Exhibit 10.10

 

LOAN AND SECURITY AGREEMENT

by and between

SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA  95054

Attn:  Loan Services

(408) 496-2429

and

OMNICELL, INC.

1101 East Meadow Drive

Palo Alto, California 94303

TOTAL CREDIT AMOUNT:  $12,500,000

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

 

1.

ACCOUNTING AND OTHER TERMS.

 

1

 

 

 

 

 

2.

LOAN AND TERMS OF PAYMENT

 

1

 

 

 

 

 

 

2.1

Credit Extensions.

 

1

 

2.2

Overadvances.

 

3

 

2.3

Interest Rate, Payments.

 

3

 

2.4

Fees.

 

4

 

 

 

 

 

3.

CONDITIONS OF LOANS

 

5

 

 

 

 

 

 

3.1

Conditions Precedent to Initial Credit Extension.

 

5

 

3.2

Conditions Precedent to all Credit Extensions.

 

5

 

 

 

 

 

4.

CREATION OF SECURITY INTEREST

 

6

 

 

 

 

 

 

4.1

Grant of Security Interest.

 

6

 

 

 

 

 

5.

REPRESENTATIONS AND WARRANTIES

 

6

 

 

 

 

 

 

5.1

Due Organization and Authorization.

 

6

 

5.2

Collateral.

 

6

 

5.3

Litigation.

 

7

 

5.4

No Material Adverse Change in Financial Statements.

 

7

 

5.5

Solvency.

 

7

 

5.6

Regulatory Compliance.

 

7

 

5.7

Subsidiaries.

 

7

 

5.8

Full Disclosure.

 

8

 

 

 

 

 

6.

AFFIRMATIVE COVENANTS

 

8

 

 

 

 

 

 

6.1

Government Compliance.

 

8

 

6.2

Financial Statements, Reports, Certificates.

 

8

 

6.3

Inventory; Returns.

 

9

 

6.4

Taxes.

 

9

 

6.5

Insurance.

 

9

 

6.6

Financial Covenants.

 

9

 

6.7

Primary Accounts.

 

10

 

6.8

Registration of Intellectual Property Rights.

 

10

 

6.9

Control Agreements.

 

10

 

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6.10

Further Assurances.

 

11

 

 

 

 

 

7.

NEGATIVE COVENANTS

 

11

 

 

 

 

 

 

7.1

Dispositions.

 

11

 

7.2

Changes in Business, Ownership, Management or Business Locations.

 

11

 

7.3

Mergers or Acquisitions.

 

11

 

7.4

Indebtedness.

 

11

 

7.5

Encumbrance.

 

12

 

7.6

Distributions; Investments.

 

12

 

7.7

Transactions with Affiliates.

 

12

 

7.8

Subordinated Debt.

 

12

 

7.9

Compliance.

 

12

 

 

 

 

 

8.

EVENTS OF DEFAULT

 

12

 

 

 

 

 

 

8.1

Payment Default.

 

12

 

8.2

Covenant Default.

 

13

 

8.3

Material Adverse Change.

 

13

 

8.4

Attachment.

 

13

 

8.5

Insolvency.

 

13

 

8.6

Other Agreements.

 

13

 

8.7

Judgments.

 

13

 

8.8

Misrepresentations.

 

14

 

 

 

 

 

9.

BANK’S RIGHTS AND REMEDIES

 

14

 

 

 

 

 

 

9.1

Rights and Remedies.

 

14

 

9.2

Power of Attorney.

 

15

 

9.3

Accounts Collection.

 

15

 

9.4

Bank Expenses.

 

15

 

9.5

Bank’s Liability for Collateral.

 

15

 

9.6

Remedies Cumulative.

 

15

 

9.7

Demand Waiver.

 

16

 

 

 

 

 

10.

NOTICES

 

16

 

 

 

 

 

11.

CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER

 

16

 

 

 

 

 

12.

GENERAL PROVISIONS

 

16

 

 

 

 

 

 

12.1

Successors and Assigns.

 

16

 

12.2

Indemnification.

 

16

 

12.3

Time of Essence.

 

17

 

12.4

Severability of Provision.

 

17

 

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12.5

Amendments in Writing, Integration.

 

17

 

12.6

Counterparts.

 

17

 

12.7

Survival.

 

17

 

12.8

Confidentiality.

 

17

 

12.9

Attorneys’ Fees, Costs and Expenses.

 

18

 

 

 

 

 

13.

DEFINITIONS

 

18

 

 

 

 

 

 

13.1

Definitions.

 

18

 

 

 

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This LOAN AND SECURITY AGREEMENT dated August 1, 2002, between SILICON VALLEY
BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara, California 95054
and OMNICELL, INC., a Delaware corporation (“Borrower”), whose address is 1101
East Meadow Drive, Palo Alto, California 94303 provides the terms on which Bank
will lend to Borrower and Borrower will repay Bank. The parties agree as
follows:

1.                                       ACCOUNTING AND OTHER TERMS.

Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP.  The term
“financial statements” includes the notes and schedules.  The terms “including”
and “includes” always mean “including (or includes) without limitation,” in this
or any Loan Document.

2.                                       LOAN AND TERMS OF PAYMENT

2.1                                 Credit Extensions.

Borrower will pay Bank the unpaid principal amount of all Credit Extensions and
interest on the unpaid principal amount of the Credit Extensions.

2.1.1                        Revolving Advances.

(a)   Bank will make Advances not exceeding the lesser of (A) the Committed
Revolving Line or (B) the Borrowing Base, minus: (i) the outstanding commitments
relating to Cash Management Services, the (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), and
(iii) the FX Reserve.  Amounts borrowed under this Section may be repaid and
reborrowed at any time prior to the Revolving Maturity Date.

(b)   To obtain an Advance, Borrower must notify Bank by facsimile or telephone
by 12:00 noon P.S.T. three (3) Business Days prior to the date the Advance is to
be made.  Borrower must promptly confirm the notification by delivering to Bank
the Payment/Advance Form attached as Exhibit B.  Bank will credit Advances to
Borrower’s deposit account.  Bank may make Advances under this Agreement based
on instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due.  Bank may rely on any telephone notice given by a person whom Bank
reasonably believes is a Responsible Officer or designee.  Borrower will
indemnify Bank for any direct loss Bank suffers due to such reliance, other than
losses arising out of Bank’s gross negligence or willful misconduct.

(c)   The Committed Revolving Line terminates on the Revolving Maturity Date,
when all Advances, accrued and unpaid interest and any other amounts due
hereunder are immediately payable, except for Corporate Advances which may be
“termed out” (converted to the Term Loan) pursuant to the terms of Section 2.1.5
(c) below.

 

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2.1.2                        Letters of Credit Sublimit.

Bank will issue or have issued Letters of Credit for Borrower’s account not
exceeding the lesser of: Committed Revolving Line or the Borrowing Base minus,
(i) the outstanding principal balance of the Advances minus, (ii) the
outstanding commitments under the Cash Management Services, minus (iii) the FX
Reserve; however, the face amount of outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) may not exceed $7,500,000.  Each
Letter of Credit will have an expiry date of no later than 180 days after the
Revolving Maturity Date, but at any time after the Revolving Maturity Date or
the termination of this Agreement Borrower’s reimbursement obligation will be
secured by a certificate of deposit maintained at Bank in an amount of no less
than an amount equal to 100% of the face amount of any issued and outstanding
Letters of Credit (including drawn but on reimbursed Letters of Credit). 
Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request.

2.1.3                        Foreign Exchange Sublimit.

If there is availability under the Committed Revolving Line then Borrower may
enter in foreign exchange forward contracts with the Bank under which Borrower
commits to purchase from or sell to Bank a set amount of foreign currency more
than one business day after the contract date (the “FX Forward Contract”).  Bank
will subtract 10% of each outstanding FX Forward Contract from the foreign
exchange sublimit which is a maximum of $750,000 (the “FX Reserve”).  The total
FX Forward Contracts at any one time may not exceed 10 times the amount of the
FX Reserve.  Bank may terminate the FX Forward Contracts if an Event of Default
occurs and continues.

