire or reacquire for value any
 of the Subordinated Debt.

 


55











	
  

 	
  

 
	
  

 	
                 (b)          Changes
 to Subordinated Debt Terms or Documents. Each Borrower covenants that it
 will not seek, agree to or permit, directly or indirectly, the amendment,
 waiver or other change to (i) any of the pricing or payment terms (including,
 principal, interest or premium provisions) of or applicable to, or the
 provisions governing the priority of or security for the payment and
 performance of the obligations under or applicable to, or acceleration,
 termination, or default provisions of or applicable to, the Subordinated Debt
 or any of the Subordinated Debt Documents other than amendments or other
 changes to pricing or payment terms, or acceleration, termination or default
 provisions, that are more favorable to Borrowers than such terms or
 provisions prior to giving effect to such amendment or change, or (ii) any
 other material term of or applicable to any of the Subordinated Debt
 Documents. For purposes of this Section 9.16, “material” means any
 modification, waiver, or amendment of the Subordinated Debt or any of the
 Subordinated Debt Documents, which, in the judgment of Bank exercised in a
 commercially reasonable manner, could (a) adversely affect any of Bank’s
 rights or remedies under the Loan Documents, the value of the Collateral, or
 Bank’s security interest in or other Lien on the Collateral (including the
 priority of Bank’s interests) or (b) create or result in an Event of Default.

 


Section 10.        FINANCIAL
COVENANTS.


          10.1         Minimum
EBITDA. As of each of the measurement dates set forth in the chart below,
for the period of twelve (12) consecutive calendar months then-ended, the
Borrowers and their respective consolidated Subsidiaries shall maintain EBITDA
in an amount not less than the amount set forth opposite such date in the chart
below:


	
  

 	
  

 	
  

 
	
 Measurement Date

 	
  

 	
 Minimum EBITDA

 
	
 Last day of each calendar
 month ending August 31, 2009 through and including December 31, 2009

 	
  

 	
 $2,600,000

 
	
  

 	
  

 	
  

 
	
 Last day of each calendar
 month ending January 31, 2010 through and including March 31, 2010

 	
  

 	
 $3,000,000

 
	
  

 	
  

 	
  

 
	
 Last day of each calendar
 month ending April 30, 2010 through and including June 30, 2010

 	
  

 	
 $3,750,000

 
	
  

 	
  

 	
  

 
	
 July 31, 2010 and the last
 day of each calendar month ending thereafter

 	
  

 	
 $4,500,000

 


          10.2         Funded
Debt to EBITDA. As of each of the measurement dates set forth in the chart
below, the Borrowers and their respective consolidated Subsidiaries shall
maintain a ratio of consolidated Funded Debt as of such date to consolidated
EBITDA (the “Leverage Ratio”), for the period of twelve (12) consecutive
calendar months then-ended, of not greater than the amount set forth opposite
such measurement date in the chart below:


	
  

 	
  

 	
  

 
	
 Measurement Date

 	
  

 	
 Maximum Leverage Ratio

 
	
 Last day of each calendar
 month ending August 31, 2009 through and including December 31, 2009

 	
  

 	
 3.75 to 1.00

 
	
  

 	
  

 	
  

 
	
 Last day of each calendar
 month ending January 31, 2010 through and including June 30, 2010

 	
  

 	
 3.25 to 1.00

 
	
  

 	
  

 	
  

 
	
 Last day of each calendar
 month ending July 31, 2010 through and including December 31, 2010

 	
  

 	
 2.75 to 1.00

 
	
  

 	
  

 	
  

 
	
 January 31, 2011 and the
 last day of each calendar month ending thereafter

 	
  

 	
 2.25 to 1.00

 


56







          10.3         Fixed
Charge Coverage. As of each of the measurement dates set forth in the chart
below, for the period of twelve (12) consecutive calendar months then-ended,
the Borrowers and their respective consolidated Subsidiaries shall maintain a
ratio (the “Fixed Charge Coverage Ratio”) of (a) the total of
consolidated EBITDA for such period, minus the sum of all income taxes
paid in cash by the Borrowers on a consolidated basis, minus all Capital
Expenditures of the Borrowers made during such period which are not financed
with Funded Debt, minus that portion of the aggregate cash payments made
by the applicable Borrower(s) in respect of the Subject Agreements and
Applicable Agreements during such period that was not deducted as an expense in
arriving at Net Income for such period, plus, without duplication, cash
proceeds received during such period by the Borrowers in respect of the
promissory note made payable to IntriCon in connection with IntriCon’s sale of
its heat technology segment in 2005, plus (or minus), to the
extent not included as income or gain (or deducted as an expense or loss) in
arriving at Net Income for such period, cash received (or paid) from dividends
(or capital calls) related to IntriCon’s 50% interest in the joint venture
Global Coils (in the case of capital calls, subject to any applicable
restrictions under Section 9.3) to (b) the sum for such period of
(i) Interest Charges paid in cash (other than Interest Charges in respect of
the early termination of IntriCon’s existing Hedging Agreement with Bank of
America, N.A.), plus (ii) regularly scheduled payments made (and,
without duplication, payments required to be made) in respect of principal of
Funded Debt (including the Term Loan, but excluding the Revolving Loans), plus
(iii) all cash dividends and distributions paid or declared in respect of
Capital Securities of the Borrowers, of not less than the amount set forth opposite
such measurement date in the chart below:


	
  

 	
  

 	
  

 
	
 Measurement Date



 	
  

 	
 Minimum Fixed Charge
Coverage Ratio



 
	
 Last day of each calendar
 month ending August 31, 2009 through and including March 31, 2010

 	
  

 	
 1.05 to 1.00

 
	
  

 	
  

 	
  

 
	
 April 30, 2010 and the
 last day of each calendar month ending thereafter

 	
  

 	
 1.25 to 1.00

 


          10.4         Capital
Expenditures. The Borrowers shall not incur Capital Expenditures in an
amount greater than Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) in the aggregate in any one fiscal year.


          10.5         Minimum
Revolving Loan Availability. The Borrowers shall at all times maintain
Revolving Loan Availability of not less than $500,000.


57








	
  

 	
  

 
	
 Section 11.

 	
  EVENTS OF
 DEFAULT.

 


          The
Borrowers, without notice or demand of any kind, shall be in default under this
Agreement upon the occurrence of any of the following events (each an “Event
of Default”).


          11.1          Nonpayment
of Obligations. Any amount due and owing on any Note or any of the
Obligations, whether by its terms or as otherwise provided herein, is not paid
when due.


