Document:

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

 

 

 

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

  

 

i

 

	
   

  	
  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

  

 

ii

 

	
   

  	
  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

  

 

 

 

iii

 

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.

 

1

 

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 

 

2

 

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

 

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.

 

4

 

(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.

 

5

 

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.

 

6

 

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.

 

7

 

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 

 

8

 

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:

 

9

 

(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 

 

10

 

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.

 

11

 

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);

 

12

 

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).

 

13

 

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.

 

14

 

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 

 

15

 

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 

 

16

 

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 

 

17

 

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.

 

18

 

“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.

 

19

 

“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.

 

20

 

“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.

 

21

 

“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

 

(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

 

“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

 

“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

 

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

 

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

 

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

 

 

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

 

 

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

 

 

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

 

 

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 

 

35

 

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.”

 

36

 

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 

 

37

 

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.

 

38

 

 

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

 

39Exhibit 10.21

 

 

 

January 22, 2003

 

Dennis P. Wolf

 

 

Dear Dennis:

 

Welcome to Omnicell!  We are
pleased to offer you the Executive Vice President & CFO position reporting
to me.  Your monthly salary will be
$23,333.34, which is an annual equivalent of $280,000. Upon acceptance of this
offer, the Compensation Committee of the Board of Directors will award you
options to purchase up to 390,000 shares of Omnicell Common Stock at a price
equal to the fair market value of such shares on the date of grant.  The shares will become exercisable over a
48-month period, with 12.5% vesting after six (6) months (a “six-(6) month
cliff”), and a portion vesting monthly for 42 months thereafter.  Also, you will be included in the change of
control plan for executives.  Details
are outlined in the attached document.

 

As part of your compensation, you are eligible to receive a quarterly
bonus of $15,000. Additionally, in the year 2003, you are eligible to receive
quarterly options to purchase 10,000 shares of Omnicell Common Stock at a price
equal to the fair market value of such shares on the date of grant.  The shares become exercisable and vest
immediately upon achievement of certain milestones. Your bonus (cash and stock)
will be awarded upon achieving your quarterly milestones.

 

If your employment is terminated without cause you will receive
severance pay equivalent to twelve- (12) months’ salary at your base rate of
pay in effect immediately prior to termination. “Cause” is defined as (1)
conviction of any felony; (2) participation in fraud, misappropriation,
embezzlement or other similar act of dishonesty or material misconduct against
the Company (or its subsidiaries or affiliates); or (3) participation in any
act materially contrary to the Company’s best interests.

 

Your start date of employment will be mutually determined upon
acceptance of this offer, but will be no later than February 18, 2003.

 

We have a competitive medical, dental and vision plans as well as term
life, long term disability insurance policies and a 401(k) plan.

 

As a condition of employment and required by law, you must show proof
of citizenship, permanent residency in the United States or authorization to
work in the United States.  To complete
the federally-required verification form (I-9), we ask that you submit copies
of this documentation with your new hire materials during your first week of

 

 

 

 

employment.  Documents may
include a US Passport, birth certificate, Social Security Card, driver’s
license or Alien Registration Receipt Card. 
In addition, we require that you sign our Proprietary Information
Agreement, which is included with this offer letter.

 

If you have any questions, please give me a call at (650)
251-6120.  Please note the above offer
is good through January 31, 2003.

 

Again, we welcome you to Omnicell as we begin this exciting stage of
our Company’s development and look forward to working with you.  We believe you will make a significant
contribution to the Company and the opportunities available to you will be wide
open as the company grows to its potential.

 

Sincerely,

 

/s/  RANDALL A. LIPPS

Randall A. Lipps

President and Chief Executive Officer

 

 

 

To
indicate your acceptance of the Company’s offer, please sign and date this
letter in the space provided below and return it to Human Resources via
confidential fax at (650) 251-6277 along with your completed
and signed W-4 form.  A duplicate is
enclosed for your records. This letter, along with the Proprietary Information
Agreement and the Policy Against Trading on the Basis of Inside Information
between you and the Company, set forth the terms of your employment with the
Company and supersede any prior representations or agreements, whether written
or oral.  This letter may not be
modified or amended except by a written agreement, signed by the Company and by
you.

 

	
  /s/  DENNIS
  P. WOLF 

  	
   

  	
  24 January 2003

  	
   

  
	
  Candidate Signature

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3 February 2003

  	
   

  
	
   

  	
   

  	
  Anticipated Start Date

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