2.1.4                        Cash Management Services Sublimit.

If there is enough availability under the Committed Revolving Line, Borrower may
use up to $7,500,000 for Bank’s Cash Management Services, which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in various cash management services agreements
related to such services (the “Cash Management Services”).  All amounts Bank
pays for any Cash Management Services will be treated as Advances under the
Committed Revolving Line.

2.1.5                        Corporate Line of Credit.

(a)   Bank will make corporate advances (“Corporate Advances”) not exceeding the
Committed Corporate Line.   Amounts borrowed under this Section may be repaid
and reborrowed at any time prior to the Corporate Line Maturity Date.

(b)   Corporate Advances may only be used for capital expenditures, including
but not limited to, acquisitions of Intellectual Property, stock repurchases or
purchases of lease residuals.

(c)   To obtain a Corporate Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 noon P.S.T. on the Business Day the Corporate Advance is to
be made.  Borrower must promptly confirm the notification by delivering to Bank
the Payment/Advance

 

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Form attached as Exhibit B.  Bank will credit Corporate Advances to Borrower’s
deposit account.  Bank may make Corporate Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Corporate Advances are necessary to meet Obligations which
have become due.  Bank may rely on any telephone notice given by a person whom
Bank believes is a Responsible Officer or designee. Borrower will indemnify Bank
for any loss Bank suffers due to such reliance, other than losses arising out of
Bank’s gross negligence or willful misconduct.

(d)   On the Corporate Line Maturity Date, Borrower may, at its option:  (i)
immediately pay all Corporate Advances and accrued and unpaid interest relating
to such Corporate Advances; or (ii) repay the balance outstanding on the
Corporate Line Maturity Date (but not to exceed $5,000,000) over a period of 36
month pursuant to the terms of paragraph (d) below (the “Term Loan”).

(e)   Should Borrower choose the Term Loan as its option, Borrower will pay 36
equal installments of principal plus accrued interest (the “Term Loan
Payment”).  Each Term Loan Payment is payable on the first day of each month
during the term of the loan.  Borrower’s final Term Loan Payment, due on June
28, 2006, includes all outstanding Term Loan principal and accrued interest.

(f)    If the Term Loan is accelerated following the occurrence of an Event of
Default or if Borrower has chosen the Term Fixed Option and prepays the Term
Loan, then Borrower will immediately pay to Bank (i) all due but unpaid Term
Loan Payments (including principal and interest), (ii) all Term Loan Payments
(including principal and interest unpaid, at the default rate if the prepayment
is due to acceleration) remaining for the term of the Term Loan; and (iii) all
other sums, if any, that shall have become due and payable with respect to the
Term Loan.

(g)   If Borrower has chosen the Term Variable Option, then at any time,
provided no Event of Default has occurred and is continuing, Borrower shall have
the option to prepay the Term Loan, provided Borrower (i) provides written
notice to Bank of its election to prepay the Term Loan at least ten (10) days
prior to such prepayment, and (ii) pays, on the date of the prepayment (A) all
outstanding principal under the Term Loan; (B) all unpaid accrued interest to
the date of the prepayment; and (C) all other sums, if any, that shall have
become due and payable hereunder with respect to this Agreement.

2.2                                 Overadvances.

If Borrower’s Obligations under Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the
lesser of either (i)  the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay Bank the excess.

2.3                                 Interest Rate, Payments.

(a)   Interest Rate. (i) Advances accrue interest on the outstanding principal
balance at a variable per annum rate of 1 percentage point (1%) above the Prime
Rate; (ii) Corporate Advances accrue interest on the outstanding principal
balance at a variable per annum rate of 1.50 percentage points (1.50%) above the
Prime Rate; and (iii) the Term Loan accrues interest at

 

3

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Borrower’s option at either: (y) a variable per annum rate of 1.50 percentage
points (1.50%) above the Prime Rate (the “Term Variable Option”) and (z) equal
to 1.50 percentage points (1.50%) above the Prime Rate which rate shall be
determined upon funding of the Term Loan and shall remain fixed for the term of
the Term Loan (the “Term Fixed Option”). The interest rate increases or
decreases when the Prime Rate changes.  Interest is computed on a 360 day year
for the actual number of days elapsed.

(b)   Provided no Event of Default has occurred and is continuing and provided
further that Borrower maintains, at or through Bank in the Liquid Reserve Fund,
Treasury Reserve Fund, demand deposit accounts or savings accounts, deposits in
a minimum amount of at least 85% of Borrower’s cash and cash equivalents,
measured on a monthly basis (the “Balance Requirement”), each of the rates of
interest set forth in paragraph (a) above will be reduced by 50 basis points
(the “Interest Rate Reduction”).  For variable rates of interest, Borrower’s
qualification for the Interest Rate Reduction will be measured as of the end of
each month and if the Balance Requirement is achieved, the Interest Rate
Reduction will apply to the month immediately following the date of
determination.  For fixed interest rates, Borrower’s qualification for the
Interest Rate Reduction will be measured on the Closing Date and on the first
day of the Term Loan.  If Borrower does not qualify during on such date, the
Interest Rate Reduction will be unavailable for the remainder of the term of the
subject credit facility.  Furthermore, if Borrower qualifies for the Interest
Rate Reduction on the Closing Date or on the first day of the Term Loan, but
subsequently fails to maintain the Required Balance, the rate of interest will
automatically revert to the relevant rate of interest set forth in paragraph (a)
above and the Interest Rate Reduction will be unavailable for the remaining term
of the subject credit facility.

(c)   After an Event of Default, Obligations accrue interest at 5 percent above
the rate effective immediately before the Event of Default, provided, however,
that Bank will cease to charge the default rate of interest upon Bank’s’ waiver
of any existing Events of Default..

(d)   Payments.  Interest due on the Committed Revolving Line and the Committed
Corporate Line is payable on the first day of each month.  Bank may debit any of
Borrower’s deposit accounts including Account Number 3300034947 for principal
and interest payments owing or any amounts Borrower owes Bank hereunder.  Bank
will promptly notify Borrower when it debits Borrower’s accounts.  These debits
are not a set-off.  Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day.  When a
payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest accrue.

2.4                                 Fees.

Borrower will pay Bank:

(a)   Loan Fee.  On or prior to the Closing Date, a loan fee in the amount of
$62,500, of which Bank has received $25,000.

 

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(b)   Letter of Credit Fee.  A per annum letter of credit fee equal to 1.50% of
the face amount of each Letter of Credit issued plus, if Letters of Credit are
issued by a financial institution other than Bank, but guaranteed by Bank, any
fees charged by the issuing financial institution.

(c)   Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
reasonable expenses) incurred through and after the date of this Agreement, are
payable when due; provided, however, that notwithstanding the foregoing, solely
with respect to Bank Expenses incurred prior to the Closing Date, Borrower will
only pay for any such Bank Expenses in excess of $5,000.

3.                                       CONDITIONS OF LOANS

3.1                                 Conditions Precedent to Initial Credit
Extension.

Bank’s obligation to make the initial Credit Extension is subject to the
following conditions precedent:

(a)   receipt by Bank of resolution adopted by Borrower’s Board of Directors
authorizing the transaction in form and substance satisfactory to Bank;

(b)   receipt by Bank of a Negative Pledge Agreement satisfactory to Bank,
relating to Borrower’s Intellectual Property;

(c)   receipt by Bank of the Loan Fee relating to Committed Revolving Line;

(d)   receipt by Bank of Borrower’s insurance certificate with Lender’s loss
payable endorsement reflecting Bank as loss payee;

(e)   completion of Bank’s collateral audit and a satisfactory result of the
same; and

(f)    receipt by Bank of all other agreement, documents and fees that Bank may
require.