          11.2          Misrepresentation.
Any written warranty, representation, certificate or statement of any Obligor
in this Agreement, the other Loan Documents shall be false in any material
respect when made (or deemed made pursuant to Section 3.5), or if any
financial data or any other information now or hereafter furnished to the Bank
by or on behalf of any Obligor shall prove to be false, inaccurate or
misleading in any material respect.


          11.3          Nonperformance.
Any failure to perform or default in the performance of any covenant, condition
or agreement contained in this Agreement and, if capable of being cured, such
failure to perform or default in performance continues for a period of twenty
days (20) days after the Borrowing Agent receives notice or knowledge from any
source of such failure to perform or default in performance, or in the other
Loan Documents and, if capable of being cured, such failure to perform or
default in performance continues for a period of twenty (20) days after the
Borrowing Agent receives notice or knowledge from any source of such failure to
perform or default in performance; provided that, in either such case,
if Borrowers have promptly commenced appropriate actions to cure such default
during such twenty (20) day period and have diligently pursued such actions but
are not able to complete such cure within such twenty (20) days through no
fault of their own, such period shall be extended by an additional ten (10)
days; and provided further, that failure by any Borrower to comply with Section
8.24 hereof shall not be subject to the foregoing twenty (20)-day cure
period or additional ten (10)-day cure period.


          11.4          Subordinated
Debt Default. (i) There occurs a Subordinated Debt Default, (ii) the
Selling Shareholder Subordination Agreement is terminated or ceases, for any
reason, to be in full and effect, or (iii) the Selling Shareholder attempts to
limit or terminate or revoke his obligations under the Selling Shareholder
Subordination Agreement.


          11.5          Default
under Other Debt. Any default by any Obligor in the payment of any Debt for
any other obligation with an outstanding principal balance of $50,000 or more
beyond any period of grace provided with respect thereto or in the performance
of any other term, condition or covenant contained in any agreement (including
any capital or operating lease or any agreement in connection with the deferred
purchase price of property) under which any such obligation is created, the
effect of which default is to cause or permit the holder of such obligation (or
the other party to such other agreement) to cause such obligation to become due
prior to its stated maturity or terminate such other agreement.


          11.6          Default
under Applicable Agreement. There occurs a material breach by any Borrower
under any Applicable Agreement, the result of which breach is the suspension of
the other parties’ performance thereunder, the delivery of a notice of
acceleration, or the termination of such Applicable Agreement.


          11.7          Bankruptcy,
Insolvency, etc. Any Obligor becomes insolvent or generally fails to pay,
or admits in writing its inability or refusal to pay, debts as they become due;
or any decree or order for relief in respect of any Obligor is entered under
any bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law, whether now or
hereafter in effect, of any jurisdiction; or any Obligor applies for, consents
to, or acquiesces in the appointment of a trustee, receiver or other custodian
for such Obligor or any property thereof, or makes a general 


58







assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is
appointed for any Obligor or for a substantial part of the property of any
thereof and is not discharged within sixty (60) days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is
commenced in respect of any Obligor, and if such case or proceeding is not
commenced by such Obligor, it is consented to or acquiesced in by such Obligor,
or remains undismissed for sixty (60) days; or any Obligor takes any action to
authorize, or in furtherance of, any of the foregoing.


          11.8          Judgments.
The entry of any final judgment, decree, levy, attachment, garnishment or other
process for the amount in excess of $50,000 against any Borrower or any other
Obligor which is not fully covered by insurance, and such judgment or other
process shall not have been, within thirty (30) days from the entry thereof,
(i) bonded over to the satisfaction of the Bank and appealed, (ii) vacated, or
(iii) discharged.


          11.9          Divestitures.
Any order, judgment or decree is entered in any proceedings against the any
Obligor decreeing a split-up of such Obligor which requires the divestiture of
assets representing a substantial part, or the divestiture of the stock of a
Subsidiary of any Obligor whose assets represent a substantial part, of the
consolidated assets of the such Obligor and its Subsidiaries (determined in
accordance with GAAP) or which requires the divestiture of assets, or stock of
a Subsidiary, which shall have contributed a substantial part of the Net Income
of any Obligor and its Subsidiaries (determined in accordance with GAAP) for
any of the three fiscal years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than 60 days.


          11.10        Change
in Control. The occurrence of any Change in Control.


          11.11        Collateral
Impairment. Any event shall occur, whether or not insured or insurable, as
a result of which (a) the Borrowing Base is reduced during any month by more
than fifteen percent (15%) other than as a result of sales of Inventory and
collections of Accounts in the ordinary course, (b) Contingent Liabilities are
incurred by the Borrowers on a consolidated basis in excess of $1,000,000 which
would be required to be reflected in the footnotes or a balance sheet prepared
in accordance with generally accepted accounting principles, consistently
applied and could reasonably be expected to become actual liabilities of one or
more of the Borrowers, excluding, however, Contingent Liabilities arising from
pending litigation, arbitration proceedings or governmental investigations or
proceedings that have not resulted in a final judgment, decree, levy,
attachment, garnishment or other process that would constitute an Event of
Default under Section 11.8, (c) operations of any Borrower are suspended
or terminated for twenty (20) days or more at any facility of any Borrower
generating more than twenty percent (20%) of such Borrower’s consolidated
revenues for the preceding fiscal year; or (d) any customer or group of
customers representing more than twenty (20%) of any Borrower’s consolidated
revenues for the preceding fiscal year terminate or suspend purchases of
Inventory from such Borrower.


          11.12        Material
Adverse Effect. Any event shall occur that the Bank determines (which
determination shall be conclusive) could reasonably be expected to have a
Material Adverse Effect.


          11.13        Employee
Plan. A contribution failure occurs with respect to any Employee Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA.


	
  

 	
  

 
	
 Section 12.

 	
  REMEDIES.

 


          Upon the
occurrence and during the continuance of an Event of Default, the Bank shall
have all rights, powers and remedies set forth in the Loan Documents, in any
written agreement or instrument 


59







(other than this Agreement or the Loan Documents) relating to any of
the Obligations or any security therefor, as a secured party under the UCC or
as otherwise provided at law or in equity. Without limiting the generality of
the foregoing, the Bank may, at its option upon the occurrence and during the
continuance of an Event of Default, declare its commitments to the Borrowers to
be terminated and all Obligations to be immediately due and payable, provided,
however, that upon the occurrence of an Event of Default under Section 11.7,
all commitments of the Bank to the Borrowers shall immediately terminate and
all Obligations shall be automatically due and payable, all without demand,
notice or further action of any kind required on the part of the Bank. Each
Borrower hereby waives any and all presentment, demand, notice of dishonor,
protest, and all other notices and demands in connection with the enforcement
of Bank’s rights under the Loan Documents, and hereby consents to, and waives
notice of release, with or without consideration, of any of the Borrowers or of
any of the other Obligors or of any Collateral, notwithstanding anything
contained herein or in the Loan Documents to the contrary. In addition to the
foregoing, upon the occurrence and during the continuation of any Event of
Default:


          12.1          Possession
and Assembly of Collateral. The Bank may, without notice, demand or legal
process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which the Bank already has possession), wherever it
may be found, and for that purpose may pursue the same wherever it may be
found, and may at any time enter into any Borrower’s premises where any of the
Collateral may be or is supposed to be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of and the Bank shall have the right to store and conduct a
sale of the same in any Borrower’s premises without cost to the Bank. At the
Bank’s request, the applicable Borrower will, at such Borrower’s sole expense,
assemble the Collateral and make it available to the Bank at a place or places
to be designated by the Bank which is reasonably convenient to the Bank and
such Borrower.


          12.2          Sale
of Collateral. The Bank may sell any or all of the Collateral at public or
private sale, upon such terms and conditions as the Bank may deem proper, and
the Bank may purchase any or all of the Collateral at any such sale. Each
Borrower acknowledges that the Bank may be unable to effect a public sale of
all or any portion of the Collateral because of certain legal and/or practical
restrictions and provisions which may be applicable to the Collateral and,
therefore, may be compelled to resort to one or more private sales to a
restricted group of offerees and purchasers. Each Borrower consents to any such
private sale so made even though at places and upon terms less favorable than
if the Collateral were sold at public sale. The Bank shall have no obligation
to clean-up or otherwise prepare the Collateral for sale. The Bank may apply
the net proceeds, after deducting all costs, expenses, attorneys’ and
paralegals’ fees incurred or paid at any time in the collection, protection and
sale of the Collateral and the Obligations, to the payment of any Note and/or
any of the other Obligations, returning the excess proceeds, if any, to the
Borrowers. The Borrowers shall remain liable for any amount remaining unpaid
after such application, with interest at the Default Rate. Any notification of
intended disposition of the Collateral required by law shall be conclusively
deemed reasonably and properly given if given by the Bank at least ten (10)
calendar days before the date of such disposition. Each Borrower hereby
confirms, approves and ratifies all acts and deeds of the Bank relating to the
foregoing, and each part thereof, and expressly waives any and all claims of
any nature, kind or description which it has or may hereafter have against the
Bank or its representatives, by reason of taking, selling or collecting any
portion of the Collateral. Each Borrower consents to releases of the Collateral
at any time (including prior to default) and to sales of the Collateral in
groups, parcels or portions, or as an entirety, as the Bank shall deem
appropriate. Each Borrower expressly absolves the Bank from any loss or decline
in market value of any Collateral by reason of delay in the enforcement or
assertion or nonenforcement of any rights or remedies under this Agreement.


          12.3          Standards
for Exercising Remedies. To the extent that applicable law imposes duties
on the Bank to exercise remedies in a commercially reasonable manner, each
Borrower acknowledges and agrees that it is not commercially unreasonable for
the Bank (a) to fail to incur expenses reasonably 


60







deemed significant by the Bank to prepare Collateral for disposition or
otherwise to complete raw material or work-in-process into finished goods or
other finished products for disposition, (b) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(c) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove liens or encumbrances on or any
adverse claims against Collateral, (d) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other Persons, whether or not in the same business as the Borrowers (or
any of them), for expressions of interest in acquiring all or any portion of the
Collateral, (g) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature, (h) to dispose of Collateral by utilizing internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets, (i) to dispose of assets in wholesale rather than retail markets, (j)
to disclaim disposition warranties, including any warranties of title, (k) to
purchase insurance or credit enhancements to insure the Bank against risks of
loss, collection or disposition of Collateral or to provide to the Bank a
guaranteed return from the collection or disposition of Collateral, or (l) to
the extent deemed appropriate by the Bank, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Bank in the collection or disposition of any of the Collateral. Each Borrower
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by the Bank would not be commercially
unreasonable in the Bank’s exercise of remedies against the Collateral and that
other actions or omissions by the Bank shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section. Without
limitation upon the foregoing, nothing contained in this Section shall be
construed to grant any rights to the Borrowers (or any of them) or to impose
any duties on the Bank that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section.


          12.4          UCC
and Offset Rights. The Bank may exercise, from time to time, any and all
rights and remedies available to it under the UCC or under any other applicable
law in addition to, and not in lieu of, any rights and remedies expressly
granted in this Agreement or in any other agreements between any Obligor and
the Bank, and may, without demand or notice of any kind, appropriate and apply
toward the payment of such of the Obligations, whether matured or unmatured,
including costs of collection and attorneys’ and paralegals’ fees, and in such
order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including
balances, credits, deposits, accounts or moneys of such Obligor in the
possession, control or custody of, or in transit to the Bank. Each Borrowers,
on behalf of itself and each Obligor, hereby waives the benefit of any law that
would otherwise restrict or limit the Bank in the exercise of its right, which
is hereby acknowledged, to appropriate at any time hereafter any such
indebtedness owing from the Bank to any Obligor.


          12.5          Additional
Remedies. The Bank shall have the right and power to:


	
  

 	
  

 	
  

 
	
  

 	
                  (a)          instruct
 the Borrowers (or any of them), at such Borrower’s own expense, to notify any
 parties obligated on any of the Collateral, including any Account Debtors, to
 make payment directly to the Bank of any amounts due or to become due
 thereunder, or the Bank may directly notify such obligors of the security
 interest of the Bank, and/or of the assignment to the Bank of the Collateral
 and direct such obligors to make payment to the Bank of any amounts due or to
 become due with respect thereto, and thereafter, collect any such amounts due
 on the Collateral directly from such Persons obligated thereon;

 


61











	
  

 	
  

 	
  

 
	
  

 	
                (b)          enforce
 collection of any of the Collateral, including any Accounts, by suit or
 otherwise, or make any compromise or settlement with respect to any of the
 Collateral, or surrender, release or exchange all or any part thereof, or compromise,
 extend or renew for any period (whether or not longer than the original
 period) any indebtedness thereunder;

 
	
  

 	
  

 	
  

 
	
  

 	
                (c)          take
 possession or control of any proceeds and products of any of the Collateral,
 including the proceeds of insurance thereon;

 
	
  

 	
  

 	
  

 
	
  

 	
                (d)          extend,
 renew or modify for one or more periods (whether or not longer than the
 original period) any Note, any other of the Obligations, any obligation of
 any nature of any other obligor with respect to any Note or any of the
 Obligations;

 
	
  

 	
  

 	
  

 
	
  