3.2                                 Conditions Precedent to all Credit
Extensions.

Bank’s obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

(a)   timely receipt of any Payment/Advance Form; and

(b)   the representations and warranties in Section 5 must be materially true on
the date of the Payment/Advance Form and on the effective date of each Credit
Extension and no Event of Default may have occurred and be continuing, or result
from the Credit Extension. Each Credit Extension is Borrower’s representation
and warranty on that date that the representations and warranties of Section 5
remain true as of such date.

 

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4.                                       CREATION OF SECURITY INTEREST

4.1                                 Grant of Security Interest.

Borrower grants Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
of Borrower’s duties under the Loan Documents.  Except for Permitted Liens, any
security interest will be a first priority security interest in the Collateral. 
If an Event of Default has occurred and is continuing, Bank may place a “hold”
on any deposit account pledged as Collateral. If this Agreement is terminated,
Bank’s lien and security interest in the Collateral will continue until Borrower
fully satisfies its Obligations.

5.                                       REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1                                 Due Organization and Authorization.

Borrower and each Subsidiary is duly existing and in good standing in its state
of formation and qualified and licensed to do business in, and in good standing
in, any state in which the conduct of its business or its ownership of property
requires that it be qualified, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.

The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under any agreement to which or by which it
is bound in which the default could reasonably be expected to cause a Material
Adverse Change.

5.2                                 Collateral.

Borrower has good title to the Collateral, free of Liens except Permitted
Liens.  The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor. 
Except as set forth in the Schedule, Borrower has no notice of any actual or
imminent Insolvency Proceeding of any account debtor whose accounts are an
Eligible Account in any Borrowing Base Certificate.  To Borrower’s knowledge,
all Inventory is in all material respects of good and marketable quality, free
from material defects.  Borrower is the sole owner of the Intellectual Property,
except for non-exclusive licenses granted to its customers in the ordinary
course of business.  Each Patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and, to Borrower’s knowledge no claim has been made that any part of the
Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.

 

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5.3                                 Litigation.

Except as shown in the Schedule, there are no actions or proceedings pending or,
to the knowledge of Borrower’s Responsible Officers and legal counsel,
threatened by or against Borrower or any Subsidiary  in which a likely adverse
decision could reasonably be expected to cause a Material Adverse Change.

5.4                                 No Material Adverse Change in Financial
Statements.

All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations as of the date indicated and for the periods stated.  There has not
been any material deterioration in Borrower’s consolidated financial condition
since the date of the most recent financial statements submitted to Bank.

5.5                                 Solvency.

The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.6                                 Regulatory Compliance.

Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act.  Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors).  Borrower has
complied in all material respects with the Federal Fair Labor Standards Act. 
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change.  None of
Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or
any Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally.  Borrower and each Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP.  Borrower and
each Subsidiary has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.

5.7                                 Subsidiaries.

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

 

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5.8                                 Full Disclosure.

No written representation, warranty or other statement of Borrower made by a
Responsible Officer in any certificate or written statement given to Bank (taken
together with all such written certificates and written statements to Bank)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading.  It being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
and forecasted results.

6.                                       AFFIRMATIVE COVENANTS

Borrower will do all of the following:

6.1                                 Government Compliance.

Borrower will maintain its and all Subsidiaries’ legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower’s business or operations.  Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business or operations or would reasonably
be expected to cause a Material Adverse Change.

6.2                                 Financial Statements, Reports, Certificates.

(a)   Borrower will deliver to Bank:  (i) so long as there are no outstanding
Obligations, as soon as available, but no later than 30 days after the last day
of each fiscal quarter, a company prepared consolidated balance sheet and income
statement covering Borrower’s consolidated operations during the period, in a
form and certified by a Responsible Officer acceptable to Bank; provided,
however, that if Borrower requests a Credit Extension from Bank, then Borrower
shall deliver to Bank, not less than three (3) Business Days prior to the date
such Credit Extension is to be made, such company prepared consolidated balance
sheet and income statement covering Borrower’s consolidated operations for the
3-month period immediately preceding such request and then thereafter, so long
as any Obligations are outstanding, as soon as available, but no later than 30
days after the last day of each month, Borrower shall deliver to Bank such
company prepared consolidated balance sheet and income statement covering
Borrower’s consolidated operations during the period, in a form and certified by
a Responsible Officer acceptable to Bank; (ii) as soon as available, but no
later than 90 days after the last day of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank,
together with a compliance certificate in the form of Exhibit C; (iii) within 5
days of filing, copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8–K filed with the Securities and

 

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Exchange Commission; (iv) a prompt report of any legal actions pending or
threatened against Borrower or any Subsidiary that could reasonably be expected
to result in damages or costs to Borrower or any Subsidiary of $500,000 or more;
and (v) budgets, sales projections, operating plans or other financial
information Bank reasonably requests.

(b)   Within 30 days after the last day of each month, Borrower will deliver to
Bank a Compliance Certificate signed by a Responsible Officer in the form of
Exhibit C.

(c)   Within 30 days after the last day of each month, Borrower will deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in the form of
Exhibit D, with aged listings of accounts receivable and accounts payable.

(d)   Bank has the right to audit Borrower’s Collateral at Borrower’s expense,
but the audits will be conducted no more often than every six months unless an
Event of Default has occurred and is continuing.

6.3                                 Inventory; Returns.

Borrower will keep all Inventory in good and marketable condition, free from
material defects.  Returns and allowances between Borrower and its account
debtors will follow Borrower’s customary practices as they exist at execution of
this Agreement.  Borrower must promptly notify Bank of all returns, recoveries, 
disputes and claims, that  involve more than $100,000.

6.4                                 Taxes.

Borrower will make, and cause each Subsidiary to make, timely payment of all
material federal, state, and local taxes or assessments, other than those being
contested in good faith and for which Borrower maintains adequate reserve and
will deliver to Bank, on demand, appropriate certificates attesting to the
payment.

6.5                                 Insurance.

Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request.  Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank’s
reasonable discretion.  All property policies will have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy.  At Bank’s
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy will, at Bank’s option, be
payable to Bank on account of the Obligations.

6.6                                 Financial Covenants.

Borrower will maintain as of the last day of each month:

 

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(i)            Quick Ratio (Adjusted).  A ratio of Quick Assets to Current
Liabilities minus: (a) Deferred Maintenance Revenue and (b) Deferred Gross
Profit of at least 1.30 to 1.00 as of the last day of every month on or prior to
June 30, 2003 and 1.50 to 1.00 as of the last day of each month thereafter;
provided, however, that so long as there are no outstanding Obligations,
Borrower will maintain the applicable ratio as of the last day each fiscal
quarter; provided, further, that if Borrower requests a Credit Extension from
Bank during such fiscal quarter, then Borrower shall deliver to Bank, not less
than three (3) Business Days prior to the date such Credit Extension is to be
made, a report of Borrower’s Quick Ratio (Adjusted) for each of the 3 months
immediately preceding such request and monthly thereafter and Bank shall reserve
the right to declare an Event of Default for any previous violations of the
above covenant.

(ii)           Tangible Net Worth.  A Tangible Net Worth of at least $16,000,000
as of the end of each month on or prior to June 30, 2003 and $18,000,000 as of
the end of each month thereafter; provided, however, that so long as there are
no outstanding Obligations, Borrower will maintain the applicable Tangible Net
Worth as of the last day each fiscal quarter; provided, further, that if
Borrower requests a Credit Extension from Bank during such fiscal quarter, then
Borrower shall deliver to Bank, not less than three (3) Business Days prior to
the date such Credit Extension is to be made, a report of Borrower’s Tangible
Net Worth for each of the 3 months immediately preceding such request and
monthly thereafter and Bank shall reserve the right to declare an Event of
Default for any previous violations of the above covenant.

6.7                                 Primary Accounts.

Borrower will maintain its primary depository and operating accounts with Bank.

6.8                                 Registration of Intellectual Property
Rights.

Borrower will, as deemed appropriate by Borrower’s Board of Directors and
consistent with Borrower’s past practice, register with the United States Patent
and Trademark Office or the United States Copyright Office its Intellectual
Property within 30 days of the date of this Agreement, and additional
Intellectual Property rights developed or acquired material to Borrower’s
business, including revisions or additions with any product before the sale or
licensing of the product to any third party.

Borrower will as it deems reasonably appropriate and consistent with past
practice (i) protect, defend and maintain the validity and enforceability of the
Intellectual Property and (ii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public without Bank’s written consent,
which consent shall not be unreasonably withheld.

Borrower will promptly advise Bank in writing of material infringements of the
Intellectual Property.

6.9                                 Control Agreements.

With respect to deposit accounts or investment accounts maintained at financial
institutions other than Bank, within 10 days of the opening of any such deposit
account or

 

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investment account, Borrower will execute and deliver to Bank, control
agreements in form satisfactory to Bank in order for Bank to perfect its
security interest in Borrower’s deposit accounts or investment accounts.

6.10                           Further Assurances.

Borrower will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s security interest in the
Collateral or to effect the purposes of this Agreement.

7.                                       NEGATIVE COVENANTS

Borrower will not do any of the following without Bank’s prior written consent,
which will not be unreasonably withheld:

7.1                                 Dispositions.

Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than Transfers (i) of Inventory in the ordinary course of
business; (ii) of non-exclusive licenses and similar arrangements for the use of
the property of Borrower or its Subsidiaries in the ordinary course of business;
(iii) of worn-out or obsolete Equipment; or (iv) other dispositions not included
in (i) through (iv) above not to exceed $100,000 in the aggregate in any one of
Borrower’s fiscal years.

7.2                                 Changes in Business, Ownership, Management
or Business Locations.

Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto or
have a material change in its ownership or management (other than the sale of
Borrower’s equity securities in a public offering or to venture capital
investors approved by Bank).  Borrower will not, without at least 30 days prior
written notice, relocate its chief executive office.

7.3                                 Mergers or Acquisitions.

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person
(other than Permitted Investments), except where (i) no Event of Default has
occurred and is continuing or would result from such action during the term of
this Agreement and (ii) and the aggregate value of such transactions would not
exceed 10% of Tangible Net Worth.  A Subsidiary may merge or consolidate into
another Subsidiary or into Borrower.

7.4                                 Indebtedness.

Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

 

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7.5                                 Encumbrance.

Create, incur, or allow any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted here, subject
to Permitted Liens.

7.6                                 Distributions; Investments.

Directly or indirectly acquire or own any Person, or make any Investment in any
Person, other than Permitted Investments, or permit any of its Subsidiaries to
do so.  Pay any dividends or make any distribution or payment or redeem, retire
or purchase any capital stock (except shares acquired upon the conversion
thereof into other shares of Borrower’s capital stock.

7.7                                 Transactions with Affiliates.

Directly or indirectly enter into or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower’s
business, on terms less favorable to Borrower than would be obtained in an arm’s
length transaction with a non-affiliated Person.

7.8                                 Subordinated Debt.

Make or permit any payment on any Subordinated Debt, except under the terms of
the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank’s prior written consent (such consent not to be
unreasonably withheld).

7.9                                 Compliance.

Become an “investment company” or a company controlled by an “investment
company,” under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower’s
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

8.                                       EVENTS OF DEFAULT

Any one of the following is an Event of Default:

8.1                                 Payment Default.

If Borrower fails to pay any of the Obligations within 3 days after their due
date.  During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);

 

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8.2                                 Covenant Default.

If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrower’s attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default.  During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period).

8.3                                 Material Adverse Change.

If there (i) occurs a material adverse change in the business operations, or
condition (financial or otherwise) of the Borrower; or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iii) is a material impairment of the value or priority of Bank’s security
interests in the Collateral.

8.4                                 Attachment.

If any material portion of Borrower’s assets is attached, seized, levied on, or
comes into possession of a trustee or receiver and the attachment, seizure or
levy is not removed in 10 days, or if Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business or if a
judgment or other claim becomes a Lien on a material portion of Borrower’s
assets, or if a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency and not paid within 10 days after
Borrower receives notice.  These are not Events of Default if stayed or if a
bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period).

8.5                                 Insolvency.

If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or
an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 30 days (but no Credit Extensions will be made before any Insolvency
Proceeding is dismissed).

8.6                                 Other Agreements.

If there is a default in any agreement between Borrower and a third party that
gives the third party the right to accelerate any Indebtedness exceeding
$500,000 or that could cause a Material Adverse Change.

8.7                                 Judgments.

If a money judgment(s) in the aggregate of at least $250,000 is rendered against
Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions
will be made before the judgment is stayed or satisfied).

 

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8.8                                 Misrepresentations.

If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.

9.                                       BANK’S RIGHTS AND REMEDIES

9.1                                 Rights and Remedies.

When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:

(a)   Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

(b)   Stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

(c)   Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;

(d)   Make any payments and do any acts it considers necessary or reasonable to
protect its security interest in the Collateral.  Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates.  Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank’s rights or remedies;

(e)   Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;

(f)    Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral.  Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section (provided such
license shall terminate immediately upon satisfaction of the Obligations),
Borrower’s rights under all licenses and all franchise agreements inure to
Bank’s benefit to the extent permitted under such agreements; and

(g)   Dispose of the Collateral according to the Code.

 

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9.2                                 Power of Attorney.

Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to:  (i) endorse Borrower’s
name on any checks or other forms of payment or security; (ii) sign Borrower’s
name on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower’s insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits.  Bank may exercise the power of attorney to sign Borrower’s name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred.  Bank’s
appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank’s obligation to provide Credit Extensions
terminates.

9.3                                 Accounts Collection.

When an Event of Default occurs and continues, Bank may notify any Person owing
Borrower money of Bank’s security interest in the funds and verify the amount of
the Account.  Borrower must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.

9.4                                 Bank Expenses.

If Borrower fails to pay any amount or furnish any required proof of payment to
third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank
deems prudent, provided, Bank will, if practical under the circumstances, notify
Borrower of its intent to make a payment to a third person, three (3) days prior
to making such payment.  Any such amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral.  No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.

9.5                                 Bank’s Liability for Collateral.

If Bank complies with reasonable banking practices and Section 9-207 of the
Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other
person.  Borrower bears all risk of loss, damage or destruction of the
Collateral.

9.6                                 Remedies Cumulative.

Bank’s rights and remedies under this Agreement, the Loan Documents, and all
other agreements are cumulative.  Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any

 

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Event of Default is not a continuing waiver. Bank’s delay is not a waiver,
election, or acquiescence.  No waiver is effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.

9.7                                 Demand Waiver.

Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.

10.                                 NOTICES

All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth at the beginning of this
Agreement.  A party may change its notice address by giving the other party
written notice.

11.                                 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER

California law governs the Loan Documents without regard to principles of
conflicts of law.  Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa Clara County, California.

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

12.                                 GENERAL PROVISIONS

12.1                           Successors and Assigns.

This Agreement binds and is for the benefit of the successors and permitted
assigns of each party.  Borrower may not assign this Agreement or any rights
under it without Bank’s prior written consent which may be granted or withheld
in Bank’s discretion.  Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits under this
Agreement.

12.2                           Indemnification.

Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against:  (a) all obligations, demands, claims, and
liabilities asserted by any other

 

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party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or consequential to transactions between Bank and Borrower (including reasonable
attorneys fees and expenses), except for losses caused by Bank’s gross
negligence or willful misconduct.  Notwithstanding the foregoing, in no event
will Borrower be liable for any amount in excess of the Obligations.