 	
                (e)          grant
 releases, compromises or indulgences with respect to any Note, any of the
 Obligations, any extension or renewal of any of the Obligations, any security
 therefor, or to any other obligor with respect to any Note or any of the
 Obligations;

 
	
  

 	
  

 	
  

 
	
  

 	
                (f)          transfer
 the whole or any part of securities which may constitute Collateral into the
 name of the Bank or the Bank’s nominee without disclosing, if the Bank so
 desires, that such securities so transferred are subject to the security
 interest of the Bank, and any corporation, association, or any of the
 managers or trustees of any trust issuing any of such securities, or any
 transfer agent, shall not be bound to inquire, in the event that the Bank or
 such nominee makes any further transfer of such securities, or any portion
 thereof, as to whether the Bank or such nominee has the right to make such
 further transfer, and shall not be liable for transferring the same;

 
	
  

 	
  

 	
  

 
	
  

 	
                (g)          vote
 the Collateral;

 
	
  

 	
  

 	
  

 
	
  

 	
                (h)          make
 an election with respect to the Collateral under Section 1111 of the
 Bankruptcy Code or take action under Section 364 or any other section of the
 Bankruptcy Code; provided, however, that any such action of the Bank as set
 forth herein shall not, in any manner whatsoever, impair or affect the
 liability of any Borrower hereunder, nor prejudice, waive, nor be construed
 to impair, affect, prejudice or waive the Bank’s rights and remedies at law,
 in equity or by statute, nor release, discharge, nor be construed to release
 or discharge, any Borrower, any guarantor or other Person liable to the Bank
 for the Obligations; 

 
	
  

 	
  

 	
  

 
	
  

 	
                (i)          at
 any time, and from time to time, accept additions to, releases, reductions,
 exchanges or substitution of the Collateral, without in any way altering,
 impairing, diminishing or affecting the provisions of this Agreement, the
 Loan Documents, or any of the other Obligations, or the Bank’s rights
 hereunder, under any Note or under any of the other Obligations;

 
	
  

 	
  

 	
  

 
	
  

 	
                (j)          to
 the extent that Bank deems it impracticable to effect a public sale of all or
 any part of the Pledged Equity Interests, Bank may elect to make one or more
 private sales of any such Collateral to a restricted group of purchasers who
 will be obligated to agree, among other things, to acquire such Collateral
 for their own account, for investment and not with a view to the distribution
 or resale thereof. Each Borrower acknowledges that any such private sale may
 be at prices and on terms less favorable to the seller than the prices and
 other terms which might have been obtained at a public sale and,
 notwithstanding the foregoing, agrees that such private sale shall be deemed
 to have been made in a commercially reasonable manner and that Bank shall
 have no obligation to delay sale of any such securities for the period of
 time necessary to permit the issuer of such securities to register such
 securities for public sale under the Securities Act of 

 


62











	
  

 	
  

 	
  

 
	
  

 	
 1933. To the extent not specified by applicable law, the parties
 agree that ten (10) days shall constitute a “commercially reasonable amount
 of time” for purpose of this subsection (j); and

 
	
  

 	
  

 	
  

 
	
  

 	
                  (k)          to
 vote for a board resolution, or to sign an instrument in writing, sanctioning
 the transfer of any or all of the Pledged Equity Interests into the name of
 Bank or into the name of any transferee to whom the Pledged Equity Interests
 or any part thereof may be sold pursuant to this Section 12.

 


Each Borrower agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law made in good faith, and not constituting
gross negligence or intentional misconduct, with respect to actions taken in
connection with the Collateral or the administration or enforcement of this
Agreement.


          12.6          Attorney-in-Fact.
Each Borrower hereby irrevocably makes, constitutes and appoints the Bank (and
any officer of the Bank or any Person designated by the Bank for that purpose)
as such Borrower’s true and lawful proxy and attorney-in-fact (and
agent-in-fact) in such Borrower’s name, place and stead, with full power of
substitution, to (i) take such actions as are permitted in this Agreement, (ii)
execute such financing statements and other documents and to do such other acts
as the Bank may require to perfect and preserve the Bank’s security interest
in, and to enforce such interests in the Collateral, and (iii) carry out any
remedy provided for in this Agreement, including endorsing such Borrower’s name
to checks, drafts, instruments and other items of payment, and proceeds of the
Collateral, executing change of address forms with the postmaster of the United
States Post Office serving the address of such Borrower, changing the address
of such Borrower to that of the Bank, opening all envelopes addressed to such
Borrower and applying any payments contained therein to the Obligations;
provided that all such powers (other than the powers to (1) endorse Borrowers’
names to checks, drafts, instruments and other items of payment, and proceeds
of the Collateral received by the Bank, (2) opening mail received into any
Lockbox established under Section 6.8 and (3) applying all proceeds of
Collateral received by the Bank (including any such proceeds enclosed with the
mail opened under the preceding clause (2)) to the Obligations, which powers
the Bank may exercise at any time) shall be exercisable by the Bank only after
either (x) a request for the applicable Borrower(s) to take such actions and
the failure by Borrowers to take such actions within five (5) days of such
request or (y) the occurrence and during the continuance of an Event of
Default. Each Borrower hereby acknowledges that the constitution and
appointment of such proxy and attorney-in-fact are coupled with an interest and
are irrevocable. Each Borrower hereby ratifies and confirms all that such
attorney-in-fact may do or cause to be done by virtue of any provision of this
Agreement.


          12.7          No
Marshaling. The Bank shall not be required to marshal any present or future
collateral security (including this Agreement and the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order. To
the extent that it lawfully may, each Borrower hereby agrees that it will not
invoke any law relating to the marshaling of collateral which might cause delay
in or impede the enforcement of the Bank’s rights under this Agreement or under
any other instrument creating or evidencing any of the Obligations or under
which any of the Obligations is outstanding or by which any of the Obligations
is secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, each Borrower hereby irrevocably waives the benefits of all such
laws.


          12.8          Application
of Proceeds. The Bank will within three (3) Business Days after receipt of
cash or solvent credits from collection of items of payment, proceeds of
Collateral or any other source, apply the whole or any part thereof against the
Obligations secured hereby. After the occurrence and during the continuance of
an Event of Default, the Bank shall further have the exclusive right to
determine how, when and what application of such payments and such credits
shall be made on the Obligations, and such determination shall be conclusive
upon each Borrower. Any proceeds of any 


63







disposition by the Bank of all or any part of the Collateral may be
first applied by the Bank to the payment of expenses incurred by the Bank in
connection with the Collateral, including attorneys’ fees and legal expenses as
provided for in Section 13 hereof.