12.3                           Time of Essence.

Time is of the essence for the performance of all obligations in this Agreement.

12.4                           Severability of Provision.

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

12.5                           Amendments in Writing, Integration.

All amendments to this Agreement must be in writing and signed by Borrower and
Bank.  This Agreement represents the entire agreement about this subject matter,
and supersedes prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.

12.6                           Counterparts.

This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
are an original, and all taken together, constitute one Agreement.

12.7                           Survival.

All covenants, representations and warranties made in this Agreement continue in
full force while  any Obligations remain outstanding.  The obligations of
Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.

12.8                           Confidentiality.

In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank’s subsidiaries or affiliates in connection
with their business with Borrower, (ii) to prospective transferees or purchasers
of any interest in the loans, (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank’s examination or audit and
(v) as Bank considers appropriate exercising remedies under this Agreement. 
Confidential information does not include information that either:  (a) is in
the public domain or in Bank’s possession when disclosed to Bank, or becomes
part of the public domain after

 

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disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does
not know that the third party is prohibited from disclosing the information.

12.9         Attorneys’ Fees, Costs and Expenses.

In any action or proceeding between Borrower and Bank arising out of the Loan
Documents, the prevailing party will be entitled to recover its reasonable
attorneys’ fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.

13.                                 DEFINITIONS

13.1                           Definitions.

                In this Agreement:

“Accounts” are all existing and later arising accounts, contract rights, and
other obligations owed Borrower in connection with its sale or lease of goods
(including licensing software and other technology) or provision of services,
all credit insurance, guaranties, other security and all merchandise returned or
reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

“Advance” or “Advances” is a loan advance (or advances) under the Committed
Revolving Line.

“Affiliate” of a Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person’s senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.

“Balance Requirement” is defined in Section 2.3 (b).

“Bank Expenses” are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

“Borrower’s Books” are all Borrower’s books and records including ledgers,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

“Borrowing Base” is 80% of Eligible Accounts as determined by Bank from
Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower’s Collateral.

“Business Day” is any day that is not a Saturday, Sunday or a day on which the
Bank is closed.

 

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“Cash Management Services” are defined in Section 2.1.4.

“Closing Date” is the date of this Agreement.

“Code” is the California Uniform Commercial Code.

“Collateral” is the property described on Exhibit A.

“Committed Corporate Line” is an Advance of up to $5,000,000.

“Committed Revolving Line” is an Advance of up to $7,500,000.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business.  The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.

“Copyrights” are all copyright rights, applications or registrations and like
protections in each work or authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.

“Corporate Advances” has the meaning set forth in Section 2.1.5 (a).

“Corporate Line Maturity Date” is July 31, 2003.

“Credit Extension” is each Advance, Corporate Advance, Letter of Credit,
Exchange Contract, or any other extension of credit by Bank for Borrower’s
benefit.

“Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities
which mature within one (1) year, plus the portion of the outstanding Credit
Extensions made hereunder which mature in more than one (1) year.

“Deferred Gross Profit” is amounts received by Borrower in advance of full
performance under a contract with a third party less deferred costs of sales.

“Deferred Maintenance Revenue” is all amounts received in advance of performance
under maintenance contract and not yet recognized as revenue.

 

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“Eligible Accounts” are Accounts in the ordinary course of Borrower’s business
that meet all Borrower’s representations and warranties in Section 5; but Bank
may change eligibility standards by giving Borrower notice.  Unless Bank agrees
otherwise in writing, Eligible Accounts will not include:

(a)   Accounts that the account debtor has not paid within 90 days of invoice
date;

(b)   Accounts for an account debtor, 50% or more of whose Accounts have not
been paid within 90 days of invoice date;

(c)   Credit balances over 90 days from invoice date;

(d)   Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed
that percentage, unless the Bank approves in writing;

(e)   Accounts for which the account debtor does not have its principal place of
business in the United States;

(f)    Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;

(g)   Accounts for which Borrower owes the account debtor, but only up to the
amount owed (sometimes called “contra” accounts, accounts payable, customer
deposits or credit accounts);

(h)   Accounts for demonstration or promotional equipment, or in which goods are
consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or
other terms if account debtor’s payment may be conditional;

(i)    Accounts for which the account debtor is Borrower’s Affiliate, officer,
employee, or agent;

(j)    Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;

(k)   Accounts for which Bank reasonably determines  collection to be doubtful.

“Equipment” is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.

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

“FX Forward Contract” is defined in Section 2.1.3.

 

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“FX Reserve” is defined in Section 2.1.3.

“GAAP” is generally accepted accounting principles.

“Guarantor” is any present or future guarantor of the Obligations.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

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

“Intellectual Property” is:

(a)           Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;

(b)           Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;

(c)           All design rights which may be available to Borrower now or later
created, acquired or held;

(d)           Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above;

All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.

“Interest Rate Reduction” is defined in Section 2.3 (b).

“Inventory” is present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or later owned by or in the custody or possession, actual or constructive, of
Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including
insurance proceeds) from the sale or disposition of any of the foregoing and any
documents of title.

 

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“Investment” is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

“Letter of Credit” is defined in Section 2.1.2.

“Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

“Liquid Reserve Fund” is a money market mutual fund of that name managed by an
affiliate of Bank.

“Loan Documents” are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

“Mask Works” are all mask works or similar rights available for the protection
of semiconductor chips, now owned or later acquired.

“Material Adverse Change” is defined in Section 8.3.

“Obligations” are debts, principal, interest, Bank Expenses and other amounts
Borrower owes Bank now or later, including cash management services, letters of
credit and foreign exchange contracts, if any and including interest accruing
after Insolvency Proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Bank.

“Patents” are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

“Permitted Indebtedness” is:

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

(b)           Indebtedness existing on the Closing Date and shown on the
Schedule;

(c)           Subordinated Debt;

(d)           Indebtedness to trade creditors incurred in the ordinary course of
business; and

(e)           Indebtedness secured by Permitted Liens.

“Permitted Investments” are:

(a)           Investments shown on the Schedule and existing on the Closing
Date; and

(b)           (i)  marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition,

 

22

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(ii) commercial paper maturing no more than 1 year after its creation and having
the highest rating from either Standard & Poor’s Corporation or Moody’s
Investors Service, Inc., and (iii) Bank’s certificates of deposit issued
maturing no more than 1 year after issue.

(c)           Investments not otherwise permitted by clauses (a) or (b) above in
an aggregate amount not to exceed $500,000 at any one time.

“Permitted Liens” are:

(a)           Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;

(b)           Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank’s security interests;

(c)           Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;

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

(e)           At Bank’s sole discretion, Liens, solely on Accounts where the
account debtor is a federal, state or local government entity (and which
Accounts have not been financed by Bank) securing financing provided by a third
party to Borrower and approved by Bank.

(f)            Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

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

“Quick Assets” is, on any date, the Borrower’s consolidated, unrestricted cash,
cash equivalents, net billed accounts receivable and marketable investments with
maturities of less than 12 months determined according to GAAP.

“Responsible Officer” is each of the Chief Executive Officer, the President, the
Chief Financial Officer and the Controller of Borrower.

 

23

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“Revolving Maturity Date” is July 31, 2003.

“Schedule” is any attached schedule of exceptions.

“Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.

“Subsidiary” is for any Person, or any other business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research and development expenses
except prepaid expenses, and (c) reserves not already deducted from assets,
(ii) Total Liabilities, and (iii) 25% of any equity capital raised after the
Closing Date.

“Term Fixed Option” is defined in Section 2.3(a).

“Term Loan” is defined in Section 2.1.5 (c).

“Term Loan Payment” is defined in Section 2.1.5 (d).

“Term Variable Option” is defined in Section 2.3(a).

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

 

24

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“Trademarks” are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

“Treasury Reserve Fund” is a money market mutual fund of that name managed by an
affiliate of Bank.

 

BORROWER:

 

 

 

 

OMNICELL, INC.

 

 

 

 

By:

/s/ Robert Newell

 

 

 

 

Title:

Chief Financial Officer

 

 

 

 

BANK:

 

 

 

 

SILICON VALLEY BANK

 

 

 

 

By:

/s/ Heather Hamilton

 

 

 

 

Title:

 

 

 

 

25

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EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to
the following whether owned now or hereafter arising and whether the Borrower
has rights now or hereafter has rights therein and wherever located:

All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

All inventory, now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is temporarily
out of Borrower’s custody or possession or in transit and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any documents of title
representing any of the above;

All contract rights and general intangibles (as such definitions may be amended
from time to time according to the Code), now owned or hereafter acquired,
including, without limitation, leases, license agreements, franchise agreements,
blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind,;

All now existing and hereafter arising accounts, contract rights, royalties,
license rights and all other forms of obligations owing to Borrower arising out
of the sale or lease of goods, the licensing of technology or the rendering of
services by Borrower (as such definitions may be amended from time to time
according to the Code) whether or not earned by performance, and any and all
credit insurance, insurance (including refund) claims and proceeds, guaranties,
and other security therefor, as well as all merchandise returned to or reclaimed
by Borrower;

All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
letter of credit rights, certificates of deposit, instruments and chattel paper
and electronic chattel paper now owned or hereafter acquired and Borrower’s
Books relating to the foregoing;

All Borrower’s Books relating to the foregoing and any and all claims, rights
and interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.

The Collateral shall not be deemed to include any copyrights, copyright
applications, copyright registration and like protection in each work of
authorship and derivative work thereof, whether published or unpublished, now
owned or hereafter acquired; any patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same,
trademarks, servicemarks and applications therefor, whether registered or not,
and the goodwill of the business of Borrower connected with and symbolized by
such trademarks, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damage by way of

 

26

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any past, present and future infringement of any of the foregoing (collectively,
the “Intellectual Property”), except that the Collateral shall include the
proceeds of all the Intellectual Property that are accounts, (i.e. accounts
receivable) of Borrower, or general intangibles consisting of rights to payment,
if a judicial authority (including a U.S. Bankruptcy Court) holds that a
security interest in the underlying Intellectual Property is necessary to have a
security interest in such accounts and general intangibles of Borrower that are
proceeds of the Intellectual Property, then the Collateral shall automatically,
and effective as of the Closing Date, include the Intellectual Property to the
extent necessary to permit perfection of Bank’s security interest in such
accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property.

Borrower and Bank are parties to that certain Negative Pledge Agreement, whereby
Borrower, in connection with Bank’s loan or loans to Borrower, has agreed, among
other things, not to sell, transfer, assign, mortgage, pledge, lease grant a
security interest in, or encumber any of its intellectual property, without
Bank’s prior written consent.

 

 

27

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EXHIBIT B

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON, P.S.T.

TO: CENTRAL CLIENT SERVICE DIVISION

DATE:

 

 

 

 

 

 

FAX#:  (408) 496-2426

TIME:

 

 

 

 

 

 

 

 

 

 

FROM:   Omnicell, Inc.

 

 

 

 

 

 

 

CLIENT NAME (BORROWER)

 

 

 

 

REQUESTED BY:

 

 

 

AUTHORIZED SIGNER’S NAME

 

 

 

 

 

AUTHORIZED SIGNATURE:

 

 

 

 

 

 

 

 

 

 

PHONE NUMBER:

 

 

 

 

 

 

 

 

FROM ACCOUNT #

 

 

TO ACCOUNT #

 

 

 

 

 

 

 

 

 

 

 

REQUESTED TRANSACTION TYPE

 

REQUESTED DOLLAR AMOUNT

 

 

 

 

 

PRINCIPAL INCREASE (ADVANCE)

 

$

 

PRINCIPAL INCREASE (CORPORATE ADVANCE)

 

$

 

PRINCIPAL PAYMENT (ONLY)

 

$

 

INTEREST PAYMENT (ONLY)

 

$

 

PRINCIPAL AND INTEREST (PAYMENT)

 

$

 

 

 

 

 

 

 

 

 

 

 

OTHER INSTRUCTIONS:

 

 

 

 

 

 

 

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.

BANK USE ONLY

 

TELEPHONE REQUEST:

 

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

 

 

 

 

Authorized Requester

 

Phone #

 

 

 

 

 

 

Received By (Bank)

 

Phone #

 

 

 

 

 

Authorized Signature (Bank)

 

 

 

28

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EXHIBIT C

COMPLIANCE CERTIFICATE

 

TO:                         SILICON VALLEY BANK

                                3003 Tasman Drive

                                Santa Clara, California  95054

 

FROM:                   OMNICELL, INC.

                                1101 East Meadow Drive

                                Palo Alto, California  94303

 

The undersigned authorized officer of Omnicell, Inc. (“Borrower”) certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date.  Attached are the required
documents supporting the certification.  The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting Covenant

 

Required

 

Complies

 

 

 

Financial Statements*

 

Quarterly / Monthly within 30 days

 

Yes

 

No

 

Annual (Audited)

 

FYE within 90 days

 

Yes

 

No

 

10-K, 10-Q, and 8K

 

Within 5 days after filing SEC

 

Yes

 

No

 

A/R & A/P Agings

 

Monthly within 30 days

 

Yes

 

No

 

A/R Audit

 

Initial and semi-annual

 

Yes

 

No

 

Borrowing Base Certificate

 

Monthly within 30 days

 

Yes

 

No

 

 

Financial Covenant

 

Required

 

Actual

 

Complies

 

As of the end of the month

 

Before 6/30/03

After 7/1/03

 

 

 

 

 

 

Tangible Net Worth**

 

$16,000,000

$18,000,000

 

 

 

Yes

No

 

Quick Ratio***

 

1.30:1.00

1.50:1.00

 

 

 

Yes

No

 

 

*So long as there are no outstanding Obligations, as soon as available, but no
later than 30 days after the last day of each fiscal quarter, a company prepared
consolidated balance sheet and income statement covering Borrower’s consolidated
operations during the period, in a form and certified by a Responsible Officer
acceptable to Bank; provided, however, that if Borrower requests a Credit
Extension from Bank, then Borrower shall deliver to Bank, not less than three
(3) Business Days prior to the date such Credit Extension is to be made, such
company prepared consolidated balance sheet and income statement covering
Borrower’s consolidated operations for the 3-month period immediately preceding
such request and then thereafter, so long as any Obligations are outstanding, as
soon as available, but no later than 30 days after the last day of each month,
Borrower shall deliver to Bank such company prepared consolidated balance sheet
and income statement covering Borrower’s consolidated operations during the
period, in a form and certified by a Responsible Officer acceptable to Bank.

**So long as there are no outstanding Obligations, Borrower will maintain the
applicable ratio as of the last day each fiscal quarter; provided, further, that
if Borrower requests a Credit Extension from Bank during such fiscal quarter,
then Borrower shall deliver to Bank, not less than three (3) Business Days prior
to the date such Credit Extension is to be made, a report of Borrower’s Quick
Ratio (Adjusted) for each of the 3 months immediately preceding such request and
monthly thereafter and Bank shall reserve the right to declare an Event of
Default for any previous violations of the above covenant.

***So long as there are no outstanding Obligations, Borrower will maintain the
applicable Tangible Net Worth as of the last day each fiscal quarter; provided,
further, that if Borrower requests a Credit Extension from Bank during such
fiscal quarter, then Borrower shall deliver to Bank, not less than three (3)
Business Days prior to the date such Credit Extension is to be made, a report of
Borrower’s Tangible Net Worth for each of the 3 months immediately preceding
such request and monthly thereafter and Bank shall reserve the right to declare
an Event of Default for any previous violations of the above covenant

 

29

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

 

 

Comments Regarding Exceptions:  See Attached.