          12.9            No
Waiver. No Event of Default shall be waived by the Bank except in writing.
No failure or delay on the part of the Bank in exercising any right, power or
remedy hereunder shall operate as a waiver of the exercise of the same or any
other right at any other time; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. There shall be no
obligation on the part of the Bank to exercise any remedy available to the Bank
in any order. The remedies provided for herein are cumulative and not exclusive
of any remedies provided at law or in equity. Each Borrower agrees that in the
event that such Borrower fails to perform, observe or discharge any of its
Obligations or liabilities under this Agreement or any other agreements with
the Bank, no remedy of law will provide adequate relief to the Bank, and
further agrees that the Bank shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.


          12.10          Letters
of Credit. With respect to all Letters of Credit for which presentment for
honor shall not have occurred at the time of an acceleration pursuant to this Section
12, the Borrowers shall at such time deposit in a cash collateral account
opened by the Bank an amount equal to the Letter of Credit Obligations then
outstanding. Amounts held in such cash collateral account shall be applied by
the Bank to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay the Obligations, in
such order of application as the Bank may, in its sole discretion, from time to
time elect. After Final Payment has been made and the Revolving Loan Commitment
and Letter of Credit Commitment have been terminated, the balance, if any, in
such cash collateral account shall be returned to the Borrowers or such other
Person as may be lawfully entitled thereto.


          12.11          Voting
Rights in Respect of the Pledged Equity Interests. So long as no Event of
Default shall have occurred and be continuing and the Bank shall not have given
notice to Borrowers that it is exercising its rights under this Section
12.11, to the extent permitted by law, IntriCon may exercise any and all
voting and other consensual rights pertaining to the Pledged Equity Interests
or any part thereof for any purpose not inconsistent with the terms of this
Agreement. Upon the occurrence and during the continuance of an Event of
Default and notice from the Bank to Borrowers that it is exercising its rights
under this Section 12.11, all rights of IntriCon to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to this Section 12.11 shall cease and all such rights shall
thereupon become vested in the Bank which shall then have the sole right to
exercise such voting and other consensual rights.


          12.12          Distribution
Rights in Respect of the Pledged Equity Interests.


	
  

 	
  

 	
  

 
	
  

 	
                    (a)          So
 long as no Event of Default shall have occurred and be continuing and the
 Bank shall not have given notice to Borrowers that it is exercising its
 rights under this Section 12.12, and subject to Section 6.12(c)
 hereof, IntriCon may receive and retain any and all distributions or interest
 paid in respect of the Pledged Equity Interests.

 
	
  

 	
  

 	
  

 
	
  

 	
                    (b)          Upon
 the occurrence and during the continuance of an Event of Default and after
 notice from the Bank to Borrowers that it is exercising its rights under this
 Section 12.12:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                 (i)          all
 rights of IntriCon to receive the distributions and interest payments which
 it would otherwise be authorized to receive and retain pursuant to paragraph
 (a) of this Section 12.12 shall cease and all such rights shall
 thereupon be vested in Bank which 

 


64











	
  

 	
  

 	
  

 
	
  

 	
  

 	
 shall then have the sole right to receive and hold as additional
 Collateral such dividends and interest payments; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                 (ii)          all
 distributions and interest payments which are received by IntriCon contrary
 to the provisions of paragraph (ii) of this clause shall be received in trust
 for the benefit of Bank, shall be segregated from other property or funds of
 IntriCon, and shall be forthwith paid over to Bank as additional Collateral
 in the exact form received, to be held by Bank as additional Collateral and
 as further collateral security for the Obligations.

 





	
  

 	
  

 
	
 Section 13.

 	
  MISCELLANEOUS.

 


          13.1          Obligations
Absolute. None of the following shall affect the Obligations of any
Borrower to the Bank under this Agreement or the Bank’s rights with respect to
the Collateral:


	
  

 	
  

 
	
  

 	
                  (a)          acceptance
 or retention by the Bank of other property or any interest in property as
 security for the Obligations;

 
	
  

 	
  

 
	
  

 	
                  (b)          release
 by the Bank of any of the Borrowers or any of the other Obligors or of all or
 any part of the Collateral (other than with respect to the Obligor or
 Collateral so released);

 
	
  

 	
  

 
	
  

 	
                  (c)          release,
 extension, renewal, modification or substitution by the Bank of any Note, or
 any note evidencing any of the Obligations, or the compromise of the
 liability of any Borrower or any other Obligor; or

 
	
  

 	
  

 
	
  

 	
                  (d)          failure
 of the Bank to resort to any other security or to pursue Borrowers (or any of
 them) or any other obligor liable for any of the Obligations before resorting
 to remedies against the Collateral.

 




          13.2          Entire
Agreement. This Agreement and the other Loan Documents (i) are valid,
binding and enforceable against each Borrower and the Bank in accordance with
their respective provisions and no conditions exist as to their legal
effectiveness; (ii) constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof; and (iii) are the final
expression of the intentions of each Borrower and the Bank. No promises, either
expressed or implied, exist between any Borrower and the Bank, unless contained
herein or therein. This Agreement, together with the other Loan Documents,
supersedes all negotiations, representations, warranties, commitments, term
sheets, discussions, negotiations, offers or contracts (of any kind or nature,
whether oral or written) prior to or contemporaneous with the execution hereof
with respect to any matter, directly or indirectly related to the terms of this
Agreement and the other Loan Documents. This Agreement and the other Loan
Documents are the result of negotiations among the Bank, the Borrowers and the
other parties thereto, and have been reviewed (or have had the opportunity to
be reviewed) by counsel to all such parties, and are the products of all
parties. Accordingly, this Agreement and the other Loan Documents shall not be
construed more strictly against the Bank merely because of the Bank’s
involvement in their preparation.


          13.3          Amendments;
Waivers. No delay on the part of the Bank in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by the Bank of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the other Loan Documents shall in any event be
effective unless the same shall be in writing and acknowledged by the Bank, and
then any such amendment, modification, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.


65







          13.4          WAIVER
OF DEFENSES. EACH BORROWER, ON BEHALF OF ITSELF AND ANY OTHER OBLIGOR,
WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR
SETOFF WHICH THE SUCH BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION
BY THE BANK IN ENFORCING THIS AGREEMENT. PROVIDED THE BANK ACTS IN GOOD FAITH,
EACH BORROWER RATIFIES AND CONFIRMS WHATEVER THE BANK MAY DO PURSUANT TO THE
TERMS OF THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK
GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWERS.


          13.5          FORUM
SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF MINNESOTA, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MINNESOTA; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO PRECLUDE THE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF MINNESOTA, AND THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF MINNESOTA FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID AND
RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
MINNESOTA. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.