 

BANK USE ONLY

 

 

 

 

 

 

 

 

Received by:

 

Sincerely,

 

 

AUTHORIZED SIGNER

 

 

 

 

 

OMNICELL, INC.

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

Verified:

 

SIGNATURE

 

 

AUTHORIZED SIGNER

 

 

 

 

 

 

 

Date:

 

TITLE

 

 

 

 

 

 

Compliance Status:

Yes

No

 

 

 

 

 

DATE

 

 

 

 

 

 

 

 

 

30

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EXHIBIT D

 

BORROWING BASE CERTIFICATE

 

Borrower:

 

OMNICELL, INC.

 

Bank:

 

Silicon Valley Bank

 

 

1101 East Meadow Drive
Palo Alto, California  94303

 

 

 

3003 Tasman Drive
Santa Clara, CA 95054

 

 

 

 

 

 

 

Commitment Amount:   $7,500,000

 

 

 

 

 

 

 

ACCOUNTS RECEIVABLE

 

 

 

 

 

 

1.

 

Accounts Receivable Book Value as of  _____________

 

 

 

 

$

 

2.

 

Additions (please explain on reverse)

 

 

 

 

$

 

3.

 

TOTAL ACCOUNTS RECEIVABLE

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

 

 

 

 

 

4.

 

Amounts over 90 days due

 

$

 

 

 

 

5.

 

Balance of 50% over 90 day accounts

 

$

 

 

 

 

6.

 

Credit balances over 90 days

 

$

 

 

 

 

7.

 

Concentration Limits*

 

$

 

 

 

 

8.

 

Governmental Accounts

 

$

 

 

 

 

9.

 

Contra Accounts

 

$

 

 

 

 

10.

 

Promotion or Demo Accounts

 

$

 

 

 

 

11.

 

Intercompany/Employee Accounts

 

$

 

 

 

 

12.

 

Other (please explain on reverse)

 

$

 

 

 

 

13.

 

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

 

 

 

 

$

 

14.

 

Eligible Accounts (#3 minus #13)

 

$

 

 

 

 

15.

 

LOAN VALUE OF ACCOUNTS (80% of #14)

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

BALANCES

 

 

 

 

 

 

16.

 

Maximum Loan Amount

 

$

 

 

 

 

17.

 

Total Funds Available [Lesser of #16 or #15]

 

 

 

 

$

 

18.

 

Present balance owing on Line of Credit

 

$

 

 

 

 

 

 

RESERVE POSITION (#17 minus #18)

 

$

 

 

 

 

 

 

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

 

 

COMMENTS:

 

 

 

 

 

 

BANK USE ONLY

 

 

 

 

 

OMNICELL, INC.

 

Rec'd By

 

 

 

 

 

Auth. Signer

 

 

 

Date:

 

By:

 

 

Verified:

 

 

Authorized Signer

 

 

Auth. Signer

 

 

 

Date:

 

 

 

 

 

 

 

 

 

31

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CORPORATE BORROWING RESOLUTION

 

Borrower:

 

OMNICELL, INC.
1101 East Meadow Drive
Palo Alto, California  94303

 

Bank:

 

Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

 

I, the Secretary or Assistant Secretary of OMNICELL, Inc. (“Borrower”), CERTIFY
that Borrower is a corporation existing under the laws of the State of Delaware.

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

NAMES

 

POSITIONS

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

may act for Borrower and:

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

Execute Loan Documents.  Execute any loan documents Bank requires.

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Letters of Credit.  Apply for letters of credit from Bank.

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

Issue Warrants.  Issue warrants for Borrower’s stock.

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

32

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

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

CERTIFIED TO AND ATTESTED BY:

 

X

 

 

 

*Secretary or Assistant Secretary

 

 

 

 

 

 

 

X

 

 

 

*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

 

33

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LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of December 31, 2002, by and
between Omnicell, Inc. (the “Borrower”) and Silicon Valley Bank (“Bank”).

1.                                       DESCRIPTION OF EXISTING INDEBTEDNESS: 
Among other indebtedness which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to, among other documents, a Loan and Security
Agreement, dated August 1, 2002, as may be amended from time to time, (the “Loan
Agreement”).  The Loan Agreement provided for, among other things, a Committed
Revolving Line and a Corporate Line of Credit.  Defined terms used but not
otherwise defined herein shall have the same meanings as in the Loan Agreement. 

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Indebtedness.”

2.                                       DESCRIPTION OF COLLATERAL:  Repayment
of the Indebtedness is secured by the Collateral as described in the Loan
Agreement.  Additionally, Borrower has agreed with Bank not to mortgage, pledge,
hypothecate, or otherwise encumber any of its Intellectual Property, pursuant to
a Negative Pledge Agreement dated August 1, 2002.

Hereinafter, the above-described security documents, together with all other
documents securing repayment of the Indebtedness shall be referred to as the
“Security Documents”.  Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as
the “Existing Loan Documents”.

3.                                       DESCRIPTION OF CHANGE IN TERMS.

A.            Modification(s) to Loan Agreement.

1.             Section 2.1.5 of the Loan Agreement is hereby amended in its
entirety to read as follows:

                “2.1.5      Corporate Line of Credit.

                (a)           Bank will make corporate advances (“Corporate
Advances”) not exceeding the Committed Corporate Line. When repaid, the
Corporate Advances may not be re-borrowed. Bank’s obligation to lend hereunder
shall terminate on the earlier of (i) the occurrence and continuance of an Event
of Default, or (ii) the Corporate Line Maturity Date.

                (b)           Corporate Advances may only be used for capital
expenditures, including but not limited to, acquisitions of Intellectual
Property, stock repurchases or purchases of lease residuals.

                (c)           To obtain a Corporate Advance, Borrower must
notify Bank by facsimile or telephone by 12:00 noon P.S.T. on the Business Day
the Corporate

 

34

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

 

Advance is to be made (the “Funding Date”).  Borrower must promptly confirm the
notification by delivering to Bank the Payment/Advance Form attached as
Exhibit B.  Bank will credit Corporate Advances to Borrower’s deposit account. 
Bank may make Corporate Advances under this Agreement based on instructions from
a Responsible Officer or his or her designee or without instructions if the
Corporate Advances are necessary to meet Obligations which have become due. 
Bank may rely on any telephone notice given by a person whom Bank believes is a
Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank
suffers due to such reliance, other than losses arising out of Bank’s gross
negligence or willful misconduct.

                (d)           Borrower will make payments monthly in advance of
principal plus accrued interest for each Corporate Advance (collectively, “Term
Loan Payments”), on the first Business Day of the month following the Funding
Date (or commencing on the Funding Date if the Funding Date is the first
Business Day of the month) with respect to such Corporate Advance and continuing
thereafter during the subsequent 35 months on the first Business Day of each
calendar month (each a “Payment Date”).  All unpaid principal and accrued
interest is due and payable in full on the last Payment Date with respect to
such Corporate Advance.  Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day.  An
Equipment Advance may only be prepaid in accordance with Subsections (g) and (h)
below.

                (e)           Interest Rate.  Borrower will pay interest on the
Payment Dates in accordance with Section 2.3 below.

                (f)            Interim Payment.  In addition to the Term Loan
Payments, on the Funding Date for each Corporate Advance (unless the Funding
Date is the first Business Day of the month) Borrower shall pay to Bank, the
projected interest to accrue from the Funding Date to the first Payment Date.