          13.6          WAIVER
OF JURY TRIAL. THE BANK AND EACH BORROWER, AFTER CONSULTING OR HAVING HAD
THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY
OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND EACH BORROWER ARE
ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWERS.


          13.7          Assignability.
The Bank may at any time assign the Bank’s rights in this Agreement, the other
Loan Documents, the Obligations, or any part thereof and transfer the Bank’s
rights in any or all of the Collateral, and the Bank thereafter shall be
relieved from all liability with respect to such Collateral; provided, however,
that so long as no Event of Default has occurred and is continuing, the Bank
shall not make any such assignment other than to an Affiliate of the Bank
without the prior written of the Borrowers, such consent not to be unreasonably
withheld, conditioned or delayed. In addition, the Bank may at any time sell
one or more participations in the Loans and/or other Obligations. No Borrower
may sell or assign this Agreement, or any other agreement with the Bank or any
portion thereof, either 


66







voluntarily or by operation of law, without the prior written consent
of the Bank. This Agreement shall be binding upon the Bank and each Borrower
and their respective legal representatives and successors. All references
herein to the Borrowers or Borrower shall be deemed to include any successors,
whether immediate or remote. In the case of a joint venture or partnership, the
terms “Borrower” or “Borrowers” shall be deemed to include all joint venturers
or partners thereof, who shall be jointly and severally liable hereunder.


          13.8          Confirmations.
Each Borrower and the Bank agree from time to time, upon written request
received by it from the other, to confirm to the other in writing the aggregate
unpaid principal amount of the Loans and/or other Obligations then outstanding
under such Note.


          13.9          Confidentiality.
The Bank agrees to use commercially reasonable efforts (equivalent to the
efforts the Bank applies to maintain the confidentiality of its own
confidential information) to maintain as confidential all information provided
to it by any Borrower, including all information designated as confidential,
except that the Bank may disclose such information (a) to Persons employed or
engaged by the Bank in evaluating, approving, structuring or administering the
Loans and/or Letters of Credit; (b) to any assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained
in this Section 13.9 (and any such assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any federal or state regulatory authority or examiner, or as reasonably
believed by the Bank to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, on the advice of the Bank’s counsel,
is required by law; (e) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any litigation to which the Bank
is a party; (f) to any nationally recognized rating agency that requires access
to information about the Bank’s investment portfolio in connection with ratings
issued with respect to the Bank; (g) to any Affiliate of the Bank who may provide
Bank Products to any Borrower or any Subsidiary of any Borrower, or (h) that
ceases to be confidential through no fault of the Bank.


          13.10        Binding
Effect. This Agreement shall become effective upon execution by each
Borrower and the Bank. If this Agreement is not dated or contains any blanks
when executed by the Borrowers, the Bank is hereby authorized, without notice
to the Borrowers, to date this Agreement as of the date when it was executed by
the Borrowers, and to complete any such blanks according to the terms upon
which this Agreement is executed.


          13.11        Governing
Law. This Agreement, the Loan Documents and any Note shall be delivered and
accepted in and shall be deemed to be contracts made under and governed by the
internal laws of the State of Minnesota (but giving effect to federal laws
applicable to national banks) applicable to contracts made and to be performed
entirely within such state, without regard to conflict of laws principles.


          13.12        Enforceability.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by, unenforceable or invalid
under any jurisdiction, such provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.


          13.13        Survival
of Borrowers’ Representations. All covenants, agreements, representations
and warranties made by each Borrower herein shall, notwithstanding any
investigation by the Bank, be deemed material and relied upon by the Bank and
shall survive the making and execution of this Agreement and the Loan Documents
and the issuance of any Note, and shall be deemed to be continuing
representations and warranties until such time as the Borrowers have fulfilled
all of their Obligations to 


67







the Bank, and the Bank has been indefeasibly paid in full in cash. The
Bank, in extending financial accommodations to the Borrowers, is expressly
acting and relying on the aforesaid representations and warranties.


          13.14        Extensions
of Bank’s Commitment. This Agreement shall secure and govern the terms of
(i) any extensions or renewals of the Bank’s commitment hereunder, and (ii) any
replacement note executed by the Borrowers and accepted by the Bank in its sole
and absolute discretion in substitution for any Note.


          13.15        Time
of Essence. Time is of the essence in making payments of all amounts due
the Bank under this Agreement and in the performance and observance by each
Borrower of each covenant, agreement, provision and term of this Agreement.


          13.16        Counterparts;
Facsimile Signatures. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. Receipt
of an executed signature page to this Agreement by facsimile or other
electronic transmission shall constitute effective delivery thereof. Electronic
records of executed Loan Documents maintained by the Bank shall deemed to be
originals thereof.


          13.17        Notices.
Except as otherwise provided herein, the
Borrower waives all notices and demands in connection with the enforcement of
the Bank’s rights hereunder. All notices, requests, demands and other
communications provided for hereunder shall be in writing and addressed as
follows:


	
  

 	
 

 	
  

 
	
  

 	
 To any Borrower:

 	
 IntriCon Corporation

 
	
  

 	
  

 	
 1260 Red Fox
 Road

 
	
  

 	
  

 	
 Arden Hills,
 MN 55112

 
	
  

 	
  

 	
 Attention:
 Scott Longval

 
	
  

 	
  

 	
  

 
	
  

 	
 With a copy
 to:

 	
 Blank Rome
 LLP

 
	
  

 	
  

 	
 One Logan
 Square

 
	
  

 	
  

 	
 130 North 18th
 Street

 
	
  

 	
  

 	
 Philadelphia,
 PA 19103

 
	
  

 	
  

 	
 Attention:
 Francis E. Dehel

 
	
  

 	
  

 	
  

 
	
  

 	
 To the Bank:

 	
 The
 PrivateBank and Trust Company

 
	
  

 	
  

 	
 50 South 6th
 Street, Suite 1415

 
	
  

 	
  

 	
 Minneapolis,
 MN 55402

 
	
  

 	
  

 	
 Attention:
 Seth Hove

 
	
  

 	
  

 	
  

 
	
  

 	
 With copy
 to:

 	
 Briggs and
 Morgan, P.A.

 
	
  

 	
  

 	
 2200 IDS
 Center

 
	
  

 	
  

 	
 80 South
 Eighth Street

 
	
  

 	
  

 	
 Minneapolis,
 MN 55402-2157 

 
	
  

 	
  

 	
 Attention:
 Todd D. Lee

 


or, as to each party, at such other address
as shall be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Subsection. All notices
addressed as above shall be deemed to have been properly given (i) if served in
person, upon acceptance or refusal of delivery; (ii) if mailed by certified or
registered mail, return receipt requested, postage prepaid, on the third (3rd)
day following the day such notice is deposited in any post office station or
letter box; or (iii) if 


68







sent by recognized overnight courier, on the
first (1st) day following the day such notice is delivered to such carrier. No
notice to or demand on the Borrowers (or any of them) in any case where such
notice or demand is not expressly required hereunder shall entitle the
Borrowers (or any of them) to any other or further notice or demand in similar
or other circumstances.


          13.18        Release
of Claims Against Bank. In consideration of the Bank making the Loans and
issuing the Letters of Credit, each Borrower and all other Obligors do each
hereby release and discharge the Bank of and from any and all claims, harm,
injury, and damage of any and every kind, known or unknown, legal or equitable,
which any Obligor may have against the Bank from the date of their respective
first contact with the Bank until the date of this Loan Agreement, including
any claim arising from any reports (environmental reports, surveys, appraisals,
etc.) prepared by any parties hired or recommended by the Bank. Each Borrower
and all other Obligors confirm to Bank that they have reviewed the effect of
this release with competent legal counsel of their choice, or have been
afforded the opportunity to do so, prior to execution of this Agreement and the
Loan Documents and do each acknowledge and agree that the Bank is relying upon
this release in extending the Loans and issuing the Letters of Credit to the
Borrowers.


          13.19        Costs,
Fees and Expenses. Subject to any express limitations otherwise set forth
in this Agreement or any other Loan Document, the Borrowers jointly and
severally agree to pay or reimburse the Bank for all reasonable costs, fees and
expenses incurred by the Bank or for which the Bank becomes obligated in
connection with the negotiation, preparation, consummation, collection of the
Obligations or enforcement of this Agreement, the other Loan Documents and all
other documents provided for herein or delivered or to be delivered hereunder
or in connection herewith (including any amendment, supplement or waiver to any
Loan Document), or during any workout, restructuring or negotiations in respect
thereof, including reasonable consultants’ fees and attorneys’ fees and time
charges of counsel to the Bank, which shall also include attorneys’ fees and
time charges of attorneys who may be employees of the Bank or any Affiliate of
the Bank, plus costs and expenses of such attorneys or of the Bank; search
fees, costs and expenses; and all taxes payable in connection with this
Agreement or the other Loan Documents, whether or not the transaction
contemplated hereby shall be consummated. In furtherance of the foregoing, the
Borrowers jointly and severally agree to pay any and all stamp and other taxes,
UCC search fees, filing fees and other costs and expenses in connection with
the execution and delivery of this Agreement, any Note and the other Loan
Documents to be delivered hereunder, and agrees to save and hold the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such costs and expenses. That
portion of the Obligations consisting of costs, expenses or advances to be
reimbursed by the Borrowers to the Bank pursuant to this Agreement or the other
Loan Documents which are not paid on or prior to the date hereof shall be
jointly and severally payable by the Borrowers to the Bank on demand. If at any
time or times hereafter the Bank: (a) employs counsel for advice or other
representation (i) with respect to this Agreement or the other Loan
Documents, (ii) to represent the Bank in any litigation, contest, dispute,
suit or proceeding or to commence, defend, or intervene or to take any other
action in or with respect to any litigation, contest, dispute, suit, or
proceeding (whether instituted by the Bank, the Borrowers (or any of them), or
any other Person) in any way or respect relating to this Agreement, the other
Loan Documents or any Borrower’s business or affairs, or (iii) to enforce
any rights of the Bank against the Borrowers (or any of them) or any other
Person that may be obligated to the Bank by virtue of this Agreement or the
other Loan Documents; (b) takes any action to protect, collect, sell,
liquidate, or otherwise dispose of any of the Collateral; and/or
(c) attempts to or enforces any of the Bank’s rights or remedies under the
Agreement or the other Loan Documents, the costs and expenses incurred by the
Bank in any manner or way with respect to the foregoing, shall be part of the
Obligations, jointly and severally payable by the Borrowers to the Bank on
demand.


69









          13.20        Indemnification.
Each Borrower agrees to defend (with counsel satisfactory to the Bank),
protect, indemnify, exonerate and hold harmless each Indemnified Party from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and distributions of any
kind or nature (including the disbursements and the reasonable fees of counsel
for each Indemnified Party thereto, which shall also include, without
limitation, reasonable attorneys’ fees and time charges of attorneys who may be
employees of any Indemnified Party), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations, including securities laws, Environmental Laws, commercial laws and
regulations, under common law or in equity, or based on contract or otherwise)
in any manner relating to or arising out of this Agreement or any of the Loan
Documents, or any act, event or transaction related or attendant thereto, the
preparation, execution and delivery of this Agreement and the Loan Documents,
including the making or issuance and management of the Loans and/or Letters of
Credit, the use or intended use of the proceeds of the Loans and/or Letters of
Credit, the enforcement of the Bank’s rights and remedies under this Agreement,
the Loan Documents, any Note, any other instruments and documents delivered
hereunder, or under any other agreement between the Borrowers (or any of them)
and the Bank; provided, however, that no Borrower shall have any obligations
hereunder to any Indemnified Party with respect to matters determined by a
court of competent jurisdiction by final and nonappealable judgment to have
been caused by or resulting from the willful misconduct or gross negligence of
such Indemnified Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it violates any
law or public policy, each Borrower shall satisfy such undertaking to the
maximum extent permitted by applicable law. Any liability, obligation, loss,
damage, penalty, cost or expense covered by this indemnity shall be paid to
each Indemnified Party on demand, and failing prompt payment, together with
interest thereon at the Default Rate from the date incurred by each Indemnified
Party until paid by the Borrowers, shall be added to the Obligations of the
Borrowers and be secured by the Collateral. The provisions of this Section
shall survive the satisfaction and payment of the other Obligations and the
termination of this Agreement.


          13.21        Revival
and Reinstatement of Obligations. If the incurrence or payment of the
Obligations by any Obligor or the transfer to the Bank of any property should
for any reason subsequently be declared to be void or voidable under any state
or federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if the Bank is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Bank is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Bank, the Obligations shall automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.


          13.22        Customer
Identification - USA Patriot Act Notice. The Bank hereby notifies the
Borrowers that pursuant to the requirements of the USA Patriot Act (Title III
of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and
the Bank’s policies and practices, the Bank is required to obtain, verify and
record certain information and documentation that identifies each Borrower,
which information includes the name and address of each Borrower and such other
information that will allow the Bank to identify the Borrowers in accordance
with the Act.