                (g)           If the Corporate Advances are accelerated
following the occurrence of an Event of Default or if Borrower has chosen the
Term Fixed Option for Corporate Advances and prepays any portion of the
Corporate Advances (provided that any prepayment shall be for whole Corporate
Advances), then Borrower will immediately pay to Bank (i) all due but unpaid
Term Loan Payments (including principal and interest), (ii) all Term Loan
Payments (including principal and interest unpaid, at the default rate if the
prepayment is due to acceleration) remaining for the term of the relevant
Corporate Advance; and (iii) all other sums, if any, that shall have become due
and payable with respect to the relevant Corporate Advance.

                (h)           If Borrower has chosen the Term Variable Option
for Corporate Advances, then at any time, provided no Event of Default has
occurred and is continuing, Borrower shall have the option to prepay any
Corporate Advance (so

 

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long as the relevant Corporate Advance is paid in full), provided Borrower
(i) provides written notice to Bank of its election to prepay the relevant
Corporate Advance at least ten (10) days prior to such prepayment, and
(ii) pays, on the date of the prepayment (A) all outstanding principal under the
relevant Corporate Advance; (B) all unpaid accrued interest to the date of the
prepayment; and (C) all other sums, if any, that shall have become due and
payable hereunder with respect to this Agreement.”

2.             Section 2.3 (a) and (b) of the Loan Agreement are hereby amended
in their entirety to read as follows:

                “(a)         Interest Rate. (i) Advances accrue interest on the
outstanding principal balance at a variable per annum rate of 1 percentage point
(1%) above the Prime Rate; (ii) Corporate Advances accrue interest on the
outstanding principal balance at Borrower’s option at either: (y) a variable per
annum rate of 1.50 percentage points (1.50%) above the Prime Rate (the “Term
Variable Option”) and (z) equal to 1.50 percentage points (1.50%) above the
Prime Rate which rate shall be determined upon funding of the Corporate Advance
and shall remain fixed for the term of the Corporate Advance (the “Term Fixed
Option”). Borrower shall determine which of the above interest options will
apply to all Corporate Advances on the Funding Date of the first Corporate
Advance.  The interest rates increase or decrease when the Prime Rate changes
(except for interest rates that have been fixed pursuant to the Term Fixed
Option).  Interest is computed on a 360 day year for the actual number of days
elapsed.

                (b)           Interest Rate Deduction.  Provided no Event of
Default has occurred and is continuing and provided further that Borrower
maintains, at or through Bank in the Liquid Reserve Fund, Treasury Reserve Fund,
demand deposit accounts or savings accounts, deposits in a minimum amount of at
least 85% of Borrower’s cash and cash equivalents, measured on a monthly basis
(the “Balance Requirement”), each of the rates of interest set forth in
paragraph (a) above will be reduced by 50 basis points (the “Interest Rate
Reduction”).  For variable rates of interest, Borrower’s qualification for the
Interest Rate Reduction will be measured as of the end of each month and if the
Balance Requirement is achieved, the Interest Rate Reduction will apply to the
month immediately following the date of determination.  For fixed interest
rates, Borrower’s qualification for the Interest Rate Reduction will be measured
on the Funding Date of the relevant Corporate Advance.  If Borrower does not
qualify during on such date, the Interest Rate Reduction will be unavailable for
the remainder of the term of the subject Credit Extension.  Furthermore, if
Borrower qualifies for the Interest Rate Reduction on the Closing Date or on the
Funding Date of the relevant Corporate Advance, but subsequently fails to
maintain the Required Balance, the rate of interest will automatically revert to
the relevant rate of interest set forth in paragraph (a) above and the Interest
Rate Reduction will be unavailable for the remaining term of the subject Credit
Extension.”

 

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3.             Section 6.6 and 6.7 of the Loan Agreement are hereby amended in
their entirety to read as follows:

                “6.6         Financial Covenants.

                Borrower will maintain:

                (a)           Quick Ratio (Adjusted).  A ratio of Quick Assets
to Current Liabilities minus: (a) Deferred Maintenance Revenue and (b) Deferred
Gross Profit of at least 1.50 to 1.00 as of the last day of every month;
provided, however, that so long as the outstanding Obligations are less than
$100,000, Borrower will maintain the applicable ratio as of the last day each
fiscal quarter; provided, further, that if Borrower requests a Credit Extension
that would cause the outstanding Obligations to exceed $100,000 during such
fiscal quarter, then Borrower shall deliver to Bank, not less than three (3)
Business Days prior to the date such Credit Extension is to be made, a report of
Borrower’s Quick Ratio (Adjusted) for each of the 3 months immediately preceding
such request and monthly thereafter and Bank shall reserve the right to declare
an Event of Default for any previous violations of the above covenant.

                (b)           Tangible Net Worth.  A Tangible Net Worth of at
least $9,000,000 as of the end of each month; provided, however, that so long as
the outstanding Obligations do not exceed $100,000, the applicable Tangible Net
Worth shall be measured as of the last day each fiscal quarter and the Tangible
Net Worth requirement shall be $12,000,000; provided, further, that if Borrower
requests a Credit Extension from Bank during such fiscal quarter, then Borrower
shall deliver to Bank, not less than three (3) Business Days prior to the date
such Credit Extension is to be made, a report of Borrower’s Tangible Net Worth
for each of the 3 months immediately preceding such request and monthly
thereafter and Bank shall reserve the right to declare an Event of Default for
any previous violations of the above covenant.

                6.7           Deposit and Investment Accounts.

                Borrower will maintain its primary depository and operating
accounts with Bank.  In addition, commencing no later than January 30, 2003 and
at all times thereafter, Borrower will maintain no less than 50% of its cash and
cash equivalents in deposit accounts at Bank or at investment accounts at SVB
Securities, Inc.”

4.             The definitions of Borrowing Base, Committed Corporate Line, and
Committed Revolving Line in Section 13.1 of the Loan Agreement are hereby
amended in their entirety to read as follows:

                “‘Borrowing Base’ is 65% of Eligible Accounts as determined by
Bank from Borrower’s most recent Borrowing Base Certificate; provided, however,
that

 

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Bank may change the percentage of the Borrowing Base after performing an audit
of Borrower’s Collateral.

                ‘Committed Corporate Line’ is an Advance of up to $2,500,000.

                ‘Committed Revolving Line’ is an Advance of up to $10,000,000.”

5.             The defined term “Term Loan” in Section 13.1 of the Loan
Agreement is hereby deleted.

6.             The following definitions are hereby added to Section 13.1 of the
Loan Agreement in the appropriate alphabetical order:

                “‘Funding Date’ is any date on which a Corporate Advance is made
to or on account of Borrower.

                ‘Payment Date’ is defined in Section 2.1.5.”

4.                                       CONSISTENT CHANGES.  The Existing Loan
Documents are hereby amended wherever necessary to reflect the changes described
above.

5.                                       PAYMENT OF LOAN FEE.  Borrower shall
pay Lender a modification fee in the amount of $5,000 (“Loan Fee”) plus all
reasonable out-of-pocket expenses not to exceed $2,000.00.

6.                                       NO DEFENSES OF BORROWER.  Borrower
agrees that, as of the date hereof, it has no defenses against the obligations
to pay any amounts under the Indebtedness.

7.                                       CONTINUING VALIDITY.  Borrower
understands and agrees that in modifying the existing Indebtedness, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents.  Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect.  Bank’s agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness.  Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness.  It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing.  No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement. 
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.

 

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8.                                       CONDITIONS.  The effectiveness of this
Loan Modification Agreement is conditioned upon payment of the Modification Fee.

This Loan Modification Agreement is executed as of the date first written above.

BORROWER:

 

BANK:

 

 

 

 

 

OMNICELL, INC.

 

SILICON VALLEY BANK

 

 

 

 

 

By:

/s/ Robert Newell

 

By:

/s/ Maria Fischer Peat

 

 

 

 

 

Name:

Robert Newell

 

Name:

Maria Fischer Peat

 

 

 

 

 

Title:

Chief Financial Officer

 

Title:

SVP

 

 

 

 

 

 

 

 

 

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