          13.23        Release
of Collateral, etc.


	
  

 	
  

 
	
  

 	
                  (a)          Upon
 (i) Final Payment and (ii) termination of the Revolving Loan Commitment and
 the Letter of Credit Commitment, the Collateral shall be released from the
 Liens created hereby, and this Agreement and all obligations (other than
 those expressly stated to survive such termination) of Bank and Borrowers
 hereunder shall terminate, all without delivery of any 

 


70











	
  

 	
  

 
	
  

 	
 instrument
 or performance of any act by any party. At the request and sole expense of
 Borrowers following any such termination, Bank shall deliver to Borrowers any
 Collateral held by Bank hereunder, and execute and deliver to Borrowers such
 documents as Borrowers shall reasonably request to evidence such termination.

 
	
  

 	
  

 
	
  

 	
                  (b)          If
 any of the Collateral shall be sold, transferred or otherwise disposed of by
 any Borrower in a transaction permitted hereunder, then Bank, at the request
 and sole expense of Borrowers, shall execute and deliver to Borrowers all
 releases or other documents reasonably necessary or desirable for the release
 of the Liens created hereby on such Collateral.

 
	
  

 	
  

 
	
  

 	
                  (c)          The
 foregoing provisions of this Section 13.23 are expressly subject to
 the terms of Section 13.21 above.

 



[Remainder of page intentionally left blank;
signature pages follow]


71








          IN WITNESS
WHEREOF, the Borrowers and the Bank have executed this Loan and Security Agreement as of the date first above written.


	
  

 	
  

 	
  

 
	
 BORROWER

 	
  

 	
  

 
	
 AND
 BORROWING AGENT:

 	
 INTRICON
 CORPORATION,

 
	
  

 	
 a
 Pennsylvania corporation

 
	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Scott
 Longval



 
	
  

 	
 Name:   Scott Longval

 
	
  

 	
 Title:     Chief Financial Officer

 
	
  

 	
  

 	
  

 
	
  

 	
 Address for notices:

 
	
  

 	
  

 	
  

 
	
  

 	
 1260 Red Fox
 Road

 
	
  

 	
 Arden Hills,
 MN 55112

 
	
  

 	
 Attention:
   Scott Longval

 
	
  

 	
 Telephone:
   651.636.9770

 
	
  

 	
 Facsimile:
    651.636.9503

 


SIGNATURE
PAGE TO LOAN AND SECURITY AGREEMENT











	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
 BORROWER:

 	
 INTRICON,
 INC. (formerly known as Resistance 

 
	
  

 	
 Technology,
 Inc.), a Minnesota corporation

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Scott
 Longval



 
	
  

 	
 Name:   Scott Longval

 
	
  

 	
 Title:     Chief Financial Officer

 
	
  

 	
  

 
	
  

 	
 Address for notices:

 
	
  

 	
  

 
	
  

 	
 1260 Red Fox
 Road

 
	
  

 	
 Arden Hills,
 MN 55112

 
	
  

 	
 Attention:  Scott
 Longval

 
	
  

 	
 Telephone:
   651.636.9770

 
	
  

 	
 Facsimile:
    651.636.9503

 
	
  

 	
  

 	
  

 
	
 SIGNATURE
 PAGE TO LOAN AND SECURITY AGREEMENT

 















	
  

 	
  

 	
  

 
	
 BORROWER:

 	
 RTI
 ELECTRONICS, INC.,

 
	
  

 	
 a Delaware
 corporation

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Scott
 Longval



 
	
  

 	
 Name:   Scott Longval

 
	
  

 	
 Title:     Chief Financial Officer

 
	
  

 	
  

 	
  

 
	
  

 	
 Address for notices:

 
	
  

 	
  

 
	
  

 	
 1260 Red Fox
 Road

 
	
  

 	
 Arden Hills,
 MN 55112

 
	
  

 	
 Attention:
   Scott Longval

 
	
  

 	
 Telephone:
   651.636.9770

 
	
  

 	
 Facsimile:
    651.636.9503

 
	
  

 	
  

 	
  

 
	
 SIGNATURE
 PAGE TO LOAN AND SECURITY AGREEMENT

 















	
  

 	
  

 	
  

 
	
 BORROWER:

 	
 INTRICON
 TIBBETTS CORPORATION 

 
	
  

 	
 (formerly
 known as TI Acquisition Corporation),

 
	
  

 	
 a Maine
 corporation

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Scott
 Longval



 
	
  

 	
 Name:   Scott Longval

 
	
  

 	
 Title:     Chief Financial Officer

 
	
  

 	
  

 	
  

 
	
  

 	
 Address for notices:

 
	
  

 	
  

 	
  

 
	
  

 	
 1260 Red Fox
 Road

 
	
  

 	
 Arden Hills,
 MN 55112

 
	
  

 	
 Attention:
   Scott Longval

 
	
  

 	
 Telephone:
   651.636.9770

 
	
  

 	
 Facsimile:
    651.636.9503

 
	
  

 	
  

 
	
 SIGNATURE
 PAGE TO LOAN AND SECURITY AGREEMENT

 















	
  

 	
  

 	
  

 
	
 BORROWER:

 	
 JON BARRON,
 INC. (d/b/a Datrix),

 
	
  

 	
 a California
 corporation

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Scott
 Longval



 
	
  

 	
 Name:   Scott Longval

 
	
  

 	
 Title:     Chief Financial Officer

 
	
  

 	
  

 	
  

 
	
  

 	
 Address for notices:

 
	
  

 	
  

 	
  

 
	
  

 	
 1260 Red Fox
 Road

 
	
  

 	
 Arden Hills,
 MN 55112

 
	
  

 	
 Attention:
   Scott Longval

 
	
  

 	
 Telephone:
   651.636.9770

 
	
  

 	
 Facsimile:
    651.636.9503

 
	
  

 	
  

 
	
 SIGNATURE
 PAGE TO LOAN AND SECURITY AGREEMENT

 
















	
  

 	
  

 	
  

 
	
 BANK:

 	
 THE
 PRIVATEBANK AND TRUST COMPANY,

 
	
  

 	
 an Illinois
 banking corporation

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Seth
 Hove



 
	
  

 	
 Name:   Seth Hove

 
	
  

 	
 Title:     Officer

 
	
  

 	
  

 	
  

 
	
  

 	
 Address for notices:

 
	
  

 	
  

 	
  

 
	
  

 	
 The
 PrivateBank and Trust Company

 
	
  

 	
 50 South 6th
 Street, Suite 1415

 
	
  

 	
 Minneapolis,
 MN 55402

 
	
  

 	
 Attn: Seth
 Hove

 
	
  

 	
 Fax: (612)
 605-6193

 
	
  

 	
  

 	
  

 
	
 SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT