<PAGE>
As filed with the Securities and Exchange Commission on August 5, 1999
Registration No. 333-78059
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
DATA CRITICAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
--------------
<TABLE>
<S> <C> <C>
Delaware 3663 91-1901482
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
19820 North Creek Parkway, Suite 100, Bothell, Washington 98011
(425) 482-7000
(Address Including Zip Code, and Telephone Number Including Area Code, of
Registrant's Principal Executive Offices)
--------------
Jeffrey S. Brown
President and Chief Executive Officer
Data Critical Corporation
19820 North Creek Parkway, Suite 100, Bothell, Washington 98011
(425) 482-7000
(Name, Address Including Zip Code, and Telephone Number Including Area Code,
of Agent for Service)
--------------
COPIES TO:
<TABLE>
<S> <C>
Craig E. Sherman, Esq. J. Robert Suffoletta, Esq.
Eric L. Dobmeier, Esq. Patrick J. Schultheis, Esq.
Joanna S. Lin Black, Esq. Richard Jay Silverstein, Esq.
VENTURE LAW GROUP Craig N. Lang, Esq.
A Professional Corporation WILSON SONSINI GOODRICH & ROSATI
4750 Carillon Point, Kirkland, Washington 98033 Professional Corporation
(425) 739-8700 650 Page Mill Road, Palo Alto, California 94304
(650) 493-9300
</TABLE>
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
--------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] __________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+We will amend and complete the information in this prospectus. Although we +
+are permitted by US federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the documentation filed with the SEC relating to these securities has been +
+declared effective by the SEC. This prospectus is not an offer to sell these +
+securities or our solicitation of your offer to buy these securities in any +
+jurisdiction where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION -- August 5, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 1999
[DATA CRITICAL LOGO APPEARS HERE]
Shares of Common Stock
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Data Critical The Offering:
Corporation: . We are offering shares of our common stock.
. We provide wireless
access to patient . The underwriters have a 30-day option to purchase
vital signs and an additional shares from us to cover over-
other medical data allotments.
from remote
locations. . This is our initial public offering, and no
public market currently exists for our shares.
. Data Critical The initial public offering price is estimated to
Corporation be between $ and $ .
19820 North Creek
Parkway . Closing: , 1999.
Suite 100
Bothell, Washington
98011
(425) 482-7000
Trading Symbol & Market:
. DCCA/Nasdaq
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
Per Share Total
----------------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriter fees:
Proceeds to Data Critical Corporation:
</TABLE>
----------------------------------------------
This investment involves risk. See "Risk Factors" beginning on page 7.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete, nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette
U.S. Bancorp Piper Jaffray
Warburg Dillon Read LLC
DLJdirect Inc.
<PAGE>
[Inside front cover of prospectus]
Heading titled "StatView System."
[Photographs of a StatView receiver displaying an electrocardiogram waveform and
a healthcare provider using a StatView receiver]
Beneath the photograph of the StatView receiver is a sentence reading: "The
StatView system notifies caregivers in near real-time of the latest waveforms
and vital signs from patients."
Heading titled "MobileView System."
[Photographs of a MobileView receiving unit displaying waveforms and a
physician using a MobileView receiver]
Immediately above the photograph of the MobileView receiving unit is a sentence
reading: "The MobileView system lets physicians in remote locations view the
latest waveforms, vital signs, and other life-critical information from
patients."
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where such offers and sales
are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, "Data
Critical," "we," "us," and "our" refer to Data Critical Corporation, unless the
context otherwise requires.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 30
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Management................................................................. 45
Certain Transactions....................................................... 55
Principal Stockholders..................................................... 56
Description of Capital Stock............................................... 58
Shares Eligible for Future Sale............................................ 61
Underwriting............................................................... 63
Legal Matters.............................................................. 65
Experts.................................................................... 65
Additional Information..................................................... 65
Index to Financial Statements.............................................. F-1
</TABLE>
----------------
MobileView(TM), StatView(TM), AlarmView(TM), Internet ECG(TM), Wireless
Telemedicine(TM), WT(TM) and the Data Critical Corporation name and corporate
logo are all trademarks of Data Critical Corporation. We also have other
trademarks that we use in our business. We license the name PalmVue(TM) from
Hewlett-Packard Company. All other brand names or trademarks appearing in this
prospectus are the property of their respective holders.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully, especially "Risk Factors."
Unless otherwise indicated, all information contained in this prospectus
assumes:
. no exercise of the underwriters' over-allotment option
. the conversion of all outstanding shares of preferred stock into common
stock
. a 1-for-4 reverse split of our common stock
Data Critical Corporation
We design, manufacture, market, install and support communication and
information systems, using wireless technology and proprietary software to
allow access to health information, including patient vital signs and other
diagnostic data. Our systems provide for information retrieval from remote
sources, both inside and outside the hospital environment, and are integrated
and coordinated through either a wireless network utilizing our interactive
device, a personal computer or the internet. Our focus within health care is on
the hospital, physician and at-home consumer markets.
We have entered into strategic alliances with the following leading
manufacturers of patient-monitoring medical equipment to assist us in the
development, marketing and distribution of our systems:
. GE Marquette Medical Systems, Inc., a subsidiary of General Electric
Company
. Hewlett-Packard Company
. Nellcor Puritan Bennett, a subsidiary of Mallinckrodt Inc.
. Protocol Systems, Inc.
. Siemens Medical Systems, Inc., a subsidiary of Siemens AG
We sell our systems through our direct sales force and jointly with these
strategic partners. Our systems are currently being used in more than 100
hospitals in over 30 states, including:
. Baylor University Medical Center in Dallas, TX
. Duke University Medical Center in Durham, NC
. Heartland Hospital in St. Joseph, MO
. Kaiser Foundation Hospital in San Francisco, CA
. The Mayo Clinic in Scottsdale, AZ
. Montefiore Medical Center - Einstein Division in New York, NY
. Memorial Sloan Kettering Cancer Center in New York, NY
. Mt. Sinai School of Medicine in New York, NY
. Northwest Hospital in Seattle, WA
. St. Mary's Hospital in Pueblo, CO
Below is a brief description of our systems:
Hospital Systems
. StatView is a wireless system that simultaneously sends an alarm and
patient data, such as vital signs and electrocardiogram (ECG) waveforms,
to the StatView receiving unit, which is generally carried by nurses
within a hospital. This system is intended to deliver this patient data
whenever a patient experiences a severe adverse event. The data
transmitted includes patient name, bed number, heart rate and a six to
ten second ECG waveform.
. AlarmView attaches to the back of non-networked patient monitors,
infusion pumps and other medical equipment and transmits near immediate
alarms and critical patient data to wireless receivers, thereby creating
a virtual network for stand-alone medical monitoring equipment at a
relatively low-cost per unit. AlarmView can be integrated with the same
wireless receiver used for StatView. We intend to
4
<PAGE>
submit our AlarmView system for approval by the U.S. Food and Drug
Administration (FDA) in August 1999, and expect to begin making commercial
sales of AlarmView systems in the first half of 2000.
Physician Systems
. MobileView transmits data that is collected by the StatView system from
individual patient bedside and telemetry monitors to physicians or other
caregivers at remote locations usually outside of the hospital. The
MobileView system uses digital wireless technology on a wide area network
to provide caregivers with immediate remote access to critical patient
information, including multiple ECGs, vital signs parameters and
associated waveforms and nurse notes. Physicians use a portable, wireless
hand-held device to access this information.
. Our DataView system allows physicians to review this same data collected
by StatView through a personal computer.
Consumer System
. Our Internet ECG system is designed to allow consumers to conduct stress
management, physical fitness and educational activities by viewing their
own ECGs through an application downloaded via the internet. Through a
proprietary hand-held device, the consumer would be able to relay heart
rate and ECG waveform information through a personal computer's
microphone to a website running our software. The website would then
relay additional biofeedback, exercise training data and personal
educational information back to the consumer in near real-time.
. We have completed development of the initial release of the Internet ECG
system, but it is not yet commercially available.
We believe that our systems reduce the overall costs of a healthcare
organization by allowing caregivers to monitor the vital signs of patients
remotely while performing other tasks. As a result, hospitals can reassign or
reallocate their staff of medical technicians whose primary responsibility is
to centrally monitor patient critical care data captured by medical equipment.
Moreover, we believe that our systems improve patient care by providing
immediate remote access to critical care information, which allows healthcare
professionals to respond more rapidly to adverse changes in patients'
conditions. Our systems are designed to open standards, use standard components
and interface with equipment manufactured by numerous medical device
manufacturers. We believe our open system architecture will allow us to partner
with additional equipment manufacturers. In addition, data received by our
systems can be encrypted before being transmitted, thereby improving the
security and confidentiality of sensitive patient information.
Our objective is to be the leading developer of wireless health information
communications systems for the hospital, physician and at-home consumer
markets. Our strategy to accomplish this objective includes:
. pursuing additional strategic alliances
. increasing market penetration and generating follow-on sales
opportunities
. expanding internationally
. expanding the use of the internet to link physicians and at-home
consumers
. maintaining and building on our technology leadership
Our company was incorporated in Oklahoma in October 1992 under the name
Intellicomm Corp. We changed our name to Data Critical Corp. in October 1993
and reincorporated in Delaware in March 1998. Our principal executive offices
are located at 19820 North Creek Parkway, Suite 100, Bothell, WA, 98011. Our
telephone number is (425) 482-7000 and our fax number is (425) 482-7010. Our
website is located at www.datacritical.com. Information contained in our
website is not incorporated by reference into this prospectus, and you should
not consider such information as part of this prospectus.
5
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by Data Critical........ shares
Common stock to be outstanding after this
offering.................................... shares
Use of proceeds.............................. For general corporate purposes, including
working capital, capital expenditures and
possible acquisitions.
Proposed Nasdaq National Market symbol....... DCCA
</TABLE>
The common stock to be outstanding after this offering is based on shares
outstanding as of March 31, 1999, and excludes 886,371 shares of common stock
issuable upon the exercise of outstanding stock options at a weighted average
exercise price of $1.58 per share and 371,471 shares of common stock issuable
upon the exercise of outstanding warrants at a weighted average exercise price
of $2.34 per share.
Summary Financial Data
The following table contains summary financial data for Data Critical. You
should read this information along with the Financial Statements and related
Notes included elsewhere in this prospectus.
Pro forma per share amounts in the table below reflect the conversion of
preferred stock of Data Critical into common stock as if the shares had been
converted immediately upon their issuance. The pro forma as adjusted balance
sheet data in the table below reflects the sale of shares of common stock
offered hereby at the initial public offering price of $ per share, after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by Data Critical. The financial data as of March 31,
1999 and for the quarters ended March 31, 1998 and March 31, 1999 are
unaudited.
<TABLE>
<CAPTION>
Years Ended December Quarters Ended
31, March 31,
------------------------- ----------------
1996 1997 1998 1998 1999
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue.......................... $ 190 $ 471 $ 4,137 $ 265 $ 2,214
Gross margin..................... 163 123 2,296 133 1,312
Net loss......................... (2,004) (4,002) (5,822) (1,597) (1,066)
Basic and diluted loss per common
share........................... $ (2.44) $ (4.28) $ (5.03) $ (1.28) $ (1.01)
Unaudited pro forma basic and
diluted loss per share.......... $ (1.01) $ (0.17)
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1999
---------------------
Pro Forma
Actual As Adjusted
(In thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................. $ 1,840 $
Working capital........................................... 1,303
Total assets.............................................. 5,151
Short-term obligations.................................... 548
Long-term obligations, net of current portion............. 127
Mandatorily redeemable preferred stock.................... 19,602
Stockholders' (deficit) equity............................ (17,570)
</TABLE>
6
<PAGE>
RISK FACTORS
You should consider carefully the risks described below before you decide to
buy our common stock. The risks and uncertainties described below are not the
only ones facing us. The risks below summarize the risks that we currently
believe are material risks of this offering. However, additional risks and
uncertainties that we do not presently know about or that we currently believe
are immaterial may also adversely impact our business. If any of the following
risks actually occur, our business, financial condition and results of
operations would likely suffer. In such case, the trading price of our common
stock could fall, and you may lose all or part of the money you paid to buy our
common stock.
If our potential customers in the healthcare industry are not willing to adopt
our communications systems, our growth and revenues will be limited.
Healthcare industry participants may not accept the transmission of critical
data through networked medical monitoring equipment as readily as we
anticipate. We believe that the complex nature of time-critical data
transmission has and may continue to hinder the development and acceptance of
communications solutions such as ours by the healthcare industry. Conversion
from traditional methods of communication may not occur as rapidly as we
expect. Even if such acceptance or conversion does occur, healthcare industry
participants may use alternative products and services offered by others.
We believe that we must gain significant market share in the healthcare
industry with our systems before competitors introduce alternative products or
systems with features and benefits similar to ours. Our business model is based
on our belief that the value and market appeal of our solution will grow as the
number of participants and scope of data transmitted increase. We may not
achieve the critical mass of users that is necessary to become successful. Any
significant shortfall in the number of users of our systems would adversely
affect our business, financial condition and results of operations.
We cannot assure you that we will achieve profitability.
We have not achieved profitability and, although our revenue has grown in
recent quarters, we cannot be certain that we will realize sufficient revenue
to achieve profitability. Data Critical has incurred net losses of $7.3 million
from inception through December 31, 1997, $5.8 million in 1998 and $1.1 million
in the first quarter of 1999. As of March 31, 1999, we had an accumulated
deficit of $18.4 million. We expect to continue to incur net losses for the
foreseeable future. We anticipate continuing to incur significant sales and
marketing, product development and general and administrative expenses and, as
a result, we will need to generate significantly higher revenue to achieve and
sustain profitability.
Our success is highly dependent on sales, marketing and development alliances
with a small number of strategic partners.
We depend on our alliances with strategic partners to generate increased
acceptance of our systems. To date, we have established only a limited number
of strategic alliances and these alliances are in the early stages of
development. We currently maintain co-marketing partnerships with Hewlett-
Packard Company, Protocol Systems, Inc. and Siemens Medical Systems, Inc.,
whose larger sales forces sell our systems on a commission basis. In addition,
we have original equipment manufacturing and distribution partnerships with GE
Marquette Medical Systems, Inc. and Nellcor Puritan Bennett, a subsidiary of
Mallinckrodt Inc.
7
<PAGE>
A substantial portion of our revenue in 1998 and the first quarter of 1999
was derived from the sale of systems marketed or distributed through Hewlett-
Packard Company and GE Marquette Medical Systems, Inc. Either of these
companies may decide to discontinue their distribution, marketing or original
equipment manufacturing relationships with us, including as a result of
proposed corporate reorganizations. Our agreements with these companies may be
cancelled on short-term notice. If either company limits or discontinues
marketing or selling our systems, our business, financial condition and results
of operations would fall short of our expectations.
If any of these strategic alliances are terminated or if we fail to
establish additional alliances, we would not be able to execute our business
model and our business, financial condition and results of operations would
suffer significantly. We may not experience increased use of our systems even
if we establish and maintain these strategic alliances.
We expect to commit substantial resources to marketing, development and
operations expenses; if we are unable to generate increasing revenues in excess
of these commitments, our business will suffer.
We anticipate that our expenses will increase substantially for at least the
next 12 months as we increase our sales and marketing activities, further
develop our technology, broaden our system offerings, expand our distribution
channels and potentially pursue acquisitions. If we fail to significantly
increase our revenue as expected as we implement our system development and
distribution strategies, our business, financial condition and results of
operations would materially suffer. In addition, we may not experience any
revenue growth in the future, and our revenue could decline. Our efforts to
expand our sales and marketing activities, system offerings, and direct and
indirect distribution channels and our efforts to pursue strategic alliances
may not succeed or may prove more expensive than we currently anticipate. As a
result, we cannot predict our future operating results with any degree of
certainty.
We may experience fluctuations in our quarterly operating results because our
revenues are heavily dependent on the timing of customer installations of our
systems and our sales mix by distribution channel.
Our revenue in any quarter depends significantly on the timing of systems
shipped and installations completed. The unexpected delay or cancellation of
shipments or installations at the end of a quarter could substantially reduce
revenue in that quarter, adversely affect our operating results and impair our
business in future periods. Because we do not know when, or if, our potential
customers will place orders, finalize contracts and permit installation, we
cannot accurately predict revenue and operating results for future quarters. In
addition, the mix of sales between distribution channels will have a
significant impact on quarterly and annual revenue and profitability because we
receive higher revenue and gross margin on direct sales, including those made
through our alliances with strategic partners, than we do on original equipment
manufacturer sales.
We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of our future performance. It is likely that in future
quarters our operating results may be below the expectations of securities
analysts and investors and, as a result, the price of our common stock may
fall. Our operating results have varied in the past, and we expect that they
will continue to vary significantly from quarter to quarter.
8
<PAGE>
Our success is dependent on sales of one product for a large portion of our
revenue.
In 1998 and the first quarter of 1999 substantially all of our revenue was
derived from the sale of our StatView system. Although we expect that our
MobileView and AlarmView systems will account for an increasing portion of
revenue in the future, it is likely that sales of our StatView system will
continue to represent a substantial portion of our revenue for at least the
next 12 months. Any factors adversely affecting the pricing of, demand for or
market acceptance of our StatView system, such as competition or technological
change, could significantly impair our business, financial condition and
results of operations.
If we are unable to keep pace with technological innovation in our industry,
our ability to continue the rapid growth of our business will be impaired.
The medical equipment and wireless communications industries are each
characterized by rapid technological change, changes in end user preferences,
and the emergence of new industry standards and practices that could render our
existing systems and proprietary technology obsolete. Our success depends, in
part, on our ability to continue to enhance our existing systems and to develop
new systems that meet the changing needs of our customers. If we are unable to
develop and introduce in a timely manner new and enhanced systems that
incorporate the latest developments in medical equipment and wireless
communications technologies, our business, financial condition and results of
operations will suffer. The pace of change in information-dependent markets,
such as the healthcare industry, is rapid and there are frequent new product
introductions and evolving industry standards. We may be unsuccessful in
responding to technological developments and changing customer needs. In
addition, our systems may become obsolete due to the adoption of new
technologies or standards by our customers or competitors. We have experienced
development delays in the past and may experience similar or more significant
delays in the future. Difficulties in system development could delay or prevent
the successful introduction or marketing of new or enhanced systems.
Our infrastructure may be unable to keep pace with our growth.
We have rapidly and significantly expanded our operations and expect this
expansion to continue. Our revenue grew from $471,000 in 1997 to $4.1 million
in 1998 and from $265,000 in the first quarter of 1998 to $2.2 million in the
first quarter of 1999. We have recently moved our Redmond, Washington
headquarters and assembly plant into new facilities in Bothell, Washington. In
addition, we expect to hire a significant number of new employees to implement
and expand our operational, sales, marketing and customer support activities.
In April 1999, we began implementing an integrated management information
system, which includes all sales, accounting, inventory and manufacturing
control functions. This implementation is expected to be completed in the
fourth quarter of 1999. There can be no assurance that this implementation will
be completed on a timely basis. We expect to face increasing daily operational
challenges as our business continues to grow, and we may fail to properly
manage our growth.
If our customers experience system defects, delays in transmission or security
breaches with our products, we could face damage to our business reputation and
potential legal liability.
Our customer satisfaction and our reputation could be harmed if we or our
customers experience any system defects, delays, failures or loss of data. We
depend on the efficient operation of wireless networks and the internet for
communication, and a major catastrophic event or other event beyond our control
including a major security breach in the transmission of data on our systems,
could cause
9
<PAGE>
loss of revenue and market share, damage our reputation and result in liability
to us. In addition, our systems may be vulnerable to computer viruses,
programming errors, attacks by third parties or similar disruptive problems.
Furthermore, patient care could suffer and we could be liable if our systems
fail to deliver correct information in a timely manner. Our contracts attempt
to limit our liability arising from our errors; however, these provisions may
not be enforceable and may not protect us from future liability. While we have
general liability and product liability insurance, including coverage for
errors and omissions, we may not be able to maintain this insurance on
reasonable terms in the future. In addition, our insurance may not be
sufficient to cover large claims and our insurer could disclaim coverage on
claims. If we are liable for an uninsured or underinsured claim or if our
premiums increase significantly, our business, financial condition and results
of operations could suffer.
We may experience substantial delays or difficulties in obtaining required
governmental approvals.
As a manufacturer of wireless telecommunications systems, we are subject to
regulation under the Communications Act of 1934, as amended, the
Telecommunications Act of 1996 and Federal Communications Commission
regulations, as well as the applicable laws and regulations of the various
states administered by the relevant state public service commissions.
Regulatory requirements affecting our operations are subject to change. Such
changes may adversely affect our business by hindering our ability to compete
with other wireless telecommunications product manufacturers, or our ability to
continue providing our existing systems or to introduce future systems or
system enhancements.
Our systems are also considered medical devices and are subject to
regulation by the FDA. Before we can market our systems we must obtain pre-
market notification clearance under Section 510(k) of the Federal Food, Drug,
and Cosmetic Act. In addition, material changes to our systems may also be
subject to FDA review and clearance prior to marketing or sale in the U.S. The
process of obtaining 510(k) clearance can be expensive and time-consuming, and
may require the submission of extensive supporting data. If the 510(k) process
is extended for a considerable length of time for any of our new systems, the
commencement of commercial sales of our new systems will be delayed
substantially or indefinitely. We intend to file for 510(k) clearance for our
AlarmView system in August 1999.
As a provider of healthcare related systems, we are also subject to
extensive and frequently changing federal regulations that govern the
licensing, conduct of operations, and other aspects of our business. Federal
certification and licensing programs establish standards for day-to-day
operation of our research and manufacturing facilities. Regulatory agencies
verify our compliance with such standards through periodic inspections.
Although we have been found to be in compliance with all such standards to
date, our facilities may not pass future inspections conducted to ensure
compliance with federal or any other applicable licensing or certification
laws.
We also are subject to extensive federal and state regulation relating to
the confidentiality and release of patient medical records. New legislation
governing the distribution of medical records has been proposed at both the
federal and state levels. It may be costly to implement security or other
measures designed to comply with any new legislation. Moreover, we may be
restricted or prevented from delivering patient records electronically. We
cannot assure you that we will not be required to incur significant costs to
comply with current or future laws or that we will not be adversely affected by
the cost of such compliance.
10
<PAGE>
Furthermore, we may expand sales of our systems to international markets.
Such an expansion would require us to comply with a wide variety of foreign
laws and practices, tariffs and other trade barriers. If we fail to obtain the
necessary regulatory approvals in foreign markets on a timely basis, our
business, financial condition and results of operations could be materially
adversely affected.
Our Internet ECG system is not proven and may not be accepted by the at-home
consumer healthcare industry.
Our Internet ECG system has not been commercially released and may never be
adequately developed and marketed by us. Developing and marketing our internet
solutions to the at-home consumer healthcare industry will be costly and time-
consuming. Our internet solutions require that consumers exchange information
in a new and different way. In addition, in order to maximize the benefits of
our internet solutions, at-home healthcare consumers must be willing to allow
sensitive personal information to be stored on our internet databases. We have
not yet determined how to commercialize our Internet ECG system, and we cannot
assure you that the at-home consumer healthcare industry will accept this
system. In addition, although we believe that our Internet ECG system is not
subject to regulatory oversight, the FDA has recently been more active in
reviewing health-related activities on the internet, and any regulatory
overview could delay substantially or indefinitely the release of our system.
If we fail to develop or market our internet solutions, or if the at-home
consumer healthcare industry fails to accept our internet solutions, the future
growth of our business would likely suffer.
We may not be able to effectively compete in the market for wireless data
communications.
We are not aware of any direct competitors that are developing or selling
products enabling wireless data transmission of medical data. However, many
companies selling products using traditional methods of patient monitoring,
such as direct patient oversight and monitoring through wired systems and voice
communications, are well positioned to compete with us. If such companies are
drawn into our market, we may be unable to effectively compete. To maintain and
improve our competitive position, we must continue to successfully:
. demonstrate the benefits of our systems to current and potential
customers
. market to hospitals and healthcare professionals
. maintain stable and constructive alliances with key manufacturers of
complementary medical equipment
. develop new and improved technologies
Many of our potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
better name recognition and a larger installed base of customers. Many of our
potential competitors may also have well-established relationships with our
existing and prospective customers. Due to these and other advantages, our
potential competitors may develop products comparable or superior to our
systems or adapt more quickly to new technologies, evolving industry standards,
new product introductions or changing customer requirements.
In addition, there is the possibility that one or more of our strategic
partners or other medical equipment manufacturers may decide to develop
products that directly compete with our systems. We also expect that
competition will increase as a result of medical equipment, wireless and
software industry consolidation. Increased competition is likely to result in
price reductions, reduced gross margins and loss of market share, any one of
which could cause our business, financial condition and results of operations
to suffer.
11
<PAGE>
We may not be able to hire and retain the personnel necessary to support our
expanding business.
Our success will depend significantly on our senior management team,
including: Dr. David Albert, Chief Scientist and Chairman of the Board; Jeffrey
Brown, President and Chief Executive Officer; Michael Singer, Chief Financial
Officer; and Bradley Harlow, Vice President of Business Development and General
Manager, International, as well as other key engineering employees. We face
intense competition for these people and may not be able to attract and retain
them. Although we have recently expanded our direct sales force and plan to
hire additional sales personnel, we need to substantially expand our sales
operations and marketing efforts, both domestically and internationally, in
order to increase market awareness and sales of our systems. Our systems
require a sophisticated sales effort targeted at several people within the
information technology departments of our prospective customers. In addition,
we currently have a small customer service and support organization and will
need to increase our staff to support new customers and the expanding needs of
existing customers. Hiring customer service and support personnel is highly
competitive in our industry due to the limited number of people available with
the necessary technical skills. We cannot assure you that we will be able to
hire and retain sufficient numbers of qualified customer service and support
personnel. We maintain key person life insurance on the life of Jeffrey Brown
in the amount of $1.0 million.
Our sales are dependent on third party single-source and limited-source
suppliers.
We use third party manufacturers to purchase necessary components and to
manufacture and test key parts of our systems, including the StatView receiver
and the AlarmView transmitter. Certain components, such as the bitmap display,
are presently only available from a single source. Other parts and components
that we rely on are available from limited sources. Our reliance upon these
single or limited-source suppliers and third party manufacturers involves risks
and uncertainties, including the possibility of a shortage or discontinuation
of key components and reduced control over delivery schedules, manufacturing
capability, quality and cost. Any reduced availability of such components or
key parts, when needed, could cause us to delay the delivery of complete
systems resulting in the delayed payment or cancellation of orders by our
customers, thereby adversely affecting our business, financial condition and
results of operations.
We may fail to protect our proprietary technology and to maintain access to the
proprietary information of third parties that support our competitive position.
Our owned and licensed intellectual property is important to our business.
We could be subject to intellectual property infringement claims as the number
of our competitors grows and the functionality of our systems overlaps with
competitive offerings. These claims, even if not meritorious, could be
expensive and divert our attention from our core business operations. If we
become liable to third parties for infringement of their intellectual property
rights, we could be required to pay substantial damages and to develop
alternative non-infringing technology, obtain a license or cease selling the
systems that contain the infringing intellectual property. We may be unable to
develop non-infringing technology or obtain a license on commercially
reasonable terms, if at all. In addition, we may not be able to protect against
misappropriation or infringement of our intellectual property by third parties.
If misappropriation or infringement occurs, we may not be able to detect it or
to effectively enforce our rights.
12
<PAGE>
Changes in the healthcare industry could force us to make costly modifications
to our business model.
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. These factors affect the
purchasing practices and operation of healthcare organizations. Changes in
current healthcare financing and reimbursement systems could cause us to make
unplanned modifications to our systems, or result in delays or cancellations of
orders. Federal and state legislatures have periodically considered programs to
reform or amend the U.S. healthcare system at both the federal and state level.
These programs may contain proposals to increase governmental involvement in
healthcare, lower reimbursement rates or otherwise change the environment in
which healthcare industry participants operate. Healthcare industry
participants may respond by reducing their investment or postponing investment
decisions, including investments in our systems. We do not know what effect any
such proposals would have on our business. Many healthcare providers are
consolidating to create integrated healthcare delivery systems. These providers
may try to use their market power to negotiate price reductions for our
systems. If we are forced to reduce our prices, our business, financial
condition and results of operations would suffer. As the healthcare industry
consolidates, competition for customers will become more intense.
If our systems are not Year 2000 compliant, we may face unexpected expenses.
Issues with respect to the year 2000 could affect the performance of our
systems. We believe our systems are designed to operate prior to, during and
after the calendar year 2000 without error relating to date data. However, we
have only tested our systems for their intended use on a stand-alone basis in a
test lab. Our business may suffer adverse effects if our systems cause
significant Year 2000 problems in a particular situation or configuration
within the systems of our customers. Our customers use our systems in many
different configurations and in conjunction with many other components and
systems, and we have no way to test whether all those configurations and
systems will properly handle the transition to the year 2000.
We also depend on other vendors and suppliers to be Year 2000 compliant.
Many of these organizations may not be Year 2000 compliant, and we do not know
what effect this may have on our systems. We potentially could be liable for
the failure of our systems even if someone else caused the failure.
Furthermore, the costs to our customers of becoming Year 2000 compliant may
result in reduced funds being available to purchase and implement our systems.
Our system development efforts and marketing plans may require us to seek
additional capital. As a result, your investment may be diluted.
We expect that the proceeds generated from this offering, combined with our
current cash resources and credit facilities, will be sufficient to meet our
capital requirements for at least the next 12 months. However, we may need to
raise additional capital at an earlier time to support expansion, develop new
or enhanced systems, respond to competitive pressures, acquire complementary
businesses or technologies or take advantage of other unanticipated
opportunities. We may need to raise additional funds by selling debt or equity
securities or entering into strategic alliances or other arrangements. We may
be unable to raise any additional capital on reasonable terms and in a timely
fashion. Any additional issuance of equity securities would dilute your
investment.
13
<PAGE>
Trading in our shares could be subject to extreme price fluctuations, and you
could experience difficulties trading your shares.
There was no public trading market for our shares prior to this offering.
The initial public offering price will be established by negotiation between
the underwriters and us. You may not be able to resell your shares at or above
the initial public offering price due to a number of factors, including:
. actual or anticipated quarterly variations in our operating results
. changes in expectations of future financial performance or changes in
estimates of securities analysts
. announcements of technological innovations
. announcements relating to strategic alliances
. customer relationship developments
. conditions affecting the healthcare industry in general
. changes in our executive management team
. the operating or stock price performance of comparable companies
The trading price of our common stock may be volatile. The stock market in
general, and the market for technology companies in particular, has experienced
extreme volatility that often has been unrelated to the operating performance
of particular companies. These broad market and industry fluctuations may
adversely affect the trading price of our common stock, regardless of our
actual operating performance. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
has often been filed. If this were to happen to us, litigation would likely be
expensive and would divert management's attention from running our business.
Delaware law and our certificate of incorporation may inhibit potential
acquisition bids that could be beneficial for stockholders.
Delaware law may inhibit potential acquisition proposals. We are subject to
the anti-takeover provisions of the Delaware General Corporation Law, which
regulates corporate acquisitions. Delaware law prevents us from engaging in a
business combination with any interested stockholder for three years following
the date that such stockholder became an interested stockholder. For purposes
of Delaware law, a business combination includes a merger or consolidation or
the sale of more than 10% of our assets. In general, Delaware law defines an
interested stockholder as any entity or person beneficially owning 15% or more
of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by such entity or person. Under
Delaware law, a Delaware corporation may opt out of the antitakeover
provisions. We do not intend to opt out of these antitakeover provisions of
Delaware law.
In addition, we have adopted provisions in our certificate of incorporation
that may discourage potential acquisition proposals and delay or prevent a
change in control of our company.
These provisions include the following:
. our board of directors may issue up to three million shares of preferred
stock and determine the applicable powers, preferences and rights and the
qualifications, limitations or restrictions of such stock, including
voting rights, without any vote or further action by stockholders
. our directors are elected to staggered three-year terms
. stockholders cannot call special meetings
14
<PAGE>
. the nomination of a director or the taking of certain actions requires
advance notice
. stockholders cannot take action by written consent
Future sales by our existing stockholders could adversely affect the market
price of our common stock.
Sales of our common stock in the public market following this offering could
adversely affect the market price of our common stock. Of the million
shares that will be outstanding upon the consummation of this offering:
. million shares will be freely tradeable in the public market
. approximately additional shares may be sold after the
expiration of 180-day lock-up agreements
. approximately additional shares may be sold upon the exercise
of stock options and warrants after the expiration of 180-day lock-up
agreements
The market price for our common stock could fall substantially if our
stockholders sell large amounts of our common stock in the public market
following this offering. These sales, or the possibility that these sales may
occur, could make it more difficult for us to sell equity or equity-related
securities in the future.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Data Critical and
our industry that involve risks and uncertainties. These forward-looking
statements are usually accompanied by words such as "believe," "anticipate,"
"plan," "seek," "expect," "intend" and similar expressions. Our actual results
may differ materially from the results discussed in the forward-looking
statements because of factors such as the risk factors set forth in this
prospectus. We undertake no obligation to update any forward-looking statements
for any reason, even if new information becomes available or other events occur
in the future.
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of shares in
this offering will be $ million ($ million if the underwriters'
over-allotment option is exercised in full), after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us and
assuming an initial public offering price of $ per share.
We expect to use the net proceeds of this offering for general corporate
purposes, including working capital and capital expenditures. A portion of the
net proceeds may also be used for the acquisition of businesses, products or
technologies that are complementary to those of Data Critical. From time to
time, we may consider and evaluate potential acquisitions; however, we have no
current understandings or agreements regarding any acquisitions. Pending such
uses, we intend to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock. We currently intend
to retain any future earnings for the continued development and expansion of
our business. We are subject to the terms of a credit agreement that restricts
our ability to pay dividends and may in the future become subject to the terms
of other credit agreements or other contractual provisions that impose
restrictions or limitations on the payment of dividends. In the absence of such
restrictions or limitations, the payment of any dividends will be at the
discretion of our board of directors.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999:
. on an actual basis
. on a pro forma basis to give effect to the conversion of all outstanding
shares of preferred stock into shares of common stock, and the filing of
a restated certificate of incorporation to provide for authorized capital
of 25,000,000 shares of common stock and 3,000,000 shares of undesignated
preferred stock
. on a pro forma as adjusted basis to reflect the sale of common stock by
Data Critical at an assumed initial public offering price of $
per share and the application of such net proceeds
This table should be read in conjunction with Data Critical's Financial
Statements and the related Notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
At March 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands, except share
data)
<S> <C> <C> <C>
Long-term obligations, net of current portion.. $ 127 $ 127 $
Mandatorily redeemable preferred stock, $0.01
par value; 19,731,893 shares authorized,
4,904,689 shares issued and outstanding
(actual); no shares authorized, no shares
issued and outstanding (pro forma and pro
forma as adjusted)............................ 19,602 --
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value; no shares
authorized, issued or outstanding (actual);
3,000,000 shares authorized, no shares issued
or outstanding (pro forma and pro forma as
adjusted).................................... -- --
Common stock $0.001 par value; 30,000,000
shares authorized, 1,402,839 shares issued
and outstanding (actual); 25,000,000 shares
authorized, 6,307,528 shares issued and
outstanding (pro forma); 25,000,000 shares
authorized, shares issued and
outstanding (pro forma as adjusted).......... 1,566 21,168
Deferred compensation......................... (729) (729)
Accumulated deficit........................... (18,407) (18,407)
-------- -------- ------
Total stockholders' (deficit) equity.......... (17,570) 2,032
-------- -------- ------
Total capitalization........................... $ 2,159 $ 2,159 $
======== ======== ======
</TABLE>
The common stock to be outstanding after this offering is based on shares
outstanding as of March 31, 1999 and excludes:
. 886,371 shares of common stock issuable upon the exercise of outstanding
stock options at a weighted average exercise price of $1.58 per share and
371,471 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $2.34 per share
. 60,786 additional shares of common stock available for issuance under our
1994 Stock Option Plan and 1,200,000 additional shares of common stock
available for issuance under our stock option and employee stock purchase
plans approved in May 1999
17
<PAGE>
DILUTION
As of March 31, 1999, Data Critical had a pro forma net tangible book value
of $ , or $ per share of common stock after giving effect to the conversion
of all outstanding shares of preferred stock into common stock. Pro forma net
tangible book value represents the amount of total tangible assets of Data
Critical less its total liabilities. After giving effect to the sale of the
shares of common stock offered by us at an assumed initial public offering
price of $ per share, and the adjustments set forth above, the pro forma as
adjusted net tangible book value of Data Critical as of March 31, 1999 would
have been $ , or $ per share. The pro forma as adjusted net tangible book
value assumes that the proceeds to us, net of underwriting discounts and
commissions and offering expenses, will be approximately $ million. Based
on the foregoing, there would be at March 31, 1999 an immediate increase in net
tangible book value of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share at March 31, 1999.. $
Increase per share attributable to new investors...............
----
Pro forma as adjusted net tangible book value per share after
this offering...................................................
----
Dilution per share to new investors.............................. $
====
</TABLE>
The following table summarizes on a pro forma basis, as of March 31, 1999,
the differences between the existing stockholders and new investors with
respect to:
. the number of shares of common stock purchased from us
. the total consideration paid to us and
. the average price paid per share. Underwriting discounts and commissions
and offering expenses have not been deducted
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration
-------------- -------------- Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Existing stockholders............... % $ % $
New investors.......................
--- ----- ---- -----
Total........................... 100.0% $ 100.0%
=== ===== ==== =====
</TABLE>
As of March 31, 1999, there were:
. options outstanding to purchase a total of 886,371 shares of common stock
issuable upon the exercise of outstanding stock options at a weighted
average exercise price of $1.58 per share and 60,786 additional shares
reserved for future grants and issuances under our 1994 Stock Option Plan
. warrants outstanding to purchase a total of 371,471 shares of common
stock at a weighted average exercise price of $2.34 per share
To the extent that any of these options or warrants are exercised, there
will be further dilution to new investors.
18
<PAGE>
SELECTED FINANCIAL DATA
The following historical selected financial and operating data set forth
below should be read along with the Financial Statements, their related Notes
and other information included elsewhere in this prospectus. The selected
statement of operations data for the years ended December 31, 1996, 1997 and
1998 and the selected balance sheet data as of December 31, 1997 and 1998 have
been derived from our audited financial statements included elsewhere in this
prospectus. The selected statement of operations data for the years ended
September 30, 1994, 1995 and 1996 and the selected balance sheet data as of
September 30, 1994, 1995 and 1996 have been derived from our audited financial
statements not included in this prospectus. Effective January 1, 1996 we
changed our fiscal year end from September 30 to December 31. The selected
balance sheet data as of December 31, 1996 has been derived from unaudited
financial statements of Data Critical not included in this prospectus. The
selected statement of operations data for the quarters ended March 31, 1998 and
March 31, 1999 and the selected balance sheet data as of March 31, 1999 have
been derived from unaudited financial statements of Data Critical appearing
elsewhere in this prospectus and, in the opinion of our management, include all
adjustments, consisting only of normal recurring adjustments, which are
necessary for a fair presentation of the results of operations for this period.
The results for any quarter are not necessarily indicative of results for any
future quarterly or annual results.
<TABLE>
<CAPTION>
Years Ended Years Ended December Quarters Ended
September 30, 31, March 31,
------------------------ ------------------------- ----------------
1994 1995 1996 1996 1997 1998 1998 1999
------ ------- ------- ------- ------- ------- ------- -------
(In thousands, except for per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue................. $ 60 $ 232 $ 187 $ 190 $ 471 $ 4,137 $ 265 $ 2,214
Cost of revenue......... 38 393 35 27 348 1,841 132 902
------ ------- ------- ------- ------- ------- ------- -------
Gross margin............ 22 (161) 152 163 123 2,296 133 1,312
------ ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 85 270 883 957 1,702 2,194 492 551
Sales and marketing... -- 282 543 512 1,200 3,512 628 1,116
General and
administrative....... 269 720 756 738 1,268 2,564 595 729
------ ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 354 1,272 2,182 2,207 4,170 8,270 1,715 2,396
------ ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (332) (1,433) (2,030) (2,044) (4,047) (5,974) (1,582) (1,084)
Other income (expense),
net.................... (11) 37 28 40 45 152 (15) 18
------ ------- ------- ------- ------- ------- ------- -------
Net loss................ $ (343) $(1,396) $(2,002) $(2,004) $(4,002) $(5,822) $(1,597) $(1,066)
====== ======= ======= ======= ======= ======= ======= =======
Basic and diluted loss
per common share....... $(0.32) $ (1.55) $ (2.21) $ (2.44) $ (4.28) $ (5.03) $ (1.28) $ (1.01)
====== ======= ======= ======= ======= ======= ======= =======
Pro forma basic and
diluted loss per common
share.................. $ (1.01) $ (0.17)
======= =======
</TABLE>
<TABLE>
<CAPTION>
At September 30, At December 31, At March 31, 1999
---------------------- ----------------------- --------------------------------
Pro Pro Forma
1994 1995 1996 1996 1997 1998 Actual Forma(1) As Adjusted(2)
------ ------ ------ ------ ------ ------- ------- -------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 142 $ 398 $ 792 $ 661 $ 865 $ 3,053 $ 1,840 $1,840
Working capital......... (372) 1,620 628 2,552 717 2,343 1,303 1,303
Total assets............ 256 2,057 1,459 3,311 1,788 5,625 5,151 5,151
Short-term obligations.. 500 -- -- -- 31 348 548 548
Long-term obligations,
net of current
portion................ -- -- -- -- 1,641 151 127 127
Mandatorily redeemable
preferred stock........ 134 4,119 5,536 8,282 8,927 19,248 19,602 --
Stockholders' (deficit)
equity................. (413) (2,189) (4,527) (5,189) (9,226) (16,218) (17,570) 2,032
</TABLE>
- --------
(1) Reflects the conversion of all outstanding shares of preferred stock into
shares of common stock.
(2) Reflects the sale of common stock by Data Critical at an assumed initial
public offering price of $ per share and the application of net
proceeds therefrom.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Data Critical commenced operations in April 1993 to develop communications
solutions for individuals who have a need for notification of data that
requires an immediate response, also known as time-critical data. From 1993
through 1996, we primarily focused on expanding our research and development
efforts, refining our business plan, developing industry and strategic
relationships, building a management team and financing these activities. Since
inception, we have funded our operations primarily through debt and equity
financing from stockholders, cash receipts from sales and commercial credit
facilities.
From inception through 1997, revenue was derived primarily from fees and
royalties paid under product engineering and development contracts, and to a
lesser extent from the sale of wireless communications systems developed for
both medical and non-medical applications. In late 1996, we focused our
development and marketing efforts on specific medical applications.
Accordingly, in 1997 we hired management and other key employees experienced in
sales, manufacturing and regulatory matters in the healthcare industry. As a
result of this new focus, our results of operations since the end of 1997 are
not directly comparable to those of prior periods.
We commercially launched our StatView system late in the third quarter of
1997. The StatView system was our primary source of revenue for 1998 and the
first quarter of 1999, and will continue to be the primary generator of our
revenue for at least the next 12 months. StatView system revenue includes the
net sales price of the system, installation and training services and software
maintenance. In future periods, we expect to receive additional revenue from
the sale of newly developed systems, such as AlarmView, which we expect to
launch for commercial service in the first half of 2000, and MobileView.
Our revenue recognition policy is as follows:
. revenue from sales of systems is generally recognized upon shipment
. revenue generated from installation and training fees is recognized upon
completion of the related services
. revenue from annual software maintenance fees is deferred and recognized
over the term of the applicable agreement
Deferred revenue was $442,000 at December 31, 1998 and $779,000 at March 31,
1999. This deferred revenue resulted primarily from the recognition of software
maintenance fees over the term of maintenance agreements, generally one year.
We expect that deferred revenue from software maintenance agreements will
represent a decreasing percentage of revenue in future periods. We also
recognize deferred revenue upon the installation of systems which are subject
to special terms, and recognize revenue upon meeting those terms. We expect
deferred revenue from these types of contracts to vary as a percentage of
revenue from quarter to quarter.
We sell our systems through a national direct field sales force, alliances
with strategic partners and OEM arrangements. Our direct sales force regularly
works together with the sales teams of our strategic partners, in particular
Hewlett-Packard Company, Siemens Medical Systems, Inc. and Protocol Systems,
Inc. We also sell our systems through OEM relationships with GE Marquette
Medical Systems, Inc. and Nellcor Puritan Bennett, a subsidiary of Mallinckrodt
Inc. Due to revenue
20
<PAGE>
variability between direct and OEM sales channels, future variations in mix of
sales between such channels could have a significant impact on revenue. We
intend to increase the proportion of our revenues generated by direct sales
versus OEM sales.
Although a number of the components used in our systems are readily
available, some of these components are specifically manufactured for us. Due
to the significant investment in capital equipment that would be necessary to
manufacture these items in-house and the relatively low volumes we require, we
have chosen to utilize contract manufacturing firms to manufacture these
components. We generally purchase these components under contracts that provide
for fixed unit costs with incentives for process and design improvements that
result in future manufacturing cost savings.
Due to our history of net operating losses, we currently pay no federal or
state income tax. As of December 31, 1998, we had $12.8 million of net
operating loss carry forwards for federal income tax purposes, which expire
beginning in 2008. Federal and state law restrictions, such as those related to
ownership changes in our voting stock, as defined in the Internal Revenue Code,
will limit our ability to use these net operating losses to offset future
income tax obligations in any one year.
Results of Operations
The following table sets forth for the periods indicated the percentage of
revenue of certain line items included in Data Critical's statement of
operations data:
<TABLE>
<CAPTION>
Quarters
Ended
March 31,
Year Ended --------------
December 31, 1998 1998 1999
----------------- ------ -----
<S> <C> <C> <C>
Revenue................................... 100.0 % 100.0 % 100.0 %
Cost of revenue........................... 44.5 49.8 40.7
------ ------ -----
Gross margin.............................. 55.5 50.2 59.3
------ ------ -----
Operating expenses:
Research and development................. 53.0 185.7 24.9
Sales and marketing...................... 84.9 237.0 50.4
General and administrative............... 62.0 224.5 32.9
------ ------ -----
Total operating expenses.................. 199.9 647.2 108.2
------ ------ -----
Loss from operations...................... (144.4) (597.0) (48.9)
Other income (expense), net............... 3.7 (5.6) 0.8
------ ------ -----
Net loss.................................. (140.7)% (602.6)% (48.1)%
====== ====== =====
</TABLE>
Quarter ended March 31, 1999 compared to quarter ended March 31, 1998
Revenue. Revenue increased to $2.2 million in the first quarter of 1999 from
$265,000 in the comparable period of 1998, an increase of 735.5%. This increase
was primarily due to increased sales of StatView systems from our OEM
arrangement with GE Marquette Medical Systems, Inc. and sales generated by our
direct sales force and co-marketing activities with our alliances with
strategic partners. Our percentage revenue growth is not expected to continue
at the same rate in future periods.
Gross margin. Gross margin consists of revenue less cost of revenue. Cost of
revenue associated with our systems consists of purchased components, cost of
contract manufacturing, labor
21
<PAGE>
for assembly and installation, and overhead. Gross margin increased to $1.3
million for the first quarter of 1999 from $133,000 in the comparable period of
1998, an increase of 886.5%. Gross margin as a percentage of revenue increased
to 59.3% in the first quarter of 1999 from 50.2% for the comparable period of
1998. Gross margin increased in absolute dollars primarily as a result of
increased revenue generated by additional sales of StatView systems. The
improvement in the gross margin percentage resulted primarily from cost
reductions on components for our StatView receivers purchased in the first
quarter of 1999 and from higher costs per system in the first quarter of 1998
due to inefficiencies related to production start-up costs.
Research and development. Research and development expenses consist
primarily of personnel and related costs, travel and contract engineering
services. Research and development expenses increased to $551,000 in the first
quarter of 1999 from $492,000 in the comparable period of 1998, an increase of
12.0%. This increase was primarily due to increases in salary and bonuses for
existing personnel and increases in contract engineering services.
Sales and marketing. Sales and marketing expenses consist primarily of
personnel and related expenses, sales commissions, trade show and advertising
expenses, telecommunications costs and consulting fees. Sales and marketing
expenses increased to $1.1 million in the first quarter of 1999 from $628,000
in the comparable period of 1998, an increase of 77.7%. This increase was
primarily due to a doubling of sales personnel and an increase in associated
expenses, including sales commissions.
General and administrative. General and administrative expenses consist
primarily of personnel and related expenses, travel, communication and
professional fees. General and administrative expenses increased to $729,000 in
the first quarter of 1999 from $595,000 in the comparable period of 1998, an
increase of 22.5%. This increase was primarily due to increases in salary and
bonus for existing personnel and the addition of regulatory and office support
staff.
Operating expenses. Operating expenses increased to $2.4 million in the
first quarter of 1999 from $1.7 million in the comparable period of 1998, an
increase of 39.7%, primarily due to an increase in the number of employees
performing sales and marketing, general and administrative, and research and
development functions. Operating expenses as a percentage of revenue decreased
to 108.2% in the first quarter of 1999 from 647.2% in the comparable period of
1998.
Other income (expense), net. Other income (expense), net, increased to a net
income of $18,000 in the first quarter of 1999 from a net expense of $15,000 in
the comparable period of 1998. This resulted primarily from an increase in
interest earned on higher cash balances in the first quarter of 1999. In
addition, interest expense decreased in the first quarter of 1999 as compared
to the comparable period of 1998 as a result of the repayment in March 1998 of
bridge loans.
1998 compared to 1997
Revenue. Revenue increased to $4.1 million in 1998 from $471,000 in 1997, an
increase of 778.3%. This increase resulted primarily from increased sales of
our StatView system, which was launched in the second half of 1997. This
increase in StatView sales was primarily due to:
. the hiring and training of a direct sales force in late 1997
. increased StatView system sales to GE Marquette Medical Systems, Inc.
. direct sales of StatView systems for Hewlett-Packard monitoring devices
beginning in July 1998
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Gross margin. Gross margin increased to $2.3 million in 1998 from $123,000
in 1997. Gross margin as a percentage of revenue increased to 55.5% in 1998
from 26.1% in 1997. Gross margin increased in absolute dollars primarily as a
result of increased revenue generated by additional sales of StatView systems.
The margin percentage increase resulted primarily from our write off of
$197,000 in inventory related to a discontinued product, which adversely
affected our 1997 gross margin. In addition, 1998 gross margins were reduced by
inefficiencies related to production start-up costs, changing contract
manufacturers and minimal production volumes.
Research and development. Research and development expenses increased to
$2.2 million in 1998 from $1.7 million in 1997, an increase of 28.9%. This
increase was primarily due to incurring a full year of salary and benefits for
a Director of Engineering hired in May 1997, additional personnel hired during
1998, an increase in travel expenditures to support an increasing number of
alliances with strategic partners and an increase in contract engineering
services.
Sales and marketing. Sales and marketing expenses increased to $3.5 million
in 1998 from $1.2 million in 1997, an increase of 192.7%. This increase was
primarily due to a full year of costs associated with our direct sales force,
of which hiring began in August 1997, and includes an increase in salaries,
benefits and related costs and increased sales commissions.
General and administrative. General and administrative expenses increased to
$2.6 million in 1998 from $1.3 million in 1997, an increase of 102.2%. This
increase was primarily due to incurring a full year of salary, benefits and
related costs for the addition, from June through November 1997, of several
senior management positions, and their related support staff.
Operating expenses. Operating expenses increased to $8.3 million in 1998
from $4.2 million in 1997, an increase of 98.3%, primarily due to an increase
in the number of employees performing sales and marketing, general and
administrative, and research and development functions.
Other income (expense), net. Other income (expense), net, increased to a net
income of $152,000 in 1998 from a net income of $45,000 in 1997. The increase
in 1998 resulted from an increase in interest income from the investment of net
proceeds received from our Series D preferred stock offering completed in the
first half of 1998. This increase was partially offset by an increase in
interest expense from bridge loans outstanding from November 1997 until March
1998, increases in term loans used for equipment purchases and the use of our
revolving line of credit.
1997 compared to 1996
Revenue. Revenue increased to $471,000 in 1997 from $190,000 in 1996, an
increase of 147.9%. This increase was primarily due to sales of our StatView
system to GE Marquette Medical Systems, Inc. beginning in December 1997 and an
increase in royalties.
Gross margin. Gross margin decreased to $123,000 in 1997 from $163,000 in
1996, a decrease of 24.5%. Gross margin as a percentage of revenue declined to
26.1% in 1997 from 85.8% in 1996. Gross margin decreased as a percentage of
revenue and in absolute dollars primarily as a result of our write off of
$197,000 in inventory related to a discontinued product. This inventory write-
off was partially offset by gross margin from increased revenue generated by
sales of our StatView system. The decrease in the margin percentage resulted
primarily from the relative decrease in the portion of revenue derived from
product development contracts and software products, which have higher margins
than system sales.
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Research and development. Research and development expenses increased to
$1.7 million in 1997 from $957,000 in 1996, an increase of 77.8%. This increase
was primarily due to an increase in the number of employees and contract
engineering services.
Sales and marketing. Sales and marketing expenses increased to $1.2 million
in 1997 from $512,000 in 1996, an increase of 134.4%. This increase was
primarily due to salaries, commissions, benefits and related support costs from
the creation of our direct sales force, which was formed in the second half of
1997.
General and administrative. General and administrative expenses increased to
$1.3 million in 1997 from $738,000 in 1996, an increase of 71.8%. This increase
resulted primarily from salary, benefits and related costs for the addition of
several senior management positions and support staff hired from June through
November 1997. In addition, rent and related facilities costs increased due to
office space additions in 1997.
Operating expenses. Operating expenses increased to $4.2 million in 1997
from $2.2 million in 1996, an increase of 88.9%, primarily due to an increase
in the number of employees performing sales and marketing, general and
administrative, and research and development functions.
Other income (expense), net. Other income (expense), net, increased to a net
income of $45,000 in 1997 from a net income of $40,000 in 1996. This increase
resulted primarily from an increase in interest income from the investment of
higher average cash balances in 1997, which was partially offset by an increase
in interest incurred on bridge loans drawn in November 1997 and an increase in
term loan balances used to purchase equipment.
Selected Quarterly Results of Operations
The following table presents unaudited quarterly statement of operations
data for each of the five quarters ended March 31, 1999, including such amounts
expressed as a percentage of total revenue. In the opinion of management, this
unaudited quarterly data has been prepared on the same basis as Data Critical's
audited financial statements appearing elsewhere in this prospectus, and
reflect all adjustments consisting only of normal recurring adjustments, which
are necessary for a fair presentation of the information for the periods
presented. You should read the quarterly data presented below along with the
Financial Statements and related Notes appearing elsewhere in this prospectus.
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The results of operations for any quarter are not necessarily indicative of
future quarterly results of operations. See "Risk Factors."
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31,
1998 1998 1998 1998 1999
--------- -------- --------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 265 $ 393 $ 1,553 $ 1,926 $ 2,214
Cost of revenue......... 132 191 679 839 902
------- ------- ------- ------- --------
Gross margin............ 133 202 874 1,087 1,312
------- ------- ------- ------- --------
Operating expenses:
Research and
development............ 492 573 536 593 551
Sales and marketing..... 628 812 921 1,151 1,116
General and
administrative......... 595 633 643 693 729
------- ------- ------- ------- --------
Total operating
expenses............... 1,715 2,018 2,100 2,437 2,396
------- ------- ------- ------- --------
Loss from operations.... (1,582) (1,816) (1,226) (1,350) (1,084)
Other income (expense),
net.................... (15) 63 60 44 18
------- ------- ------- ------- --------
Net loss................ $(1,597) $(1,753) $(1,166) $(1,306) $ (1,066)
======= ======= ======= ======= ========
Percentage of Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 49.8 48.6 43.7 43.6 40.7
------- ------- ------- ------- --------
Gross margin............ 50.2 51.4 56.3 56.4 59.3
------- ------- ------- ------- --------
Operating expenses:
Research and
development............ 185.7% 145.8% 34.5% 30.7% 24.9%
Sales and marketing..... 237.0 206.6 59.3 59.8 50.4
General and
administrative......... 224.5 161.1 41.4 36.0 32.9
------- ------- ------- ------- --------
Total operating
expenses............... 647.2 513.5 135.2 126.5 108.2
------- ------- ------- ------- --------
Loss from operations.... (597.0) (462.1) (78.9) (70.1) (48.9)
Other income (expense),
net.................... (5.6) 16.0 3.8 2.3 0.8
------- ------- ------- ------- --------
Net loss................ (602.6)% (446.1)% (75.1)% (67.8)% (48.1)%
======= ======= ======= ======= ========
</TABLE>
Liquidity and Capital Resources
Since inception, we have satisfied our liquidity needs primarily from the
net proceeds of approximately $17.8 million generated through private sales of
common and preferred stock and, to a lesser extent, from bank borrowings and
advance deposits received from customers on open orders.
Net cash used in operating activities was $1.3 million in the first quarter
of 1999, $5.3 million in 1998, $3.7 million in 1997 and $1.8 million in 1996.
Net cash used in operating activities for each of these periods primarily
consisted of net losses as well as increases in accounts receivable, prepaid
expenses and inventories partially offset by increases in accounts payable,
accrued expenses, customer deposits, net deferred revenue and depreciation and
amortization. Working capital decreased to $1.3 million at March 31, 1999 from
$2.3 million at December 31, 1998, primarily due to net losses from operating
activities. Working capital increased to $2.3 million at December 31, 1998 from
$717,000 at December 31, 1997, primarily due to the net proceeds of $9.1
million received from the private sale of our Series D preferred stock.
Investing activities used net cash of $71,000 in the first quarter of 1999
and $394,000 in 1998, provided net cash of $1.6 million in 1997 and used net
cash of $1.5 million in 1996. Net cash used in
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investing activities for the first quarter of 1999 and for 1998 primarily
consisted of purchases of equipment and systems, including computer equipment.
Net cash provided by investing activities in 1997 primarily consisted of sales
of marketable securities, which were partially offset by purchases of computer
and office equipment. Net cash used in investing activities in 1996 primarily
consisted of net purchases of marketable securities, investment in an
unconsolidated affiliate, payment of licensing fees and patent acquisition
costs and the purchase of computer and office equipment.
Net cash provided by financing activities was $176,000 for the first quarter
of 1999, $7.9 million in 1998, $2.3 million in 1997 and $3.6 million in 1996.
Net cash provided by financing activities for the first quarter of 1999
consisted of proceeds from the issuance of notes payable partially offset by
debt repayments. Net cash provided by financing activities during 1998
primarily consisted of net proceeds of $7.0 million from the issuance of
preferred stock and proceeds from the issuance of $450,000 of term debt
obligations. Net cash provided by financing activities in 1997 primarily
consisted of net proceeds of $650,000 from the issuance of common stock on the
exercise of warrants and the issuance of bridge notes payable of $1.6 million.
Net cash provided by financing activities during 1996 primarily consisted of
net proceeds of $3.2 million from the issuance of preferred stock and $400,000
from the issuance of convertible notes.
From inception through March 31, 1999, we have invested a total of
approximately $1.1 million in fixed assets, consisting primarily of computer
equipment, related software and office furniture. We expect to spend an
additional $1.0 million over the next 12 months for additional fixed assets,
principally leasehold improvements and furnishings for our new offices,
computer systems, demonstration equipment and additional production test
equipment. Approximately $200,000 of this amount will be invested in an
integrated management information system, which comprises all sales,
accounting, inventory and manufacturing control systems, the implementation of
which began in April 1999 and is expected to conclude in the fourth quarter of
1999. We had no material commitments for capital expenditures at March 31,
1999.
As of March 31, 1999, we had $1.8 million of cash and cash equivalents. As
of that date, our principal commitments consisted of obligations outstanding
under operating leases and commercial bank loans.
We have a working capital line of credit that allows us to borrow up to 75%
of eligible accounts receivable to a maximum of $1.5 million. The line is
collateralized by substantially all of our assets and incurs interest at the
bank's prime rate plus 0.75%. This line of credit expires in April 2000 and
requires us to comply with various financial covenants including profitability
and current ratios. As of March 31, 1999, $450,000 in borrowings were
outstanding and $340,000 in letters of credit issued to provide collateral for
our new facility lease were drawn under this line of credit, leaving an
available balance of $710,000.
In April 1999, we established a subordinated debt facility totaling $1.5
million that expires in October 1999. Loans made under this facility will be
secured by substantially all of our assets, subordinated to the commercial bank
loans referenced above. Advances under the subordinated debt agreement are
subject to certain conditions, and these advances are limited to $500,000 or
more per advance and are payable at interest only for the first twelve months
at an 11% rate and in equal monthly principal and interest payments for the
following 24 months. As of June 30, 1999, nothing was outstanding under this
debt facility. In connection with this debt facility, we also granted the
lender an option to purchase up to 105,000 shares of our Series D preferred
stock at a purchase price
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<PAGE>
of $5.00 per share. This option expires upon an initial public offering or
merger, consolidation or sale of substantially all of our assets.
The same lender has also provided a lease line of credit for up to $1.0
million, comprised of $800,000 to finance equipment and $200,000 to finance
equipment, leasehold improvements and software. Advances made under the lease
line are payable over 36 equal monthly installments. As of June 30, 1999,
nothing was outstanding under this lease line. As part of this lease line, the
lender received a warrant to purchase 12,500 shares of Series D preferred stock
at an exercise price of $1.00 per share. This warrant expires upon the earlier
of April 27, 2006 or five years after our initial public offering.
Although it is difficult for us to predict future liquidity requirements
with certainty, we believe that the net proceeds from this offering, together
with our existing liquidity sources and anticipated funds from operations, will
satisfy our cash requirements for at least the next 12 months. Thereafter, we
may require additional funds to support our working capital requirements or for
other purposes and may seek additional funds through public or private equity
or debt financings or from other sources. There can be no assurance that
additional financing will be available to us or that, if available, such
financing will be available on terms favorable to us and our stockholders.
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies and governmental agencies may need
to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
State of Readiness
We have made a preliminary assessment of the Year 2000 readiness of our
information technology systems, including the hardware and software that enable
us to provide and deliver our systems. Our assessment plan consisted of:
. quality assurance testing of our systems, including internally developed
proprietary software incorporated in our systems, which has been
completed for our StatView systems and is ongoing for our other systems
. contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of our systems, which is scheduled for completion in the
third quarter of 1999
. an assessment of repair or replacement requirements, which has identified
no material issues to date
. implementation, which is ongoing
. creation of contingency plans in the event of Year 2000 failures, which
will be a continuous assessment
In accordance with our Year 2000 compliance plan we have begun to identify
measures that will help to avoid Year 2000 disruptions to our business
operations. As part of our move to larger facilities in June 1999, we are
replacing all data connectivity and telephone equipment with updated hardware.
In addition, our new facility is located in a newly constructed office park. We
are currently
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implementing a new integrated management information system primarily in order
to manage our growth. We will test this new system for Year 2000 compliance
during the third and fourth quarters of 1999, with an expected completion date
in the fourth quarter of 1999.
We believe our hardware and software component vendors provide products that
are currently Year 2000 compliant. We will require our material hardware and
software component vendors to provide assurance of their Year 2000 compliance.
We will complete this process during the fourth quarter of 1999. We are
currently assessing our non-information technology systems and will seek
assurance of Year 2000 compliance from providers of material non-information
technology systems. Until such testing is complete and such vendors and
providers are contacted, we will not be able to completely evaluate whether our
information technology systems or non-information technology systems will need
to be revised or replaced.
We have not specifically contacted our existing customers regarding the Year
2000 compliance of our systems. However, we have posted our Year 2000 policy on
our website since November 1998, and we reference our Year 2000 policy on each
customer quote and purchase order.
Costs
To date, we have not incurred significant costs in connection with
identifying or evaluating Year 2000 compliance issues including costs
associated with time spent by employees in the evaluation process and Year 2000
compliance matters generally. If these costs are substantially higher than
anticipated in future periods, it could have a material adverse effect on our
business, financial condition and results of operations. The cost of Year 2000
compliance will be accounted for as an operating expense and funded from
working capital.
Risks
We are not currently aware of any Year 2000 compliance problems relating to
our technology or our internal systems that would have a material adverse
effect on our business, financial condition and results of operations. Third-
party software or hardware incorporated in our systems for sale to customers or
in our internal systems may need to be revised or replaced, all of which could
be time consuming and expensive. In addition, we may discover Year 2000
compliance problems in our technology that will require substantial revisions.
If we fail to fix or replace third-party software or hardware or upgrade our
technology on a timely basis, the result could be lost revenue, increased
operating costs, the loss of customers and other business interruptions, any
one of which could have a material adverse effect on our business, financial
condition and results of operations. Moreover, the failure to adequately
address Year 2000 compliance issues in our technology and our internal systems
could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time-consuming to
defend. In addition, there can no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these types of
entities to be Year 2000 compliant could result in a systemic failure beyond
our control, such as a prolonged internet, telecommunications or electrical
failure, which could also prevent us from delivering our systems to our
customers, and therefore have a material adverse effect on our business,
financial condition and results of operations.
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Contingency Plan
As discussed above, we are engaged in an ongoing Year 2000 assessment and
the development of contingency plans. The responses received from third-party
vendors and service providers will be taken into account in determining the
nature and extent of any contingency plans. We have identified our worst-case
scenario as the interruption of our business resulting from the inability of
our vendors to deliver components or the failure of public utilities to provide
services. We have not yet completed our worst-case scenario contingency plan.
Without a worst-case scenario contingency plan we may not have enough time to
complete remedial measures and implement contingency planning for the worst-
case scenario. We plan to complete our worst-case scenario contingency plan in
accordance with our compliance plan in the fourth quarter of 1999.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 is effective for
financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use including the requirement to capitalize specified costs and
amortization of such costs. The implementation of SOP 98-1 is not expected to
have a material impact on our financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up
Activities." SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. The implementation of SOP 98-5
is not expected to have a material impact on our financial position or results
of operations.
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BUSINESS
We design, manufacture, market, install and support communication and
information systems to allow access to health information, including patient
vital signs and other diagnostic data, using wireless technology and
proprietary software. Our systems provide for information retrieval from remote
sources, both inside and outside the hospital environment, and are integrated
and coordinated through either a wireless network utilizing our interactive
device, a personal computer or the internet. Our focus within health care is on
the hospital, physician and at-home consumer markets. The following are
examples of data that can be transmitted using our technology:
. ECG waveforms . heart rate
. blood pressure . temperature
. oxygen levels in the blood . patient name and location
. ventilator data . physician and nurse notes
We have entered into strategic alliances with the following leading
manufacturers of patient-monitoring medical equipment to assist us in the
development, marketing and distribution of our systems:
. GE Marquette Medical Systems, Inc., a subsidiary of General Electric
Company
. Hewlett-Packard Company
. Nellcor Puritan Bennett, a subsidiary of Mallinckrodt Inc.
. Protocol Systems, Inc.
. Siemens Medical Systems, Inc., a subsidiary of Siemens AG
We sell our systems through our direct sales force and jointly with these
strategic partners. Our systems are currently being used in more than 100
hospitals is over 30 states, including:
. Baylor University Medical Center . Montefiore Medical Center -
in Dallas, TX Einstein Division in New York, NY
. Duke University Medical Center in . Memorial Sloan Kettering Cancer
Durham, NC Center in New York, NY
. Heartland Hospital in St. Joseph, . Mt. Sinai School of Medicine in
MO New York, NY
. Kaiser Foundation Hospital in San . Northwest Hospital in Seattle, WA
Francisco, CA
. St. Mary's Hospital in Pueblo, CO
. The Mayo Clinic in Scottsdale, AZ
Industry Background
Recent technological advances in digital wireless communications and the
demands of an increasingly mobile workforce have resulted in the proliferation
of wireless hand-held information communication devices. The capabilities of
these sophisticated devices, which include personal digital assistants,
wireless receivers and smart phones, are fostering the development of
information-intensive applications than can result in greater workforce
productivity and efficiency.
At the same time, healthcare facilities, such as hospitals and extended care
facilities, are focused on reducing costs and enhancing workforce productivity.
These facilities are seeking to improve the response time, decision-making
quality and overall efficiency of caregivers, including physicians and nurses,
who treat patients in life-critical situations.
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Dynamics of Healthcare Industry
Large Market with Need for Reduced Costs
According to the Health Care Financing Administration (HCFA), healthcare is
estimated to be the largest single sector of the U.S. economy in 1999,
representing approximately $1.2 trillion, or 14% of the U.S. gross domestic
product. According to data from the American Hospital Association, in 1997
there were 6,097 hospitals and 1,035,890 hospital beds in the United States.
Inefficiencies within the healthcare system consume significant time, resources
and capital. During 1998, an estimated $250 billion, or 25 percent of every
healthcare dollar, was spent on excessive administrative costs, the delivery of
unnecessary care and performance of redundant tests and procedures. One
responsive measure taken by the government and managed care companies has been
to impose restrictions on hospital admittance and reimbursement. This has
resulted in higher levels of acuity and a lower number of patients being
treated in an inpatient environment, each requiring closer monitoring in order
to maintain an appropriate level of care.
Aging of the Population
Rapid growth in the aged population is expected as the baby boomers move
into the elderly population group. According to the U.S. Census Bureau, the 75+
age group is expected to grow from 13.2 million in 1990 to over 16.6 million by
the year 2000. The population of seniors age 85+ is expected to increase from
3.1 million in 1990 to 4.3 million by the year 2000. As the proportion of
population who are elderly increases, the average age of hospital patients
increases as well. Since the elderly are more susceptible to complications
while hospitalized, monitoring of their vital signs is critical to ensure
against unforeseeable adverse events.
Migration of Patients to Less Costly Care Environments
In response to escalating healthcare costs, government and private pay
sources have implemented cost-containment measures designed, when appropriate,
to migrate post-acute patients more quickly from higher intensity care, high
cost units such as intensive care units to lower intensity care, lower cost
units such as step-down units. These patients continue to require monitoring
even though they have been moved to a lower cost setting which has a much lower
nurse-to-patient ratio. Hospitals spend significant capital to upgrade their
monitoring equipment to accommodate the level of care required by these
patients. Because of this trend of moving more ill patients out of critical
areas of the hospital sooner, hospitals are converting more of their general
medical/surgical beds to step-down units or telemetry units.
Underdeveloped Communications Technology in Hospitals
Underdeveloped information systems and communications procedures within
hospitals, specifically relating to critical care patient information,
contribute to inefficiencies and high cost in the healthcare industry.
Caregivers must attend to several patients in various locations while
simultaneously accessing time-critical patient medical information that is
monitored and collected by medical equipment. Within hospitals, patients are
monitored by medical equipment that either is centrally connected or operates
on a stand-alone basis. According to Frost and Sullivan, the worldwide hospital
monitoring equipment market, which includes cardiac, respiratory, blood gas,
and neurological monitoring equipment, is estimated to be approximately $6.4
billion in 1999. The large number of medical monitoring devices in each
hospital and the fact that these devices are manufactured by numerous medical
equipment suppliers has hampered the ability of many hospitals
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to create integrated critical care patient communications networks. While most
hospitals operate in a decentralized nurse mode, the information from medical
equipment is available only at a central location. Consequently, most hospitals
employ monitoring technicians to centrally monitor critical care patient data
captured by medical equipment and inform caregivers when problems arise. This
method of communicating critical care information is time-consuming, costly and
can adversely impact the care of patients requiring immediate attention. Due to
these conditions, neither monitoring technicians nor caregivers within
hospitals are able to attend to other vital stand-alone medical equipment on a
regular basis.
Growth of Wireless Communications
In recent years, the proliferation of wireless communications solutions has
extended the reach and connectivity of mobile professionals. For example, in
voice communications, cellular telephones have enabled mobile users to place
phone calls from virtually any location. Similarly, advances in wireless data
communications, including wireless local area networks (LANs) and radio modems,
have enabled the extension of enterprise networks to
the notebook computers and handheld information communication devices of mobile
users. The projected growth of wireless data communications systems, driven by
increasing connectivity options for mobile users, will result in increased
accuracy, timeliness and convenience of information access, thereby reducing
costs and improving productivity. Frost & Sullivan expects revenue from
wireless data services to triple to more than $9 billion in 2000 from an
estimated $3 billion in 1997.
The Internet as a Critical Healthcare Information Tool
Consumers are seeking more information in order to actively manage their
personal health and wellness. As a result, many consumers are turning to the
Internet to obtain health information. According to Cyber Dialogue, an industry
research firm, during 1998, approximately 22 million adults in the United
States searched online for health and medical information. In addition, Cyber
Dialogue estimates that in the year 2000, the number of adults in the United
States searching for online health and medical information will grow to
approximately 33 million, and they will spend approximately $150 billion for
all types of health-related products and services. Cyber Dialogue also
estimates that approximately 70% of the persons searching for health and
medical information online believe the Internet empowers them by providing them
with resourceful information to make better informed health decisions. Over the
past decade, the healthcare industry has changed radically as employers seeking
to reduce their healthcare costs have turned from indemnity insurance to
managed health plans. Approximately 180 million people, or 90% of the insured
U.S. population, are now subject to some form of managed care. We believe that
consumers increasingly question the motivations of their caregivers and are
more inclined to take an active role in the decisions that affect their health
and wellness as well as that of their families.
The Data Critical Solution
Data Critical's systems extend the power of wireless technology to the
healthcare industry by employing a suite of hardware and software systems that
transmit complex time-critical data over wireless networks and through the
internet. Our systems improve communications and decision-making both in the
hospital and in remote locations, thereby improving the delivery of patient
care and reducing healthcare costs.
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Our solution provides the following key benefits:
Increased Work Efficiency. Our systems extend a hospital's existing patient-
monitoring capability by allowing physicians and nurses to remotely monitor
critically-ill patients and communicate on a near-immediate basis. By gathering
data from a broad array of patient-monitoring and other medical equipment and
distributing that data to a wireless communications device, caregivers can
monitor patient conditions while continuing to perform tasks elsewhere. When
there are adverse changes in a particular patient's condition, caregivers are
immediately alerted. Alarms can then be automatically and simultaneously
transmitted to individual nurses, physicians or other caregivers.
Reduced Costs. Most hospitals employ technicians with the responsibility to
monitor patient data from central locations. Those hospitals that use
monitoring technicians generally employ one to two full time equivalents per
nursing station. Our systems reduce the need for hospitals to maintain large
staffs of monitoring technicians. We believe that in many situations hospitals
can realize full return on their investment within 12 months of purchasing our
systems simply through the redeployment of these hospital personnel.
Improved Quality of Care. Our systems are designed to provide critical
patient information on a near-immediate basis directly to caregivers in and out
of the hospital. This near immediate delivery of information allows for more
rapid response times with better information. Our products allow hospitals to
maintain or improve quality of care, especially in light of the current trend
of declining caregiver-to-patient ratios.
Ease of Use. We have designed our receivers based on feedback from
healthcare professionals that dictated operational simplicity and hand-held
form factors. Device operation is rapidly learned. We believe that our design
features allow our customers to quickly and easily deploy our systems without
requiring extensive or technical training.
Open Architecture. Our systems are designed to interface with medical
equipment manufactured by numerous medical equipment suppliers. By providing a
standard, scaleable system we can interface with the medical equipment that is
already deployed in hospitals. In addition, the ability of our systems to
operate with other similar medical equipment allows us to partner with various
manufacturers.
Security and Confidentiality. Certain of our systems include strict
authentication methods and data encryption technology. These security features
allow for the exchange of confidential patient information without that
information being compromised. In addition, our Wireless Telemedicine (WT)
Server software provides access to the proprietary network software of our
strategic partners' patient monitoring systems.
Our Strategy
Our objective is to be the leader in providing wireless health information
communications systems to industries that depend upon the interactive
transmission of complex and time-critical data to mobile individuals. The
principal elements of our strategy include the following:
Pursue Additional Strategic Alliances. We are continuing to pursue
additional strategic alliances that will augment or expand our distribution
channels and system offerings. In the immediate term, we are pursuing
additional partners for our AlarmView system. In addition to our
33
<PAGE>
direct sales force, we distribute our systems through leading vendors of
complementary medical equipment. We expect to build upon the expertise we gain
though these strategic alliances to facilitate additional alliances and move
into new markets. We will continue to review mutually beneficial opportunities
to share new technologies, such as cross-licensing opportunities. We also
intend to enter into strategic relationships with one or more internet portals
and other web-based healthcare companies to promote the use of our Internet ECG
system and DataView system.
Increase Market Penetration and Generate Follow-On Sales Opportunities. The
initial target market for our systems includes approximately 5,000 hospitals
and 50,000 cardiology-related physicians in the U.S. Each of these hospitals
has multiple placement opportunities for our systems in various areas
throughout the hospital, including critical care units, step-down units,
emergency rooms, telemetry units and obstetrics. Since commencing distribution
of our systems in late 1997, we have installed our systems in over 100 U.S.
hospitals. We intend to increase our market penetration in major U.S. hospitals
by building upon the existing installed base of products manufactured by our
strategic alliance partners. In addition, once we have introduced our systems
to a hospital and have demonstrated the benefits of these systems to healthcare
professionals, we plan to sell our systems to other areas of practice within
that hospital.
International Expansion. We intend to expand sales of our systems into
international markets, including Europe and Japan. The international healthcare
market makes use of similar networked and stand-alone monitoring devices and
has similar scope to that of the U.S. healthcare market. We believe that there
may be significant demand for our systems in international markets because
hospitals outside the U.S. are even less equipped with remote monitoring and
interconnectivity systems than U.S. hospitals. We intend to build upon our
existing strategic alliances through their dealer and distributor organizations
to further our international expansion strategy.
Expand Use of the Internet to Link Physicians and At-home Consumers. Through
our Internet ECG system and the DataView system, we expect to expand our
ability to rapidly provide complex data to these users. We believe that many of
our existing technologies for the efficient transmission of data may have broad
applications for hospitals, physicians and patients seeking to access and
deliver information from and to remote locations, through either wireless or
wired devices linked to the internet. We have developed core technology to
address the need to transmit medical information from homes through the
internet.
Maintain and Build on Technology Leadership. We are a technology leader in
providing for the communication of complex healthcare data through wireless
systems and networks. To strengthen and extend our communications solutions, we
plan to continue investing in research and development to expand the features
and functionality of our systems. For example, future systems may extend the
remote communications network to other types of medical equipment, such as
infusion pumps, ventilators, incubators, medical information systems, smart
beds, nurse call devices and home care devices. In addition, we may apply our
technology to other industries where the rapid communication of detailed
information is critical, and where the mobility of end users is key, such as
law enforcement or other government services.
34
<PAGE>
Our Systems
We design our systems to address the needs of the healthcare industry.
Caregivers are highly dependent on access to complex and time-critical data and
benefit greatly from the rapid transmission of such data.
The following table provides a summary of the features and benefits of our
systems:
<TABLE>
<CAPTION>
Market Focus Systems Features and Benefits
- -------------------------------------------------------------------------------
<C> <C> <S>
Hospitals StatView . Hand-held unit that alerts caregivers within ten
seconds when alarms from patient monitors or
other medical equipment are triggered
. Provides reminder messages and periodic patient
updates
. Enables immediate responses to patient alarms
. Allows caregivers to monitor graphic
representations of data, known as waveforms, and
vital signs while performing tasks elsewhere in
the hospital
------------------------------------------------------------------
AlarmView . Uses wireless technology to deliver alarms and
other information collected by stand-alone
medical equipment to a patient-monitoring
system, creating a virtual network
. Designed to allow rapid response to non-
networked medical equipment
. Designed to increase caregiver efficiency and
flexibility at a low cost per unit
- -------------------------------------------------------------------------------
Physicians MobileView . Uses digital wireless technology on a wide area
network to provide critical patient information
to caregivers in remote locations usually outside
of the hospital
. Allows caregivers to remotely review ECGs, vital
signs parameters, associated waveforms, and nurse
notes
. Permits faster and more informed clinical
consultation and decision-making from remote
locations
. Delivers quality waveforms without faxes or phone
lines
------------------------------------------------------------------
DataView . Allows caregivers to access data collected by
StatView through a personal computer
- -------------------------------------------------------------------------------
Consumers Internet ECG . Enables consumers to view their ECGs through an
application downloaded via the internet
. Permits at-home use for stress management, self-
monitoring of physical fitness and educational
activities
</TABLE>
Hospital Systems
StatView
The StatView system is a local wireless system that alerts nurses when
alarms from patient-monitoring systems are triggered. The StatView system
connects to an existing patient-monitoring network, collects alarm data from
these monitors and transmits vital signs and waveforms through a dedicated
wireless transmitter to a StatView receiver unit worn by the nurse. Alarm
events can be transmitted automatically to individuals or groups and periodic
updates can be transmitted to the appropriate caregivers. Nurses using the
StatView system carry a compact graphic
35
<PAGE>
wireless receiver that sounds alarm tones or vibrates whenever a patient
monitor generates an alarm. The receiver then displays bed number, patient
name, diagnosis (such as ventricular tachycardia), heart rate, and, with one
button click, a six second ECG waveform. By looking at the waveform, nurses
can determine the urgency of the alarm and be informed prior to reaching a
patient's bedside.
The following diagram illustrates a typical StatView installation:
[CHART APPEARS HERE]
"StatView System"
[Beneath the heading is a diagram containing four icons. Starting from the
left, there are two icons, one showing three telemetry units labeled "Portable
Monitors" and one below this showing two monitors labeled "Bedside Monitors."
These icons are both linked to an icon of a monitor labeled "Central Station,"
which is linked to a third icon to the right labeled "WT Server." The "WT
Server" icon is linked to an icon labeled "Wireless Transmitter" that is
depicted as transmitting signals to two icons of a StatView receiving unit
labeled "StatView Receiver."]
The StatView system has the following key features and benefits:
. transmits alarm data to lightweight, hand-held StatView receivers within
ten seconds
. enables alarm information to be sent to all nurses or to the patient's
assigned caregiver
. sends reminder pages for any alarms that have not been acknowledged
within a specific time period
. allows caregivers to configure the transmission of periodic updates
AlarmView
AlarmView is a wireless system that is designed to connect to stand-alone
devices to create a virtual monitoring network. AlarmView attaches to the back
of non-networked patient monitors, infusion pumps and other intelligent
devices and can deliver near immediate alarms and other information to
wireless receivers in less than ten seconds. The information from AlarmView
transmitters can be sent to the same StatView receivers already worn by
caregivers. As the volume of patient admissions changes, the AlarmView
transmitter can be easily transferred to devices manufactured by multiple
vendors without requiring costly and time-consuming setup since AlarmView is
designed to automatically interface upon connection. We intend to submit our
AlarmView system for approval by the FDA in August 1999, and expect to begin
commercial sales of AlarmView systems in the first half of 2000.
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<PAGE>
AlarmView has the following key features and benefits:
. increases efficiency and flexibility within hospital wards
. low cost per unit
. can store information not recorded by stand-alone devices
. can integrate with StatView
Physician Systems
MobileView
MobileView transmits data that is collected by the StatView system from
individual patient bedside and telemetry monitors to physicians or other
caregivers at remote locations usually outside of the hospital. The MobileView
System uses digital wireless technology on a wide area network to provide
caregivers with immediate remote access to critical patient information,
including multiple ECGs, vital signs parameters and associated waveforms and
nurse notes. Physicians can access this information through a portable,
wireless hand-held device or through a website that uses our DataView system.
MobileView is designed to be easily integrated into a wide variety of
monitoring equipment and is compatible with our StatView system.
DataView
Our DataView system allows physicians to review data collected by StatView
systems through a website.
The following diagram illustrates a typical MobileView and DataView
installation:
[CHART APPEARS HERE]
"MobileView and DataView Systems"
[Beneath the heading is a diagram containing eight icons. Starting from the
left, there are two icons, one showing three telemetry units labeled "Portable
Monitors" and one below this showing two monitors labeled "Bedside Monitors."
These icons are both linked to an icon of a monitor to labeled "Central
Station," which is linked to a third icon to the right labeled "WT Server."
The "WT Server" icon is linked to an icon labeled "Wireless Carrier." The
"Wireless Carrier" icon is connected to an icon of a communications tower that
is depicted as transmitting signals to an icon of two MobileView receiving
units labeled "MobileView" on the far right of the page.
The "Wireless Carrier" icon is also connected to an icon of a personal
computer labeled "DataView" to the far right beneath the MobileView receiving
unit icons.]
The MobileView system has the following key features and benefits:
. delivers quality waveforms and other patient data to remote locations
. enables faster clinical consultation and decision making
. transmits data securely
. integrates with StatView
. provides a dial-up, wireless connection to the patient-monitoring network
37
<PAGE>
Consumer System
Internet ECG
We have completed development of the initial release of our Internet ECG
system, which is designed for consumers to view their own ECGs and review them
through an application downloaded via the internet. Through a proprietary hand-
held device, the consumer would be able to relay heart rate and ECG waveform
information via a personal computer's microphone to a website running our
software. The website would then relay additional biofeedback, exercise
training data and personal educational information back to the consumer almost
simultaneously. The Internet ECG system is not yet commercially available. We
intend to pursue agreements with internet portals and other web-based
healthcare companies for distribution of this system.
The Wireless Telemedicine (WT) Server
Our StatView and MobileView systems depend on our WT Server, which is
designed to collect, compress and encrypt critical patient data for
transmission to individual handheld devices through wireless networks. The WT
Server combines an Intel server running Microsoft NT with our proprietary
technology, which is designed to ensure secure and rapid transmission of
confidential patient information.
The WT Server has the following key features and benefits:
. compatible with the leading patient monitoring systems
. internet browser-based system administration
. allows multiple concurrent wireless connections
. radio frequency transmitter provides unit coverage area
. modem interface with digital wireless networks
Strategic Alliances
We have entered into strategic alliances with manufacturers of medical
equipment to:
. increase our revenue
. gain access to proprietary technology
. increase our market penetration
. provide important specialized industry experience
. enhance our system portfolio
We have entered into direct sales and co-marketing arrangements with the
following companies:
Hewlett-Packard Company. Hewlett-Packard Company's Medical Product Group is
a worldwide manufacturer and supplier of clinical measurement and diagnostic
equipment for the healthcare industry. In September 1997, we obtained a
nonexclusive license to a patent from Hewlett-Packard for the transmission of
data over an alphanumeric paging network. This patent is used in our MobileView
system. The Hewlett-Packard license agreement has an indefinite duration,
subject to termination if either party breaches its material obligations
thereunder. We also have an arrangement with Hewlett-Packard to engage in joint
sales and marketing programs and trade show presentations for StatView and
MobileView systems.
Siemens Medical Systems, Inc. Siemens Medical Systems, a division of Siemens
AG, manufactures and sells a wide variety of medical equipment, including life
support, anesthesia, and
38
<PAGE>
electrocardiography products. In July 1998, we entered into an agreement with
Siemens under which Siemens has enabled us to integrate our MobileView and
StatView systems with Siemens' Infinity Patient Monitoring System. The Siemens
agreement is effective through January 2000, with successive automatic 12 month
renewal periods. Either party may terminate the Siemens agreement upon 60 days
notice or if the other party breaches its material obligations thereunder. We
have also engaged in joint sales and marketing programs and trade show
presentations with Siemens for our MobileView and StatView systems.
Protocol Systems, Inc. Protocol designs, manufactures and markets patient
monitoring instruments and systems in more than 80 countries worldwide. In
March 1998, we entered into an agreement with Protocol under which Protocol has
paid us to integrate our MobileView and StatView systems with Protocol's
Flexible Monitoring System. We have also agreed to provide Protocol with an OEM
system under jointly agreed upon labeling. The Protocol agreement is effective
through April 2001, subject to early termination if either party breaches its
material obligations thereunder. Protocol may elect to extend the agreement for
an additional three year term.
We have entered into original equipment manufacturing arrangements with the
following companies:
GE Marquette Medical Systems, Inc. GE Marquette Medical Systems, a
subsidiary of General Electric Company, manufactures and supplies patient-
monitoring products in more than 65 countries worldwide. In January 1997, we
entered into an agreement with GE Marquette under which we granted GE Marquette
nonexclusive worldwide distribution rights to the StatView system under the
trade name IMPACT. We also granted GE Marquette the exclusive right to
distribute StatView systems with certain custom features, subject to minimum
purchase requirements. The GE Marquette agreement is effective through January
2000, subject to early termination if either party breaches its material
obligations thereunder.
Mallinckrodt Inc. Nellcor Puritan Bennett, a subsidiary of Mallinckrodt
Inc., manufactures and sells a wide range of healthcare products, including
pulse oximetry monitoring devices, in more than 100 countries worldwide. In
February 1999, we entered into an agreement with Nellcor Puritan Bennett under
which Nellcor Puritan Bennett paid us to integrate our AlarmView systems with
Nellcor Puritan Bennett's products. Nellcor Puritan Bennett has also agreed to
serve as a nonexclusive distributor of AlarmView. The Nellcor Puritan Bennett
agreement is effective through February 2004, subject to early termination if
either party breaches its material obligations thereunder.
Customers and Markets
Data Critical currently focuses on the healthcare industry because of the
critical need of healthcare professionals to have immediate access to time-
critical patient data. Our target customers include hospitals and physicians
primarily across the U.S., and to a lesser extent in Canada and Europe. We
believe that such groups would benefit from using the StatView and AlarmView
systems, by reducing costs and increasing productivity. Our target markets also
include aggregators of individual physicians such as large medical groups,
independent practice associations, physician practice management companies and
other large organized physician entities. We also target physicians who
practice outreach telemedicine. Additionally, we believe that specialist
physicians with patients who require immediate medical attention upon sudden
change in medical status, such as cardiologists, nephrologists, obstetricians
and gynecologists, would benefit from using our
39
<PAGE>
MobileView systems. Although our products are only being used by hospitals and
physicians, we are targeting the at-home consumer market.
Below is a summary of our target domestic markets and end users:
<TABLE>
<CAPTION>
Market Category System Market Size
- ---------------------------------------------------------------------------
<C> <C> <S>
Hospitals StatView More than 5,000 hospitals
AlarmView in the U.S.
- ---------------------------------------------------------------------------
Physicians MobileView Approximately 50,000
cardiology-related physicians
DataView in
the U.S.
- ---------------------------------------------------------------------------
At-home Consumers Internet ECG More than 58 million
people with cardiovascular
disease in the U.S.
</TABLE>
Our systems are being used in more than 100 hospitals in over 30 states. Our
current customers include:
. Baylor University Medical . Montefiore Medical Center -
Center in Dallas, TX Einstein Division in New York, NY
. Duke University Medical Center . Memorial Sloan Kettering Cancer
in Durham, NC Center in New York, NY
. Heartland Hospital in St. . Mt. Sinai School of Medicine in New
Joseph, MO York, NY
. Kaiser Foundation Hospital in . Northwest Hospital in Seattle, WA
San Francisco, CA
. St. Mary's Hospital in Pueblo, CO
. The Mayo Clinic in Scottsdale,
AZ
Sales, Marketing and Customer Support
We market and sell our systems both through direct marketing and sales
programs and through OEM relationships with our strategic partners. We
currently have 15 sales territories in two regions supported by four telephone
direct sales account managers. In addition, our strategic partners provide
field sales people who actively sell and market our StatView and/or MobileView
systems to their respective accounts. We carefully select our strategic
partners and work closely with them throughout their sales process to increase
our revenue potential. We maintain direct co-marketing relationships with
several of our partners, which allow us more control and flexibility over the
sales and marketing process of our systems.
We also directly target physicians and large medical groups for MobileView
and nurses and nursing professional associations for StatView. We maintain an
extensive, online database of all U.S. hospitals that is updated quarterly.
This database is a key source of sales information covering capital equipment
purchase cycles, key decision makers and the status of all contacts made at the
account. We attend and showcase our systems at major trade shows, including
those sponsored by the American Heart Association, the Association of Nurse
Executives and the Society of Critical Care Medicine. At many of these trade
shows, we co-promote our products in our strategic partners'
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<PAGE>
booths. We also send direct mailings to potential customers promoting our
systems, and support the external research efforts of institutions that are
reviewing technology uses within the healthcare industry.
We believe that a high level of customer support is necessary to achieve
wide acceptance of our systems. We provide customer support services twenty-
four hours a day, seven days a week. We employ technical support personnel who
work directly with our direct sales force, strategic partners and customers. We
also provide training programs for our customers.
Manufacturing
Our manufacturing operations consist primarily of final assembly and
testing, quality assurance, packaging and shipping. Our current manufacturing
facility is located in Bothell, Washington. Our facilities are regulated by the
FDA and are subject to periodic audits for compliance with the FDA's quality
system regulations.
We currently rely on outside contract manufacturers for certain components
of our systems. We purchase standard server hardware directly from third party
manufacturers and install our proprietary software on these servers. We have
developed a supplier selection procedure and approved vendor list to maintain
quality. In addition, we monitor our suppliers' performance to ensure
consistent quality, reliability and yield.
Research and Development
The emerging market for the use of wireless communications in the healthcare
industry is characterized by rapid technological developments, frequent new
product introductions and evolving industry standards. Advances in operating
systems, radio frequency systems and hardware are enabling the rapid
proliferation of new solutions.
Through our research and development efforts, we strive to use the most
current technology to ensure that we provide systems that meet the needs of an
ever-changing marketplace. We believe that our future success will depend in
large part on our ability to continue to maintain and enhance our software
applications, wireless technologies and other proprietary technology while
simultaneously improving the performance, features and reliability of our
systems. The success of our new system introductions will be dependent on
several factors, including:
. identification of a realizable market opportunity
. definition of new systems
. timely completion and introduction of new systems
. market acceptance of our systems
To enable us to develop new systems more rapidly, we intend to leverage the
modular nature of our system architecture. In addition, we intend to rely on
our alliances with strategic partners for additional research and development
resources to create solutions that interface with their products.
In the first quarter of 1999 and the years 1998, 1997 and 1996, expenses
attributable to research and development totaled $551,000, $2.2 million, $1.7
million and $957,000, respectively. We believe that the timely development of
new and enhanced systems and technologies is necessary to remain competitive in
the marketplace. Accordingly, we intend to continue recruiting and hiring
experienced development personnel, as well as making other investments in
research and development.
41
<PAGE>
Competition
Currently, we are not aware of any product offerings directly competitive to
our systems. Our systems compete primarily with traditional methods of patient
monitoring, such as direct patient oversight, monitoring through wired systems
and voice communications. If we are successful in establishing a need for our
systems, we expect that additional entrants will be drawn into our market. In
addition, there is the possibility that one or more of our strategic partners
or other medical equipment manufacturers may decide to develop products that
directly compete with our systems. We may have difficulty competing with these
potential competitors because many of them may have longer operating histories,
significantly greater resources, better name recognition and a larger installed
base of products and technologies.
Our systems compete on the basis of cost-efficiency, enhanced mobility,
features, functionality and price. We believe we compete favorably with regard
to each of these factors. To maintain and improve our competitive position, we
must:
. continue to prove the benefits of our systems
. develop new and improved technologies
. market to hospitals, healthcare professionals and consumers
. maintain and continue to create alliances with key manufacturers of
complementary medical equipment
Patents and Intellectual Property Rights
We rely on a combination of patent, copyright, trademark and trade secret
laws and other agreements with employees and third parties to establish and
protect our proprietary rights. Currently, we own three patents, two of which
were filed with the U.S. Patent and Trademark Office (PTO) in 1993 and one in
1996, have one pending patent application that was filed with the PTO in 1996,
and license two patents, filed with the PTO in 1991 and 1995, and certain trade
secrets and other intellectual property rights from third parties. The duration
of patents filed with the PTO is 20 years from the date of filing. Our patents
cover specific technology related to the wireless transmission of waveforms.
Our strategic partners have also disclosed and/or licensed to us source code or
output protocols, which are proprietary to their medical equipment and
monitoring systems. We believe that no other company in our industry currently
has the access to the breadth of medical monitoring equipment and source/output
code that we do.
We require each of our employees and consultants, including our executive
officers, to enter into standard agreements containing provisions requiring
confidentiality of proprietary information and assignment to us of all
inventions made during the course of their employment. We also enter into
nondisclosure agreements and limit access to and distribution of our software,
documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our systems or may independently develop
technologies that are substantially equivalent to ours. We cannot be certain
that our patent application will be allowed or that our existing patents will
be held valid and enforceable by a court if we desire to enforce them. In
addition, employees or other parties may breach confidentiality agreements or
other contracts we have entered, and we may not be able to effectively enforce
our rights in the event of such breaches.
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<PAGE>
Government Regulation
Federal Communications Commission
In the U.S., we are subject to various FCC rules and regulations. The FCC
requires that wireless access devices meet various standards, including safety
standards with respect to human exposure to electromagnetic radiation and basic
signal leakage. The FCC has approved our radio frequency system components. In
addition, we currently hold an FCC license on 26 frequencies in the UHF
spectrum.
We are also subject to regulation under the Telecommunications Act of 1996
and other federal, state and international laws and regulations. Additional
laws and regulations may also be adopted with respect to wireless
communications networks covering issues such as user privacy and quality of
products and services. The adoption of any additional laws or regulations, or
our failure to comply with existing laws and regulations, may impede the growth
of wireless communications networks, decrease the demand for our systems and
have a material adverse effect on our business, financial condition and results
of operations.
Food and Drug Administration
The FDA is responsible for assuring the safety and effectiveness of medical
devices under the Federal Food, Drug and Cosmetic Act. Our StatView, MobileView
and AlarmView systems are subject to regulation by the FDA because they have
been defined as medical devices used in the diagnosis and treatment of disease.
Under FDA regulations, medical devices are classified into one of three
classes on the basis of the controls deemed by the FDA to be necessary to
reasonably ensure their safety and effectiveness: Class I, Class II and Class
III. Class I requires only general controls such as labeling, pre-market
notification and adherence to good manufacturing practices. Class II requires
general and specific controls such as performance standards and post-market
surveillance. Class III requires pre-market approval by the FDA. The FDA has
classified our StatView system as a Class III product. MobileView is currently
classified as a Class II product, grandfathered under the Hewlett-Packard
PalmVue classification. We intend to submit our AlarmView system for FDA
approval as a Class III product during August 1999.
Before we can market systems that are classified as Class III products, we
must obtain pre-market notification clearance under Section 510(k) of the
Federal Food, Drug, and Cosmetic Act. In addition, material changes to our
systems may also be subject to FDA review and clearance prior to marketing or
sale in the U.S. The FDA will typically grant 510(k) clearance if we can
establish that our device is "substantially equivalent" to a legally marketed
Class I or II medical device or to a Class III device for which the FDA has not
yet required the submission of a pre-market approval application.
The process of obtaining 510(k) clearance can be expensive and time-
consuming, and may require the submission of extensive supporting data. If we
fail to obtain 510(k) clearance for any of our new or modified systems, or if
the 510(k) process is extended for a considerable length of time, the
commencement of commercial sales of our such systems will be delayed
substantially or indefinitely.
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<PAGE>
Healthcare Regulations
As a provider of healthcare related systems, we are also subject to
extensive and frequently changing federal regulations that govern the
licensing, conduct of operations and other aspects of our business. Federal
certification and licensing programs establish standards for day-to-day
operation of our research and manufacturing facilities. Regulatory agencies
verify our compliance with such standards through periodic inspections and
required participation in proficiency testing programs. Although we have been
found to be in compliance with all such standards to date, our facilities may
not pass future inspections conducted to ensure compliance with federal or any
other applicable licenses or certification laws.
Patient Medical Record Confidentiality Laws
The confidentiality of patient records and the circumstances under which
records may be released for transmission through our systems are subject to
substantial regulation by state governments. These state laws and regulations
govern both the disclosure and the use of confidential patient medical record
information. Although compliance with these laws and regulations is at present
principally the responsibility of the hospital, physician or other healthcare
provider, regulations governing patient confidentiality rights are evolving
rapidly. Additional legislation governing the dissemination of medical record
information has been proposed at both the state and federal level. This
legislation may require holders of confidential patient information to
implement security measures that could require substantial expenditures.
Changes to state or federal laws could materially restrict the ability of
healthcare providers to transmit information from patient records using our
systems.
Employees
As of March 31, 1999, we had 59 employees, including five in manufacturing,
21 in sales and marketing, five in services and support, 15 in research and
development and 13 in general and administrative functions. We believe that our
employee relations are good.
Facilities
Our principal executive offices and final assembly and testing facilities
are located in Bothell, Washington where we lease approximately 17,000 square
feet under a lease that expires in June 2004. We also maintain a facility used
primarily as an advanced development laboratory in approximately 4,700 square
feet of space in Oklahoma City, Oklahoma under a lease that expires on December
31, 2000.
Legal Proceedings
We are not a party to any material legal proceedings.
44
<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of Data Critical as of July 31, 1999
are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Chief Scientist and Chairman of the
David E. Albert, M.D............. 44 Board
President, Chief Executive Officer and
Jeffrey S. Brown................. 39 Director
Bradley R. Harlow................ 42 Vice President of Business Development
and General Manager, International
Craig S. Kairis.................. 40 Vice President of Sales
Vice President and Chief Financial
Michael E. Singer................ 37 Officer
Vice President and Chief Information
Robert W. Benson................. 43 Officer
Richard L. Earnest (1)(2)........ 56 Director
Ronald H. Kase (2)............... 40 Director
George M. Middlemas (1)(2)....... 52 Director
David B. Swedlow (1)............. 52 Director
</TABLE>
- --------
(1) Member of the audit committee
(2) Member of the compensation committee
David E. Albert, M.D. founded Data Critical in October 1992 and serves as
Chief Scientist and Chairman of the Board of Data Critical. Prior to founding
Data Critical, Dr. Albert served as a consultant to Hewlett-Packard's
Cardiology Business Unit from 1990 to 1992. Dr. Albert was president and
founder of Corazonix Corp. from 1984 to 1989, and from 1984 to 1987 served as a
consultant to Quinton Instrument Co. in Seattle. Dr. Albert holds an A.B.
degree from Harvard University and an M.D. from Duke University.
Jeffrey S. Brown has served as President and Chief Executive Officer of Data
Critical since September 1994. Mr. Brown has also served as a director of Data
Critical since September 1994. Prior to joining Data Critical, he served as
Vice President of Sales and Marketing/Business Development for McCaw Wireless
Data where he was responsible for the general management of this start-up
business unit from January 1993 to September 1994. From June 1992 to January
1993, Mr. Brown was Director of Product Development at McCaw Cellular
Engineering where he was responsible for developing key wireless products,
including packet and circuit switched data and advanced voice service products.
From 1990 to June 1992, Mr. Brown was Director of Marketing Operations and
National Accounts at PacTel Cellular, a subsidiary of Pacific Telesys. Mr.
Brown has also held sales and marketing positions at Pacific Bell, a subsidiary
of Pacific Telesys, from 1984 to 1990, and at AT&T from 1982 to 1984. Mr. Brown
earned a B.A. in political science from the University of California at
Berkeley and an M.B.A. from Golden Gate University.
Bradley R. Harlow joined Data Critical as Vice President and General Manager
of Data Critical in August 1997 and became Vice President of Business
Development and General Manager, International in July 1999. Prior to joining
Data Critical, he served as Vice President of Worldwide Sales and Marketing at
Instromedix, Inc., a producer of ambulatory products that transmit data over
phone lines, from 1991 until 1997. From 1989 to 1991, he served as General
Manager of the Avionics/Marine department at Icom America Communications
Company. Mr. Harlow also held management positions at Spacelabs/ATL Ultrasound
from 1982 to 1989 and at Kaiser Industries from 1979 to 1982. In addition,
Mr. Harlow is a faculty advisor and instructor at the Marshall School of
Business at the University of Southern California, Los Angeles. Mr. Harlow
earned both a B.S. in
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<PAGE>
accounting from Oregon State University and an M.B.A. from Albers School of
Business at Seattle University. Mr. Harlow also serves as a director of
Prevention Concepts Incorporated, a private ultrasound cardiac risk analysis
company.
Craig S. Kairis joined Data Critical as Vice President of Business
Development in February 1995 and became Vice President of Sales in July 1999.
Prior to joining Data Critical, he served as director of sales at McCaw
Wireless Data, from January 1994 until February 1995. Prior to his role at
McCaw, Mr. Kairis served in sales, marketing, channel development and systems
integration positions at IBM from July 1980 until December 1993. Mr. Kairis
holds a B.A. degree in business from the University of Washington.
Michael E. Singer has served as Vice President and Chief Financial Officer
of Data Critical since June 1999. Prior to joining Data Critical, from 1992 to
1999 Mr. Singer was an investment banker focusing on mergers & acquisitions and
corporate financings for health care companies. During that period of time, Mr.
Singer served as a principal at Banc of America/NationsBanc Montgomery
Sercuities from 1998 to 1999, vice president at Alex, Brown & Sons from 1997 to
1998 and vice president at Wolfensohn & Co., Incorporated from 1992 to 1997.
From 1990 to 1992, Mr. Singer worked at Union Bank of Switzerland in Zurich,
Switzerland in global corporate and institutional banking, and in 1986 at the
Commission of the European Communities in Brussels, Belgium. Mr. Singer holds a
Ph.D. degree from the London School of Economics, a M.A. degree from the
Maxwell School of Public Affairs, Syracuse University and a B.A. degree from
Washington and Lee University.
Robert W. Benson joined Data Critical as Chief Financial Officer in July
1997 and became Vice President and Chief Information Officer in June 1999.
Prior to joining Data Critical, he served as executive vice president and chief
financial officer of Stellar One Corp., a digital telecommunications equipment
and software developer, from 1994 until 1997. Prior to his role at Stellar One
Corp., Mr. Benson was chief financial officer at Special Devices, Inc., a
manufacturer of pyrotechnic devices for the automotive and aerospace
industries, from 1991 until 1994. Mr. Benson holds a B.S. degree in accounting
from California State University.
Richard L. Earnest has served as a director of Data Critical since May 1997.
Since December 1998, Mr. Earnest has been the mayor of the city of Del Mar,
California. From 1995 to 1997, Mr. Earnest served as chief executive officer of
Tudor Publishing Company, a private educational software company. From 1993 to
1995, Mr. Earnest was chief executive officer at Demax Software, Inc., a VAX
and UNIX security products company. From 1991 to 1993, Mr. Earnest was the
chief executive officer at AdvantEDGE Systems Group, a software re-engineering
company. From 1989 to 1991, Mr. Earnest was chief executive officer at
Peregrine Systems. From 1983 to 1989, he was the president at VM Software, Inc.
Mr. Earnest is a director of Security Dynamics Technologies Inc., a computer
network security products company, and also serves as a director on the board
of various private companies.
Ronald H. Kase has served as a director of Data Critical since March 1998.
Since January 1991, Mr. Kase has been employed by New Enterprise Associates, a
venture capital investment firm, and became a general partner in May 1995. Mr.
Kase also serves as a director of Endocardial Solutions and several privately-
held healthcare companies.
George M. Middlemas has served as a director of Data Critical since February
1995. Since 1991, Mr. Middlemas has been a managing general partner of Apex
Investment Partners, a Chicago-based
46
<PAGE>
venture capital firm that focuses on telecommunications, information technology
and software investments. Mr. Middlemas earned an M.B.A. from Harvard
University and is a certified public accountant. Mr. Middlemas is a director of
Security Dynamics Technologies Inc., a computer network security products
company, and Tut Systems, Inc., a telecommunications products company, and also
serves as a director on the board of various private companies.
David B. Swedlow has served as a director of Data Critical since July 1998.
Dr. Swedlow founded and has been a principal of The Swedlow Group, a medical
technologies consulting firm, since April 1998. From 1987 to April 1998, Dr.
Swedlow was Senior Vice President of Medical Affairs and Technology Development
at Nellcor Puritan Bennett. Dr. Swedlow earned a B.S. from the Massachusetts
Institute of Technology and an M.D. from Harvard Medical School.
Board of Directors
We currently have authorized seven directors. Our board of directors
currently has one vacancy. The executive officers serve at the discretion of
the board of directors. There are no family relationships among any of our
directors or executive officers.
Our board of directors will be divided into three classes effective upon the
closing of this offering. The class I directors, Jeffrey S. Brown, Richard L.
Earnest and one director to be named to fill an existing vacancy, will serve an
initial term until the 2000 annual meeting of stockholders, the class II
directors, David B. Swedlow and George M. Middlemas, will serve an initial term
until the 2001 annual meeting of stockholders, and the class III directors,
David E. Albert and Ronald H. Kase, will serve an initial term until the 2002
annual meeting of stockholders. Each class will be elected for three-year terms
following its respective initial term.
Director Compensation
Directors are not compensated for their services. We reimburse directors for
reasonable travel expenses relating to their attendance at each meeting. Non-
employee directors are eligible to participate in the 1999 Directors' Stock
Option Plan. Directors who are employees are eligible to participate in our
1999 Stock Option Plan and our 1999 Employee Stock Purchase Plan. Under our
1994 Stock Option Plan, Mr. Brown was granted an option to purchase 208,832
shares of common stock at an exercise price of $0.80 per share in September
1994, an option to purchase 41,167 shares of common stock at an exercise price
of $1.60 per share in November 1997 and an option to purchase 75,000 shares of
common stock at an exercise price of $2.40 per share in May 1998. Mr. Earnest
was granted an option to purchase 12,500 shares of common stock under our 1994
Stock Option Plan at $0.80 per share in May 1997. Mr. Middlemas was granted an
option to purchase 12,500 shares of common stock under our 1994 Stock Option
Plan at an exercise price of $1.60 per share in February 1998. Mr. Kase was
granted an option to purchase 12,500 shares of common stock under our 1994
Stock Option Plan at an exercise price of $1.60 per share in March 1998.
Mr. Swedlow was granted an option to purchase 3,125 shares of common stock
under our 1994 Stock Option Plan at an exercise price of $2.40 per share in
July 1998. These options vest over a four-year period.
Committees of the Board of Directors
In April 1995, the board of directors established the audit committee and in
December 1994, the board of directors established the compensation committee.
The audit committee reviews our annual
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<PAGE>
audit and meets with our independent auditors to review our internal controls
and financial management practices. The board of directors' audit committee
currently consists of Messrs. Earnest, Middlemas and Swedlow. The compensation
committee recommends to the board of directors compensation for our executive
officers and administers our stock purchase and stock option plans. The
compensation committee currently consists of Messrs. Earnest, Kase and
Middlemas.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between the board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
Executive Compensation
The following table lists the compensation received for services rendered to
Data Critical for the fiscal year ending December 31, 1998 by our chief
executive officer and each of the other four most highly compensated executive
officers, each of whose aggregate compensation during our last fiscal year
exceeded $100,000. Throughout the rest of the prospectus, we will refer to the
following officers as our named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual
Compensation Securities
---------------- Underlying
Name and Principal Position(s) Salary Bonus Options
------------------------------ -------- ------- ------------
<S> <C> <C> <C>
David E. Albert, M.D. ........................... $121,042 $25,000 --
Chief Scientist and Chairman of the Board
Jeffrey S. Brown................................. 180,000 40,000 75,000
President and Chief Executive Officer
Bradley R. Harlow................................ 141,875 12,731 75,000
Vice President of Business Development and
General Manager, International
Craig S. Kairis.................................. 111,458 5,000 32,500
Vice President of Sales
Robert W. Benson................................. 119,583 23,000 --
Vice President and Chief Information Officer
</TABLE>
- --------
This table excludes perquisites and other personal benefits which did not
exceed the lesser of $50,000 or 10% of the total annual compensation of such
officers.
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<PAGE>
Stock Option Grants
The following table provides summary information regarding stock options
granted to the named executive officers during the year ended December 31,
1998, and consists of options granted under our 1994 Stock Option Plan. The
option term for each option listed below is seven years. The 5% and 10% assumed
annual rates of compounded stock price appreciation are mandated by SEC rules.
There can be no assurance that the actual stock price appreciation over the
seven year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the common stock appreciates over the
option term, no value will be realized from the option grants made to the named
officers.
Option Grants in 1998
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration --------------------------
Name Granted Fiscal Year per Share Date 5% 10%
- ---- ---------- ------------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
David E. Albert, M.D.... -- -- -- -- -- --
Jeffrey S. Brown........ 75,000 23.6% $2.40 9/28/05 $ 73,278 $ 170,769
Bradley R. Harlow....... 75,000 23.6% 2.40 9/28/05 73,278 170,769
Craig S. Kairis......... 32,500 10.2% 2.40 9/28/05 31,754 74,000
Robert W. Benson........ -- -- -- -- -- --
</TABLE>
Option Exercises and Holdings
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by each of the named
executive officers as of December 31, 1998. No options were exercised by the
named executive officers during the year ended December 31, 1998.
1998 Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
December 31, 1998 December 31, 1998
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David E. Albert, M.D....... -- -- -- --
Jeffrey S. Brown........... 219,123 105,876 $ $
Bradley R. Harlow.......... 37,500 112,500
Craig S. Kairis............ 21,250 41,250
Robert W. Benson........... 15,625 46,875
</TABLE>
Value is determined by subtracting the exercise price from the proposed
initial public offering price of the common stock, multiplied by the number of
shares underlying the options.
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<PAGE>
Employment Agreements
None of our named executive officers has an employment agreement with Data
Critical.
In June 1999, we entered into an employment agreement with Michael Singer,
our Chief Financial Officer, for a period of five years. Until June 2000, we
may terminate the agreement only for cause. Thereafter, we may terminate the
agreement without cause upon 30 days' prior written notice. Mr. Singer may
terminate the agreement at any time without cause upon 30 days' prior written
notice. The agreement provides for an annual base salary of $160,000, with
increases and/or bonuses in the discretion of our board of directors, and
provides that Mr. Singer shall be entitled to one year's severance if he is
terminated without cause. In connection with his employment, we have agreed to
grant Mr. Singer 7,500 shares of common stock and options to purchase a total
of 175,000 shares of common stock. We have also agreed to reimburse Mr. Singer
for any federal excise "parachute" taxes imposed upon him as a result of
compensation he may receive in connection with a merger, acquisition or other
change of control of Data Critical. The agreement also contains a non-
competition agreement, which provides that for a period of one year after
termination of Mr. Singer's employment, he will not compete with Data Critical
or solicit its customers or employees.
Stock Plans
1999 Stock Option Plan.
Our 1999 Stock Option Plan was adopted by the board of directors and
approved by our stockholders in May 1999. 1,000,000 shares plus an annual
increase in each of the next five years equal to the lesser of 250,000 shares
or two percent of the outstanding shares of common stock on the last day of the
preceding fiscal year of common stock have been reserved for issuance under the
1999 Stock Plan.
The purposes of the 1999 Stock Plan are to attract and retain the best
available personnel at Data Critical, to provide additional incentives to our
employees and consultants and to promote the success of our business. The 1999
Stock Plan provides for the grant of incentive stock options to employees and
directors who are employees, and nonstatutory stock options to employees, non-
employee directors and consultants. To the extent an option holder would have
the right in any calendar year to exercise for the first time one or more
incentive stock options for shares having an aggregate fair market value (under
all plans of Data Critical and determined for each share as of the date the
option to purchase the shares was granted) in excess of $100,000, any such
excess options shall be treated as nonstatutory stock options. If not
terminated earlier, the 1999 Stock Plan will terminate in May 2009.
The 1999 Stock Plan is administered by the compensation committee of the
board of directors. The administrator determines the terms of options granted
under the 1999 Stock Plan, including the number of shares subject to the
option, exercise price, term and exercisability of the options. The exercise
price of all incentive stock options granted under the 1999 Stock Plan must be
at least equal to the fair market value of the common stock of Data Critical on
the date of grant. The exercise price of any incentive stock option or
nonstatutory stock option granted to an option holder who owns shares
representing more than 10% of the total combined voting power of all classes of
outstanding capital stock of Data Critical must equal at least 110% of the fair
market value of the common stock on the date of grant. The exercise price of
all nonstatutory stock options must equal at least 85% of the fair market value
of the common stock on the date of grant if required by applicable law. Payment
of the exercise price may be made in cash or other consideration as determined
by the administrator.
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<PAGE>
Options granted under the 1999 Stock Plan generally become exercisable at
the rate of 25% of the total number of shares subject to the options 12 months
after the date of grant, and 25% of the total number of shares subject to the
options every 12 months thereafter.
In the event of the sale of all or substantially all of the assets of Data
Critical, or the merger of Data Critical with another corporation, each option
will be accelerated so that 50% of the unvested shares covered by each option,
up to a maximum of 50% of all unvested shares covered by all options held by
the option holder, shall become fully vested. The administrator has the
authority to amend or terminate the 1999 Stock Plan as long as such action does
not adversely affect any outstanding option and provided that stockholder
approval shall be required for an amendment to increase the number of shares
subject to the 1999 Stock Plan, to change the designation of the class of
persons eligible to be granted options, or to change the limitation on grants
to individual employees.
1994 Stock Option Plan.
Our 1994 Stock Option Plan was adopted by the board of directors and
approved by the stockholders in December 1994. 950,000 shares of common stock
have been reserved for issuance under the 1994 Stock Plan. As of March 31,
1999, options to purchase 2,843 shares of common stock had been exercised,
options to purchase a total of 886,371 shares at a weighted average exercise
price of $1.58 per share were outstanding and 60,786 shares remained available
for future option grants. After the completion of this offering, no further
options will be granted under the 1994 Plan.
The 1994 Stock Plan provides for the grant of incentive stock options to
employees and directors who are employees, and nonstatutory stock options to
employees, non-employee directors and consultants. If not terminated earlier,
the 1994 Stock Plan will terminate in December 2001.
The 1994 Stock Plan may be administered by the board of directors or a
committee of the board of directors. The 1994 Stock Plan is currently
administered by the compensation committee of the board of directors. The
administrator determines the terms of options granted under the 1994 Stock
Plan, including the number of shares subject to the option, exercise price,
term and exercisability. The term of options may not exceed seven years, or
five years in the case of an incentive stock option granted to a 10%
stockholder. Options granted under the 1994 Stock Plan generally become
exercisable at the rate of 25% of the total number of shares subject to the
options 12 months after the vesting commencement date, and 25% of the total
number of shares subject to the options every 12 months thereafter.
In the event of the sale of all or substantially all of our assets, or the
merger of Data Critical with another corporation, then each option may be
assumed or an equivalent option substituted by the successor corporation. The
administrator may instead elect to accelerate the exercisability of each option
in its discretion. The administrator has the authority to amend or terminate
the 1994 Stock Plan as long as such action does not adversely affect any
outstanding option. Stockholder approval is required for an amendment to
increase the number of shares subject to the 1994 Stock Plan, to change the
designation of the class of persons eligible to be granted options, or to
change the limitation on grants to individual employees.
1999 Directors' Stock Option Plan.
1999 Directors' Stock Option Plan was adopted by the board of directors and
approved by the stockholders in May 1999. 100,000 shares of common stock have
been reserved for issuance under
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<PAGE>
the Directors' Plan. The Directors' Plan provides for the grant of nonstatutory
stock options to non-employee directors of Data Critical. The Directors' Plan
is designed to work automatically without administration; however, to the
extent administration is necessary, it will be performed by the board of
directors. To the extent that conflicts of interest arise, it is expected that
such conflicts will be addressed by having any interested director abstain from
both deliberations and voting regarding matters in which such director has a
personal interest.
The Directors' Plan provides that each person who is or becomes a non-
employee director of Data Critical will be granted a nonstatutory stock option
to purchase 15,000 shares of common stock on the later of the date on which the
option holder first becomes a non-employee director of Data Critical or the
date of the closing of this offering. Thereafter, on the date of our annual
stockholders' meeting each year, each non-employee director of Data Critical
will be granted an additional option to purchase 5,000 shares of common stock
if, on such date, he or she has served on our board of directors for at least
six months.
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one non-employee director, but does
specify the number of shares that may be included in any grant and the method
of making a grant. No option granted under the Directors' Plan is transferable
by the option holder other than by will or the laws of descent or distribution
or pursuant to a qualified domestic relations order, and each option is
exercisable, during the lifetime of the option holder, only by such option
holder. The Directors' Plan provides that each option shall be fully vested and
exercisable on the date of grant. If a non-employee director ceases to serve as
a director for any reason other than death or disability, he or she may, but
only within 90 days after the date he or she ceases to be a director of Data
Critical, exercise options granted under the Directors' Plan. If he or she does
not exercise such option within such 90 day period, such option shall
terminate. The exercise price of all stock options granted under the Directors'
Plan shall be equal to the fair market value of a share of our common stock on
the date of grant of the option. Options granted under the Directors' Plan have
a term of ten years.
Upon a change in control of Data Critical, each non-employee director shall
have either a reasonable time within which to exercise their options prior to
the effectiveness of such change in control, at the end of which time the
option shall terminate, or the right to exercise the option, or receive a
substitute option with comparable terms, as to an equivalent number of shares
of stock of the corporation succeeding Data Critical in the change in control.
The board of directors may amend or terminate the Directors' Plan but must
obtain stockholder consent if required by any applicable law. If not terminated
earlier, the Directors' Plan will have a term of ten years.
1999 Employee Stock Purchase Plan.
Data Critical's 1999 Employee Stock Purchase Plan was adopted by the board
of directors and approved by the stockholders in May 1999. 100,000 shares plus
an annual increase in each of the next five years equal to the lesser of
150,000 shares or one percent of the outstanding shares of common stock on the
last day of the preceding fiscal year of common stock have been reserved for
issuance under the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code, will be implemented by a series of overlapping offering
periods of 24 months in duration, with new offering periods (other than the
first offering period) commencing on February 1 and August 1 of each year. Each
offering period will consist of four consecutive purchase periods of six months
in
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<PAGE>
duration. The initial offering period is expected to commence on the date of
this offering and end on July 31, 2001; the initial purchase period is expected
to end on January 31, 2000. The Purchase Plan will be administered by the
compensation committee. Employees, including officers and employee directors,
of Data Critical, or of any majority-owned subsidiary designated by the board
of directors, are eligible to participate in the Purchase Plan if they are
employed by Data Critical or any such subsidiary for at least 20 hours per week
and more than five months per year. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, which may not be
less than 1% and not more than 20% of an employee's compensation, at a price
equal to the lower of 85% of the fair market value of Data Critical's common
stock at the beginning of each offering period or at the end of each purchase
period. Employees may end their participation in the offering at any time
during the offering period, and participation ends automatically on termination
of employment with Data Critical. If not terminated earlier, the Purchase Plan
will have a term of 20 years.
The Purchase Plan provides that in the event of a merger of Data Critical
with or into another corporation or a sale of all or substantially all of Data
Critical's assets, each right to purchase stock under the Purchase Plan will be
assumed or an equivalent right substituted by the successor corporation unless
the board of directors shortens the offering period so that employees' rights
to purchase stock under the Purchase Plan are exercised prior to the merger or
sale of assets. The board of directors has the power to amend or terminate the
Purchase Plan as long as that action does not adversely affect any outstanding
rights to purchase stock under the Purchase Plan.
401(k) Plan
Data Critical provides a tax-qualified employee savings and retirement plan,
commonly known as a 401(k) plan, which covers our eligible employees. Pursuant
to the 401(k) plan, employees may elect to reduce their current annual
compensation up to the lesser of 15% or the statutorily prescribed limit, which
is $10,000 in calendar year 1999, and have the amount of the reduction
contributed to the 401(k) plan. The 401(k) plan is intended to qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code, so that contributions
by our employees to the 401(k) plan, and income earned on plan contributions,
are not taxable to employees until withdrawn from the 401(k) plan, and so that
contributions will be deductible by Data Critical when made. The trustee of the
401(k) plan invests the assets of the 401(k) plan in the various investment
options as directed by the participants.
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, our restated
certificate of incorporation limits the personal liability of its officers and
directors to the maximum extent permitted by Delaware law for breach or alleged
breach of their fiduciary duties. Delaware law provides that directors of a
corporation will not be personally liable for monetary damages for breach of
their fiduciary duties as directors, except for liability for
. any breach of the director's duty of loyalty to Data Critical or its
stockholders
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
. unlawful payments of dividends or unlawful stock repurchases or
redemptions or other distributions
. any transaction from which a director derives an improper personal
benefit
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<PAGE>
In addition, our bylaws provide that Data Critical is required to indemnify
its officers and directors to the fullest extent permitted by law, including in
those circumstances in which indemnification would otherwise be discretionary.
Data Critical is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified. Data Critical has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in Delaware law. The
indemnification agreements require Data Critical to indemnify such officers and
directors against liabilities that may arise by reason of their status or
service as officers and directors, other than liabilities arising from willful
misconduct of a culpable nature, to advance their expenses incurred as a result
of any proceeding against them as to which they could be indemnified, and to
obtain directors' and officers' insurance if available on reasonable terms.
Data Critical has also obtained directors' and officers' liability insurance.
At present, Data Critical is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of
Data Critical in which indemnification would be required or permitted. Data
Critical is not aware of any threatened litigation or proceeding that might
result in a claim for such indemnification. Data Critical believes that its
charter provisions and indemnification agreements are necessary to attract and
retain qualified persons as directors and officers.
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<PAGE>
CERTAIN TRANSACTIONS
On July 10, 1996, Data Critical entered into a Product Development Agreement
with Nomadics, Inc. and Colin Cumming, the President of Nomadics, under which
Nomadics has agreed to perform engineering services, and we agreed to provide
operating capital pursuant to a note in the principal amount of $50,000 with an
interest rate of 8.0% per annum, due July 10, 2000. The outstanding principal
due under this note is convertible at our election into up to a 3.6% equity
interest in Nomadics at any time prior to July 10, 2000. The largest aggregate
amount outstanding under the loan during fiscal year 1998 was $59,878, and the
amount outstanding as of March 31, 1999 was $60,878. As of the date of this
prospectus, Data Critical owns 130,208 shares of common stock of Nomadics
representing a 10.8% ownership share. David E. Albert, M.D., our Chief
Scientist and Chairman of the Board, formerly served on the board of directors
of Nomadics.
From September to November of 1996, Data Critical sold an aggregate of
1,187,809 shares of Series C preferred stock for $3.20 per share. Apex
Investment Fund II, L.P. whose general partner is George M. Middlemas, a
director of Data Critical, purchased 181,885 shares, and ML Oklahoma and
Kimberlin Family Partners, L.P., each of which beneficially owns more than five
percent of our common stock, purchased 32,500 shares and 317,485 shares,
respectively in the Series C financing. Also, Mr. Middlemas, individually,
purchased 62,500 shares.
On November 4, 1997, Data Critical and 15 lenders entered into a bridge loan
agreement under which Data Critical issued bridge notes in the principal amount
of $2,120,482 with an interest rate of 9.0% per annum, due upon November 1,
1999 or upon the close of a private or public offering sale of equity
securities by Data Critical resulting in cash proceeds of at least $4,000,000.
Pursuant to the bridge loan agreement, common stock purchase warrants were
granted to the lenders which permit the lenders to purchase an aggregate of
198,792 shares of common stock at an exercise price of $1.60 per share at any
time on or before November 1, 2002. In March 1998, all lenders holding bridge
notes issued by Data Critical under the bridge loan agreement tendered them as
payment for the purchase of 530,119 shares of Series D preferred stock at a
price of $4.00 per share. Apex Investment Fund II, L.P. loaned us $302,208,
which converted into 75,552 shares of Series D preferred stock, and received a
warrant to purchase 28,332 shares of common stock. Kimberlin Family Partners,
L.P. loaned us $1,000,000, which converted into 250,000 shares of Series D
preferred stock, and received a warrant to purchase 93,750 shares of common
stock.
From March to June of 1998, Data Critical sold an aggregate of 2,296,734
shares of its Series D preferred stock for $4.00 per share. Apex Investment
Fund II, L.P., purchased 75,552 shares, New Enterprises Associates VII, L.P.,
NEA Presidents Fund, L.P. and NEA Ventures 1998, L.P. purchased 1,075,000,
18,750 and 1,250 shares, respectively and Ronald L. Kase, one of our directors
is a general partner of each. Kimberlin Family Partners, L.P. purchased 250,000
shares. Acacia Ventures Partners, L.P. and South Pointe Venture Partners, L.P.
purchased 451,250 and 48,750 shares, respectively, and together beneficially
own more than five percent of our common stock. Mr. Middlemas, individually,
purchased 25,000 shares. Michael Singer, our Chief Financial Officer, purchased
50,000 shares.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table summarizes information regarding the beneficial
ownership of our common stock as of March 31, 1999 and as adjusted to reflect
the sale of the common stock in this offering and the conversion of all
outstanding shares of preferred stock into shares of common stock by:
. each person known by us to own beneficially more than five percent of
our common stock
. each of our directors and named executive officers and
. all of our directors and executive officers as a group.
Except pursuant to applicable community property laws or as otherwise noted
below this table, we believe each stockholder identified in the table possesses
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by such stockholder. The number of shares
beneficially owned by a person includes all shares the individual has the right
to acquire within 60 days of March 31, 1999. Unless otherwise indicated, the
address of each stockholder identified below is: c/o Data Critical Corporation,
19820 North Creek Parkway, Suite 100, Bothell, Washington 98011.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
Number of Shares ------------------------------
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
<S> <C> <C> <C>
Ronald H. Kase
New Enterprise Associates
VII LP(1).................. 1,098,125 17.4% %
2490 Sand Hill Road
Menlo Park, CA 94025
Kimberlin Family Partners,
L.P.
Oshkim Limited Partners
Oshkim Family Partners
Spencer Trask Holdings,
Inc.(2).................... 994,096 15.4
535 Madison Ave., 18th
Floor
New York, NY 10022
George M. Middlemas
Apex Investment Fund II,
L.P.(3).................... 716,724 11.4
233 South Wacker Dr., Suite
9500
Chicago, IL 60606
ML Oklahoma Venture
Partners, Limited
Partnership................ 553,125 8.5
10830 E. 45th St., Suite
307
Tulsa, OK 74146
Acacia Venture Partners,
L.P........................ 500,000 7.9
South Pointe Venture
Partners, L.P.(4)
101 California Street,
Suite 3160
San Francisco, CA 94111
David E. Albert, M.D........ 525,937 8.3
100 North Broadway, Suite
2200
Oklahoma City, OK 73102
Jeffrey S. Brown(5)......... 237,873 3.4
Bradley R. Harlow(6)........ 75,000 1.2
Robert W. Benson(7)......... 15,625 * *
Craig S. Kairis(8).......... 35,625 * *
Richard L. Earnest(9)....... 6,250 * *
2194 San Dieguito Drive
Del Mar, CA 32014
All directors and executive
officers as a group
(10 persons)(10)........... 2,711,159 40.4% %
</TABLE>
56
<PAGE>
- --------
* Less than one percent of the outstanding shares of common stock.
(1) Includes 1,075,000 shares held by New Enterprise Associates VII, Limited
Partnership; 18,750 shares held by NEA Presidents Fund, L.P.; 1,250 shares
held by NEA Ventures 1998, L.P. Ronald H. Kase, one of our directors, is
general partner of each of these entities, and as such may be deemed to
share voting and investment power with respect to such shares. Mr. Kase
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest. Also includes 3,125 shares issuable upon exercise of
options held by Mr. Kase.
(2) Includes 582,906 shares and immediately exercisable warrants to purchase
93,750 shares held by Kimberlin Family Partners, L.P.; 218,875 shares and
immediately exercisable warrants to purchase 45,326 shares held by Oshkim
Limited Partners, L.P.; 39,062 shares held by Oshkim Family Partners; and
immediately exercisable warrants to purchase 14,177 shares held by Spencer
Trask Holdings, Inc.
(3) Includes 663,392 shares and immediately exercisable warrants to purchase
28,332 shares held by Apex Investment Fund II, L.P. George Middlemas, one
of our directors, is general partner of Apex Management Partnership, the
sole general partner of Apex Investment Fund II, L.P., and as such may be
deemed to share voting and investment power with respect to such shares.
Mr. Middlemas disclaims beneficial ownership of such shares, except to the
extent of his pecuniary interest. Also includes 21,875 shares and 3,125
shares issuable upon exercise of options held by Mr. Middlemas.
(4) Includes 451,250 shares held by Acacia Venture Partners, L.P. and 48,750
shares held by South Pointe Venture Partners, L.P.
(5) Includes 237,873 shares issuable upon exercise of options.
(6) Includes 75,000 shares issuable upon exercise of options, which will vest
in full upon the completion of this offering.
(7) Includes 15,625 shares issuable upon exercise of options.
(8) Includes 35,625 shares issuable upon exercise of options.
(9) Includes 6,250 shares issuable upon exercise of options.
(10) Includes 376,623 shares issuable upon exercise of options. Includes
1,758,392 shares and immediately exercisable warrants to purchase 28,332
shares held by entities affiliated with certain directors as described in
footnotes (1) and (3).
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, Data Critical will be authorized to
issue 25,000,000 shares of common stock, $0.001 par value per share, and
3,000,000 shares of undesignated preferred stock, $0.001 par value per share.
All currently outstanding shares of preferred stock will be converted into
common stock upon the closing of this offering. The following description is
intended to be a summary of all material terms of our capital stock, but it
does not describe all provisions of our certificate of incorporation or bylaws
or Delaware law applicable to Data Critical. For a more thorough understanding
of the terms of our capital stock, you should refer to our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus is a part.
Common Stock
As of March 31, 1999, there were 6,307,528 shares of common stock
outstanding held of record by 130 stockholders after giving effect to the
conversion of all outstanding shares of our preferred stock into common stock.
After giving effect to the sale of the shares offered hereby, there will be
shares of common stock outstanding, assuming no exercise of the
underwriter's over-allotment option.
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. Subject to preferences that
may be applicable to any outstanding preferred stock, holders of common stock
are entitled to receive ratably such dividends, if any, as may be declared by
the board of directors out of funds legally available for that purpose. In the
event of a liquidation, dissolution or winding up of Data Critical, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to the prior distribution rights of any
outstanding preferred stock. The common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions available to the common stock. The outstanding shares of common
stock are, and the shares of common stock to be issued upon completion of this
offering will be, fully paid and non-assessable.
Preferred Stock
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into 4,904,689 shares of common stock and automatically
retired. Thereafter, the board of directors has the authority, without further
action by the stockholders, to issue up to 3,000,000 shares of preferred stock,
$0.001 par value, in one or more series, to fix the number of shares
constituting any series and to designate the rights, preferences and privileges
of each series. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of Data Critical without
further action by the stockholders and may also adversely affect the voting
power of the holders of common stock. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock. Data
Critical currently has no plans to issue any shares of preferred stock.
Warrants
As of March 31, 1999, there were 42 warrants outstanding to purchase an
aggregate of 371,471 shares of common stock, with a weighted average exercise
price of $2.34, expiring between April 14, 2000 and November 1, 2002. In
addition, on April 27, 1999, we issued a warrant to purchase 12,500 shares of
Series D preferred stock to a commercial lender in connection with an equipment
lease line.
58
<PAGE>
This warrant expires upon the earlier of April 27, 2006 or five years after our
initial public offering. Generally, each outstanding warrant contains
provisions for the adjustment of the exercise price and the aggregate number of
shares issuable upon the exercise of the warrant in the case of stock
dividends, stock splits, reorganizations, reclassifications, consolidations and
dilutive issuances of securities at prices below the then existing warrant
exercise price.
Purchase Option
There is a purchase option outstanding to purchase 105,000 shares of Series
D preferred stock at an exercise price of $5.00 per share issued to a
commercial lender in connection with a debt facility. This option expires upon
the earlier of April 27, 2006 or five years after our initial public offering.
Registration Rights
Following the closing of this offering, the holders of 5,293,752 shares of
common stock and warrants to purchase 371,471 shares of common stock will have
rights to register those shares under the Securities Act. These rights are
provided under the terms of an agreement between Data Critical and the holders
of the registrable securities. Subject to limitations specified in the
agreement, the holders of at least 40% of the registrable securities then
outstanding may require, on two occasions beginning 120 days after the date of
this offering, that Data Critical use its best efforts to register the
registrable securities for public resale if Form S-3 is not available. If Data
Critical registers any of its common stock either for its own account or for
the account of other security holders, the holders of registrable securities
are entitled to include their shares of common stock in such registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering. The holders of registrable securities then
outstanding may also require Data Critical to register all or a portion of
their registrable securities on Form S-3 when use of such form becomes
available to us, provided that the proposed aggregate selling price net of any
underwriters' discounts or commissions is at least $250,000. We will be
responsible for paying all registration expenses, and the holders of
registrable securities selling their shares will be responsible for paying all
selling expenses.
Delaware Law and Data Critical Charter and Bylaw Provisions
Provisions of Delaware law and our charter documents could make the
acquisition of Data Critical or the removal of incumbent officers and directors
more difficult. These provisions may discourage certain types of takeover
practices and encourage persons seeking to acquire control of Data Critical to
negotiate first. Data Critical believes that the benefits of protecting our
ability to negotiate with a proponent of an unsolicited business combination
proposal outweigh the disadvantages of potentially discouraging such proposals
because negotiation of such proposals could result in terms more favorable to
our stockholders.
Data Critical is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly-held
Delaware corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date that the person became
an interested stockholder unless the business combination or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a business combination includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the stockholder.
Generally, an interested stockholder is a person who, together with affiliates
and associates, owns, or within three years prior, did own, 15% or more of the
59
<PAGE>
corporation's voting stock. These provisions may have the effect of delaying,
deferring or preventing a change in control of Data Critical without further
action by the stockholders.
Our board of directors, without stockholder approval, has the authority
under our certificate of incorporation to issue preferred stock with rights
superior to the rights of the holders of common stock. As a result, preferred
stock could be issued quickly and easily, could adversely affect the rights of
holders of common stock and could be issued with terms calculated to delay or
prevent a change of control or make removal of management more difficult. Our
certificate of incorporation provides that stockholder action can be taken only
at an annual or special meeting of stockholders and may not be taken by written
consent. Our certificate of incorporation also requires that business
combinations--including a merger, share exchange or other disposition of a
substantial part of our assets--be approved by either the holders of two-thirds
of the outstanding shares or by a majority of disinterested directors, in which
case the affirmative vote required shall be the holders of a majority of the
outstanding shares. In addition, our board of directors will be staggered in
three classes effective upon the closing of this offering. See "Management--
Board of Directors". As a result, only one class of directors will be elected
at each annual stockholder meeting, with the other classes continuing for the
remainder of their terms. The bylaws provide that special meetings of
stockholders can be called only by the board of directors, the Chairman of the
Board or the President. Moreover, the business permitted to be conducted at any
special meeting of stockholders is limited to the business stated in the
special meeting notice. The bylaws set forth an advance notice procedure for
the nomination of candidates for election as directors and for business to be
brought before a meeting of stockholders. These provisions in our certificate
of incorporation and bylaws may have the effect of delaying or preventing
changes in control of Data Critical.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Service LLC. The transfer agent's address is 520 Pike Street, Suite
1220, Seattle, WA 98101, and telephone number is (206) 674-3030.
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have [ ] shares of common stock
issued and outstanding, or [ ] shares if the underwriters' over-allotment
option is exercised in full, and [ ] shares issuable upon the exercise of
outstanding warrants and options, in each case as of March 31, 1999 and as
adjusted for the issuance of shares in this offering. The [ ] shares sold in
the offering, plus any shares issued or sold upon exercise of the underwriters'
over-allotment option, will be freely tradable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" as the term is defined in Rule 144 under the Securities Act, may
generally only be resold in compliance with applicable provisions of Rule 144.
We issued the remaining [ ] shares in private transactions. These shares
may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as Rule 144. In
general, under Rule 144, as currently in effect, a person who has beneficially
owned shares for at least one year, including an "affiliate," is entitled to
sell, within any three-month period, a number of "restricted" shares that does
not exceed the greater of one percent (1%) of the then outstanding shares of
common stock, or [ ] shares based on the number of shares expected to be
outstanding after the offering, or the average weekly trading volume during the
four calendar weeks preceding such sale. Sales under Rule 144 are subject to
manner of sale limitations, notice requirements and the availability of current
public information about the issuer. Rule 144(k) provides that a person who is
not deemed an "affiliate" and who has beneficially owned shares for at least
two years is entitled to sell such shares at any time under Rule 144 without
regard to the limitations described above. We estimate that [ ] outstanding
shares fall in this category. Of the 6,307,528 shares outstanding before the
offering, affiliates beneficially own over 36.6% of such shares.
Any employee, officer, director, advisor or consultant who purchased his or
her shares pursuant to a written compensatory plan or contract is entitled to
rely on the resale provision of Rule 701, which permits non-affiliates to sell
their Rule 701 shares without having to comply with the public information,
holding period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this prospectus.
As of March 31, 1999, there were outstanding stock options to purchase an
aggregate of 886,371 shares of common stock, of which 355,855 are presently
exercisable or exercisable within 60 days. These outstanding stock options are
held by our executive officers, directors or employees. Following the offering,
we intend to file a registration statement on Form S-8 covering the 2,086,371
shares of common stock issuable under our stock plans, including shares subject
to outstanding options, thus permitting the resale of such shares in the public
market without restriction under the Securities Act, other than restrictions
applicable to affiliates.
As of March 31, 1999, there were also outstanding warrants to purchase an
aggregate of 371,471 shares of common stock, which are all presently
exercisable. The warrants have a weighted-average exercise price of $2.34 per
share.
We have granted registration rights to many of our stockholders. As of the
date of this prospectus, 5,293,752 of the outstanding shares of common stock
are entitled to these registration rights. These registration rights also
extend to another 371,471 shares not yet issued, for example, shares issuable
upon the exercise of warrants.
61
<PAGE>
We, our executive officers and directors, and many of our stockholders have
agreed that, subject to limited exceptions in which the transferee agrees to
the same restriction, for a period 180 days from the date of this prospectus,
neither we nor they will, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock or
. enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, regardless of whether any of these transactions are to be settled
by the delivery of common stock, or such other securities, in cash or
otherwise.
In addition, during the same period, we have agreed not to file any
registration statement with respect to, and each of our executive officers,
directors and stockholders entitled to registration rights has agreed not to
make any demand for, or exercise any right with respect to, the registration of
any shares of our common stock or any securities convertible into or
exercisable or exchangeable for common stock without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation. The lock-up agreements
by persons other than us cover an aggregate of [ ] shares, and an additional
[ ] shares issuable upon exercise of outstanding options and warrants. Of
the [ ] outstanding shares and shares issuable upon exercise of outstanding
options and warrants not subject to lock-up agreements, only [ ] of such
shares will be freely tradable immediately following the offering under Rule
144 as discussed above. Under Rule 144, the remaining [ ] shares will be
available for resale subject to the limitations of Rule 144 beginning 90 days
following the offering.
Donaldson, Lufkin & Jenrette Securities Corporation has advised us that they
have no intention to waive any of the agreements described in the immediately
preceding paragraph. Donaldson, Lufkin & Jenrette Securities Corporation has
further advised us that in determining whether to grant any requested waiver,
they would consider the market prices and trading volumes for our common stock
at that time, market conditions generally, the size and timing of the requested
waiver and any special circumstances of the requesting person.
Prior to the offering, there has been no public market for our common stock.
We are unable to estimate the number of shares that may be sold in the future
by our existing stockholders or the effect, if any, that sales of shares by
such stockholders, or the availability of shares for sale, will have on the
market price of the common stock prevailing from time to time. Sales of
substantial amounts of common stock by existing stockholders could adversely
affect prevailing market prices.
62
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, dated the
date of this prospectus, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, U.S. Bancorp Piper
Jaffray, Warburg Dillon Read LLC and DLJdirect Inc., have severally agreed to
purchase from us the number of shares of common stock set forth opposite their
names below.
<TABLE>
<CAPTION>
Number
Underwriters of Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..............
U.S. Bancorp Piper Jaffray.......................................
Warburg Dillon Read LLC..........................................
DLJdirect Inc. ..................................................
-------
Total..........................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
included in the offering are subject to approval of certain legal matters by
their counsel and to certain other conditions. The underwriters are obligated
to purchase and accept delivery of all the shares, other than those covered by
the over-allotment option described below, if they purchase any of the shares.
The underwriters propose to initially offer some of the shares of common
stock directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the shares to certain dealers at the
public offering price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share on sales to certain other dealers. After the initial
offering of the shares to the public, the representatives may change the public
offering price and such concessions. The underwriters do not intend to confirm
sales to any accounts over which they exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by us in connection with the offering. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
<TABLE>
<CAPTION>
Paid by Data Critical
-------------------------
No Exercise Full Exercise
<S> <C> <C>
Per share.......................................... $ $
Total.............................................. $ $
</TABLE>
We will pay the offering expenses, estimated to be [$ ]
We have granted to the underwriters an option, exercisable for 30 days from
the date of the underwriting agreement, to purchase up to [ ] additional
shares at the public offering price less the underwriting fees. The
underwriters may exercise such option solely to cover over-allotments, if any,
made in connection with the offering. To the extent that the underwriters
exercise such option, each underwriter will become obligated, subject to
certain conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.
63
<PAGE>
We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriters may be required to make in respect
of any of those liabilities.
Our common stock has been approved for quotation on the NASDAQ National
Market under the symbol DCCA.
Prior to the offering, there has been no established trading market for our
common stock. The initial public offering price for our shares of common stock
offered hereby will be determined by negotiation among us and the
representatives of the underwriters. The factors to be considered in
determining the initial public offering price include the history of and the
prospects for the industry in which we compete, our past and present
operations, our historical results of operations, the prospects for future
earnings, the recent market prices of securities of generally comparable
companies and the general condition of the securities markets at the time of
the offering.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of our common
stock included in the offering in any jurisdiction where action for that
purpose is required. The shares included in the offering may not be offered or
sold, directly or indirectly, nor may this prospectus or any other offering
material or advertisement in connection with the offer and sale of any such
shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in the offering in any jurisdiction where that
would not be permitted or legal.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 5% of the shares included in the offering, to be
sold to certain of our directors, officers, employees, distributors, dealers,
business associates and related persons. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares that are not orally confirmed for
purchased within one day of the pricing of the offering will be offered by the
underwriters to the general public on the same terms as the other shares
offered hereby.
In connection with the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of our common stock.
Specifically, the underwriters may overallot the offering, creating a syndicate
short position. The underwriters may bid for and purchase shares of our common
stock in the open market to cover such syndicate short position or to stabilize
the price of the common stock. In addition, the underwriting syndicate may
reclaim selling concessions from syndicate members if Donaldson, Lufkin &
Jenrette Securities Corporation repurchases previously distributed common stock
in syndicate covering transactions, in stabilizing transactions or otherwise or
if Donaldson, Lufkin & Jenrette Securities Corporation receives a report that
indicates that the clients of such syndicate members have "flipped" the common
stock. These activities may stabilize or maintain the market price of our
common stock above independent market levels. The underwriters are not required
to engage in these activities, and may end any of these activities at any time.
64
<PAGE>
LEGAL MATTERS
The validity of the common stock in this offering will be passed upon for
Data Critical by Venture Law Group, A Professional Corporation, Kirkland,
Washington. Craig E. Sherman, a director of Venture Law Group, is the Secretary
of Data Critical. Legal matters in connection with this offering will be passed
upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. As of the date of this prospectus, certain
directors of Venture Law Group and an investment partnership affiliated with
Venture Law Group own an aggregate of 2,500 shares of Data Critical's Series D
preferred stock, which shares will convert into 2,500 shares of Data Critical's
common stock upon the completion of this offering.
EXPERTS
The audited financial statements included in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock in this offering. This prospectus does
not contain all of the information set forth in the registration statement and
its exhibits and schedules. For further information on Data Critical and the
common stock offered hereby, you should refer to the registration statement and
to its exhibits and schedules. Statements made in this prospectus concerning
the contents of any document referred to herein are not necessarily complete.
For each such document filed as an exhibit to the registration statement, you
should refer to the exhibit for a more complete description of the matter
involved. The registration statement and the attached exhibits and schedules
may be inspected without charge at the public reference facilities maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor,
New York, NY 10048, and the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part of the
registration statement may be obtained from the SEC's offices upon payment of
certain fees prescribed by the SEC. The SEC maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of
this website is http://www.sec.gov.
65
<PAGE>
DATA CRITICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Balance Sheets at December 31, 1997 and 1998, and March 31, 1999
(unaudited)............................................................. F-3
Statements of Operations for the Years Ended December 31, 1996, 1997 and
1998, and for the Quarters Ended March 31, 1998 and March 31, 1999
(unaudited)............................................................. F-4
Statements of Stockholders' Deficit for the Years Ended December 31,
1996, 1997 and 1998, and for the Quarter Ended March 31, 1999
(unaudited)............................................................. F-5
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and
1998, and for the Quarters Ended March 31, 1998 and March 31, 1999
(unaudited)............................................................. F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Data Critical Corporation:
We have audited the accompanying balance sheets of Data Critical Corporation
(a Delaware corporation) as of December 31, 1997 and 1998, and the related
statements of operations, stockholders' deficit and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Data Critical Corporation
as of December 31, 1997 and 1998, and the results of its operations and cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Seattle, Washington
May 7, 1999
F-2
<PAGE>
DATA CRITICAL CORPORATION
BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
At December 31, At Pro Forma
---------------- March 31, At March 31,
1997 1998 1999 1999
------- ------- --------- -------------
(Note 1)
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......... $ 865 $ 3,053 $ 1,840 $ 1,840
Accounts receivable, net of
allowance for doubtful accounts of
$6, $21, $33 and $33,
respectively...................... 74 1,182 1,701 1,701
Inventories........................ 189 281 433 433
Prepaid expenses and other......... 35 271 321 321
------- ------- ------- -------
Total current assets............. 1,163 4,787 4,295 4,295
Note receivable from officer......... 45 45 45 45
Investment in and advances to
unconsolidated affiliate............ 207 211 212 212
Property, equipment and software,
net................................. 253 444 455 455
Other assets, net.................... 120 138 144 144
------- ------- ------- -------
Total assets..................... $ 1,788 $ 5,625 $ 5,151 $ 5,151
======= ======= ======= =======
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS'
(DEFICIT) EQUITY
Current Liabilities:
Line of credit..................... $ -- $ 250 $ 450 $ 450
Current portion of notes payable... 31 98 98 98
Accounts payable................... 318 486 525 525
Other current liabilities.......... 97 1,610 1,919 1,919
------- ------- ------- -------
Total current liabilities........ 446 2,444 2,992 2,992
Notes payable, net of current
portion............................. 60 151 127 127
Convertible notes.................... 1,581 -- -- --
------- ------- ------- -------
Total liabilities................ 2,087 2,595 3,119 3,119
Commitments and contingencies (Note
10)
Mandatorily redeemable preferred
stock, $0.01 par value, 19,731,893
shares authorized; 2,607,955,
4,904,689, 4,904,689 and no shares
issued and outstanding,
respectively........................ 8,927 19,248 19,602 --
------- ------- ------- -------
Stockholders' (Deficit) Equity:
Common stock, $.001 par value,
30,000,000 shares authorized;
1,402,246, 1,402,839, 1,402,839
and 6,307,528 shares issued and
outstanding, respectively, and
additional paid-in capital........ 713 1,321 1,566 21,168
Deferred compensation.............. -- (552) (729) (729)
Accumulated deficit................ (9,939) (16,987) (18,407) (18,407)
------- ------- ------- -------
Total stockholders' (deficit)
equity.......................... (9,226) (16,218) (17,570) 2,032
------- ------- ------- -------
Total liabilities, mandatorily
redeemable preferred stock and
stockholders' (deficit) equity.. $ 1,788 $ 5,625 $ 5,151 $ 5,151
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
DATA CRITICAL CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended
Years Ended December 31, March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue........................ $ 190 $ 471 $ 4,137 $ 265 $ 2,214
Cost of revenue................ 27 348 1,841 132 902
-------- -------- -------- ------- -------
Gross margin................ 163 123 2,296 133 1,312
-------- -------- -------- ------- -------
Operating expenses:
Research and development..... 957 1,702 2,194 492 551
Sales and marketing.......... 512 1,200 3,512 628 1,116
General and administrative... 738 1,268 2,564 595 729
-------- -------- -------- ------- -------
Total operating expenses.... 2,207 4,170 8,270 1,715 2,396
-------- -------- -------- ------- -------
Loss from operations........ (2,044) (4,047) (5,974) (1,582) (1,084)
Interest income................ 46 71 202 20 29
Interest expense............... (6) (26) (50) (35) (11)
-------- -------- -------- ------- -------
Loss before income taxes....... (2,004) (4,002) (5,822) (1,597) (1,066)
Provision for income taxes..... -- -- -- -- --
-------- -------- -------- ------- -------
Net loss....................... $ (2,004) $ (4,002) $ (5,822) $(1,597) $(1,066)
======== ======== ======== ======= =======
Preferred stock dividends and
accretion of mandatory
redemption obligations........ 420 685 1,226 198 354
-------- -------- -------- ------- -------
Net loss attributable to
common stock............... $ (2,424) $ (4,687) $ (7,048) $(1,795) $(1,420)
======== ======== ======== ======= =======
Basic and diluted loss per
common share.................. $ (2.44) $ (4.28) $ (5.03) $ (1.28) $ (1.01)
======== ======== ======== ======= =======
Shares used to calculate basic
and diluted loss per common
share......................... 994 1,095 1,402 1,402 1,403
======== ======== ======== ======= =======
Pro forma basic and diluted
loss per common share......... $ (1.01) $ (0.17)
======== =======
Shares used to calculate pro
forma basic and diluted loss
per common share.............. 5,762 6,308
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
DATA CRITICAL CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
and Additional
Paid-in Capital
---------------- Deferred Accumulated Stockholders'
Shares Amount Compensation Deficit Deficit
--------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 993,746 $ 57 $ -- $ (2,828) $ (2,771)
Common stock options
and warrants
exercised............ 2,250 2 -- -- 2
Stock warrants issued
for consulting
services............. -- 2 -- -- 2
Accretion of mandatory
redemption
obligations.......... -- -- -- (38) (38)
Series B and C
mandatorily
redeemable preferred
stock dividend
accruals............. -- -- -- (382) (382)
Net loss.............. -- -- -- (2,004) (2,004)
--------- ------ ----- -------- --------
Balance, December 31,
1996................... 995,996 61 -- (5,252) (5,191)
Common stock options
and warrants
exercised............ 406,250 650 -- -- 650
Stock warrants issued
for consulting
services............. -- 2 -- -- 2
Accretion of mandatory
redemption
obligations.......... -- -- -- (67) (67)
Series B and C
mandatorily
redeemable preferred
stock dividend
accruals............. -- -- -- (618) (618)
Net loss.............. -- -- -- (4,002) (4,002)
--------- ------ ----- -------- --------
Balance, December 31,
1997................... 1,402,246 713 -- (9,939) (9,226)
Common stock options
and warrants
exercised............ 593 1 -- -- 1
Stock warrants issued
for consulting
services............. -- 2 -- -- 2
Deferred stock
compensation......... -- 605 (605) -- --
Amortization of
deferred stock
compensation......... -- -- 53 -- 53
Accretion of mandatory
redemption
obligations.......... -- -- -- (52) (52)
Series B, C and D
mandatorily
redeemable preferred
stock dividend
accruals............. -- -- -- (1,174) (1,174)
Net loss.............. -- -- -- (5,822) (5,822)
--------- ------ ----- -------- --------
Balance, December 31,
1998................... 1,402,839 1,321 (552) (16,987) (16,218)
Deferred stock
compensation......... -- 245 (245) -- --
Amortization of
deferred stock
compensation......... -- -- 68 -- 68
Accretion of mandatory
redemption
obligations.......... -- -- -- (16) (16)
Series B, C and D
preferred stock
dividend accruals
(unaudited).......... -- -- -- (338) (338)
Net loss (unaudited).. -- -- -- (1,066) (1,066)
--------- ------ ----- -------- --------
Balance, March 31, 1999
(unaudited)............ 1,402,839 $1,566 $(729) $(18,407) $(17,570)
========= ====== ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
DATA CRITICAL CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Quarters Ended
Years Ended December 31, March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net loss...................... $ (2,004) $ (4,002) $ (5,822) $(1,597) $(1,066)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization............... 133 171 208 50 57
Amortization of deferred
stock compensation......... -- -- 53 -- 68
Issuance of preferred stock
for legal services......... 25 -- -- -- --
Issuance of warrants for
consulting services........ 2 2 2 1 --
Changes in assets and
liabilities:
Accounts receivable........ (30) (28) (1,108) (85) (519)
Inventories................ 4 (8) (92) (16) (152)
Prepaid expenses and other
current assets............ (46) 28 (263) (15) (54)
Accounts payable and other
current liabilities....... 157 156 1,681 141 348
-------- -------- -------- ------- -------
Net cash used in operating
activities............... (1,759) (3,681) (5,341) (1,521) (1,318)
-------- -------- -------- ------- -------
Cash Flows From Investing
Activities:
Purchases of marketable
securities................... (1,813) -- -- -- --
Sales of marketable
securities................... 640 1,813 -- -- --
Issuance of notes receivable
from officer................. -- (44) -- -- --
Investment in and advances to
unconsolidated affiliate..... (201) -- -- -- --
Purchases of property and
equipment.................... (75) (197) (380) (49) (65)
Other assets.................. (83) (9) (14) (1) (6)
-------- -------- -------- ------- -------
Net cash (used in)
provided by investing
activities............... (1,532) 1,563 (394) (50) (71)
-------- -------- -------- ------- -------
Cash Flows From Financing
Activities:
Proceeds from issuance of
common stock, net............ 2 650 1 -- --
Proceeds from issuance of
mandatorily redeemable
preferred stock, net......... 3,223 -- 6,975 4,039 --
Redemption of preferred
stock........................ (20) -- -- -- --
Proceeds from line of credit.. -- -- 250 -- 200
Proceeds from notes payable... -- 94 200 -- --
Payment on notes payable...... -- (3) (42) (7) (24)
Issuance of convertible
notes........................ 400 1,581 539 539 --
-------- -------- -------- ------- -------
Net cash provided by
financing activities..... 3,605 2,322 7,923 4,571 176
-------- -------- -------- ------- -------
Net increase in cash........... 314 204 2,188 3,000 (1,213)
Cash at beginning of period.... 347 661 865 865 3,053
-------- -------- -------- ------- -------
Cash at end of period.......... $ 661 $ 865 $ 3,053 $ 3,865 $ 1,840
======== ======== ======== ======= =======
Supplemental disclosure of cash
flow information:
Cash paid for interest........ $ 6 $ 5 $ 72 $ 56 $ 11
======== ======== ======== ======= =======
Supplemental disclosure of
noncash financing activities:
Conversion of notes payable to
mandatorily redeemable
preferred stock.............. $ 400 $ -- $ 2,120 $ 2,120 $ --
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
1. Nature of Business and Summary of Significant Accounting Policies:
Nature of Business
Data Critical Corporation (the Company) designs, manufactures, markets and
supports open personal information communications systems that provide
individuals with mobile interactive access to highly complex and life-critical
data. The Company's market focus is the healthcare industry, including
hospital, clinical, extended care and home care markets. The Company's systems
combine wireless technology and proprietary software to allow access to patient
vital signs and other diagnostic data from remote locations, both inside and
outside the hospital environment, either through an interactive access device,
a personal computer server or the Internet. To date, the Company has directed a
significant portion of its efforts to research and development, development of
markets for its products, application for patents, raising capital and
planning. The Company performed selected contract development services during
this period as well as commenced sales of related products during 1995. During
1997, the Company focused on addressing its technology to specific medical
applications. The resulting products are regulated by the U.S. Food and Drug
Administration and therefore require pre-market approval from the FDA prior to
making sales. The first of these approvals was granted in November 1997.
The Company commenced sales of its current products and services late in the
third quarter of 1997. The Company continues to be subject to a number of risks
similar to other companies in a comparable stage of development including:
reliance on key personnel; successful marketing of its products; competition
from other companies with greater technical, financial, management and
marketing resources; successful development of new products and the enhancement
of existing products; and the ability to secure adequate financing to support
future growth, if and when required.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity when
purchased of 90 days or less to be cash equivalents. Cash and cash equivalents
consist of cash on deposit with banks and money market investments.
Inventories
The Company's initial medical product is made up of the Company's
proprietary software applications which it integrates with hardware that is
acquired from third parties as well as hardware made by third parties to the
Company's specifications. Inventories consist primarily of the Company's
hardware product, components to make such product and other third-party
equipment, all of which is stated at the lower of cost or market, using the
first-in, first-out method.
Property, Equipment and Software
Property, equipment and software are stated at historical cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, generally three to five
years. Ordinary repairs and maintenance and purchases of less than $500 are
F-7
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
expensed as incurred. Leasehold improvements are amortized over the lesser of
the term of the lease or the estimated useful life of the asset.
Investment In and Advances To Unconsolidated Affiliate
The Company accounts for its investments in entities in which it owns less
than a 20% interest under the cost method.
Other Assets
Other assets include licensed intellectual property rights and other
intangible assets which are stated at historical cost less accumulated
amortization provided on a straight-line basis over the estimated useful lives
of the asset, generally seven years. Other assets also include capitalized
legal expenses associated with patent applications. These costs will be
amortized over their estimated useful lives upon patent issuance by the U.S.
Patent Office. Amortization expense on other assets was $11,000, $15,000 and
$19,000 in 1996, 1997 and 1998, respectively, and $4,000 and $4,000 for the
quarters ended March 31, 1998 and 1999, respectively. Accumulated amortization
was $28,000, $42,000 and $49,000 at December 31, 1997 and 1998, and March 31,
1999, respectively.
Revenue Recognition
The Company's revenue recognition policies are in conformity with Statement
of Position 97-2, as amended, of the American Institute of Certified Public
Accountants. License revenue is earned under software license agreements to end
users and distributors and is recognized when delivery has occurred, the fee is
fixed and determinable, evidence of an arrangement exists, collection of the
receivable is probable and there are no significant post-delivery obligations
remaining. Maintenance and support revenue is recognized over the term of the
agreement. In 1996 and 1997, the Company recognized revenue from software
development contracts involving significant production, modification or
customization of software, based on performance milestones specified in the
contract where such milestones fairly reflect progress toward contract
completion; no such revenue occurred in 1998 and the first quarter of 1999.
Major Customers
In January 1997, Data Critical signed a distribution and license agreement
with GE Marquette Medical Systems, Inc. for the non-exclusive licensing and
distribution of a medical wireless data product. Approximately 17.3%, 38.3%,
54.5%, 99.9% and 25.9% of the Company's revenues for the years ended December
31, 1996, 1997 and 1998, and the quarters ended March 31, 1998 and 1999,
respectively, is attributable to GE Marquette Medical Systems, Inc.
Approximately 65.3% and 20.3% of the Company's revenue for the years ended
December 31, 1996 and 1997, respectively, is attributable to Hewlett-Packard
Company (HP) pursuant to a 1994 license agreement which provided HP exclusive
distribution rights to a specific implementation of the Company's medical
wireless data technology. In September 1997, the 1994 license agreement between
the Company and HP was terminated by mutual agreement thus allowing the Company
to sell directly to HP customers.
F-8
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
Approximately 1.5% and 22.1% of the Company's revenue for the years ended
December 31, 1996 and 1997, respectively, is attributable to federal and state
governmental agencies. The Company had no sales to federal and state
governmental agencies in 1998 or 1999.
Warranty Obligations
The Company generally provides product warranties for 12 months after date
of purchase. Estimated warranty obligations are provided at the time of the
sale of the Company's products.
Royalty Expense
During 1997 and 1998, the Company entered into two nonexclusive licenses to
sell products using patented technology. In exchange for the licenses the
Company is required to make quarterly royalty payments based on the number of
products invoiced. Amounts charged to expense for the two nonexclusive licenses
were $14,000 and $142,000 in 1997 and 1998, respectively, and $13,000 and
$47,000 for the quarters ended March 31, 1998 and 1999, respectively.
Research and Development Costs
The Company's accounting policy is to capitalize eligible computer software
development costs upon the establishment of technological feasibility, which
the Company has defined as completion of a working model. For the periods ended
December 31, 1997 and 1998, the amount of eligible costs to be capitalized has
not been material and accordingly, the Company has charged all software
development costs to research and development in the accompanying statements of
operations.
Advertising Costs
Costs related to advertising the Company's products are expensed in the
period incurred. Advertising costs incurred during the years ended December 31,
1998, 1997 and 1996 were $67,000, $31,600 and $20,400, respectively.
Income Taxes
Deferred income taxes are accounted for using the asset and liability
method. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities. The effect on deferred taxes for a change in tax rates is
recognized in income in the period that includes the enactment date. To date,
the Company has fully reserved for its net deferred tax assets.
Stock Options
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." In
accordance with the provisions of SFAS 123, the Company has elected the
disclosure only provisions related to employee stock
F-9
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
options and follows the provisions of Accounting Principals Board Opinion No.
25 (APB 25) in accounting for stock options issued to employees. Under APB 25,
compensation expense, if any, is recognized as the difference between the
exercise price and the fair value of the common stock on the measurement date,
which is typically the date of grant, and is recognized over the service
period, which is typically the vesting period.
The Company discloses the pro forma effect on net income as if it had
accounted for option grants to employees under the "fair value" method
prescribed by SFAS 123. The fair-value based model values stock options using
an acceptable valuation model. Pro forma compensation cost is measured at the
grant date based upon the fair value of the award and is recognized over the
service period, which is typically the vesting period.
Warrants and options granted to non-employees are accounted for under the
fair value provisions of SFAS 123.
Concentrations of Credit Risk
Financial instruments which subject the Company to concentrations of credit
risk consist principally of cash and trade receivables. The risk for cash and
cash equivalents is limited by the Company's policy of maintaining cash and
equivalents in multiple, highly rated, liquid investments. The Company has
credit risk with respect to trade accounts receivables as most of these
receivables are with healthcare institutions or with distributors to healthcare
institutions. To mitigate this risk, the Company has a credit policy under
which it verifies the creditworthiness of its customers.
Financial Instruments
The Company enters into various types of financial instruments in the normal
course of business and in raising capital. Fair values of cash, trade
receivables, notes receivable and notes payable all approximate market value.
The fair value of mandatorily redeemable preferred stock at December 31, 1998
and 1997 were estimated to be approximately $32,822,000 and $9,917,000,
respectively. This estimates of fair value were determined by management using
recent sales of preferred stock, consideration of significant milestones
achieved by the Company and other market considerations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Loss Per Share
In accordance with Statement of Financial Accounting Standards No. 128,
"Computation of Earnings Per Share," basic loss per share is computed by
dividing net loss attributable to common
F-10
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
stock (net loss less preferred stock redemption obligation accretion and
dividend requirements) by the weighted average number of shares of common stock
outstanding during the period. Diluted loss per share is computed by dividing
net loss by the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Common equivalent shares
consist of the shares of common stock issuable upon the conversion of the
mandatorily redeemable preferred stock (using the if-converted method) and
shares issuable upon the exercise of stock options and warrants (using the
treasury stock method); common equivalent shares are excluded from the
calculation as their effect is antidilutive. Accordingly, basic and diluted
loss per share are equivalent. The Company has not had any issuances or grants
for nominal consideration as defined under U.S. Securities and Exchange
Commission Staff Accounting Bulletin 98.
Pro forma basic and diluted net loss per share is computed based on the
weighted average number of shares of common stock outstanding giving effect to
the conversion of mandatorily redeemable preferred stock outstanding as of
December 31, 1998, that will automatically convert upon completion of the
Company's initial public offering (using the if-converted method from the
original issuance date). Pro forma diluted net loss per share excludes the
impact of stock options and warrants as the effect of their inclusion would be
antidilutive.
Unaudited Interim Financial Statements
The interim financial information contained herein is unaudited but, in the
opinion of management, reflects all adjustments which are necessary for a fair
presentation of the financial position, results of operations and cash flows
for the periods presented. All such adjustments are of a normal, recurring
nature. Results of operations for interim periods presented herein are not
necessarily indicative of results of operations for the entire year.
Unaudited Pro Forma Amounts
If the offering contemplated by this prospectus is completed, all of the
mandatorily redeemable preferred stock outstanding as of the closing date will
automatically be converted into an aggregate of 4,904,689 shares of common
stock. The unaudited pro forma balance sheet at March 31, 1999, is adjusted for
the conversion of preferred stock.
Segment Reporting
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information," (SFAS
131) during 1998. SFAS 131 requires companies to disclose certain information
about operating segments. Based on the criteria within SFAS 131, the Company
has determined that it has one reportable segment, wireless data products.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), "Accounting for the Cost of Computer
Software Developed or Obtained
F-11
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
for Internal Use." SOP 98-1 is effective for financial statements for years
beginning after December 15, 1998. SOP 98-1 provides guidance over accounting
for computer software developed or obtained for internal use including the
requirement to capitalize specified costs and amortization of such costs. The
implementation of SOP 98-1 is not expected to have a material impact on the
Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up
Activities." SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. The implementation of SOP 98-5
is not expected to have a material impact on the Company's financial position
or results of operations.
2. Inventories:
<TABLE>
<CAPTION>
December 31,
------------- March 31,
1997 1998 1999
------------- ---------
(in thousands)
<S> <C> <C> <C>
Purchased components.............................. $ 184 $ 246 $ 344
Finished goods.................................... 5 35 89
----- ------- ------
$ 189 $ 281 $ 433
===== ======= ======
3. Property, Equipment and Software:
<CAPTION>
December 31,
------------- March 31,
1997 1998 1999
------------- ---------
(in thousands)
<S> <C> <C> <C>
Computers, equipment and purchased software....... $ 592 $ 888 $ 950
Furniture and fixtures............................ 27 111 114
Leasehold improvements............................ 19 19 19
----- ------- ------
638 1,018 1,083
Less: Accumulated depreciation.................... 385 574 628
----- ------- ------
$ 253 $ 444 $ 455
===== ======= ======
Depreciation expense was $122,000, $156,000 and $189,000 in 1996, 1997 and
1998, respectively.
4. Other Current Liabilities:
<CAPTION>
December 31,
------------- March 31,
1997 1998 1999
------------- ---------
(in thousands)
<S> <C> <C> <C>
Accrued expenses.................................. $ 36 $ 184 $ 123
Accrued royalties................................. -- 96 132
Customer deposits................................. -- 296 254
Deferred revenue.................................. 6 442 779
Accrued product warranties........................ 5 374 458
Accrued payroll and benefits...................... 50 218 173
----- ------- ------
$ 97 $ 1,610 $1,919
===== ======= ======
</TABLE>
F-12
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
5. Notes Payable:
The Company has a secured bank line of credit with maximum available
borrowings of $1.5 million, subject to a borrowing base of 75% of accounts
receivable. The line bears interest at the bank's prime rate plus 0.75% (10.5%
and 8.5% at December 31, 1997 and 1998). The Company had outstanding borrowings
of $250,000 and $450,000, and outstanding letters of credit of $170,000 and
$340,000, as of December 31, 1998 and March 31, 1999, respectively. The Company
had available balances on the line of $480,000 and $710,000 as of December 31,
1998 and March 31, 1999, respectively. There were no outstanding borrowings at
December 31, 1997.
The Company has notes payable to a bank, secured by certain equipment, with
a total outstanding balance of $91,000, $249,000 and $225,000 at December 31,
1997, 1998 and March 31, 1999. The loans bear interest at the bank's prime rate
plus 1.0% to 2.5% (11.0% at December 31, 1997 and 8.75% to 10.25% at
December 31, 1998), due in monthly installments maturing through October 2001.
Under these credit arrangements, the Company is restricted as to its ability
to pay dividends prior to obtaining approval from the lenders.
In July and September 1996, the Company consummated private placements of
its 8% convertible bridge notes, for $300,000 and $100,000, respectively. Under
the terms of the notes, on September 27, 1996, the notes were converted into
125,000 shares of Series C mandatorily redeemable preferred stock at the
conversion price of $3.20 per share.
During 1997 and 1998, the Company issued convertible notes totaling $2.1
million and bearing interest at 9.0%. With these notes, the Company also issued
warrants to purchase 198,792 shares of common stock for $1.60 per share. In
March 1998, all accrued interest was paid and the principal balances were
converted into approximately 530,119 shares of Series D mandatorily redeemable
preferred stock.
The future scheduled maturities at December 31, 1998 are as follows (in
thousands):
<TABLE>
<S> <C>
1999........................................ $348
2000........................................ 95
2001........................................ 56
----
Total....................................... $499
====
</TABLE>
6. Capital Structure
Mandatorily Redeemable Preferred Stock
As of December 31, 1998, there were approximately 4.9 million shares of
preferred stock outstanding, all of which are convertible preferred stock with
mandatory redemption requirements of 33 1/3% of the outstanding shares of each
class on January 31, 2002, 2003 and 2004. Failure to redeem on the redemption
dates results in a reduction in the common stock conversion price by
F-13
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
10.0% per quarter until redemption occurs. Series D mandatorily redeemable
preferred stock has liquidation and dividend preference over Series C
mandatorily redeemable preferred stock which has liquidation and dividend
preference over Series B mandatorily redeemable preferred stock which has
liquidation preference over Series A mandatorily redeemable preferred stock.
Liquidation preference includes cumulative accrued dividends, which accrue on
the Series B, C and D preferred stock at 8.0% per annum. A summary of
mandatorily redeemable preferred stock follows (in thousands, except share
amounts):
<TABLE>
<CAPTION>
Mandatorily
Redeemable
Preferred Stock
------------------
Shares Amount
--------- -------
<S> <C> <C>
Balance, December 31, 1995.................................. 1,426,396 $ 4,194
Redemption of Series B mandatorily redeemable preferred
stock.................................................... (6,250) (20)
Issuance of Series C mandatorily redeemable preferred
stock, net of issuance costs of $152..................... 1,054,997 3,223
Conversion of notes payable to Series C mandatorily
redeemable preferred stock............................... 125,000 400
Series C mandatorily redeemable preferred stock issued for
legal services........................................... 7,812 25
Accretion of mandatory redemption obligations............. -- 38
Series B and C mandatorily redeemable preferred stock
dividend accruals........................................ -- 382
--------- -------
Balance, December 31, 1996.................................. 2,607,955 8,242
Accretion of mandatory redemption obligations............. -- 67
Series B and C mandatorily redeemable preferred stock
dividend accruals........................................ -- 618
--------- -------
Balance, December 31, 1997.................................. 2,607,955 8,927
Issuance of Series D mandatorily redeemable preferred
stock, net of issuance costs of $91...................... 1,766,615 6,975
Conversion of notes payable to Series D mandatorily
redeemable preferred stock............................... 530,119 2,120
Accretion of mandatory redemption obligations............. -- 52
Series B, C and D mandatorily redeemable preferred stock
dividend accruals........................................ -- 1,174
--------- -------
Balance, December 31, 1998.................................. 4,904,689 19,248
--------- -------
Accretion of mandatory redemption obligations............. -- 16
Series B, C and D mandatorily redeemable preferred stock
dividend accruals........................................ -- 338
--------- -------
Balance, March 31, 1999..................................... 4,904,689 $19,602
========= =======
</TABLE>
The preferred stock structure as of December 31, 1998 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Number of Liquidation
Shares Preference/Redemption Price
--------- ---------------------------
<S> <C> <C>
Series D mandatorily redeemable pre-
ferred stock........................... 2,296,734 $9,739
Series C mandatorily redeemable pre-
ferred stock........................... 1,187,809 4,477
Series B mandatorily redeemable pre-
ferred stock........................... 1,232,646 5,141
Series A mandatorily redeemable pre-
ferred stock........................... 187,500 150
</TABLE>
Issuance costs associated with the mandatorily redeemable preferred stock
offerings were recorded as a reduction to preferred stock. The preferred stock
is being accreted to its redemption
F-14
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
amount over the period ending with the mandatory redemption dates. Accretion of
mandatory redemption costs is computed using the straight-line method, which
approximates the effective interest rate method. The redemption price is equal
to the liquidation preference.
Upon the closing of an initial public offering of common stock with gross
proceeds of greater than $10.0 million and at a price of at least $8.00 per
share, all of the mandatorily redeemable preferred stock will convert into
common shares on a one-for-one basis.
Warrants
The Company has issued warrants to purchase common stock in connection with
its stock and debt offerings. A summary of warrant activity follows:
<TABLE>
<CAPTION>
Warrants Outstanding
---------------------------
Number of Weighted Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Balance, December 31, 1995..................... 461,299 $1.80
Issued....................................... 117,630 3.20
Exercised.................................... -- --
-------- -----
Balance, December 31, 1996..................... 578,929 2.08
Issued....................................... 148,257 1.60
Exercised.................................... (406,250) 1.60
-------- -----
Balance, December 31, 1997..................... 320,936 2.48
Issued....................................... 50,535 1.60
Exercised.................................... -- --
-------- -----
Balance, December 31, 1998..................... 371,471 $2.34
======== =====
</TABLE>
These warrants generally expire within five years from grant (2000 to 2002).
The warrants were recorded as a component of additional paid-in capital at
their estimated fair value at the date of issuance.
7. Stock Option Plan:
Under the Company's 1994 Stock Option Plan (the Plan), 950,000 shares of
common stock have been reserved for issuance to key management, directors or
key professional employees. Directors who are not key management employees of
the Company can be granted only nonqualified stock options. Options vest
ratably over one to four years from the date of grant. In the event option
holders cease to be employed by the Company, all unvested options are forfeited
and all vested options can be exercised within a three-month period; otherwise
the options are forfeited.
Incentive options are granted at not less than the fair value of common
stock on the date of grant, and nonqualified options are granted at not less
than 50% of fair value on the date of grant. All options expire no later than
seven years from the date of grant.
F-15
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
Information relating to stock options outstanding and stock options
exercisable at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
1996 1997 1998 March 31, 1999
------------------ ------------------ ------------------ ------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg. Wtd Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price Shares Ex. Price
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 272,769 $0.80 266,331 $0.80 528,873 $0.92 836,422 $1.45
Granted................. 18,937 0.80 267,917 1.06 317,987 2.33 75,888 3.29
Exercised............... (2,250) 0.80 -- -- (593) 0.97 -- --
Canceled................ (23,125) 0.80 (5,375) 1.43 (9,845) 1.65 (25,939) 2.44
------- ----- ------- ----- ------- ----- ------- -----
Outstanding at end of
period................. 266,331 $0.80 528,873 $0.92 836,422 $1.45 886,371 $1.58
======= ===== ======= ===== ======= ===== ======= =====
Exercisable at end of
period................. 154,657 $0.80 238,176 $0.80 339,624 $0.92 355,963 $0.92
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Under the Plan, options to purchase 110,734 shares of common stock were
available for future grant. As of December 31, 1998 the 836,423 options
outstanding under the Plan have exercise prices between $0.80 and $3.20 and a
weighted-average remaining contractual life of 5.24 years. During 1998 and the
quarter ended March 31, 1999, the Company recorded $605,000 and $245,000,
respectively, of deferred compensation from the issuance of stock options with
exercise prices less than the fair value of common stock. This deferred
compensation is recognized as expense ratably over the vesting period of the
options. In 1998 and the quarter ended March 31, 1999, the Company recognized
$53,000 and $68,000, respectively, of expense related to this deferred
compensation. The fair value of common stock on the dates of stock option
grants was determined by management using recent sales of preferred stock,
consideration of significant milestones achieved by the Company and other
market considerations.
For purposes of pro forma disclosure, the estimated fair value of each
option grant is estimated on the date of grant using the minimum value method,
which considers the time-value of money, with the following assumptions for
grants in 1996, 1997 and 1998: risk-free interest rates of 6.25% to 6.35%;
expected lives of five years; no dividends. The weighted average fair value of
options granted in 1996, 1997 and 1998 were $0.20, $0.27 and $0.58,
respectively. The pro forma effect upon net loss and net loss per share, taking
into account only the additional compensation expense that would be recognized
using the fair value method, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Net loss....................................... $(2,004) $(4,002) $(5,822)
Pro forma net loss............................. (2,004) (4,012) (5,865)
Basic and diluted loss per share............... (2.44) (4.28) (5.03)
Pro forma basic and diluted loss per share..... (2.44) (4.29) (5.06)
</TABLE>
8. Income Taxes:
At December 31, 1997 and 1998, the Company had net operating loss
carryforwards of approximately $7,571,000 and $13,225,000, respectively. The
Company is limited in its ability to use
F-16
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
these carryforwards in any one year to $1,300,000 due to preferred stock sales.
Management believes that, based on a number of factors, the available objective
evidence creates significant uncertainty regarding the realization of the net
deferred tax assets. Accordingly, a valuation allowance has been provided for
the net deferred tax assets of the Company. This valuation allowance increased
in 1996, 1997 and 1998 by $661,000, $1,417,000 and $2,232,000, respectively.
These carryforwards, which may provide future tax benefits, expire from 2008 to
2018.
The difference between the statutory tax rate of approximately 35% (34%
federal and 1% state, net of federal benefits) and the tax benefit of zero
recorded by the Company is primarily due to the Company's full valuation
against its net deferred tax assets.
The components of the deferred tax asset and liabilities were as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward......................... $ 2,574 $ 4,629
Other................................................... 107 284
------- -------
Deferred tax assets...................................... 2,681 4,913
Valuation allowance...................................... (2,681) (4,913)
------- -------
Total.................................................. $ -- $ --
======= =======
</TABLE>
9. Related Party Transactions:
Investment in and Advance to Unconsolidated Affiliate
On July 10, 1996, the Company loaned Nomadics, Inc. $50,000 in exchange for
a promissory note, which matures on July 10, 2000. The note is convertible into
approximately a 3.6% equity interest in Nomadics, Inc., at the earlier of July
10, 2000 or upon an initial public offering of the Company's stock. Interest
accrues at 8.0% per year. On November 7, 1996, the Company acquired Nomadics,
Inc. common stock representing a 10.8% interest for a cash payment of $151,000.
Note Receivable from Officer
As a part of the employment contract with a senior executive, the Company
loaned $45,000 on July 18, 1997, in exchange for a promissory note, which
matures on July 17, 2001. Interest of 6.7% on the unpaid principal balance is
due annually.
10. Commitments And Contingencies:
Commitments
The Company leases office space under lease agreements which expire over the
next two years. In December 1998, the Company entered into a lease for a new
facility which will expire five years after the scheduled June 1999 occupancy.
The leases require minimum monthly payments over the
F-17
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
term of the lease. The Company's rent expense during 1996, 1997 and 1998 was
$76,000, $124,000 and $243,000, respectively. Future minimum payments required
under non-cancelable leases as of December 31, 1998, are as follows (in
thousands):
<TABLE>
<S> <C>
1999...................................... $ 263
2000...................................... 311
2001...................................... 252
2002...................................... 264
2003...................................... 271
Thereafter................................ 113
------
$1,474
======
</TABLE>
Contingencies
Under a Registration Rights Agreement between the Company and its common and
preferred stockholders, the Company may be required to register its common
stock under the Federal Securities Act at the request of 40% of the common and
preferred stockholders. The expenses of the registration would be borne by the
Company.
11. Valuation and Qualifying Amounts:
<TABLE>
<CAPTION>
Charged Balance
Balance at to costs at end
Beginning and of
Description of period expenses Deductions(1) period
- ----------- ---------- -------- ------------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
December 31, 1996................... 0 1,505 0 1,505
December 31, 1997................... 1,505 4,078 0 5,583
December 31, 1998................... 5,583 15,618 (575) 20,626
</TABLE>
- --------
(1) Amounts include write-offs of accounts receivable deemed uncollectable.
12. Subsequent Events:
In April 1999, the Company established a subordinated debt facility totaling
$1.5 million that expires in October 1999. Loans made under this facility will
be secured by substantially all of the Company's assets, subordinated to the
commercial bank loans. Advances under the subordinated debt agreement are
subject to certain conditions, and these advances are limited to $500,000 or
more per advance and are payable at 11.0% interest only for the first 12 months
and in equal monthly principal and interest payments for the following 24
months. In connection with this debt facility, the lender received an option to
purchase up to 105,000 shares of Series D preferred stock at a purchase price
of $5.00 per share. This option expires upon an initial public offering or
merger, consolidation or sale of substantially all of the Company's assets.
The same lender has also provided a lease line of credit for up to $1.0
million, comprised of $800,000 to finance equipment and $200,000 to finance
equipment, leasehold improvements and
F-18
<PAGE>
DATA CRITICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts and disclosures for the quarters ended
March 31, 1998 and 1999 are unaudited)
software. Advances made under the lease line are payable over 36 equal monthly
installments. As part of this lease line, the lender received a warrant to
purchase 12,500 shares of Series D preferred stock at an exercise price of
$4.00 per share. This warrant expires upon the earlier of April 27, 2006 or
five years after an initial public offering.
On May 7, 1999, the board of directors approved the filing with the U.S.
Securities and Exchange Commission a registration statement and prospectus for
the initial public offering of the Company's common stock.
On May 7, 1999, the board of directors approved a one-for-four reverse stock
split of all outstanding common and mandatorily redeemable preferred stock. All
common share and per share amounts in the accompanying consolidated financial
statements have been adjusted retroactively to give effect to the reverse stock
split.
F-19
<PAGE>
[Inside back cover of prospectus]
Page titled "Internet ECG" with the words "Under Development" immediately
beneath the title. The bottom left corner of the page contains a rendering of a
prototype Internet ECG transmitter. This photograph is linked by an arrow to a
photograph immediately to the right labeled "Home" that shows a home user
holding the Internet ECG transmitter to her chest while sitting at a personal
computer. There is a line connecting the photograph of the home user to an icon
immediately above it labeled "Internet," which is in turn linked to an icon
above it labeled "Server." The "Server" icon is depicted as connecting to screen
shots of a personal computer displaying vital sign waveforms.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
Shares of Common Stock
[LOGO OF DATA CRITICAL]
----------------
PROSPECTUS
----------------
Donaldson, Lufkin & Jenrette
U.S. Bancorp Piper Jaffray
Warburg Dillon Reed LLC
DLJdirect Inc.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Data
Critical have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all dealers that
effect transactions in these shares of common stock may be required to deliver
a prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Data Critical in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee.............................................. $12,468
NASD filing fee................................................... $ 4,985
Nasdaq National Market listing fee................................ *
Printing and engraving expenses................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue Sky qualification fees and expenses.......................... *
Transfer agent and registrar fees................................. *
Miscellaneous fees and expenses................................... *
-------
Total........................................................... *
=======
</TABLE>
- --------
* to be filed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's board of directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article IX of our Certificate of
Incorporation (Exhibit 3.2 hereto) and Article VI of our Bylaws (Exhibit 3.3
hereto) provide for indemnification of our directors, officers, employees and
other agents to the maximum extent permitted by Delaware Law. In addition, we
have entered into Indemnification Agreements (Exhibit 10.22 hereto) with its
officers and directors. The Underwriting Agreement (Exhibit 1.1) also provides
for cross-indemnification among Data Critical and the Underwriters with respect
to certain matters, including matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since March 31, 1996, Data Critical has issued and sold the following
securities:
1. On April 4, 1996, Data Critical issued 15,625 shares of its Series B
preferred stock to Elizabeth M. Riley in exchange for services rendered by
Mazza & Riley.
2. From September 27, 1996 to November 1, 1996, Data Critical issued
1,187,809 shares of its Series C preferred stock to 38 accredited investors
for an aggregate cash consideration of $3,800,988.80.
II-1
<PAGE>
3. From March 11, 1998 to May 29, 1998, Data Critical issued 2,296,734
shares of its Series D preferred stock to 39 accredited investors for an
aggregate cash consideration of $9,186,936.
4. Since inception Data Critical has issued and sold 7,686 shares of
common stock to employees at prices ranging from $0.80 to $3.20 per share,
in cash, upon exercise of stock options pursuant to the 1994 stock option
plan.
5. On July 10, 1996, Data Critical issued warrants to purchase 99,682
shares of its common stock with an exercise price of $3.20 per share to two
holders in part consideration for entering into a product development
agreement with Data Critical; on October 18, 1996, Data Critical issued
warrants to purchase 54,888 shares of its common stock with an exercise
price of $0.80 per share to six accredited investors in partial
consideration for the Series C preferred stock financing; and on November
4, 1997, Data Critical issued warrants to purchase 198,798 shares of common
stock with an exercise price of $1.60 per share to 15 accredited investors
in partial consideration for providing a bridge loan to Data Critical.
6. On April 27, 1999, Data Critical issued a warrant to purchase
12,500 shares of its Series D preferred stock with an exercise price of
$4.00 per share to one holder in partial consideration for financing an
equipment lease to Data Critical.
7. On April 27, 1999, Data Critical granted a purchase option to convert
up to $525,000 of the outstanding principal on a subordinated loan into
105,000 shares of Series D preferred stock at a price of $5.00 per share at
the lender's option.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) or Regulation
D, or other applicable exemption of such Securities Act as transactions by an
issuer not involving any public offering. In addition, certain issuances
described in Item 4 were deemed exempt from registration under the Securities
Act in reliance upon Rule 701 promulgated under the Securities Act. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and warrants issued in such transactions. All
recipients had adequate access, through their relationships with Data Critical,
to information about Data Critical.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1** Form of Underwriting Agreement dated , .
3.1* Amended and Restated Certificate of Incorporation of Data Critical.
3.2* Amended and Restated Certificate of Incorporation of Data Critical
(proposed).
3.3* Amended and Restated Bylaws of Data Critical.
4.1** Specimen Stock Certificate.
4.2* Amended and Restated Registration Rights Agreement dated February 22,
1995, as amended.
4.3 Warrant Agreement dated April 13, 1995 between Data Critical and
Spencer Trask Securities Incorporated with Form of Common Stock
Purchase Warrant issued in connection with the Series B and Series C
Preferred Stock financings.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
4.4 Form of Common Stock Purchase Warrant issued in connection with the
bridge loan financing.
4.5 Common Stock Purchase Warrant dated July 10, 1996 issued by Data
Critical in favor of Nomadics, Inc.
4.6 Common Stock Purchase Warrant dated July 10, 1996 issued by Data
Critical in favor of Colin Cumming.
4.7 Warrant Agreement to purchase shares of Series D Preferred Stock dated
April 27, 1999 issued by Data Critical in favor of Comdisco, Inc.
5.1** Opinion of Venture Law Group regarding the legality of the common stock
being registered.
10.1+* Termination and Patent License Agreement dated September 16, 1997
between Data Critical and Hewlett-Packard Company.
10.2+* Distribution and License Agreement dated January 23, 1997 between Data
Critical and Marquette Medical Systems, Inc.
10.3+* Addendum to Marquette Distribution and License Agreement dated
September 14, 1998 between Data Critical and Marquette Medical
Systems, Inc.
10.4 Subordinated Loan and Security Agreement dated April 27, 1999 between
Data Critical and Comdisco, Inc.
10.5 Master Lease Agreement dated April 27, 1999 between Data Critical and
Comdisco, Inc.
10.6 Business Loan Agreement dated April 10, 1997 between Data Critical and
Silicon Valley Bank.
10.7 Loan Modification Agreement dated June 17, 1997 between Data Critical
and Silicon Valley Bank.
10.8 Loan Modification Agreement dated October 15, 1997 between Data
Critical and Silicon Valley Bank.
10.9 Loan Modification Agreement dated April 14, 1998 between Data Critical
and Silicon Valley Bank.
10.10 Loan Modification Agreement dated May 8, 1998 between Data Critical and
Silicon Valley Bank.
10.11 Loan Modification Agreement dated September 1, 1998 between Data
Critical and Silicon Valley Bank.
10.12 Loan Modification Agreement dated February 12, 1999 between Data
Critical and Silicon Valley Bank.
10.13 Loan Modification Agreement dated March 26,1999 between Data Critical
and Silicon Valley Bank.
10.14 Loan Modification Agreement dated May 6, 1999 between Data Critical and
Silicon Valley Bank.
10.15 Promissory Note dated April 10, 1997 between Data Critical and Silicon
Valley Bank with an original principal amount of $100,000.00.
10.17 Promissory Note dated April 10, 1997 between Data Critical and Silicon
Valley Bank with an original principal amount of $500,000.00.
10.18 Promissory Note dated April 14, 1998 between Data Critical and Silicon
Valley Bank with an original principal amount of $250,000.00.
10.19 Employment Agreement dated June 14, 1999 between Data Critical and
Michael E. Singer.
10.20* Facility Lease dated December 21, 1998 between S/I Northcreek II,
L.L.C. and Data Critical.
10.21* Amendment dated March 30, 1999 to the Facility Lease dated December 21,
1998 between S/I Northcreek II, L.L.C. and Data Critical.
10.22* Form of Indemnification Agreement between Data Critical and each of its
Officers and Directors.
10.23* 1999 Stock Option Plan (adopted May 7, 1999).
10.24* 1999 Directors' Stock Option Plan (adopted May 7, 1999).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.25* 1999 Employee Stock Purchase Plan (adopted May 7, 1999).
10.26* 1994 Stock Option Plan (dated December 19, 1994).
23.1 Consent of Arthur Andersen LLP.
23.2** Consent of Venture Law Group (included in Exhibit 5.1)
24.1 Power of Attorney (included in signature page to Registration
Statement).
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested for the portions in the copy of
the exhibit filed with the Securities and Exchange Commission. The omitted
information has been filed separately with the Securities and Exchange
Commission pursuant to the application for confidential treatment.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth is not applicable or is shown in the financial
statements or their related notes.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Bothell, State of
Washington on August 5, 1999.
DATA CRITICAL CORPORATION
/s/ Jeffrey S. Brown
By: ____________________________
Jeffrey S. Brown
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment has been signed by the following person in the capacities and on the
date indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey S. Brown President, Chief Executive August 5, 1999
____________________________________ Officer and Director
Jeffrey S. Brown
/s/ Michael E. Singer Vice President, Chief August 5, 1999
____________________________________ Financial Officer
Michael E. Singer
* Director August 5, 1999
____________________________________
David E. Albert, M.D.
* Director August 5, 1999
____________________________________
George M. Middlemas
* Director August 5, 1999
____________________________________
Richard Earnest
* Director August 5, 1999
____________________________________
Ronald Kase
* Director August 5, 1999
____________________________________
David B. Swedlow
</TABLE>
/s/ Jeffrey S. Brown
*By: _____________________
Jeffrey S. Brown
Attorney-in-Fact
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Jeffrey S. Brown
and Robert W. Benson, and each of them, as his attorney-in-fact, with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this registration statement (including post-effective
amendments), and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this registration statement and its amendments, if
any, and to file the same, with exhibits and other documents in connection,
with the Securities and Exchange Commission, hereby ratifying and confirming
our signatures as they may be signed by our said attorney to any and all
amendments to said registration statement.
<TABLE>
<S> <C> <C>
/s/ Michael E. Singer Vice President, Chief August 5, 1999
____________________________________ Financial Officer
Michael E. Singer
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1** Form of Underwriting Agreement dated , .
3.1* Amended and Restated Certificate of Incorporation of Data Critical.
3.2* Amended and Restated Certificate of Incorporation of Data Critical
(proposed).
3.3* Amended and Restated Bylaws of Data Critical.
4.1** Specimen Stock Certificate.
4.2* Amended and Restated Registration Rights Agreement dated February 22,
1995, as amended.
4.3 Warrant Agreement dated April 13, 1995 between Data Critical and
Spencer Trask Securities Incorporated with Form of Common Stock
Purchase Warrant issued in connection with the Series B and Series C
Preferred Stock financings.
4.4 Form of Common Stock Purchase Warrant issued in connection with the
bridge loan financing.
4.5 Common Stock Purchase Warrant dated July 10, 1996 issued by Data
Critical in favor of Nomadics, Inc.
4.6 Common Stock Purchase Warrant dated July 10, 1996 issued by Data
Critical in favor of Colin Cumming.
4.7 Warrant Agreement to purchase shares of Series D Preferred Stock dated
April 27, 1999 issued by Data Critical in favor of Comdisco, Inc.
5.1** Opinion of Venture Law Group regarding the legality of the common stock
being registered.
10.1+* Termination and Patent License Agreement dated September 16, 1997
between Data Critical and Hewlett-Packard Company.
10.2+* Distribution and License Agreement dated January 23, 1997 between Data
Critical and Marquette Medical Systems, Inc.
10.3+* Addendum to Marquette Distribution and License Agreement dated
September 14, 1998 between Data Critical and Marquette Medical
Systems, Inc.
10.4 Subordinated Loan and Security Agreement dated April 27, 1999 between
Data Critical and Comdisco, Inc.
10.5 Master Lease Agreement dated April 27, 1999 between Data Critical and
Comdisco, Inc.
10.6 Business Loan Agreement dated April 10, 1997 between Data Critical and
Silicon Valley Bank.
10.7 Loan Modification Agreement dated June 17, 1997 between Data Critical
and Silicon Valley Bank.
10.8 Loan Modification Agreement dated October 15, 1997 between Data
Critical and Silicon Valley Bank.
10.9 Loan Modification Agreement dated April 14, 1998 between Data Critical
and Silicon Valley Bank.
10.10 Loan Modification Agreement dated May 8, 1998 between Data Critical and
Silicon Valley Bank.
10.11 Loan Modification Agreement dated September 1, 1998 between Data
Critical and Silicon Valley Bank.
10.12 Loan Modification Agreement dated February 12, 1999 between Data
Critical and Silicon Valley Bank.
10.13 Loan Modification Agreement dated March 26, 1999 between Data Critical
and Silicon Valley Bank.
10.14 Loan Modification Agreement dated May 6, 1999 between Data Critical and
Silicon Valley Bank.
10.15 Promissory Note dated April 10, 1997 between Data Critical and Silicon
Valley Bank with an original principal amount of $100,000.00.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.17 Promissory Note dated April 10, 1997 between Data Critical and Silicon
Valley Bank with an original principal amount of $500,000.00.
10.18 Promissory Note dated April 14, 1998 between Data Critical and Silicon
Valley Bank with an original principal amount of $250,000.00.
10.19 Employment Agreement dated June 14, 1999 between Data Critical and
Michael E. Singer.
10.20* Facility Lease dated December 21, 1998 between S/I Northcreek II,
L.L.C. and Data Critical.
10.21* Amendment dated March 30, 1999 to the Facility Lease dated December 21,
1998 between S/I Northcreek II, L.L.C. and Data Critical.
10.22* Form of Indemnification Agreement between Data Critical and each of its
Officers and Directors.
10.23* 1999 Stock Option Plan (adopted May 7, 1999).
10.24* 1999 Directors' Stock Option Plan (adopted May 7, 1999).
10.25* 1999 Employee Stock Purchase Plan (adopted May 7, 1999).
10.26* 1994 Stock Option Plan (dated December 19, 1994).
23.1 Consent of Arthur Andersen LLP.
23.2** Consent of Venture Law Group (included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to Registration
Statement).
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested for the portions in the copy of
the exhibit filed with the Securities and Exchange Commission. The omitted
information has been filed separately with the Securities and Exchange
Commission pursuant to the application for confidential treatment.
<PAGE>
Exhibit 4.3
WARRANT AGREEMENT dated as of April 13, 1995 between DATA CRITICAL CORP.,
an Oklahoma corporation (the "Company"), and SPENCER TRASK SECURITIES
INCORPORATED (the "Agent").
W I T N E S S E T H
----------------------------
WHEREAS, the Agent has agreed, pursuant to the Placement Agency Agreement
dated as of March 8, 1995, between the Agent and the Company (the "Agency
Agreement"), to act as the placement agent in connection with the Company's
proposed private placement (the "Offering") of up to 40 Units (capitalized terms
not otherwise defined herein shall be as defined in the Agency Agreement); and
WHEREAS, the company is required to issue to the Agent warrants
("Warrants") to purchase a number of shares of Common Stock, $.001 par value, of
the Company ("Common Stock"), as set forth below; and
NOW, THEREFORE, in consideration of the premises, the payment by the Agent
to the Company of ONE DOLLAR, the agreements herein set forth and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant. The Agent is hereby granted the right as evidenced by the
-------
Warrants, to purchase 220,219 shares of Common Stock of the Company, an such
number may be adjusted pursuant hereto ("Warrant Shares"), at any time from the
date hereof until 5:30 p.m., New York time, on the later of (i) the fifth
anniversary of the date of Final Closing and (ii) the third anniversary of the
Closing date of the Company's initial public offering occurring within such
five-year period (the "Warrant Exercise Term"), at the Exercise Price.
"Exercise price" shall initially mean $0.80 per share of Common Stock as such
price may be, from time to time, adjusted pursuant to Section 7 hereof.
2. Warrant certificates. On each Closing Date, the Company shall deliver
---------------------
to the Agent warrant certificates (the "Warrant Certificates") evidencing
Warrants to purchase the Warrant Shares. Each Warrant Certificate delivered and
to be delivered pursuant to this Agreement shall be in the form set forth in
Exhibit A, attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions, and other variations as required or
permitted by this Agreement and shall be delivered without tax, cost or other
expense of any kind to the Agent. Within 30 days after the Closing Date, the
Agent may surrender such Warrant Certificate in exchange for Warrant
Certificates to purchase the Warrant Shares to be issued to the Agent's
designees, each of whom shall consist of broker-licensed employees of the Agent.
3. Exercise of Warrant.
--------------------
3.1 Method of Exercise. The Warrant Certificates may be exercised by the
-------------------
Agent and/or other registered holders ("Holders") thereof by surrender of such
Warrant Certificate with
<PAGE>
the annexed Form of Election to Purchase Pursuant to Section 3.1 duly executed,
together with payment of the Exercise Price by certified or official bank check
in New York Clearing House funds for the Warrant Shares purchased, at the
Company's principal offices at 2733 152nd Avenue, Redmond, Washington 98052.
Warrant Certificates may be exercised to purchase all or part of the Warrant
snares covered thereby (but not for fractional shares of Common Stock). in the
event that any Warrant Certificate is exercised to purchase less than all the
Warrant Shares covered thereby, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Warrant Shares,
3.2 Exercise by Surrender of Warrant. Warrants may also be exercised, in
---------------------------------
full or in part, without cash payment, at any time after registration of the
Common Stock under the Securities Exchange Act of 1934 (the "Exchange Act"), by
surrendering the Warrant Certificate with the annexed Form of Election to
Purchase Pursuant to Section 3.2 in exchange for the number of shares of Common
Stock equal to the product of (x) the number of shares as to which the Warrants
are being exercised multiplied by (y) a fraction, the numerator of which is the
market Price (as hereinafter defined) of the Common Stock minus the Exercise
Price and the denominator of which is such Market Price. For all purposes of
this Agreement, the phrase "Market Price" at any date shall be deemed to be the
last reported sale price, or, in case no such reported sale takes place on such
day, the average of the last reported sale prices for the last five trading
days, in either case as officially reported by the principal securities exchange
on which the Common Stock is listed or admitted to trading, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
or The Nasdaq Stock Market ("Nasdaq"), the average closing bid price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or if the Common Stock is not quoted on Nasdaq as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to its.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
-------------------------
issuance of certificates for the Warrant Shares shall be made promptly (and in
any event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof. Such Certificates shall (subject to the provisions of
Sections 5 and 6 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which my be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of any such tax or
shall have established to the satisfaction of the Company that such tax is not
due or has been paid. The Warrant certificates and the certificates representing
the Warrant Shares shall be duly executed on behalf of the Company. Warrant
Certificates shall be dated the date of initial issuance, division, exchange,
substitution or transfer.
5. Transfer Of Securities. The Agent and Holders covenant and agree that
-----------------------
they are acquiring the Warrants and the Warrant Shares (collectively, the
"Warrant Securities") for their
-2-
<PAGE>
own account, for investment, and not with a view to distribution thereof.
Holders of the Warrants or Warrant Shares may transfer such Warrants or Warrant
Shares only in compliance with applicable federal and state securities laws. In
order for any transferee of any Warrants or Warrant Shares to receive any of the
benefits of this Agreement, the Company must have received notice of such
transfer, at the address in section 3.1 above, in the form of assignment
attached hereto, accompanied by an opinion of counsel, which opinion of counsel
shall be reasonably acceptable to the Company, that an exemption from
registration of such Warrants or Warrant Shares under the Securities Act of
1933, as amended, (the "1933 Act") and under any applicable state securities
laws is available. Any transferee must also covenant and agree that it is
acquiring such Warrants or Warrant Shares, as the case may be, as an investment
and not with a view to distribution thereof.
6. Registration.
-------------
6.1 No Registration Under the 1933 Act. The warrant Securities have not
-----------------------------------
been registered under the 1933 Act or any state securities or "blue sky" laws
and may not be resold except pursuant to an effective registration statement
thereunder or exemption therefrom. The Warrant Certificates and certificates
representing the Warrant Shares shall bear the legend set forth below:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or under any state securities or "blue
sky" laws, and may not be offered or sold except pursuant to (i) an
effective registration statement under such Act and such laws, or (ii) an
opinion of counsel, if such opinion shall be reasonably satisfactory to the
issuer, that an exemption from registration under such Act and laws is
available."
6.2 Registration Rights. Reference is made to the Amended and Restated
--------------------
Registration Rights Agreement dated February 22, 1995, between the Company,
certain principal stockholders of the Company, purchasers of Units in the
offering and holders of certain warrants of the Company (the "Registration
Agreement"). The Company and the Holders agree that the Holders shall be
entitled to such rights and benefits with respect to registration of the Warrant
Shares as if the Holders were party to such Registration Agreement as holders of
Restricted Stock (as defined in the Registration Agreement) and the Warrant
Shares shall be considered as Restricted Stock for all purposes under the
Registration Agreement. The Company shall execute all such additional agreements
or documents as any Holder shall reasonably request to give effect to this
Section 6.2.
7. Adjustments to Exercise Price and Number of Securities
------------------------------------------------------
7.1 Computation of Adjusted Exercise Price. Except as hereinafter
---------------------------------------
provided, in case the Company shall at any time after the date hereof issue or
sell any shares of Common Stock (other than the grants, issuances or sales
referred to in Section 7.7 hereof), including shares held in the Company's
treasury and shares of Common Stock issued upon the exercise of any options,
rights or warrants, or upon the direct or indirect conversion or exchange of
securities for shares of Common Stock, for a consideration per share less than
the Exercise Price in effect immediately prior to the issuance or sale of such
shares, then forthwith upon such issuance or sale, the
-3-
<PAGE>
Exercise Price shall (until another such issuance or sale) be reduced to the
lower at the price (calculated to the nearest full cent), determined by dividing
(i) an amount equal to the sum of (a) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the then
existing Exercise Price, and (b) the aggregate amount of the consideration, if
any, received by the Company upon such issuance or sale by (ii) the total number
of shares of Common Stock outstanding immediately after such issuance or sale.
In no event shall the Exercise Price be adjusted pursuant to this
computation to an amount in excess of the Exercise Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock, an provided by Section 7.3 hereof.
For the purposes of any computation to be made in accordance with this
Section 7.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares or, if either of such securities shall be sold to
underwriters or dealers for public offering, the initial public offering price,
in all cases before deducting therefrom any compensation paid or discount
allowed in the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services, or any expenses incurred in connection
therewith.
(ii) In came of the issuance or sale (otherwise than as a dividend or
other distribution on any stock of the Company) of shares of Common Stock for a
consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to he the value of such
consideration as determined in good faith by the Board of Directors of the
Company irrespective of any accounting treatment.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business an the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (ii) of this Section 7.1.
(v) The number of shares at Common Stock at any one time outstanding
shall include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issu-
-4-
<PAGE>
ance thereof) upon the exercise of options, rights, warrants, and upon the
conversion or exchange of convertible or exchangeable securities.
7.2 Options, Rights, Warrants and Convertible and Exchange Securities. In
------------------------------------------------------------------
case the Company shall at any time after the date hereof issue options, rights
or warrants to subscribe for shares at Common Stock other than as set forth in
Section 7.7, or issue any securities convertible into or exchangeable for shares
of Common Stock, for a consideration per share less than the Exercise Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
Exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 7.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common Stock, as the case
may be, issuable under such options, rights or warrants shall be deemed to be
issued and outstanding at the time such options, rights or warrants were issued,
and for a consideration equal to the minimum purchase price per share provided
for in such options, rights or warrants at the time of issuance, plus the
consideration (determined in the same manner as consideration received on the
issue or sale of shares in accordance with the terms of the Warrants), if any,
received by the Company for such options, rights or warrants.
(b) The aggregate maximum number of shares of Common Stock issuable upon
conversion or exchange of any convertible or exchangeable securities shall be
deemed to be issued and outstanding at the time of issuance of such securities,
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of shares at Common Stock
in accordance with the terms of the Warrants) received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof.
(c) If any change shall occur in the price per share provided for in any
of the options, rights or warrants referred to in subsection (a) of this Section
7.2, or in the price per share at which the securities referred to in subsection
(b) of this Section 7.,2 are convertible or exchangeable, such options, rights
or warrants or conversion or exchange rights, as the case may be, shall be
deemed to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
(d) Upon the termination or expiration of any options, warrants or rights
referred to in Section (a) of this Section 7.2, or the termination or expiration
at any convertible or exchangeable securities referred to in Section (b) of this
Section 7.2, the Exercise Price shall forthwith be readjusted to such Exercise
Price as would have been obtained had the adjustment made upon the issuance of
such options, warrants or rights, or convertible or exchangeable securities been
made
-5-
<PAGE>
upon the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options, warrants or rights, or upon
the conversion or exchange of convertible or exchangeable securities.
7.3 Subdivision and Combination. In case the Company shall at any time
----------------------------
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
7.4 Adjustment in Number of Shares. Upon each adjustment of the Exercise
-------------------------------
Price pursuant to the provisions of this Section 7, the number of Warrant Shares
issuable upon exercise of the Warrants shall be adjusted to the nearest full
amount by multiplying a number equal to the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares issuable upon exercise
of time Warrants immediately prior to such adjustment and dividing the product
so obtained by the adjusted Exercise Price.
7.5 Definition of Common Stock. For the purpose of this Agreement, the
---------------------------
term "Common Stock" shall mean (i) the class of stock designated an Common Stock
in the Certificate of Incorporation of the Company as such Certificate of
Incorporation may be amended as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par value to no par
value or from no par value to par value.
7.6 Merger or Consolidation. In case of any consolidation of the Company
------------------------
with, or merger of the Company with, or merger of the Company into, another
corporation other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation or merger, by a holder of the number of shares of Common
Stock of the Company for which such warrant might have been exercised
immediately prior to such consolidation or merger. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in this section 7. The above provision of this Subsection
shall similarly apply to successive consolidations or mergers.
7.7 No Adjustment of Exercise Price in Certain Cases. No adjustment of the
-------------------------------------------------
Exercise Price shall be made:
(a) Upon the grant of options, or the issuance or sale of Common Stock, to
officers, directors, employees or consultants of the Company, whether done
directly or pursuant to any existing or future stock option, stock purchase or
restricted stock plan approved by the Company's Board of Directors, including,
but not limited to, the grant of options under the Data Critical Corp. 1994
Stock Option Plan and the exercise of outstanding and future options granted
thereunder.
-6-
<PAGE>
(b) Upon the issuance of Common Stock upon conversion of any shares of the
Company's issued and outstanding Preferred Stock (including Preferred Stock sold
in the Offering) and the Company's outstanding Series A convertible
Participating Preferred Stock.
(c) Upon exercise of this Warrant or any other stock warrants or options
issued and outstanding as of the date hereof.
(d) If the amount of said adjustment shall be less than $.02 per Warrant
Share; provided, however, that in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
any adjustment so carried forward, shall amount to at least $.02 per Warrant
Share,
7.8 Dividends and Other Distributions. In the event that the Company
----------------------------------
shall at any time prior to the exercise of all Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidence of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Subsection 7.8.
8. Exchange and Replacement of Warrant Certificates.
-------------------------------------------------
(a) Each Warrant Certificate is exchangeable upon the surrender thereof by
the registered Holder at the principal office of the Company and reimbursement
to the company of all reasonable expenses incidental thereto, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
(b) Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
9. Elimination of Fractional Interests. The Company shall not be required
------------------------------------
to issue certificates representing fractions of shares of Common Stock upon the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent
-7-
<PAGE>
of the parties that all fractional interests shall be eliminated by rounding any
fraction to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
10. Reservations of Securities. The Company shall at all times reserve and
---------------------------
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the exercise of the Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable
upon the exercise thereof. The Company covenants and agrees that upon exercise
of the Warrants and payment of the Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any stockholder.
11. Notice to Warrant Holders. Nothing contained in this Agreement shall
--------------------------
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company intends to declare a dividend (other than a dividend
consisting solely of shares of Common Stock) or otherwise distribute to its
stockholders any assets (other than shares of Common Stock), whether issued by
the company or by another, or any other thing of value; or
(b) the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company, or
(c) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option right
or warrant to subscribe therefor; or
(d) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all
of its property, assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights., or entitled to vote on such
proposed dissolution,, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
-8-
<PAGE>
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
12 Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3. 1 hereof or
to such other address as the Company may designate by notice to the Holders; or
(c) If to the Agent, to 535 Madison Avenue, 18th Floor, New York, New York
10022.
13. Supplements and Amendments. The Company and the Agent may from time to
---------------------------
time supplement or amend this Agreement without the approval of any Holders of
Warrant Certificates (other than the Agent) in order to cure any ambiguity, to
correct or supplement any provision contained heroin which may be defective or
inconsistent with any provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the Agent
may deem necessary or desirable and which the Company and the Agent deem shall
not adversely affect the interests of the Holders of Warrant Certificates. Other
amendments to this Agreement may be made only with the written consent of the
Holders of a majority of the Warrant securities.
14. Successors. All the covenants and provisions of this Agreement shall
-----------
be binding upon and inure to the benefit of the Company, the Agent, the Holders
and their respective successors and assigns hereunder.
15. Termination. This Agreement shall terminate on the eighth anniversary
------------
of the First Closing. Notwithstanding the foregoing, the indemnification
provisions of Section 6 shall survive such termination until the expiration of
the applicable statute of limitations.
16. Governing Law: Submission to Jurisdiction. This Agreement and each
------------------------------------------
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Agent and the Holders by accepting Warrants issued
pursuant to this Agreement, hereby agree that any action, proceeding or claim
against it or them arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the United States and the State
of New York located in the City of New York, and irrevocably submit to such
jurisdiction, which jurisdiction shall be exclusive. The Company, the Agent and
the Holders hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum.
-9-
<PAGE>
Any process or summons to be served upon any of the Company, the Agent and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address as set
forth in Section 12 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Agent and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
17. Entire Agreement; Modification. This Agreement (including the
-------------------------------
Placement Agency Agreement and the Registration Agreement to the extent referred
to herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
as provided in Section 13 or by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
18. Severability. It any provision of this Agreement shall be held to be
-------------
invalid and unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this Agreement are
---------
for convenience of reference only and are not intended, nor, should they be
construed as, a part of this Agreement and shall be given no substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall be
---------------------------
construed to give to any person or corporation other than the Company and the
Agent and any other registered Holder(s) of the Warrant Certificates or Warrant
Securities any legal or equitable right; remedy or claim under this Agreement;
and this Agreement shall be for the sole and exclusive benefit of the Company
and the Agent and any other Holder(s) of the Warrant Certificates or warrant
Securities.
21. Counterparts. This Agreement may be executed in any number of
-------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
-10-
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND SUCH LAWS, OR (II) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO THE ISSURER, THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND LAWS IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. [WARRANT NO.] [SHARES] Warrants
WARRANT CERTIFICATE
This Warrant Certificate, certifies that [HOLDER] is the registered holder of
[SHARES] Warrants each to purchase initially, at any time after the date hereof
until 5:30 p.m. New York time on the later of (i) the fifth anniversary of the
Final Closing and (ii) the third anniversary of the closing date of the initial
public offering of Data Critical Corp. (the "Company") occurring within such
five-year period (the "Expiration Date") one fully paid and non-assessable
share of Common Stock, $.001 par value ("Common Stock"), of the Company at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price") , of $.80 per share upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, or by
surrender of this Warrant Certificate in lieu of cash payment, but subject to
the conditions set forth herein and in the Warrant Agreement dated as of April
13, 1995 between the Company and Spencer Trask Securities Incorporated (the
"Warrant Agreement"). Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Warrant Agreement. Payment of the Exercise
Price shall be made by certified or official bank check in Now York clearing
House funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time,. on the
Expiration Date, at which time all Warrants evidenced hereby,. unless exercised
prior thereto, shall thereafter be void.
A-1
-11-
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in, and made a part of,
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company, the Agent and the holders (the words "holders" or "holder" meaning the
registered holder or registered holders) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate in accordance with the Warrant Agreement at an office or agency of
the Company, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants be issued to the
transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided. Upon the exercise or less than without any charge
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such number of unexercised
Warrants.
The company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof , and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
A-2
-12-
<PAGE>
Warrantholders who currently hold this Form of Common Stock Warrant
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Warrant
No. Holder Shares
- --------------------------------------------------------------------------
<S> <C> <C>
W-2 David Banker 158
- --------------------------------------------------------------------------
W-3 Naresh Belwal 369
- --------------------------------------------------------------------------
W-4 Georges Boyer 1,265
- --------------------------------------------------------------------------
W-5 Tim Collins 949
- --------------------------------------------------------------------------
W-6 Bill Dioguardi 1,912
- --------------------------------------------------------------------------
W-7 Rob DiVenere 211
- --------------------------------------------------------------------------
W-9 Don Spongberg 791
- --------------------------------------------------------------------------
W-10 Bill Stein 422
- --------------------------------------------------------------------------
W-11 Harriot Stewart 211
- --------------------------------------------------------------------------
W-12 Ed Taylor 263
- --------------------------------------------------------------------------
W-13 Spencer Trask Holdings Inc. 1,318
- --------------------------------------------------------------------------
W-14 First National Fund 211
- --------------------------------------------------------------------------
W-15 Locus Trust 791
- --------------------------------------------------------------------------
W-16 Richard A. Oshkims Irrevocable Trust dated 1,125
11/21/90
- --------------------------------------------------------------------------
W-17 John Steimetz 1,322
- --------------------------------------------------------------------------
W-18 Laura McNamara 750
- --------------------------------------------------------------------------
W-19 Donna Baselice 375
- --------------------------------------------------------------------------
W-20 Spencer Trask Holdings Inc. 5,670
- --------------------------------------------------------------------------
W-24 William P. Dioguardi 1,795
- --------------------------------------------------------------------------
W-25 Oshkim Limited Partners 8,388
- --------------------------------------------------------------------------
W-26 William Stein 70
- --------------------------------------------------------------------------
W-27 Laura M. McNamara 293
- --------------------------------------------------------------------------
W-28 Spencer Trask Holdings Inc. 7,189
- --------------------------------------------------------------------------
W-29 First National Fund Corp. 213
- --------------------------------------------------------------------------
W-30 Oshkim Limited Partnership 36,938
- --------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
Exhibit 4.4
THIS WARRANT AND THE COMMON STOCK ISSUABLE WITH RESPECT HERETO HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE BLUE
SKY ACTS AND MAY BE TRANSFERRED OR SOLD ONLY PURSUANT TO REGISTRATION UNDER SUCH
ACTS, OR TO EXEMPTIONS THEREUNDER.
DATA CRITICAL CORP.
an Oklahoma corporation
(the "Company")
January 26, 1998
For the Purchase of [SHARES] Shares of the
Company's Common Stock, $.001 par value
FORM OF COMMON STOCK PURCHASE WARRANT
NO. [WARRANT NO.]
This certifies that [HOLDER], or such person's registered assigns (the
"Warrant Holder"), is entitled, subject to the terms and conditions hereinafter
set forth at any time on or before November 1, 2002, to purchase from time to
time up to a total of [SHARES] shares of the Company's common stock, $.001 par
value (the "Common Stock"), at a price per share of $.40 (the "Purchase Price").
The number of shares of Common Stock purchasable under this Common Stock
Purchase Warrant (the "Warrant") and the Purchase Price thereof shall be subject
to adjustment as hereinafter provided.
Upon presentation and surrender of this Warrant, together with payment of
the Purchase Price for the shares of Common Stock thereby purchased, at the
office of the Company's Transfer Agent for the transfer of such stock or, if at
any time there is no such Transfer Agent, at the principal office of the
Company, the Warrant Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased (the "Shares"). All
Shares that may be issued upon the exercise of this Warrant will, upon issuance,
be fully paid, nonassessable, and free from all taxes, liens, and charges with
respect thereto.
This Warrant is subject to the following additional terms and conditions:
1. Exercise of Warrant.
1.1. At Warrant Holder's Option. This Warrant may be exercised at any
time on or before November 1, 2002 (the "Termination Date"), and the purchase
rights represented hereby are exercisable solely at the Warrant Holder's option.
If the Warrant Holder does not exercise its right to purchase the number of
shares of Common Stock designated herein, this
<PAGE>
Warrant shall automatically expire on the Termination Date. In the event the
Warrant Holder purchases less than all the shares purchasable under this
Warrant, the Company shall cancel this Warrant upon the surrender hereof and
execute and deliver a new Warrant of like tenor for the balance of the shares
purchasable hereunder.
1.2. Payment of Purchase Price. The Purchase Price shall be payable
in any one of the following ways, or in any combination thereof:
(i) Cash. The Purchase Price is payable in cash or by
----
certified or bank cashier's check in lawful funds of the United States of
America.
(ii) Cancellation of Indebtedness. The Purchase Price is
----------------------------
payable through the cancellation of indebtedness owed by the Company to the
Warrant Holder.
(iii) Common Stock. The Purchase Price is payable by delivery to
------------
the Company of shares of the Company's Common Stock owned by the Warrant Holder.
The shares of Common Stock constituting such payment shall be valued at Fair
Market Value on the date of delivery. For purposes of this Warrant, "Fair Market
Value" of a share of Common Stock on a given day means the average of one of the
following prices for the five trading days immediately preceding such given day
of valuation: (i) if the Common Stock is listed on an established stock exchange
or exchanges or the Nasdaq National Market System, the highest closing sales
price of Common Stock as reported thereon; or if not so reported, (ii) the
average of the bid and asked prices, as quoted on the Nasdaq Small Cap Market,
Nasdaq Bulletin Board, or by the National Quotations Bureau. If the Common Stock
shall not be so quoted, the Fair Market Value shall be determined by the Board
of Directors of the Company taking into account all relevant facts and
circumstances, but in no event shall the Fair Market Value so determined by the
Board of Directors be less than the price per share of Common Stock in the
Company's equity financing most recently consummated prior to the valuation
date, with total proceeds to the Company in excess of $1,000,000.
(iv) Net-Issuance. In addition to the foregoing methods of
------------
payment, the Warrant Holder may exercise this Warrant, or a portion thereof, and
the Purchase Price shall be payable in connection therewith, by relinquishing
the right under this Warrant to purchase an Exercise Block and, in exchange
therefor, the Warrant Holder shall receive that number of shares of Common Stock
equal to the number of shares constituting the Exercise Block, less a number of
shares equal to the quotient of (i) the aggregate Purchase Price for the
Exercise Block, divided by (ii) the Fair Market Value per share of Common Stock
(determined as of the date of relinquishment). For purposes of this Section
1.2(iv), "Exercise Block" shall mean that total number of shares covered by this
Warrant for which the Warrant Holder desires to relinquish as provided herein.
2. Adjustments.
-2-
<PAGE>
2.1. Adjustment to Purchase Price. The Purchase Price of the Common
Stock issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, as follows:
(i)(A) If the Company shall issue any Additional Stock (as
hereinafter defined) after the date hereof for a consideration (the "New
Consideration") per share less than the Purchase Price for the Common Stock
issuable upon exercise of the Warrant in effect immediately prior to the
issuance of such Additional Stock, the Purchase Price shall be reduced so as to
be equal to such New Consideration.
(B) No adjustment of the Purchase Price for the Common Stock
issuable upon the exercise of this Warrant shall be made in an amount less than
one cent ($.01) per share, and (except to the limited extent provided for in
subparagraphs (i)(E)(y) and (i)(E)(z) of this Section 2.1) no adjustment of such
Purchase Price shall have the effect of increasing the Purchase Price above the
Purchase Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions, or other expenses allowed,
paid, or incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Company's
Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities that by their terms are
convertible into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities (which are
not excluded from the definition of Additional Stock):
(w) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subparagraphs (i)(C) and (i)(D) of this
Section 2.1), if any, received by the Company upon the issuance of such options
or rights, plus the minimum purchase price provided in such options or rights
for the Common Stock covered thereby ;
(x) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such convertible or exchangeable securities were issued or such options or
rights were issued and for a consideration equal to the consideration, if any,
received
-3-
<PAGE>
by the Company for any such convertible or exchangeable securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in subparagraphs (i)(C) and (i)(D) of this
Section 2.1);
(y) upon any change in the number of shares of Common
Stock deliverable upon exercise of such options or rights or conversion of or
exchange for such convertible or exchangeable securities, the Purchase Price as
then in effect shall forthwith be readjusted to such Purchase Price as would
have been obtained had the adjustment made upon the issuance of such options,
rights, or securities not converted prior to such change or options or rights
related to such securities not converted prior to such change been made upon the
basis of such change, but no further adjustment shall be made for the actual
issuance of Common Stock upon the exercise of any such options or rights or the
conversion or exchange of such securities;
(z) upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Purchase Price shall forthwith be readjusted to such Purchase Price as would
have been obtained had the adjustment made upon the issuance of such options,
rights, or securities or options or rights related to such securities been made
upon the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities, or upon the exercise of the options or rights
related to such securities.
(ii) "Additional Stock" for purposes of this Warrant shall mean
any shares of the Company's Common Stock issued by the Company in conjunction
with or after the determination of the Purchase Price as specified hereinabove,
other than :
(A) Common Stock issued pursuant to a transaction
described in Section (iii) hereof;
(B) Common Stock issuable or issued to officers,
directors, employees, or consultants of the Company, whether directly or
pursuant to the exercise of options, on terms that have been approved by the
Company's Board of Directors; and
(C) Common Stock issued or issuable upon conversion of any
shares of the Company's outstanding Preferred Stock or upon exercise of this
Warrant or any other stock warrants issued contemporaneously herewith or issued
and outstanding as of the date hereon .
(iii) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision payable in shares of Common Stock or by a
subdivision or split-up of shares of the Company's Common Stock, then, following
the record date fixed for the determination of holders of Common Stock entitled
to receive such stock dividend, subdivision, or split-up, the Purchase
-4-
<PAGE>
Price for the Common Stock issuable upon the exercise of this Warrant shall be
appropriately decreased so that the number of shares of Common Stock issuable
upon the exercise of this Warrant will be increased in proportion to such
increase in the number of outstanding shares of the Company's Common Stock.
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination or reverse stock split
of the outstanding shares of the Company's Common Stock, then, following the
record date of such combination or reverse stock split, the Purchase Price
for the Common Stock shall be appropriately increased so that the number of
shares of Common Stock issuable upon the exercise of this Warrant will be
decreased in proportion to such decrease in the number of outstanding shares of
Common Stock.
2.2. Adjustment to Number of Shares Purchasable Under Warrant. Upon
any adjustment to the Purchase Price, the number of shares purchasable under
this Warrant shall be adjusted to equal the product of (i) the number of shares
of Common Stock purchasable under this Warrant immediately prior to such
adjustment to the Purchase Price and (ii) the quotient of (A) the Purchase Price
in effect immediately prior to such adjustment divided by (B) the Purchase Price
in effect immediately after such adjustment.
2.3. Warrant Need Not be Changed to Reflect Adjustments. This Warrant
need not be changed to reflect any adjustment or changes in the Purchase Price.
2.4. Reorganization, Merger, Etc. If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or entity, or the sale or conveyance of
all or substantially all of the Company's assets to another corporation or
entity shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, or conveyance, lawful and
adequate provision shall be made whereby the Warrant Holder shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities, or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger, sale, or conveyance not taken place, and, in any such
case, appropriate provision shall be made with respect to the rights and
interests of the Warrant Holder such that the provisions hereof (including,
without limitation, provisions for adjustment of the Purchase Price) shall
thereafter be applicable, as nearly as may be, to any stock, securities, or
assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any consolidation, merger, or sale of all or
substantially all of its assets to any other corporation or entity, unless prior
to or simultaneously with the consummation thereof the successor corporation or
entity (if other than the Company) resulting from such consolidation or merger,
or the corporation or entity purchasing such assets, shall assume, by written
instrument executed and mailed or delivered to the Warrant Holder at the address
indicated in Section 7 hereof, the obligation of such corporation or entity to
deliver to
-5-
<PAGE>
such Warrant Holder shares of stock, securities, or assets as, in accordance
with the provisions of this Warrant, such Warrant Holder may be entitled to
purchase, and to perform and observe each and every covenant and condition of
this Warrant to be performed and observed by the Company.
2.5. Notice to Warrant Holder or Warrant Holders.
(i) Upon any adjustment of the Purchase Price, the Company,
within thirty (30) days thereafter, shall give written notice thereof, pursuant
to Section 7 hereof, which notice shall state the adjusted Purchase Price
setting forth in reasonable detail the method of calculation and the facts
(including a statement of the consideration received or deemed to have been
received by the Company for any additional shares or convertible or exchangeable
securities or rights or options) upon which such calculations are based. Where
appropriate, such notice may be given in advance and be included as part of the
notice required to be mailed pursuant to the provisions of paragraph (b) of this
Section 2.5.
(ii) In case at any time:
(A) the Company shall declare any dividend upon its Common
Stock payable otherwise than in cash or in the Common Stock of the Company or
payable otherwise than out of net income for a twelve (12) month period ending
not earlier than ninety (90) days prior to the date of payment of such dividend;
or
(B) the Company shall offer for subscription to the holders
of its Common Stock any additional shares of stock of any class or any other
securities convertible into or exchangeable for shares of stock or any rights or
options to subscribe thereto; or
(C) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale or conveyance of
all or substantially all of the assets of the Company, or a consolidation or
merger of the Company with another corporation or entity; or
(D) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company; or
(E) the Company intends to issue or has issued any Common
Stock or rights convertible into Common Stock for a per share consideration of
less than the Purchase Price, then, in any one or more of said cases, the
Company shall give written notice, pursuant to Section 7 hereof, at the earliest
time legally practicable (and, unless otherwise impossible for a legal reason,
not less than thirty (30) days before any record date or other date set for
definitive action) of the date as of which (y) the books of the Company shall
close or a record date shall be taken for such dividend, distribution, or
subscription rights or options, or (z) such reorganization, reclassification,
sale, conveyance, consolidation, merger, dissolution, liquidation, or winding up
shall take place, as the case may be. Such notice shall also specify the date as
of which the holders of the Common Stock of record shall participate in said
dividend,
-6-
<PAGE>
distribution, subscription rights, or options or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding up, as the case may be (on which date, in
the event of voluntary or involuntary dissolution, liquidation, or winding up of
the Company, the right to exercise this Warrant shall cease and terminate).
2.6. Conditions Not Specifically Covered. In case at any time
conditions shall arise by reason of action taken by the Company, which, in the
good faith judgment of the Company's Board of Directors, are not adequately
covered by the limited antidilution provisions of this Warrant so as to
potentially materially and adversely affect the rights of the Warrant Holder or
Warrant Holders, or, in case at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, its Board of
Directors shall appoint a firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the Company's
financial statements), who shall give an opinion as to the adjustment, if any
(not inconsistent with the standards established in this Section 2 hereof), of
the Purchase Price, which is, or would be, required to preserve, without
dilution, the rights of the Warrant Holder or Warrant Holders to the extent
provided herein. The Company's Board of Directors shall make the adjustment
recommended forthwith upon the receipt of such opinion or the taking of any such
action contemplated, as the case may be. Nothing in this Section 2.6 or any
other provision of this Warrant shall permit or require adjustment regarding the
number of shares of Common Stock into which this Warrant may hereafter be
exercisable, it being the parties' intention to limit antidilution protection in
this Warrant solely to adjustments to the Purchase Price.
3. Status of Warrant Holders. This Warrant does not entitle the Warrant
Holder or Warrant Holders hereof to any rights as a shareholder of the Company.
4. Remedies. The Company stipulates that the remedies at law of the
Warrant Holder or Warrant Holders in the event of any default or threatened
default by the Company in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
5. Reservation of Shares. The Company shall reserve and keep available a
sufficient number of shares of Common Stock to satisfy the requirements of this
Warrant. Before taking any action that would cause a reduction of the Purchase
Price below the then current par value of the shares of Common Stock issuable
upon exercise of this Warrant, the Company will take any corporate action that
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Purchase Price.
6. Assignment. This Warrant shall be binding upon and inure to the
benefit of the Company, the Warrant Holder, and their respective successors and
assigns.
-7-
<PAGE>
7. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been given when
personally delivered, mailed first class (postage prepaid), or delivered to a
telegraph office:
(i) if to a Warrant Holder, at the address of such Warrant Holder as
shown on the books of the Company.
(ii) if to the Company, at 2733 152nd Avenue N.E., Redmond, Washington
98052, to the attention of the corporate Secretary, or at such other address as
may have been furnished to the Warrant Holder in writing.
8. Headings. The headings of the Sections and subsections of this
Warrant are inserted for convenience only and shall not be deemed to constitute
a part of this Warrant.
-8-
<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by its duly
authorized officer as of the date first above written.
DATA CRITICAL CORP.
an Oklahoma corporation
By: /s/ Jeffrey S. Brown
----------------------------------
Jeffrey S. Brown, President
-9-
<PAGE>
Warrantholders who currently hold this Form of Common Stock Warrant
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Warant
No. Holder Shares
- -----------------------------------------------------------------------
<S> <C> <C>
013 Kimberlin Family Partners, L.P. 93,750
- -----------------------------------------------------------------------
014 APEX Investment Fund II, L.P. 28,332
- -----------------------------------------------------------------------
015 The Productivity Fund II, L.P. 10,795
- -----------------------------------------------------------------------
016 Environmental Private Equity Fund, L.P. 15,383
- -----------------------------------------------------------------------
017 Austin O. Furst, Jr. 9,531
- -----------------------------------------------------------------------
018 James V. Kimsey 2,667
- -----------------------------------------------------------------------
019 Leonard and Stella Kleinrock 6,417
- -----------------------------------------------------------------------
020 Aubrey Kerr McClendon 4,687
- -----------------------------------------------------------------------
021 Pearson Street Limited Partnership 4,687
- -----------------------------------------------------------------------
022 Elizabeth G. Riley 2,667
- -----------------------------------------------------------------------
023 Tom Ward, TTEE, FBO McClendon Children's 9,375
Trust
- -----------------------------------------------------------------------
024 Sherman H. Starr 2,274
- -----------------------------------------------------------------------
025 William M. Cameron 1,770
- -----------------------------------------------------------------------
026 American Fidelity Corp. 1,770
- -----------------------------------------------------------------------
027 Clarion Capital Corporation 4,687
- -----------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
Exhibit 4.5
THIS WARRANT AND THE COMMON STOCK ISSUABLE WITH RESPECT HERETO HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE BLUE
SKY ACTS AND MAY BE TRANSFERRED OR SOLD ONLY PURSUANT TO REGISTRATION UNDER SUCH
ACTS, OR TO EXEMPTIONS THEREUNDER.
DATA CRITICAL CORP.
an Oklahoma corporation
(the "Company")
July 10, 1996
For the Purchase of 199,363 Shares of the
Company's Common Stock, $.001 par value
COMMON STOCK PURCHASE WARRANT
This certifies that Nomadics, Inc., an Oklahoma corporation, or such
person's registered assigns (the "Warrant Holder"), is entitled, subject to the
terms and conditions hereinafter set forth at any time on or before July 10,
2000, to purchase from time to time up to a total of 199,363 shares of the
Company's common stock, $0.001 par value (the "Common Stock"), at a price per
share of $.80 (the "Purchase Price"). The number of shares of Common Stock
purchasable under this Common Stock Purchase Warrant (the "Warrant") and the
Purchase Price thereof shall be subject to adjustment as hereinafter provided.
The Purchase Price shall be payable in cash or by certified or bank
cashier's check in lawful funds of the United States of America or by
cancellation of indebtedness. Upon presentation and surrender of this Warrant,
together with payment of the Purchase Price for the shares of Common Stock
thereby purchased, at the office of the Company's Transfer Agent for the
transfer of such stock or, if at any time there is no such Transfer Agent, at
the principal office of the Company, the Warrant Holder shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased (the "Shares"). All Shares that may be issued upon the exercise of
this Warrant will, upon issuance, be fully paid, nonassessable, and free from
all taxes, liens, and charges with respect thereto.
This Warrant is subject to the following additional terms and conditions:
1. Exercise of Warrant.
1.1. At Warrant Holder's Option. (a) Subject to the vesting
provisions of Section 1.1(b) and (c), this Warrant may be exercised at any time
on or before July 10, 2000 (the "Termination Date"), and the purchase rights
represented hereby are exercisable solely at the Warrant Holder's option. If
the Warrant Holder does not exercise its right to purchase the
<PAGE>
number of shares of Common Stock designated herein, this Warrant shall
automatically expire on the Termination Date. In the event the Warrant Holder
purchases less than all the shares purchasable under this Warrant, the Company
shall cancel this Warrant upon the surrender hereof and execute and deliver a
new Warrant of like tenor for the balance of the shares purchasable hereunder.
(b) This Warrant shall be immediately vested as to 37,380 shares of
Common Stock. The remaining 161,983 shares shall vest in quarterly increments
of 7.69% per quarter, at the end of each of the next 13 calendar quarters,
commencing the quarter ending September 30, 1996.
(c) Provided that DCC is not in default or breach of that certain
Product Development Agreement (the "Product Development Agreement"), dated July
10, 1996, by and between the Company and the Warrant Holder, if DCC terminates
the Product Development Agreement under Section 3(c) thereof, or if Nomadics or
Colin Cumming terminates under Section 3(b) thereof, this Warrant shall
automatically terminate as to any unvested shares purchasable at the time of
such termination.
1.2. Payment of Purchase Price. The Purchase Price shall be payable
in any one of the following ways, or in any combination thereof:
a. Cash. The Purchase Price is payable in cash
----
or by certified or bank cashier's check in lawful funds of
the United States of America.
b. Cancellation of Indebtedness. The Purchase
----------------------------
Price is payable through the cancellation of indebtedness
owed by the Company to the Warrant Holder.
c. Common Stock. The Purchase Price is payable
------------
by delivery to the Company of shares of the Company's Common
Stock owned by the Warrant Holder. The shares of Common
Stock constituting such payment shall be valued at Fair
Market Value on the date of delivery. For purposes of this
Warrant, "Fair Market Value" of a share of Common Stock on a
given day means the average of one of the following prices
for the five trading days immediately preceding such given
day of valuation: (i) if the Common Stock is listed on an
established stock exchange or exchanges or the NASDAQ
National Market System, the highest closing sales price of
Common Stock as reported thereon; or if not so reported,
(ii) the average of the bid and asked prices, as quoted on
the NASDAQ Small-Cap Market, NASDAQ Bulletin Board, or by
the National Quotations Bureau. If the Common Stock shall
not be so quoted, the Fair Market Value shall be determined
by the Board of Directors of the Company taking into account
all relevant facts and circumstances, but in no event shall
the Fair Market Value so determined by the Board of
<PAGE>
Directors be less than the price per share of Common Stock
in the Company's equity financing most recently consummated
prior to the valuation date, with total proceeds to the
Company in excess of $1,000,000.
d. Net-Issuance. In addition to the foregoing
------------
methods of payment, the Warrant Holder may exercise this
Warrant, or a portion thereof, and the Purchase Price shall
be payable in connection therewith, by relinquishing the
right under this Warrant to purchase an Exercise Block and,
in exchange therefor, the Warrant Holder shall receive that
number of shares of Common Stock equal to the number of
shares constituting the Exercise Block, less a number of
shares equal to the quotient of (i) the aggregate Purchase
Price for the Exercise Block, divided by (ii) the Fair
Market Value per share of Common Stock (determined as of the
date of relinquishment). For purposes of this Section
1.2(d), "Exercise Block" shall mean that total number of
shares covered by this Warrant for which the Warrant Holder
desires to relinquish as provided herein.
2. ADJUSTMENTS.
2.1. Adjustment to Purchase Price. The Purchase Price of the Common
Stock issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, as follows:
(i)(A) If the Company shall issue any Additional Stock (as
hereinafter defined) after the date hereof for a consideration (the "New
Consideration") per share less than the Purchase Price for the Common Stock
issuable upon exercise of the Warrant in effect immediately prior to the
issuance of such Additional Stock, the Purchase Price shall be reduced so as to
be equal to such New Consideration.
(B) Except to the limited extent provided for in subparagraphs
(i)(E)(y) and (i)(E)(z) of this Section 2.1, no adjustment of the Purchase Price
shall have the effect of increasing the Purchase Price above the Purchase Price
in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions, or other expenses allowed,
paid, or incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Company's
Board of Directors irrespective of any accounting treatment.
<PAGE>
(E) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities that by their terms are
convertible into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities (which are
not excluded from the definition of Additional Stock):
(w) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in subparagraphs (i)(C) and
(i)(D) of this Section 2.1), if any, received by the Company upon
the issuance of such options or rights, plus the minimum purchase
price provided in such options or rights for the Common Stock
covered thereby;
(x) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion
or exchange thereof shall be deemed to have been issued at the
time such convertible or exchangeable securities were issued or
such options or rights were issued and for a consideration equal
to the consideration, if any, received by the Company for any
such convertible or exchangeable securities and related options
or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subparagraphs (i)(C) and
(i)(D) of this Section 2.1);
(y) upon any change in the number of shares of
Common Stock deliverable upon exercise of such options or rights
or conversion of or exchange for such convertible or exchangeable
securities, the Purchase Price as then in effect shall forthwith
be readjusted to such Purchase Price as would have been obtained
had the adjustment made upon the issuance of such options,
rights, or securities not converted prior to such change or
options or rights related to such securities not converted prior
to such change been made upon the basis of such change, but no
further adjustment shall be made for the actual issuance of
Common Stock upon the exercise of any such options or rights or
the conversion or exchange of such securities;
(z) upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange
or the expiration of any options or rights related to such
convertible or exchangeable securities, the Purchase Price shall
forthwith be readjusted to such Purchase Price as would have
<PAGE>
been obtained had the adjustment made upon the issuance of such
options, rights, or securities or options or rights related to
such securities been made upon the basis of the issuance of only
the number of shares of Common Stock actually issued upon the
exercise of such options or rights, upon the conversion or
exchange of such securities, or upon the exercise of the options
or rights related to such securities.
(ii) "Additional Stock" for purposes of this Warrant shall mean
any shares of the Company's Common Stock issued by the Company in conjunction
with or after the determination of the Purchase Price as specified hereinabove,
other than:
(A) Common Stock issued pursuant to a transaction
described in Section (iii) hereof;
(B) Common Stock (not to exceed 1,790,000 shares)
issuable or issued as incentive compensation to employees or consultants of the
Company, whether directly or pursuant to the exercise of options.
(C) Common Stock issued or issuable upon conversion of
any shares of the Company's outstanding Series A Convertible Participating
Preferred Stock or Series B Convertible Participating Preferred Stock or upon
exercise of this Warrant or any other stock warrants issued contemporaneously
herewith or issued and outstanding as of the date hereon.
(iii) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision payable in shares of Common Stock or by a
subdivision or split-up of shares of the Company's Common Stock, then, following
the record date fixed for the determination of holders of Common Stock entitled
to receive such stock dividend, subdivision, or split-up, the Purchase Price for
the Common Stock issuable upon the exercise of this Warrant shall be
appropriately decreased so that the number of shares of Common Stock issuable
upon the exercise of this Warrant will be increased in proportion to such
increase in the number of outstanding shares of the Company's Common Stock.
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination or reverse stock split
of the outstanding shares of the Company's Common Stock, then, following the
record date of such combination or reverse stock split, the Purchase Price for
the Common Stock shall be appropriately increased so that the number of shares
of Common Stock issuable upon the exercise of this Warrant will be decreased in
proportion to such decrease in the number of outstanding shares of Common Stock.
2.2. No Adjustment to Number of Shares Purchasable Under Warrant in
Event of Purchase Price Adjustment Under Section 2.1(i). Upon any adjustment to
the Purchase Price under Section 2.1(i), there shall be no adjustment in the
number of shares purchasable under this Warrant.
<PAGE>
2.3. Warrant Need Not be Changed to Reflect Adjustments. This Warrant
need not be changed to reflect any adjustment or changes in the Purchase Price.
2.4. Reorganization, Merger, Etc. If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or entity, or the sale or conveyance of
all or substantially all of the Company's assets to another corporation or
entity shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, or conveyance, lawful and
adequate provision shall be made whereby the Warrant Holder shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities, or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger, sale, or conveyance not taken place, and, in any such
case, appropriate provision shall be made with respect to the rights and
interests of the Warrant Holder such that the provisions hereof (including,
without limitation, provisions for adjustment of the Purchase Price) shall
thereafter be applicable, as nearly as may be, to any stock, securities, or
assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any consolidation, merger, or sale of all or
substantially all of its assets to any other corporation or entity, unless prior
to or simultaneously with the consummation thereof the successor corporation or
entity (if other than the Company) resulting from such consolidation or merger,
or the corporation or entity purchasing such assets, shall assume, by written
instrument executed and mailed or delivered to the Warrant Holder at the address
indicated in Section 7 hereof, the obligation of such corporation or entity to
deliver to such Warrant Holder shares of stock, securities, or assets as, in
accordance with the provisions of this Warrant, such Warrant Holder may be
entitled to purchase, and to perform and observe each and every covenant and
condition of this Warrant to be performed and observed by the Company.
2.5. Notice to Warrant Holder or Warrant Holders.
(a) Upon any adjustment of the Purchase Price, the Company,
within thirty (30) days thereafter, shall give written notice thereof, pursuant
to Section 7 hereof, which notice shall state the adjusted Purchase Price
setting forth in reasonable detail the method of calculation and the facts
(including a statement of the consideration received or deemed to have been
received by the Company for any additional shares or convertible or exchangeable
securities or rights or options) upon which such calculations are based. Where
appropriate, such notice may be given in advance and be included as part of the
notice required to be mailed pursuant to the provisions of paragraph (b) of this
Section 2.5.
(b) In case at any time:
<PAGE>
(i) the Company shall declare any dividend upon its Common
Stock payable otherwise than in cash or in the Common Stock of the Company
or payable otherwise than out of net income for a twelve (12) month period
ending not earlier than ninety (90) days prior to the date of payment of
such dividend; or
(ii) the Company shall offer for subscription to the
holders of its Common Stock any additional shares of stock of any class or
any other securities convertible into or exchangeable for shares of stock
or any rights or options to subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale or
conveyance of all or substantially all of the assets of the Company, or a
consolidation or merger of the Company with another corporation or entity;
or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company; or
(v) the Company intends to issue or has issued any Common
Stock or rights convertible into Common Stock for a per share consideration
of less than the Purchase Price, then, in any one or more of said cases,
the Company shall give written notice, pursuant to Section 7 hereof, at the
earliest time legally practicable (and, unless otherwise impossible for a
legal reason, not less than thirty (30) days before any record date or
other date set for definitive action) of the date as of which (A) the books
of the Company shall close or a record date shall be taken for such
dividend, distribution, or subscription rights or options, or (B) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend, distribution,
subscription rights, or options or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding up, as the case may be (on which date,
in the event of voluntary or involuntary dissolution, liquidation, or
winding up of the Company, the right to exercise this Warrant shall cease
and terminate).
2.6. Conditions Not Specifically Covered. In case at any time
conditions shall arise by reason of action taken by the Company, which, in the
good faith judgment of the Company's Board of Directors, are not adequately
covered by the limited antidilution provisions of this Warrant so as to
potentially materially and adversely affect the rights of the Warrant Holder or
Warrant Holders, or, in case at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, its Board of
Directors shall appoint a firm of independent certified public accountants of
recognized standing (which may be the firm that
<PAGE>
regularly examines the Company's financial statements), who shall give an
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 2 hereof), of the Purchase Price, which is, or would
be, required to preserve, without dilution, the rights of the Warrant Holder or
Warrant Holders to the extent provided herein. The Company's Board of Directors
shall make the adjustment recommended forthwith upon the receipt of such opinion
or the taking of any such action contemplated, as the case may be. Nothing in
this Section 2.6 or any other provision of this Warrant shall permit or require
adjustment regarding the number of shares of Common Stock into which this
Warrant may hereafter be exercisable, it being the parties' intention to limit
antidilution protection in this Warrant solely to adjustments to the Purchase
Price.
3. Status of Warrant Holders. This Warrant does not entitle the Warrant
Holder or Warrant Holders hereof to any rights as a shareholder of the Company.
4. Remedies. The Company stipulates that the remedies at law of the
Warrant Holder or Warrant Holders in the event of any default or threatened
default by the Company in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
5. Reservation of Shares. The Company shall reserve and keep available a
sufficient number of shares of Common Stock to satisfy the requirements of this
Warrant. Before taking any action that would cause a reduction of the Purchase
Price below the then current par value of the shares of Common Stock issuable
upon exercise of this Warrant, the Company will take any corporate action that
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Purchase Price.
6. Assignment. This Warrant shall be binding upon and inure to the
benefit of the Company, the Warrant Holder, and their respective successors and
assigns.
7. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been given when
personally delivered, mailed first class (postage prepaid), or delivered to a
telegraph office:
(i) if to a Warrant Holder, at the address of such Warrant Holder as
shown on the books of the Company.
(ii) if to the Company, at 2733 152nd Avenue, N.E., Redmond,
Washington 98052, to the attention of the corporate Secretary, or at such
other address as may have been furnished to the Warrant Holder in writing.
8. Headings. The headings of the Sections and subsections of this
Warrant are inserted for convenience only and shall not be deemed to constitute
a part of this Warrant.
<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by its duly
authorized officer as of the date first above written.
DATA CRITICAL CORP.
an Oklahoma corporation
By: /s/ Jeffrey S. Brown
------------------------------
Jeffrey S. Brown, President
<PAGE>
EXHIBIT 4.6
THIS WARRANT AND THE COMMON STOCK ISSUABLE WITH RESPECT HERETO HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE BLUE
SKY ACTS AND MAY BE TRANSFERRED OR SOLD ONLY PURSUANT TO REGISTRATION UNDER SUCH
ACTS, OR TO EXEMPTIONS THEREUNDER.
DATA CRITICAL CORP.
an Oklahoma corporation
(the "Company")
July 10, 1996
For the Purchase of 199,363 Shares of the
Company's Common Stock, $.001 par value
COMMON STOCK PURCHASE WARRANT
This certifies that Colin Cumming, or such person's registered assigns (the
"Warrant Holder"), is entitled, subject to the terms and conditions hereinafter
set forth at any time on or before July 10, 2000, to purchase from time to time
up to a total of 199,363 shares of the Company's common stock, $0.001 par value
(the "Common Stock"), at a price per share of $.80 (the "Purchase Price"). The
number of shares of Common Stock purchasable under this Common Stock Purchase
Warrant (the "Warrant") and the Purchase Price thereof shall be subject to
adjustment as hereinafter provided.
The Purchase Price shall be payable in cash or by certified or bank
cashier's check in lawful funds of the United States of America or by
cancellation of indebtedness. Upon presentation and surrender of this Warrant,
together with payment of the Purchase Price for the shares of Common Stock
thereby purchased, at the office of the Company's Transfer Agent for the
transfer of such stock or, if at any time there is no such Transfer Agent, at
the principal office of the Company, the Warrant Holder shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased (the "Shares"). All Shares that may be issued upon the exercise of
this Warrant will, upon issuance, be fully paid, nonassessable, and free from
all taxes, liens, and charges with respect thereto.
This Warrant is subject to the following additional terms and conditions:
1. Exercise of Warrant.
1.1. At Warrant Holder's Option. (a) Subject to the vesting
provisions of Sections 1.1(b) and (c), this Warrant may be exercised at any time
on or before July 10, 2000 (the "Termination Date"), and the purchase rights
represented hereby are exercisable solely at the Warrant Holder's option. If
the Warrant Holder does not exercise its right to purchase the number of shares
of Common Stock designated herein, this Warrant shall automatically expire
<PAGE>
on the Termination Date. In the event the Warrant Holder purchases less than all
the shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and execute and deliver a new Warrant of like tenor
for the balance of the shares purchasable hereunder.
(b) This Warrant shall be immediately vested as to 37,380 shares of
Common Stock. The remaining 161,983 shares shall vest in quarterly increments
of 7.69% per quarter, at the end of each of the next 13 calendar quarters,
commencing the quarter ending September 30, 1996.
(c) Provided that DCC is not in default or breach of that certain
Product Development Agreement (the "Product Development Agreement"), dated July
10, 1996, by and between the Company and the Warrant Holder, if DCC terminates
the Product Development Agreement under Section 3(c) thereof, or if Nomadics or
Colin Cumming terminates under Section 3(b) thereof, this Warrant shall
automatically terminate as to any unvested shares purchasable at the time of
such termination.
1.2. Payment of Purchase Price. The Purchase Price shall be payable
in any one of the following ways, or in any combination thereof:
a. Cash. The Purchase Price is payable in cash or by
----
certified or bank cashier's check in lawful funds of the United States
of America.
b. Cancellation of Indebtedness. The Purchase Price is
----------------------------
payable through the cancellation of indebtedness owed by the Company
to the Warrant Holder.
c. Common Stock. The Purchase Price is payable by delivery
------------
to the Company of shares of the Company's Common Stock owned by the
Warrant Holder. The shares of Common Stock constituting such payment
shall be valued at Fair Market Value on the date of delivery. For
purposes of this Warrant, "Fair Market Value" of a share of Common
Stock on a given day means the average of one of the following prices
for the five trading days immediately preceding such given day of
valuation: (i) if the Common Stock is listed on an established stock
exchange or exchanges or the NASDAQ National Market System, the
highest closing sales price of Common Stock as reported thereon; or if
not so reported, (ii) the average of the bid and asked prices, as
quoted on the NASDAQ Small-Cap Market, NASDAQ Bulletin Board, or by
the National Quotations Bureau. If the Common Stock shall not be so
quoted, the Fair Market Value shall be determined by the Board of
Directors of the Company taking into account all relevant facts and
circumstances, but in no event shall the Fair Market Value so
determined by the Board of Directors be less than the price per share
of Common Stock in the Company's equity financing most recently
consummated prior to the
<PAGE>
valuation date, with total proceeds to the Company in excess of
$1,000,000.
d. Net-Issuance. In addition to the foregoing methods of
------------
payment, the Warrant Holder may exercise this Warrant, or a portion
thereof, and the Purchase Price shall be payable in connection
therewith, by relinquishing the right under this Warrant to purchase
an Exercise Block and, in exchange therefor, the Warrant Holder shall
receive that number of shares of Common Stock equal to the number of
shares constituting the Exercise Block, less a number of shares equal
to the quotient of (i) the aggregate Purchase Price for the Exercise
Block, divided by (ii) the Fair Market Value per share of Common Stock
(determined as of the date of relinquishment). For purposes of this
Section 1.2(d), "Exercise Block" shall mean that total number of
shares covered by this Warrant for which the Warrant Holder desires to
relinquish as provided herein.
2. Adjustments.
2.1. Adjustment to Purchase Price. The Purchase Price of the Common
Stock issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, as follows:
(i)(A) If the Company shall issue any Additional Stock (as
hereinafter defined) after the date hereof for a consideration (the "New
Consideration") per share less than the Purchase Price for the Common Stock
issuable upon exercise of the Warrant in effect immediately prior to the
issuance of such Additional Stock, the Purchase Price shall be reduced so as to
be equal to such New Consideration.
(B) Except to the limited extent provided for in subparagraphs
(i)(E)(y) and (i)(E)(z) of this Section 2.1, no adjustment of the Purchase Price
shall have the effect of increasing the Purchase Price above the Purchase Price
in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions, or other expenses allowed,
paid, or incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Company's
Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities that by their terms are
convertible into or exchangeable
<PAGE>
for Common Stock, or options to purchase or rights to subscribe for such
convertible or exchangeable securities (which are not excluded from the
definition of Additional Stock):
(w) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subparagraphs (i)(C)
and (i)(D) of this Section 2.1), if any, received by the Company upon the
issuance of such options or rights, plus the minimum purchase price
provided in such options or rights for the Common Stock covered thereby;
(x) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such convertible or exchangeable securities were issued
or such options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such convertible or
exchangeable securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the
manner provided in subparagraphs (i)(C) and (i)(D) of this Section 2.1);
(y) upon any change in the number of shares of Common Stock
deliverable upon exercise of such options or rights or conversion of or
exchange for such convertible or exchangeable securities, the Purchase
Price as then in effect shall forthwith be readjusted to such Purchase
Price as would have been obtained had the adjustment made upon the issuance
of such options, rights, or securities not converted prior to such change
or options or rights related to such securities not converted prior to such
change been made upon the basis of such change, but no further adjustment
shall be made for the actual issuance of Common Stock upon the exercise of
any such options or rights or the conversion or exchange of such
securities;
(z) upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Purchase Price shall forthwith be readjusted to such
Purchase Price as would have been obtained had the adjustment made upon the
issuance of such options, rights, or securities or options or rights
related to such securities been made upon the basis of the issuance of only
the number of shares of Common Stock actually issued upon the exercise of
such options or rights, upon the conversion or
<PAGE>
exchange of such securities, or upon the exercise of the options or rights
related to such securities.
(ii) "Additional Stock" for purposes of this Warrant shall mean any
shares of the Company's Common Stock issued by the Company in conjunction with
or after the determination of the Purchase Price as specified hereinabove, other
than:
(A) Common Stock issued pursuant to a transaction described
in Section (iii) hereof;
(B) Common Stock (not to exceed 1,790,000 shares) issuable or
issued as incentive compensation to employees or consultants of the Company,
whether directly or pursuant to the exercise of options.
(C) Common Stock issued or issuable upon conversion of any
shares of the Company's outstanding Series A Convertible Participating Preferred
Stock or Series B Convertible Participating Preferred Stock or upon exercise of
this Warrant or any other stock warrants issued contemporaneously herewith or
issued and outstanding as of the date hereon.
(iii) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision payable in shares of Common Stock or by a
subdivision or split-up of shares of the Company's Common Stock, then, following
the record date fixed for the determination of holders of Common Stock entitled
to receive such stock dividend, subdivision, or split-up, the Purchase Price for
the Common Stock issuable upon the exercise of this Warrant shall be
appropriately decreased so that the number of shares of Common Stock issuable
upon the exercise of this Warrant will be increased in proportion to such
increase in the number of outstanding shares of the Company's Common Stock.
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination or reverse stock split
of the outstanding shares of the Company's Common Stock, then, following the
record date of such combination or reverse stock split, the Purchase Price for
the Common Stock shall be appropriately increased so that the number of shares
of Common Stock issuable upon the exercise of this Warrant will be decreased in
proportion to such decrease in the number of outstanding shares of Common Stock.
2.2. No Adjustment to Number of Shares Purchasable Under Warrant in Event
of Purchase Price Adjustment Under Section 2.1(i). Upon any adjustment to the
Purchase Price under Section 2.1(i), there shall be no adjustment in the number
of shares purchasable under this Warrant.
2.3. Warrant Need Not be Changed to Reflect Adjustments. This Warrant
need not be changed to reflect any adjustment or changes in the Purchase Price.
2.4. Reorganization, Merger, Etc. If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company
<PAGE>
with another corporation or entity, or the sale or conveyance of all or
substantially all of the Company's assets to another corporation or entity shall
be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, or conveyance, lawful and adequate provision shall
be made whereby the Warrant Holder shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, securities, or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby
had such reorganization, reclassification, consolidation, merger, sale, or
conveyance not taken place, and, in any such case, appropriate provision shall
be made with respect to the rights and interests of the Warrant Holder such that
the provisions hereof (including, without limitation, provisions for adjustment
of the Purchase Price) shall thereafter be applicable, as nearly as may be, to
any stock, securities, or assets thereafter deliverable upon the exercise
hereof.
The Company shall not effect any consolidation, merger, or sale of all or
substantially all of its assets to any other corporation or entity, unless prior
to or simultaneously with the consummation thereof the successor corporation or
entity (if other than the Company) resulting from such consolidation or merger,
or the corporation or entity purchasing such assets, shall assume, by written
instrument executed and mailed or delivered to the Warrant Holder at the address
indicated in Section 7 hereof, the obligation of such corporation or entity to
deliver to such Warrant Holder shares of stock, securities, or assets as, in
accordance with the provisions of this Warrant, such Warrant Holder may be
entitled to purchase, and to perform and observe each and every covenant and
condition of this Warrant to be performed and observed by the Company.
2.5. Notice to Warrant Holder or Warrant Holders.
(a) Upon any adjustment of the Purchase Price, the Company,
within thirty (30) days thereafter, shall give written notice thereof, pursuant
to Section 7 hereof, which notice shall state the adjusted Purchase Price
setting forth in reasonable detail the method of calculation and the facts
(including a statement of the consideration received or deemed to have been
received by the Company for any additional shares or convertible or exchangeable
securities or rights or options) upon which such calculations are based. Where
appropriate, such notice may be given in advance and be included as part of the
notice required to be mailed pursuant to the provisions of paragraph (b) of this
Section 2.5.
(b) In case at any time:
(i) the Company shall declare any dividend upon its Common
Stock payable otherwise than in cash or in the Common Stock of the Company
or payable otherwise than out of net income for a twelve (12) month period
ending not earlier than ninety (90) days prior to the date of payment of
such dividend; or
<PAGE>
(ii) the Company shall offer for subscription to the
holders of its Common Stock any additional shares of stock of any class or
any other securities convertible into or exchangeable for shares of stock
or any rights or options to subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale or
conveyance of all or substantially all of the assets of the Company, or a
consolidation or merger of the Company with another corporation or entity;
or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company; or
(v) the Company intends to issue or has issued any Common
Stock or rights convertible into Common Stock for a per share consideration
of less than the Purchase Price, then, in any one or more of said cases,
the Company shall give written notice, pursuant to Section 7 hereof, at the
earliest time legally practicable (and, unless otherwise impossible for a
legal reason, not less than thirty (30) days before any record date or
other date set for definitive action) of the date as of which (A) the books
of the Company shall close or a record date shall be taken for such
dividend, distribution, or subscription rights or options, or (B) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend, distribution,
subscription rights, or options or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding up, as the case may be (on which date,
in the event of voluntary or involuntary dissolution, liquidation, or
winding up of the Company, the right to exercise this Warrant shall cease
and terminate).
2.6. Conditions Not Specifically Covered. In case at any time
conditions shall arise by reason of action taken by the Company, which, in the
good faith judgment of the Company's Board of Directors, are not adequately
covered by the limited antidilution provisions of this Warrant so as to
potentially materially and adversely affect the rights of the Warrant Holder or
Warrant Holders, or, in case at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, its Board of
Directors shall appoint a firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the Company's
financial statements), who shall give an opinion as to the adjustment, if any
(not inconsistent with the standards established in this Section 2 hereof), of
the Purchase Price, which is, or would be, required to preserve, without
dilution, the rights of the Warrant Holder or Warrant Holders to the extent
provided herein. The Company's Board of Directors shall make the adjustment
recommended forthwith upon the receipt of such opinion or the taking of any such
action contemplated, as the case may be. Nothing in this Section 2.6 or any
other provision of this Warrant shall permit or require adjustment regarding the
number of shares of Common Stock into which this Warrant may hereafter be
exercisable, it being the
<PAGE>
parties' intention to limit antidilution protection in this Warrant solely to
adjustments to the Purchase Price.
3. Status of Warrant Holders. This Warrant does not entitle the Warrant
Holder or Warrant Holders hereof to any rights as a shareholder of the Company.
4. Remedies. The Company stipulates that the remedies at law of the
Warrant Holder or Warrant Holders in the event of any default or threatened
default by the Company in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
5. Reservation of Shares. The Company shall reserve and keep available a
sufficient number of shares of Common Stock to satisfy the requirements of this
Warrant. Before taking any action that would cause a reduction of the Purchase
Price below the then current par value of the shares of Common Stock issuable
upon exercise of this Warrant, the Company will take any corporate action that
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Purchase Price.
6. Assignment. This Warrant shall be binding upon and inure to the
benefit of the Company, the Warrant Holder, and their respective successors and
assigns.
7. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been given when
personally delivered, mailed first class (postage prepaid), or delivered to a
telegraph office:
(i) if to a Warrant Holder, at the address of such Warrant Holder as
shown on the books of the Company.
(ii) if to the Company, at 2733 152nd Avenue, N.E., Redmond,
Washington 98052, to the attention of the corporate Secretary, or at such
other address as may have been furnished to the Warrant Holder in writing.
8. Headings. The headings of the Sections and subsections of this
Warrant are inserted for convenience only and shall not be deemed to constitute
a part of this Warrant.
IN WITNESS WHEREOF, this Warrant has been duly executed by its duly
authorized officer as of the date first above written.
DATA CRITICAL CORP.
an Oklahoma corporation
By: /s/ Jeffrey S. Brown
-------------------------------
Jeffrey S. Brown, President
<PAGE>
EXHIBIT 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series D Preferred Stock of
DATA CRITICAL CORP.
Dated as of April 27, 1999 (the "Effective Date")
WHEREAS, Data Critical Corp., a Delaware corporation (the "Company") has
entered into a Master Lease Agreement dated as of April 27, 1999, Equipment
Schedule No. VL-1 and VL-2 dated as of April 27, 1999, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series D Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 50,000 fully paid and non-
assessable shares of the Company's Series D Preferred Stock ("Preferred Stock")
at a purchase price of $1.00 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) five (5) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
<PAGE>
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a five (5) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the five (5) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
Authorization and Reservation of Shares. During the term of this Warrant
---------------------------------------
Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a proportional cash payment therefor based upon the
Exercise Price then in effect.
<PAGE>
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Warrantholder's total cost
----------------------------------
of equipment leased pursuant to the Leases exceeds $1,000,000, Warrantholder
shall have the right to purchase from the Company, at the Exercise Price
(adjusted as set forth herein), an additional number of shares, which number
shall be determined by (i) multiplying the amount by which the Warrantholder's
total equipment cost exceeds $1,000,000 by 5%, and (ii) dividing the product
thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly
<PAGE>
provide the Warrantholder with any restatement, amendment, modification or
waiver of the Charter. The Company shall provide Warrantholder with prior
written notice of any issuance of its stock or other equity security to occur
after the Effective Date of this Warrant, which notice shall include (a) the
price at which such stock or security is to be sold, (b) the number of shares to
be issued, and (c) such other information as necessary for Warrantholder to
determine if a dilutive event has occurred.
(g) Notice of Certain Events. If: (i) the Company shall declare any
------------------------
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, if any (ii) the amount of the adjustment, if any
(iii) the method by which such adjustment was calculated, if applicable (iv) the
Exercise Price, and (v) the number of shares subject to purchase hereunder after
giving effect to such adjustment, if any, and shall be given by first class
mail, postage prepaid, addressed to the Warrantholder, at the address as shown
on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder, unless Warrantholder agrees
to waive the applicable notice period. The notice period shall begin on the date
Warrantholder actually receives a written notice containing all the information
specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
<PAGE>
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 35,000,000
shares of Common Stock, of which 5,611,375 shares are issued and
outstanding, and (B) 750,000 shares of Series A Preferred Stock, of which
750,000 shares are issued and outstanding and are convertible into 750,000
shares of Common Stock at $0.20 per share, (C) 4,930,625 shares of Series B
Preferred Stock, of which 4,930,625 shares are issued and outstanding and
are convertible into 4,930,625 share of Common Stock at $0.80 per share,
(D) 4,751,268 shares of Series C Preferred Stock, of which 4,751,268 shares
are issued and outstanding and are convertible into 4,751,268 share of
Common Stock at $0.80 per share, and (E) 9,800,000 shares of Series D
Preferred Stock, of which 9,186,960 shares are issued and outstanding and
are convertible into 9,186,960 share of Common Stock at $1.00 per share.
(ii) The Company has reserved (A) 3,797,625 shares of Common Stock
for issuance under its 1994 Stock Option Plan, under which 3,563,000
options are outstanding at an average price of $0.40 per share. Except for
1,485,929 warrants issued there are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock
or other securities of the Company.
(iii) In accordance with the Company's Certificate of Incorporation,
no shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in the
----------------------------------------
Amended and Restated Registration Rights Agreement, the Company is not, pursuant
to the terms of any other agreement currently in existence, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
<PAGE>
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. RIGHT OF FIRST OFFER.
--------------------
In accordance with the provisions of Section 9 of Stockholder Agreement
dated as of March 4, 1998 ("Stockholder Agreement"), if the Company proposes to
offer any shares of, or securities convertible into or exercisable for any
shares of, any class of its capital stock ("Shares"), subject to the exceptions
set forth in paragraph (d) thereof, the Company shall promptly provide
Warrantholder with an offer to sell Warrantholder a portion of such Shares equal
to the proportion that the number of shares of Preferred Stock to be issued upon
exercise hereunder or number of shares of common stock upon conversion thereof,
bears to the total number of shares of common stock of the Company then
outstanding (assuming full conversion of all shares of Preferred Stock).
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, (i) in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers and (ii) each transferee agrees in writing
to be bound to the terms and conditions of this Warrant Agreement. The transfer
shall be recorded on the books of the Company upon receipt by the Company of a
notice of transfer in the form attached hereto as Exhibit III (the "Transfer
Notice"), at its principal offices and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer.
<PAGE>
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 2733
152nd Avenue NE, Redmond, WA 98052, Attention: CFO (and/or if by facsimile,
(425) 885-3377) or at such other address as any such party may subsequently
designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
<PAGE>
Company: DATA CRITICAL CORP.
By: /s/ Robert W. Benson
--------------------
Title: CFO
---
Warrantholder: COMDISCO, INC.
By: /s/ James Labe
--------------
Title: President, Comdisco Ventures Divison
------------------------------------
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series D Preferred Stock of _________________, pursuant to the terms of
the Warrant Agreement dated the ______ day of April, 1999 (the "Warrant
Agreement") between Data Critical Corp. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series D Preferred Stock of Data
Critical Corp., the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series D Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series D Preferred Stock of Data Critical Corp., pursuant to the terms of
the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
COMPANY: DATA CRITICAL CORP.
By: _________________________
Title: ______________________
Date: _______________________
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________________________
(Please Print)
whose address is__________________________________________________
__________________________________________________________________
Dated: ___________________________________
Holder's Signature: ______________________
Holder's Address: ______________________
___________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
By signing below, the transferee of this Warrant agrees to abide by and be bound
by the terms and conditions of the Warrant, including without limitation the
restrictions on transfer and exercise contained in Sections 2 and 3. The
transferee further makes all of the representations and covenants contained in
Section 10 of the Warrant.
Transferee's signature:___________________
Date:_______________________________
<PAGE>
EXHIBIT 10.4
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of April 27, 1999, is entered
into by and between Data Critical Corp., a Delaware corporation, with its chief
executive office and principal place of business located at 2733 152nd Avenue
NE, Redmond, WA 98052 (the "Borrower") and Comdisco, Inc., a Delaware
corporation, with its principal place of business located at 6111 North River
Road, Rosemont, Illinois 60018 (the "Lender" or sometimes, "Comdisco"). In
consideration of the mutual agreements contained herein, the parties hereto
agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a loan
or loans up to an aggregate principal amount of ONE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($1,500,000.00) (as the same may from time to time be amended,
modified, supplemented or revised, individually or collectively referred to as
the "Loan(s)"), which would be evidenced by Subordinated Promissory Note(s)
executed by Borrower substantially in the form of Exhibit A hereto (as the same
---------
may from time to time be amended, modified, supplemented or restated the
"Note(s)");
WHEREAS, Lender is willing to make the Loan(s) on the terms and conditions
set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "Account" means any "account" as such term is defined in Section 9-106
of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
<PAGE>
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Borrower under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Borrower (whether or not yet earned by performance on the
part of Borrower or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
1.2 "Account Debtor" means any "account debtor," as such term is defined
in Section 9-105(1)(a) of the UCC.
1.3 "Advance" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "Advance Date" means the funding date of any Advance of the Loan.
1.5. "Advance Request" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit C attached hereto, as
---------
submitted by Borrower to Lender from time to time.
1.6 "Chattel Paper" means any "chattel paper," as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.7 "Closing Date" means the date hereof.
1.8 "Collateral" shall have the meaning assigned to such term in Section
3 of this Agreement.
1.9 "Contracts" means all contracts, undertakings, franchise agreements
or other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "Copyrights" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
1.11 "Copyright License" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
<PAGE>
1.12 "Documents" means any "documents," as such term is defined in Section
9-105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
1.13 "Equipment" means any "equipment," as such term is defined in Section
9-109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
1.14 "Excluded Agreements" means (i) the Master Lease Agreement dated as
of April 27, 1999 between Borrower, as lessee, and Lender, as lessor, including,
without limitation, any Equipment Schedules and Summary Equipment Schedules to
the Master Lease Agreement executed or delivered by Borrower pursuant thereto
and any other modifications or amendments thereof, whereby Borrower (as lessee)
leases equipment, software, or goods from Lender (as lessor) to Borrower (as
lessee).
1.15 "Facility Fee" means one percent (1.0%) of the Maximum Available Loan
and due to Lender at the Closing Date, plus the transaction fee of 5,000.00.
1.16 "Fixtures" means any "fixtures," as such term is defined in Section
9-313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.17 "General Intangibles" means any "general intangibles," as such term
is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License), claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9-105(e) of the UCC), rights to sue
for past, present and future infringement of Copyrights, Trademarks and Patents,
rights to receive tax refunds and other payments and rights of indemnification.
1.18 "Initial Public Offering" means an initial public offering of
Borrower's securities.
<PAGE>
1.19 "Instruments" means any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.20 "Intellectual Property" means all Copyrights, Trademarks, Patents,
trade secrets, source codes, customer lists, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
skill, expertise, experience, processes, models, drawings, materials and
records.
1.21 "Inventory" means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, wherever located, now or hereafter owned or
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Borrower's business, or the processing,
packaging, promotion, delivery or shipping of the same, and all furnished goods
whether or not such inventory is listed on any schedules, assignments or reports
furnished to Lender from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Borrower
or is held by Borrower or by others for Borrower's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Borrower or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other persons.
1.22 "License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.23 "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.24 "Loan Documents" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided, that the Loan Documents
--------
shall not include any of the Excluded Agreements.
---
1.25 "Material Adverse Effect" means a material adverse effect upon: (i)
the business, operations, properties, prospects, assets or conditions (financial
or otherwise) of Borrower; or (ii) the ability of Borrower to perform, or of
Lender to enforce, the Secured Obligations.
1.26 "Maturity Date" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
<PAGE>
1.27 "Maximum Loan Amount" means One Million Five Hundred Thousand and
No/100 Dollars ($1,500,000.00).
1.28 "Merger Event" means a capital reorganization of the shares of the
Borrower's stock (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Borrower with or into another corporation whether or not
the Borrower is the surviving corporation, or the sale of all or substantially
all of the Borrower's properties and assets to any other person.
1.29 "Patent License" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.30 "Patents" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
1.31 "Permitted Liens" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt.
1.32 "Preferred Stock" means the Borrower's Series D Preferred Stock.
1.33 "Proceeds" means "proceeds," as such term is defined in Section 9-
306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), (d) any claim of Borrower against third parties (i) for
past, present or future infringement of any Copyright, Patent or Patent License
or (ii) for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License and (e)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
1.34 "Purchase Option" shall have the meaning assigned to such term in
Section 8 of this Agreement.
1.35 "Receivables" shall mean and include all of the Borrower's accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now
<PAGE>
existing or hereafter created or arising, and whether or not specifically sold
or assigned to Lender hereunder.
1.36 "Secured Obligations" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.37 "Senior Creditor" means a bank, insurance company, pension fund, or
other institutional lender to be determined and identified to Lender in
accordance with the Subordination Agreement, or a syndication of such
institutional lenders that provides Senior Debt financing to Borrower; provided,
--------
that Senior Creditor shall not include any officer, director, shareholder,
venture capital investor, or insider of Borrower, or any affiliate of the
foregoing persons, except upon the express written consent of Lender.
1.38 "Senior Debt" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower provided, that Senior Debt shall not include debt exceeding
One Million Seven Hundred Twenty Five Thousand Dollars ($1,725,000.00)
outstanding at any one time.
1.39 "Senior Loan Documents" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.40 "Subordination Agreement" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior.
1.41 "Trademark License" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.42 "Trademarks" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent
<PAGE>
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof and
(b) any reissues, extensions or renewals thereof.
1.43 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Lender agrees to lend to Borrower an amount not to exceed One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00) in the aggregate at any
one time outstanding for the purposes and upon the terms and subject to the
conditions contained in this Agreement.
2.2 The Loan(s) shall be available in minimum Advances of Five Hundred
Thousand Dollars ($500,000.00). Each Advance made by Lender to Borrower shall
be evidenced by a Note in the original principal amount of such Advance. The
principal balance of each Note shall bear interest thereon precomputed at the
rate of eleven percent (11%) per annum, and each such Note shall be due and
payable in twelve (12) equal monthly installments of interest only, payable on
the first day of each month, followed by twenty four (24) equal monthly
installments of principal and interest, payable on the first day of each month,
to and including the Maturity Date (each, a "Payment Date"). If any payment
under a Note shall be payable on a day other than a business day, then such
payment shall be due and payable on the next succeeding business day.
2.3 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than five (5) business days from
the date of such notice. Upon receipt of an Advance Request, Lender shall
verify the information contained in the Advance Request and if Lender determines
to fund such Advance it shall deliver a Note dated the Advance Date evidencing
such Advance to Borrower for signature. Upon receipt of the signed Note, Lender
will fund the Advance in the manner requested by the Advance Request. Borrower
agrees that Lender may rely on any notice given by any Person it reasonably
believes to be an authorized officer of Borrower without the necessity of
independent investigation.
2.4 Borrower shall have the option to prepay any Note, in whole or in
part, without premium after twelve (12) months from the Advance Date by paying
the principal amount thereon together with all accrued and unpaid interest with
respect to such principal amount, as of the date of such prepayment. If Borrower
prepays a Note within twelve (12) months from the Advance Date thereof, Borrower
shall pay the principal amount together with all accrued and unpaid interest and
a prepayment premium equal to one percent (1%) of the then outstanding principal
amount. Notwithstanding the foregoing, any such prepayment by the Borrower shall
not affect Lessor's right to purchase as described in Section 8 herein.
2.5 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be
<PAGE>
the laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Secured Obligations of Borrower
under this Agreement and the Note(s) (as said rate is calculated over a period
of time from the date of this Agreement through the end of time that any
principal is outstanding on the Note(s)), which amount of interest exceeds
interest calculated at the Maximum Rate on said principal chargeable over said
period of time, then such excess interest actually paid by Borrower shall be
applied first, to the payment of principal outstanding on the Note(s); second,
after all principal is repaid, to the payment of Lender's out of pocket costs,
expenses, and professional fees which are owed by Borrower to Lender under this
Agreement or the Loan Documents; and third, after all principal, costs,
expenses, and professional fees owed by Borrower to Lender are repaid, the
excess (if any) shall be refunded to Borrower, and the effective rate of
interest will be automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.2.
(c) Upon and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest, compounded
interest, and professional fees, shall bear interest at a rate per annum equal
to the rate set forth in Section 2.2 plus five percent (5%) per annum ("Default
Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for security purposes only, and
hereby grants to Lender a security interest in, all of Borrower's right, title
and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible
or intangible and whether now or hereafter owned or existing,
leased, consigned by or to, or acquired by, Borrower and wherever
located; and
<PAGE>
(g) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of each of the foregoing.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan(s) on each Advance Date shall be
subject to Lender's discretion and satisfactory completion of its due diligence
and approval process. The obligations of the Lender to make Loans hereunder are
also subject to the satisfaction by Borrower, or waiver by Lender, of the
following conditions:
4.1 Borrower, on or prior to the Closing Date, shall have delivered to
Lender the following:
(a) executed originals of the Agreement, the Subordination
Agreement, and any other documents reasonably required by Lender to
effectuate the liens of Lender with respect to all Collateral;
(b) copy of resolutions of Borrower's board of directors evidencing
approval of the borrowing and other transactions evidenced by the Loan
Documents;
(c) certified copies of the Certificate of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have a
Material Adverse Effect;
(e) payment of the Facility Fee;
(f) an executed Master Lease Agreement and associated equipment
schedules with Lender as lessor, in the minimum amount of Three Hundred
Seventy Five Thousand Dollars ($375,000.00); and
(g) such other documents as Lender may reasonably request.
4.2 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request for such
Advance as required by Section 2.3, (ii) an executed Note evidencing such
Advance and (iii) any other documents Lender may reasonably request.
(b) The representations and warranties set forth in Section 5
hereof shall be true and correct in all material respects on and as of the
Advance Date with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date.
<PAGE>
(c) The Borrower shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part to be
observed or performed, and at the time of and immediately after such Advance no
Event of Default shall have occurred and be continuing.
Each Advance Request shall be deemed to constitute a representation and warranty
by the Borrower on the Advance Date as to the matters specified in paragraphs
(b) and (c) of this Section 4.2.
4.3 With each Advance Request made, Borrower shall deliver a certificate
signed by its Chief Executive Officer and Chief Financial Officer certifying
that Borrower has achieved at least seventy-five percent (75%) or more of its
cumulative revenues and net income/loss projections as set forth in its Business
Plan dated January 1999 in the prior six (6) month period prior to the Advance
Date, attached hereto as Exhibit D.
---------
4.4 Perfection Of Security Interests. Borrower shall have taken or
caused to be taken such actions requested by Lender to grant Lender a first
priority perfected security interest in the Collateral, subject only to
Permitted Liens. Such actions shall include, without limitation, the delivery to
Lender of all appropriate financing statements, executed by Borrower, as to the
Collateral granted by Borrower for all jurisdictions as may be necessary or
desirable to perfect the security interest of Lender in such Collateral.
4.5 Absence of Events of Defaults. As of the Closing Date or the
Advance Date, no fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute an Event of Default under
this Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a default under the Senior Loan Documents between Borrower and Senior
Creditor.
4.6 Material Adverse Effect. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
4.7 Termination Date. Notwithstanding anything in this Agreement to the
contrary, Lender's obligations to provide the Loan(s) shall terminate on the
earlier of (i) October 27, 1999 or (ii) the occurrence of an Event of Default
pursuant to Section 9, and no Advance Requests shall be accepted after such
date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest in the Collateral as
security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims, other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection
<PAGE>
herewith as the Lender may reasonably request. Except for Permitted Liens, no
other lien, security interest, adverse claim or encumbrance has been created by
Borrower or is known by Borrower to exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of Delaware, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or
location of its properties require such qualifications and where the failure to
be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents, required to be
delivered or executed in connection herewith, have been duly authorized by all
necessary corporate action of Borrower, the individual or individuals executing
the Loan Documents were duly authorized to do so; and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization or other similar laws generally affecting the
enforcement of the rights of creditors.
5.5 This Agreement and the other Loan Documents do not and will not
violate any provisions of Borrower's Certificate of Incorporation, bylaws or any
contract, agreement, law, regulation, order, injunction, judgment, decree or
writ to which the Borrower is subject, or result in the creation or imposition
of any lien, security interest or other encumbrance upon the Collateral, other
than those created by this Agreement.
5.6 The execution, delivery and performance of this Agreement and the
other Loan Documents do not require the consent or approval of any other person
or entity including, without limitation, any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
5.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
5.8 No fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute a default under the Senior Loan
Documents.
5.9 (a) There are no actions, suits or proceedings at law or in equity or
by or before any governmental authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any business, property
or rights of the Borrower (i) which involve any Loan Document or (ii) as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, could, individually or in the aggregate, result in a
Material Adverse Effect.
(b) The Borrower is not in violation of any law, rule or regulation,
or in default with respect to any judgment, writ, injunction or decree of any
governmental authority, where such violation or default could result in a
Material Adverse Effect.
5.10 (a) The Borrower is not a party to any agreement or instrument or
subject to any corporate restriction that has resulted or could result in a
Material Adverse Effect.
<PAGE>
(b) The Borrower is not in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could result in a Material Adverse Effect.
5.11 No information, report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrower to the Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.
5.12. All issued and outstanding shares of Common Stock, Preferred Stock
or any other securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. All outstanding shares of Common
Stock, Preferred Stock and any other securities were issued in full compliance
with all Federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
35,000,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), of which 5,611,375 shares shall be issued and outstanding, and
20,231,893 shares of Preferred Stock, $.01 par value per share, of which
750,000 shares shall have been designated as Series A Preferred Stock,
4,930,625 shares shall have been designated as Series B Preferred Stock,
4,751,268 shares shall have been designated as Series C Preferred Stock.
750,000 shares of Series A Preferred Stock, 4,930,625 shares of Series B
Preferred Stock, 4,751,268 shares of Series C Preferred Stock are issued
and outstanding. All of the issued and outstanding shares of Preferred
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. All of the issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. There are 3,800,000 shares of Common Stock reserved for
issuance under the Company's 1994 Stock Option Plan, of which 2,375 shares
have been issued upon the exercise of options, 3,563,000 shares are
subject to outstanding options and 234,625 shares remain available for
issuance. Except as set forth in this Agreement and 1,485,929 warrants
issued, (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the Company
has no obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right or to issue or
distribute to holders of a share of its capital stock any evidences of
indebtedness or assets of the Company, and (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay
any dividend to make any other distribution in respect thereof. All of the
issued and outstanding securities or the Company have been offered, issued
and sold by the Company is compliance with applicable federal and state
securities laws.
(ii) In accordance with the Company's Certificate of Incorporation,
no shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
<PAGE>
5.13 Borrower has filed and will file all tax returns, federal, state
and local, which it is required to file and has duly paid or fully reserved for
all taxes or installments thereof (including any interest or penalties) as and
when due, which have or may become due pursuant to such returns or pursuant to
any assessment received by Borrower for the three (3) years preceding the
Closing Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies evidencing such
insurance to provide for at least thirty (30) days prior written notice by the
underwriter or insurance company to Lender in the event of cancellation or
expiration. Such policies shall be issued by such insurers and in such amounts
as are reasonably acceptable to Lender.
6.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's gross negligence or willful misconduct.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within thirty (30)
days) after the end of each month, unaudited interim financial statements
as of the end of such month (prepared on a consolidated and consolidating
basis, if applicable), including balance sheet and related statements of
income and cash flows accompanied by a report detailing any material
contingencies (including the commencement of any material litigation by
or against Borrower) or any other occurrence that could reasonably be
expected to have a Material Adverse Effect, all certified by Borrower's
Chief Executive Officer or Chief Financial Officer to be true and
correct;
<PAGE>
(b) as soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year, unqualified audited financial
statements as of the end of such year (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows, and setting forth in comparative
form the corresponding figures for the preceding fiscal year, certified
by a firm of independent certified public accountants selected by
Borrower and reasonably acceptable to Lender, accompanied by any
management report from such accountants;
(c) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange; and
(d) promptly, any additional information, financial or otherwise
(including, but not limited, to tax returns and names of principal
creditors) as Lender reasonably believes necessary to evaluate Borrower's
continuing ability to meet its financial obligations.
7.2 Borrower shall permit any authorized representative of Lender and
its attorneys and accountants on reasonable notice to inspect, examine and make
copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, such representative
of Lender and its attorneys and accountants shall have the right to meet with
management and officers of the Borrower to discuss such books of account and
records.
7.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be requested by Lender; and take all
further action that may be necessary or desirable, or that Lender may request,
to confirm, perfect, preserve and protect the security interests intended to be
granted hereby, and in addition, and for such purposes only, Borrower hereby
authorizes Lender to execute and deliver on behalf of Borrower and to file such
financing statements, security agreement and other documents without the
signature of Borrower either in Lender's name or in the name of Borrower as
agent and attorney-in-fact for Borrower. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
7.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender) and shall give Lender immediate written notice thereof.
7.5 Without Lender's prior written consent, Borrower shall not (a) grant
any material extension of the time of payment of any of the Receivables, (b) to
any material extent, compromise, compound or settle the same for less than the
full amount thereof, (c) release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount
<PAGE>
whatsoever thereon other than trade discounts granted in the ordinary course of
business of Borrower.
7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.
7.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of twenty (20) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof.
7.8 Borrower shall not, without the prior written consent of Lender,
such consent not to be unreasonably withheld, declare or pay any cash dividend
or make a distribution on any class of stock, other than pursuant to employee
repurchase plans upon an employee's death or termination of employment or
transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except inventory sold in the normal course of business).
7.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection. Borrower shall take all action necessary to maintain such logs and
maintenance records in a correct and complete fashion.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
7.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (i) with the prior
written consent of the Lender not to be unreasonably withheld; and (ii) if such
relocation shall be within the continental United States. If permitted to
relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed
in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
SECTION 8. PURCHASE OPTION
<PAGE>
8.1 Lender shall have the right to purchase shares of Borrower's Preferred
Stock with an aggregate value of up to thirty five percent (35%) of the Maximum
Loan Amount (subject to increase as provided in Section 8.2) at any time, at
Lender's sole and absolute discretion (the "Purchase Option"). The Purchase
Option shall be exercisable by Lender at a purchase price equal to $1.25 per
share (the "Purchase Price"). The number and purchase price of such shares are
subject to adjustment as provided in this Section 8.
8.2 If the Borrower has not repaid the outstanding principal amount under
a Note in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid, Lender shall have the right to purchase
from the Borrower, at the Purchase Price (adjusted, as set forth and defined in
Section 8.3 herein), an additional amount of Preferred Stock with a value equal
to the product of (x) the outstanding principal amount which is due but unpaid
and (y) three percent (3%).
8.3 The Purchase Price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by combination,
reclassification, exchange or subdivision of the securities as to which
purchase rights under this Purchase Option exist into the same or a
different number of securities of any other class or classes, this Purchase
Option shall thereafter represent the right to acquire such number and kind
of securities as would have been issuable as the result of such change with
respect to the securities which were subject to the purchase rights under
this Purchase Option immediately prior to such classification, exchange,
subdivision or other change.
(b) If the Borrower at any time shall combine or subdivide its
Preferred Stock, the Purchase Price shall be proportionately decreased in
the case of a subdivision, or proportionately increased in the case of a
combination.
(c) If the Borrower at any time shall pay a dividend payable in, or
make any other distribution (except any distribution specifically provided
for in the foregoing subsections (a) or (b)) of the Borrower's stock, then
the Purchase Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Purchase Price in effect immediately prior to such record date by a
fraction (i) the numerator of which shall be the total number of all shares
of the Borrower's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number
of all shares of the Borrower's stock outstanding immediately after such
dividend or distribution. The Lender shall thereafter be entitled to
purchase, at the Purchase Price resulting from such adjustment, the number
of shares of Preferred Stock (calculated to the nearest whole share)
obtained by multiplying the Purchase Price in effect immediately prior to
such adjustment by the number of shares of Preferred Stock issuable upon
the exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such adjustment.
(d) Additional antidilution rights applicable to the Preferred Stock
purchasable hereunder are as set forth in the Borrower's Certificate of
Incorporation, as amended through the Effective Date, a true and complete
copy of which is attached hereto as Exhibit E (the
---------
<PAGE>
"Charter"). The Borrower shall promptly provide the Lender with any restatement,
amendment, modification or waiver of the Charter.
(e) If: (i) the Borrower shall declare any dividend or distribution
upon its stock, whether in cash, property, stock or other securities; (ii) the
Borrower shall offer for subscription prorata to the holders of any class of its
preferred or other convertible stock any additional shares of stock of any class
or other rights; (iii) there shall be any Merger Event; (iv) there shall be an
Initial Public Offering; or (v) there shall be any voluntary dissolution,
liquidation or winding up of the Borrower; then, in connection with each such
event, the Borrower shall send to the Lender: (A) at least twenty (20) days'
prior written notice of the date on which the books of the Borrower shall close
or a record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; (B) in the case of any such dissolution,
liquidation or winding up, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon dissolution, liquidation or
winding up); and (C) in the case of a Initial Public Offering or Merger Event,
the Borrower shall give the Lender at least twenty (20) days written notice
prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown on the books of the Lender.
(f) Failure to timely provide such notice required by subsection (e)
above shall entitle Lender to retain the benefit of the applicable notice period
notwithstanding anything to the contrary contained in any insufficient notice
received by Lender. The notice period shall begin on the date Lender actually
receives a written notice containing all the information specified above.
8.5 The Purchase Option is exercisable by the Lender, in whole or in part,
at any time, or from time to time, prior to the earlier of (i) Initial Public
Offering, or (ii) Merger Event. Lender may exercise its Purchase Option by
tendering to the Borrower at its principal office a notice of exercise in the
form attached hereto as EXHIBIT F (the "Notice of Purchase"), duly completed and
---------
executed together with payment in an amount equal to the Purchase Price for that
portion of the Purchase Option so exercised, in cash or by bank cashier's or
certified check; provided that Lender may satisfy all or a portion of the
Purchase Price by tender of one or more Note(s), the outstanding principal and
interest of which shall be credited against the Purchase Price, with the
balance, if any, of the Purchase Price payable in cash or by check as provided
above. In such event, the Note(s) so tendered will be deemed satisfied in full
and will be cancelled by the Borrower and the Borrower will have no further
obligation to the Lender under such Note(s).
Promptly upon receipt of the Notice of Purchase and the payment of the
Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as EXHIBIT G
---------
(the "Acknowledgment of Purchase") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of withdrawal, no
later than twenty-one (21) days thereafter, the Borrower shall issue to the
Lender a certificate for the number of shares of Preferred Stock purchased.
<PAGE>
8.6 (a) During the term of this Purchase Option, the Borrower will at all
times have authorized and reserved a sufficient number of shares of its
Preferred Stock to provide for the exercise of the rights to purchase Preferred
Stock as provided for herein.
(b) If any shares of Preferred Stock required to be reserved
hereunder require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the Securities
Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such purchase), or listing on any domestic securities
exchange, before such shares may be issued upon purchase, the Borrower will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
8.7 No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Purchase Option, but in lieu of such fractional
shares the Borrower shall make a cash payment therefor upon the basis of the
Purchase Price then in effect.
8.8 This Purchase Option does not entitle the Lender to any voting rights
or other rights as a shareholder of the Borrower prior to the exercise of the
Purchase Option.
8.9 Borrower shall give Lender at least 45 days notice of its intent to
consummate any Merger Event or any Initial Public Offering of its capital stock
pursuant to a registration statement filed with the Securities and Exchange
Commission. In either such event, Lender shall have the right to exercise its
Purchase Option subject to the successful completion of such Merger Event or
Initial Public Offering. If such closing does not take place, the Borrower shall
promptly notify the Lender that such proposed transaction has been terminated,
and the Lender may rescind any exercise of its Purchase Option promptly after
such notice of termination of the proposed transaction if the exercise of this
Purchase Option has occurred after the Borrower notified the Lender that the
Merger Event was proposed.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or
9.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) days after
Lender has given written notice of such default to Borrower.
9.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect; or
<PAGE>
9.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy not dismissed within sixty (60)
days, or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation
pertinent to such circumstances, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver, or liquidator of Borrower or of all or any
substantial part (33-1/3% or more) of the properties of Borrower; or Borrower or
its directors or majority shareholders shall take any action initiating the
dissolution or liquidation of Borrower; or
9.5 Sixty (60) days shall have expired after the commencement of an action
by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
9.7 The default by Borrower under any Excluded Agreement(s), any other
promissory note or agreement for borrowed money, or any other agreement between
Borrower and Lender; or
9.8 The occurrence of any default under any lease or other agreement or
obligation of Borrower involving an amount in excess of $100,000.00 or having a
Material Adverse Effect; or the entry of any judgment against Borrower involving
an award in excess of $100,000.00 that would have a Material Adverse Effect,
that has not been bonded or stayed on appeal within thirty (30) days; or
9.9 The occurrence of any material default under the Senior Loan
Documents.
SECTION 10. REMEDIES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
--------
of an Event of Default of the type described in Sections 9.4 or 9.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, Section
2.5 (c) of this Agreement. Lender may Purchase all rights and remedies with
respect to the Collateral under the Loan Documents or otherwise
<PAGE>
available to it under applicable law, including the right to release, hold or
otherwise dispose of all or any part of the Collateral and the right to occupy,
utilize, process and commingle the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
twenty (20) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to Lender and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender in the following order of
priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs and
professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its
sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction may
direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9-207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 11. MISCELLANEOUS
11.1 Continuation of Security Interest. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in full force and
effect and all the rights, powers and remedies of Lender hereunder shall
continue to exist until the Secured Obligations are paid in full as the same
become due and payable and until Lender has executed a written termination
statement (which Lender shall execute within a reasonable time after full
payment of the Secured Obligations hereunder), reassigning to Borrower, without
recourse, the Collateral and all rights conveyed hereby and returning possession
of the Collateral to Borrower. The rights, powers and remedies of Lender
hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The Purchase of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of or election of remedies with respect to any other rights, powers and
remedies of Lender.
11.2 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be
<PAGE>
ineffective only to the extent and duration of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
11.3 Notice. Except as otherwise provided herein, all notices and
service of process required, contemplated, or permitted hereunder or with
respect to the subject matter hereof shall be in writing, and shall be deemed to
have been validly served, given or delivered upon the earlier of: (i) the first
business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) If to Lender:
------------
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
With a Copy to:
--------------
COMDISCO, INC./COMDISCO VENTURES
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
(b) If to Borrower:
--------------
DATA CRITICAL CORP.
Attention: CFO
2733 152/nd/ Avenue NE
Redmond, WA 98052
Facsimile: (425) 885-3377
Phone: (425) 885-3500
or to such other address as each party may designate for itself by like notice.
11.4 Entire Agreement; Amendments. This Agreement, the Note(s), and the
other Loan Documents constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof (including, without
limitation, Lender's proposal letter dated December 7, 1998, all of which are
merged herein and therein. None of the terms of this Agreement, the Note(s) or
any of the other Loan Documents may be amended except by an instrument executed
by each of the parties hereto.
11.5 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
<PAGE>
11.6 No Waiver. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at any
time to enforce any right or remedy reserved to it, or to require performance of
any of the terms, covenants or provisions hereof by Borrower at any time
designated, shall be a waiver of any such right or remedy to which Lender is
entitled, nor shall it in any way affect the right of Lender to enforce such
provisions thereafter.
11.7 Survival. All agreements, representations and warranties contained in
this Agreement, the Note(s) and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement.
11.8 Successor and Assigns. The provisions of this Agreement and the other
Loan Documents shall inure to the benefit of and be binding on Borrower and its
permitted assigns (if any). Borrower shall not assign its obligations under this
Agreement, the Note(s) or any of the other Loan Documents without Lender's
express written consent, and any such attempted assignment shall be void and of
no effect. Lender may assign, transfer, or endorse its rights hereunder and
under the other Loan Documents without prior notice to Borrower, and all of such
rights shall inure to the benefit of Lender's successors and assigns.
11.9 Further Indemnification. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
11.10 Governing Law. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in the
State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.11 Consent to Jurisdiction and Venue. All judicial proceedings arising
in or under or related to this Agreement, the Note(s) or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
located in the State of Illinois. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal
jurisdiction in Cook County, State of Illinois; (b) waives any objection as to
jurisdiction or venue in Cook County, State of Illinois; (c) agrees not to
assert any defense based on lack of jurisdiction or venue in the aforesaid
courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, the Note(s) or the other Loan Documents.
Service of process on any party hereto in any action arising out of or relating
to this agreement shall be effective if given in accordance with the
requirements for notice set forth in Section 11.3, above and shall be deemed
effective and received as set forth in Section 11.3, above. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of either party to bring proceedings in the courts of any
applicable jurisdiction.
<PAGE>
11.12 Mutual Waiver of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR
ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR
ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver
extends to all such Claims, including, without limitation, Claims which involve
persons or entities other than Borrower and Lender; Claims which arise out of or
are in any way connected to the relationship between Borrower and Lender; and
any Claims for damages, breach of contract arising out of this Agreement, any
other Loan Document or any of the Excluded Agreements, specific performance, or
any equitable or legal relief of any kind.
11.13 Confidentiality. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower, unless and until Lender has acquired
indefeasible title thereto.
11.14 Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: DATA CRITICAL CORP.
Signature: /s/ Robert W. Benson
--------------------
Print Name: Robert W. Benson
--------------------
Title: CFO
--------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
- ------------------------------
LENDER: COMDISCO, INC.
Signature: /s/ James Labe
--------------
Print Name: James Labe
----------
Title: President Comdiso Ventures
--------------------------
Division
--------
<PAGE>
Exhibit C
Advance Request
Date:___________, 1999
To: Lender:
Comdisco, Inc.
% Comdisco Ventures
3000 Sand Hill Road
Menlo Park, CA 94025
Attention: Vika Tonga
Facsimile (650) 854-4026
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the
amount of $__________________ on ______________, 1999 (the "Advance Date") under
that Subordinated Loan and Security Agreement between Borrower and Lender dated
April 27, 1999 (the "Agreement").
Please:
(a) Issue a check payable to Borrower ________
or
(b) Wire Funds to Borrower's account ________
Bank:_________________________________
Address:______________________________
______________________________
ABA Number:___________________________
Account Number:_______________________
Account Name:_________________________
Borrower hereby represents that the Conditions Precedent to Loan set forth
in Section 4 of the Agreement are satisfied and will be satisfied upon the
making of such Loans, except and to the extent described on Schedule 1 to this
Advance Request. Borrower understands and acknowledges that Lender has the right
to review such Schedule and based upon such review in its sole discretion Lender
may decline to fund the requested Advance.
Executed this ___ day of __________, 199__ by:
BORROWER: DATA CRITICAL CORP.
BY: ______________________________
TITLE: ______________________________
PRINT: ______________________________
<PAGE>
EXHIBIT F
NOTICE OF EXERCISE OF PURCHASE OPTION
TO: ________ ("Borrower")
(1) The undersigned Lender hereby elects to exercise its Purchase Option with
respect to _______ shares of the Series D Preferred Stock of Borrower
("Preferred Stock"), pursuant to the terms of the Subordinated Loan and
Security Agreement dated the 27th day of April, 1999 (the "Loan Agreement")
between Borrower and the Lender, and tenders herewith payment of the
purchase price for such shares in full, together with all applicable
transfer taxes, if any.
(2) In exercising its rights with respect to the Purchase Option, the
undersigned hereby represents and warrants to Borrower as follows:
(a) The right to acquire Preferred Stock or the Preferred Stock issuable
upon exercise of the Lender's rights contained herein will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Lender has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) The Lender understands (i) that the Preferred Stock issuable upon
exercise of its Purchase Option is not registered under the 1933 Act nor
qualified under applicable state securities laws on the ground that the issuance
contemplated by its Purchase Option will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Borrower's reliance on
such exemption is predicated on the representations set forth in this notice.
(c) The Lender has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment,
and has the ability to bear the economic risks of its investment.
(d) The Lender understands that if the Borrower does not register with the
Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the
"1934 Act"), or file reports pursuant to Section 15(d), of the 1934 Act, or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this its Purchase Option, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, if may be required to hold such securities
for an indefinite period. The Lender also understands that any sale of its
rights of the Lender to purchase Preferred Stock or Preferred Stock which might
be made by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(e) Lender is an "accredited investor" within the meaning of the
Securities and Exchange Rule 501 of Regulation D, as presently in effect.
(3) If requested in writing by the underwriters for the initial underwritten
public offering of securities of the Company, Lender agrees not to sell publicly
any shares of Preferred Stock without the consent of such underwriters, for a
period of not more than 90 days following the effective date
<PAGE>
of the registration statement relating to such offering; provided however, that
all persons entitled to registration rights with respect to shares of Common
Stock who are not parties to the Data Critical Corp. Registration Rights
Agreement dated February 22, 1995, as amended, all other persons selling share
of Common Stock in such offering, all persons holding in excess of 1% of the
capital stock of the Company on a full diluted basis and all executive officers
and directors of the Company shall also have agreed to not to sell publicly
their Common Stock under the circumstances and pursuant to the terms set forth
in this paragraph.
(4) Subject to our review and acceptance of your Acknowledgement Certificate
with respect to this Notice, please issue a certificate or certificates
representing said shares of Series D Preferred Stock in the name of the
undersigned or in such other name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Lender: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
EXHIBIT G
ACKNOWLEDGMENT OF RECEIPT OF NOTICE
OF EXERCISE OF PURCHASE OPTION
The undersigned ________ ("Borrower") hereby acknowledges receipt of the
"Notice of Purchase" from Comdisco, Inc. ("Lender") to exercise its Purchase
Option with respect to ____ shares of the Series D Preferred Stock
of______________, pursuant to the terms of the Subordinated Loan and Security
Agreement dated April 27, 1999 (the "Agreement"). Borrower further acknowledges
that ______ shares remain subject to purchase under the terms of the Agreement.
In connection with such Purchase Option the undersigned hereby represents,
warrants and agrees as follows:
(a) All representations and warranties of the Borrower made pursuant to
the Agreement are true and correct in all material respects on and as of the
date of this Acknowledgment with the same effect as though made on and as of
this date (except as set forth in Schedule 1 to this Acknowledgment)
(b) The Preferred Stock issuable upon exercise of the Lender's rights has
been duly and validly reserved and, when issued in accordance with the
provisions of the Purchase Option, will be validly issued, fully paid and non-
assessable, and will be free of any taxes, liens, charges or encumbrances of any
nature whatsoever; provided, however, that the Preferred Stock issuable pursuant
to the Purchase Option may be subject to restrictions on transfer under state
and/or Federal securities laws. The Borrower has made available to the Lender
true, correct and complete copies of its Charter and Bylaws, as amended. The
issuance of certificates for shares of Preferred Stock upon Purchase of the
Purchase Option shall be made without charge to the Lender for any issuance tax
in respect thereof, or other cost incurred by the Borrower in connection with
such Purchase and the related issuance of shares of Preferred Stock. The
Borrower shall not be required to pay any tax which may be payable in respect of
any transfer involved and the issuance and delivery of any certificate in a name
other than that of the Lender.
(c) The issuance to Lender of the right to acquire the shares of Preferred
Stock, has been duly authorized by all necessary corporate action on the part of
the Borrower, and the Purchase Option is not inconsistent with the Borrower's
Charter or Bylaws, does not contravene any law or governmental rule, regulation
or order applicable to it, does not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Purchase
Option constitutes a legal, valid and binding agreement of the Borrower,
enforceable in accordance with its terms.
(d) No consent or approval of, giving of notice to, registration with, or
taking of any other action in respect of any state, Federal or other
governmental authority or agency is required with respect to the execution,
delivery and performance by the Borrower of its obligations under the Purchase
Option, except for the filing of notices pursuant to Regulation D
<PAGE>
under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(e) The Borroweris not, pursuant to the terms of any other agreement
currently in existence, under any obligation to register under the 1933 Act any
of its presently outstanding securities or any of its securities which may
hereafter be issued.
(f) Subject to the accuracy of the Lender's representations in its Notice,
the issuance of the Preferred Stock upon exercise of the Purchase Option will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) If Lender proposes to sell Preferred Stock issuable upon the exercise
of the Purchase Option in compliance with Rule 144 promulgated by the Securities
and Exchange Commission, the Borrower shall furnish to the Lender, within ten
days after receipt of a written request, a written statement confirming the
Borrower's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule, as such Rule may be amended from
time to time.
Borrower acknowledges that Lender has the right to review Schedule 1 to
this Certificate and that Lender may in its sole discretion withdraw its notice
of exercise of Purchase Option within the ten business days after Lender's
receipt of this Acknowledgment.
Borrower: DATA CRITICAL CORP.
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
EXHIBIT 10.5
M A S T E R L E A S E A G R E E M E N T
MASTER LEASE AGREEMENT (the "Master Lease") dated April 27, 1999 by and between
COMDISCO, INC. ("Lessor") and Data Critical Corp. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture,
<PAGE>
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Master Lease and each Schedule constitute legal, valid and
binding agreements of the Lessee, enforceable in accordance with their terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally and rules of law concerning equitable
remedies.
(c) There are no actions, suits, proceedings or patent claims pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee
is a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when
due if that failure continues for five (5) business days after written notice;
or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or warranty made by
the Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10) business
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure
by Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any petition under any bankruptcy or
insolvency law or for the appointment of a trustee or other officer with similar
powers, the adjudication of Lessee as insolvent, the liquidation of Lessee, or
the taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all Rent due under
the defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the
U.S. Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
<PAGE>
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month
(and in any event within thirty (30) days), Lessee will provide to Lessor the
same information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee,
Lessor will not be obligated to lease any Equipment which would have a
Commencement Date after said notice if: (i) Lessee is in default under this
Master Lease or any Schedule; (ii) Lessee is in default under any loan
agreement, the result of which would allow the lender or any secured party to
demand immediate payment of any material indebtedness; (iii) there is a material
adverse change in Lessee's credit standing; or (iv) Lessor determines (in
reasonable good faith) that Lessee will be unable to perform its obligations
under this Master Lease or any Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
4.5 Entire Agreement. This Master Lease and associated Schedules and
Summary Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but
not limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by
the other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL
HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master
Lease or any Schedule is for any reason held invalid, illegal or unenforceable,
the remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in
any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed Products
which will at all times remain the property of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in excess
of $1,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel
in a form acceptable to Lessor regarding the representations and warranties in
Section 8.
14.15 Electronic Communications. Each of the parties may communicate with
the other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby agrees
that Lessor shall not, by virtue of its entering into this Master Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
- -------------
Casualty Value - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date - is defined in each Schedule.
- -----------------
Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
- ----------------
Fair Market Value - means the aggregate amount which would be obtainable in an
- -----------------
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
<PAGE>
Initial Term - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
- -----------
maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
- -----------------
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
- -----
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
- --------
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
DATA CRITICAL CORP. COMDISCO, INC.,
as Lessee
By: /s/ Robert W. Benson By: /s/ James Labe
-------------------- -------------------------------
Title: CFO Title: President, Comdisco Ventures
----------------- ----------------------------
Division
--------
<PAGE>
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF APRIL 27, 1999
BETWEEN DATA CRITICAL CORP., AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease are hereby modified and amended as follows:
1) 3, "Rent and Payment"
----------------
In line 2, after "payable" insert "within three (3) days".
2) 6.2, "Taxes and Fees"
--------------
In line 3, after "negligence" insert "or willful misconduct".
3) 8, "Representations and Warranties of Lessee"
----------------------------------------
Subsection (b), line 4, delete "Articles" and replace with "Certificate".
4) 11, "Indemnify"
---------
5th line from the bottom, before "negligent" insert "willful misconduct
or".
5) 14.1., "Board Attendance"
----------------
Delete this section in its entirety.
6) 14.2, "Financial Statements"
--------------------
Line 10, before "Lessee will promptly" insert "upon request,".
7) 14.3, "Obligation to Lease Additional Equipment"
----------------------------------------
Line 3, before "default" insert "material".
8) 14.4, "Merger and Sale Provisions"
--------------------------
Line 2, delete "sixty (60)" and replace with "thirty (30)".
At the end of this section insert the following: Upon termination in
connection with a Merger as described herein, Lessee may purchase the
Equipment under mutually agreeable terms and conditions to both parties."
9) 14.7, "Binding Nature"
--------------
<PAGE>
Line 2, after "OBLIGATIONS" insert "WITHOUT THE REASONABLE CONSENT OF
LESSOR, PROVIDED THAT NO CONSENT IS REQUIRED FOR ASSIGNMENTS BY OPERATION
OF LAW".
10) 14.4 "Secretary's Certificate"
-----------------------
Delete the last sentence in its entirety.
Except as amended hereby, all other terms and conditions of the Master Lease
Agreement remain in full force and effect.
DATA CRITICAL CORP. COMDISCO, INC.
as LESSEE as LESSOR
By: /s/ Robert W. Benson By: /s/ James Labe
-------------------- -------------------------------
Title: CFO Title: President, Comdisco Ventures
----------------- ----------------------------
Division
----------------------------
Date: 4-27-99 Date: Apr 29 1999
------------------ -----------------------------
<PAGE>
EXHIBIT 10.6
BUSINESS LOAN AGREEMENT
Borrower: DATA CRITICAL CORP. Lender: Silicon Valley Bank, a California
chartered bank
2733 152nd Avenue NE Pacific Northwest Loan Production Office
Redmond, WA 98052 915 118th Avenue, S.E., Suite 250
Bellevue, WA 98005
- ---------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between DATA CRITICAL CORP. ("Borrower") and
Silicon Valley Bank, a California chartered bank ("Lender") is made and executed
on the following terms and conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan or loans and
other financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of April 10, 1997, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
Borrower. The word "Borrower" means DATA CRITICAL CORP.. The word "Borrower"
also includes, as applicable, all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive of
extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated;
<PAGE>
whether Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery
upon such Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
-2-
<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
Lender. The word "Lender" means Silicon Valley Bank, a California chartered
bank, its successors and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without limitation any and
all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract. or otherwise, evidencing,
governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of
1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrowers total assets
excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current assets,
excluding prepaid expenses, less Borrowers current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lenders obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lenders satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to Lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d) evidence of insurance as
required below; and (e) any other documents required under this Agreement or by
Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
-3-
<PAGE>
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
-4-
<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
No Event of Default There shall not exist at the time of any advance a condition
which would constitute an Event of Default under this Agreement,
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Oklahoma and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage. Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the last five (5)
years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and its
agents to enter upon the properties to make such inspections and tests as Lender
may deem appropriate to determine compliance of the properties with this section
of the Agreement. Any inspections or tests made by Lender shall be at Borrower's
expense and for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for hazardous waste and
hazardous substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's ownership
or interest in the properties, whether or not the same was or should have been
known to Borrower. The provisions of this section of the Agreement, including
the obligation to indemnify,
-5-
<PAGE>
shall survive the payment of the Indebtedness and the termination or expiration
of this Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's
-6-
<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
financial condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender in
writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may have
any liability complies in all material respects with all applicable requirements
of law and regulations, and (i) no Reportable Event nor Prohibited Transaction
(as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower
has not withdrawn from any such plan or initiated steps to do so, (iii) no steps
have been taken to terminate any such plan, and (iv) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.
Investment Company Act. Borrower is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
Public Utility Holding Company Act. Borrower is not a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
Regulations G, T and U. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T and
U of the Board of Governors of the Federal Reserve System).
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 2733 152nd Avenue NE, Redmond, WA 98052. Unless Borrower
has designated otherwise in writing this location is also the office or offices
where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be, true and accurate in
every material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading.
Claims and Defenses. There are no defenses or counterclaims, offsets or other
adverse claims, demands or actions of any kind, personal or otherwise, that
Borrower, Grantor, or any Guarantor could assert with respect to the Note, Loan,
Indebtedness, this Agreement, or the Related Documents.
Survival of Representations and Warranties. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
-7-
<PAGE>
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
-8-
<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
Financial Statements. Furnish Lender with, as soon as available, but in no event
later than ninety (90) days after the end of each fiscal year, Borrowers balance
sheet and income statement for the year ended, audited by a certified public
accountant satisfactory to Lender, and, as soon as available, but in no event
later than thirty (30) days after the end of each month, Borrower's balance
sheet and profit and loss statement for the period ended, prepared and certified
as correct to the best knowledge and belief by Borrower's chief financial
officer or other officer or person acceptable to Lender. All financial reports
required to be provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Accounts Receivable and Accounts Payable. Provide to Lender not later than
twenty (20) days after and as of the end of each month, with a Borrowing Base
Certificate and aged lists of accounts receivable and accounts payable. Lender
shall conduct an initial audit of Borrower's accounts receivable, prior to any
disbursements in excess of $250,000.00 under the Note, thereafter, such audits
shall be conducted on a semi-annual basis. Borrower's deposit account will be
debited for the audit expense and a notification will be mailed to Borrower.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports With respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
Financial Covenants and Ratios. Comply with the following covenants and ratios:
Borrower shall maintain, on a monthly basis, a minimum quick ratio of 1.50 to
1.00; a minimum Tangible Net Worth of $2,000,000.00; a maximum total Debt to
Tangible Net Worth ratio of 0.80 to 1.00; and a minimum Liquidity Coverage ratio
of 2.00 to 1.00. Furthermore, Borrower shall not permit quarterly losses to
exceed $250,000.00, beginning as of the quarter ending September 30, 1997.
For purposes of the foregoing, Liquidity Coverage shall be defined as cash (and
equivalents) plus availability under Borrowers line of credit facility divided
by outstandings under Borrowers equipment term loan facility. The Liquidity
Coverage covenant shall pertain to Borrowers equipment term loan facility only.
Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be
made in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower and
operations, in form, amounts, coverages and with insurance companies reasonably
acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days' prior written notice to Lender. Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Borrower or any other person. In connection with all policies covering assets
in which Lender holds or is offered a security interest for the Loans, Borrower
will provide Lender with such loss payable or other endorsements as Lender may
require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
Other Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same shall be
contested in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax,
-9-
<PAGE>
charge, levy, lien, or claim in accordance with generally accepted accounting
practices. Borrower, upon demand of Lender, will furnish to Lender evidence of
payment of the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at any time
a written statement of any assessments, taxes, charges, levies, liens and claims
against Borrower's properties, income, or profits.
-10-
<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
Performance. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
Environmental Studies. Promptly conduct and complete, at Borrowers expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance defined as toxic
or a hazardous substance under any applicable federal, state, or local law,
rule, regulation, order or directive, or any waste or by-product thereof, at or
affecting any property or any facility owned, leased or used by Borrower.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrowers other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
monthly within thirty (30) days and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate and further certifying that, as of the date of
the certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects with
all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets, or
(c) sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of ) their ownership of
shares of stock of Borrower, or (d) purchase or retire any of Borrower's
outstanding shares or alter or amend Borrower's capital structure.
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<PAGE>
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
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BUSINESS LOAN AGREEMENT
(CONTINUED)
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if.
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender: (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
LOAN ADVANCES. Lender, in its discretion, will make loans to Borrower, in
amounts determined by Lender, up to the amounts as defined and permitted in this
Agreement and the Related Documents, including, but not limited to, any
Promissory Notes, executed by Borrower (the "Credit Limit"). Borrower is
responsible for monitoring the total amount of Loans and Indebtedness
outstanding from time to time, and Borrower shall not permit the same, at any
time to exceed the Credit Limit. If any any time the total of all outstanding
Loans and Indebtedness exceeds the Credit Limit, Borrower shall immediately pay
the amount of the excess to Lender, without notice or demand.
BORROWING BASE FORMULA. Funds shall be advanced under Borrower's line of credit
facility according to a borrowing base formula, as determined by Lender on a
monthly basis, defined as follows: the lesser of (i) $500,000.00 minus the face
amount of all outstanding letters of credit (including drawn but unreimbursed
letters of credit) or (ii) seventy-five percent (75%) of Eligible Accounts
Receivable minus the face amount of all outstanding letters of credit (including
drawn but unreimbursed letters of credit). Eligible Accounts Receivable shall be
defined as those accounts that arise in the ordinary course of Borrower's
business, and shall include, but not be limited to, those accounts outstanding
less than 90 days from the date of invoice, excluding all foreign, government,
contra and intercompany accounts, and exclude accounts wherein 50% or more of
the account is outstanding more than 90 days from the date of invoice. Any
account which alone exceeds 25% of total accounts will be ineligible to the
extent said account exceeds 25% of total accounts. Lender shall also deem
ineligible any credit balances which are aged past 90 days, and accounts
generated by the sale of demonstration or promotional equipment. The standards
of eligibility shall be fixed from time to time by Lender, in Lender's
reasonable judgment, upon notification to Borrower. Lender reserves the right to
exclude any accounts, the collection of which, Lender reasonably determines to
be doubtful.
LETTER OF CREDIT SUBLIMIT. Subject to the terms and conditions of this
Agreement, Lender agrees to issue or cause to be issued under Borrower's line of
credit facility, letters of credit for the account of Borrower in an aggregate
face amount not to exceed (i) the lesser of the $500,000.00 or the Borrowing
Base Formula minus (ii) the then outstanding principal balance of the line of
credit facility; d that the face amount of outstanding letters of credit
(including drawn but unreimbursed letters of credit) shall not in any case
provided Two Hundred Thousand and 00/ Dollars ($200,000.00). Each such letter of
credit shall have an expiry date no later than one hundred eighty (180) days
after the maturity date of the line of credit facility provided that Borrower's
letter of credit reimbursement obligation shall be secured by cash on terms
acceptable to Lender at any time after the maturity date if the term of the
Agreement is not extended by Lender. All such letters of credit shall be, in
form and substance, acceptable to Lender in its sole discretion and shall be
subject to the terms and conditions of Lender's form of application and Letter
of Credit agreement.
Borrower shall indemnify, defend and hold Lender harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys' fees,
arising out of or in connection with any letters of credit.
Borrower may request that Lender issue a letter of credit payable in a currency
other than United States Dollars. If a demand for payment is made under any such
letter of credit, Lender shall treat such demand as an Advance under the line of
credit facility to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
Upon the issuance of any letter of credit payable in a currency other than
United States Dollars, Lender shall create a reserve (the "Letter of Credit
Reserve") under the line of credit facility for letters of credit against
fluctuations in currency exchange rates, in an amount equal to ten percent (10%)
of the face amount of such letter of credit. The amount of such reserve may be
amended by Lender from time to time to account for fluctuations in the exchange
rate. The availability of funds under the line of credit facility shall be
reduced by the amount of such reserve for so long as such letter of credit
remains outstanding.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due on the
Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower to comply
with or to perform any other term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.
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Default in Favor of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrowers property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
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<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect at the time
made or furnished, or becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrowers financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lenders option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have the rights and remedies provided in
the Related Documents or available at law, in equity, or otherwise. Except as
may be prohibited by applicable law, all of Lender's rights and remedies shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or to take action to perform an obligation of
Borrower or of any Grantor shall not affect Lender's right to declare a default
and to exercise its rights and remedies.
DEFAULT RATE. Following an Event of Default, including failure to pay upon final
maturity, Lender, at its option, may do one or both of the following: (a)
increase the variable interest rate on the Note to five percentage points
(5.000%) over the otherwise effective interest rate payable thereunder, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the interest rate provided in the Note.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Washington. If there is a lawsuit, Borrower agrees upon
Lenders request to submit to the jurisdiction of the courts of King County, the
State of Washington. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall mean
each and every Borrower. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
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<PAGE>
Consent to Loan Participation. Borrower agrees and consents to Lenders sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any
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<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest in
the Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.
Borrower Information. Borrower consents to the release of information on or
about Borrower by Lender in accordance with any court order, law or regulation
and in response to credit inquiries concerning Borrower.
Non-Liability of Lender. The relationship between Borrower and Lender is a
debtor and creditor relationship and not fiduciary in nature, nor is the
relationship to be construed as creating any partnership or joint venture
between Lender and Borrower. Borrower is exercising its own judgment with
respect to Borrowers business. All information supplied to Lender is for
Lender's protection only and no other party is entitled to rely on such
information. There is no duty for Lender to review, inspect, supervise, or
inform Borrower of any matter with respect to Borrower's business. Lender and
Borrower intend that Lender may reasonably rely on all information supplied by
Borrower to Lender, together with all representations and warranties given by
Borrower to Lender, without investigation or confirmation by Lender and that any
investigation or failure to investigate will not diminish Lender's right to so
rely.
Notice of Lender's Breach. Borrower must notify Lender in writing of any breach
of this Agreement or the Related Documents by Lender and any other claim, cause
of action or offset against Lender within thirty (30) days after the occurrence
of such breach or after the accrual of such claim, cause of action or offset.
Borrower waives any claim, cause of action or offset for which notice is not
given in accordance with this paragraph. Lender is entitled to rely on any
failure to give such notice.
Borrower Indemnification. Borrower shall indemnify and hold Lender harmless from
and against all claims, costs, expenses, losses, damages, and liabilities of any
kind, including but not limited to attorneys' fees and expenses, arising out of
any matter relating directly or indirectly to the Indebtedness, whether
resulting from internal disputes of the Borrower, disputes between Borrower and
any Guarantor, or whether involving any third parties, or out of any other
matter whatsoever related to this Agreement or the Related Documents, but
excluding any claim or liability which arises as a direct result of Lender's
gross negligence or willful misconduct. This indemnity shall survive full
repayment and satisfaction of the Indebtedness and termination of this
Agreement.
Counterparts. This Agreement may be executed in multiple counterparts, each of
which, when so executed, shall be deemed an original, but all such counterparts,
taken together, shall constitute one and the same Agreement.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's expenses,
including without limitation attorneys' fees, incurred in connection with the
preparation, execution, enforcement, modification and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice
is to change the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower will keep Lender informed at all
times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
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Successors and Assigns. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
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<PAGE>
BUSINESS LOAN AGREEMENT
(CONTINUED)
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL
10, 1997.
BORROWER:
DATA CRITICAL CORP.
By: /s/ - Jeffrey S. Brown
Title: President, CEO
LENDER:
Silicon Valley Bank, a California chartered bank
By: /s/ - Jo Surbrugg
Title: Senior Vice President
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<PAGE>
CORPORATE RESOLUTION TO BORROW
Borrower: DATA CRITICAL CORP. Lender: Silicon Valley Bank, a California
chartered bank
2733 152nd Avenue NE Pacific Northwest Loan Production Office
Redmond, WA 98052 915 118th Avenue, S.E., Suite 250
Bellevue, WA 98005
I, the undersigned Secretary or Assistant Secretary of DATA CRITICAL CORP. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of Oklahoma as a corporation for
profit, with its principal office at 2733 152nd Avenue NE, Redmond, WA 98052,
and is duly authorized to transact business in the State of Washington.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held on April 10, 1997, at which a quorum was present and voting, or
by other duly authorized corporate action in lieu of a meeting, the following
resolutions were adopted:
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
- ------------------ -------------- ---------------------
Jeffrey S. Brown President, CEO /s/ - Jeffrey S. Brown
Craig S. Kairis Vice President /s/ - Craig Kairis
acting for and on behalf of the Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank, a California
chartered bank ("Lender"), on such terms as may be agreed upon between the
Corporation and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.
Execute Notes. To execute and deliver to Lender the promissory note or notes, or
other evidence of credit accommodations of the Corporation, on Lender's forms,
at such rates of interest and on such terms as may be agreed upon, evidencing
the sums of money so borrowed or any indebtedness of the Corporation to Lender,
and also to execute and deliver to Lender one or more renewals, extensions,
modifications, refinancing, consolidations, or substitutions for one or more of
the notes, any portion of the notes, or any other evidence of credit
accommodations.
Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Corporation to
Lender at any time owing, however the same may be evidenced, any property now or
hereafter belonging to the Corporation or in which the Corporation now or
hereafter may have an interest, including without limitation all real property
and all personal property (tangible or intangible) of the Corporation. Such
property may be mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed,
hypothecated, or encumbered.
Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which may be submitted by Lender,
and which shall evidence the terms and conditions under and pursuant to which
such liens and encumbrances, or any of them, are given; and also to execute and
deliver to Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which they may in their discretion deem
reasonably necessary or proper in connection with or pertaining to the giving of
the liens and encumbrances,
Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation in which the Corporation may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the account of the Corporation with Lender, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements,
including agreements waiving the right to a trial by jury, as they may in their
discretion deem reasonably necessary or proper in order to carry into effect the
provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Lender may rely on
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<PAGE>
these Resolutions until written notice of their revocation shall have been
delivered to and received by Lender. Any such notice shall not affect any of the
Corporation's agreements or commitments in effect at the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at
Lenders address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation, (b)
change in the assumed business name(s) of the Corporation, (c) change in the
management of the Corporation,, (d) change in the authorized signer(s), (e)
conversion of the Corporation to a new or different type of business entity, or
(f) change in any other aspect of the Corporation that directly or indirectly
relates to any agreements between the Corporation and Lender. No change in the
name of the Corporation will take effect until after Lender has been notified.
FOREIGN EXCHANGE CONTRACTS. Execute and deliver foreign exchange contracts,
either spot or forward, from time to time, in such amount as, in,the judgment of
the officer or officers herein authorized.
LETTERS OF CREDIT. To execute Letter of Credit applications and other related
documents pertaining to Lender's issuance of letters of credit.
ISSUE WARRANTS. To issue warrants to purchase the Corporation's capital stock,
for such series and number, and on such terms, as an officer of the Corporation
shall deem appropriate.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever. The Corporation has no corporate seal, and therefore,
no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I have hereunto set my hand on April 10, 1997 and attest
that the signatures set opposite the names listed above, are their genuine
signatures.
CERTIFIED TO AND ATTTESTED BY:
/s/ - Douglas Branch
NOTE: in case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.23(c) 1997 CFl ProServices, Inc.
All rights reserved. (WA-C10 DATACRIT.LN G21.0VL)
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EXHIBIT 10.7
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 17, 1997, by and
between Data Critical Corp. ("Borrower") whose address is 2733 152nd Avenue, NE,
Redmond, WA 98052, and Silicon Valley Bank ("Lender") whose address is 3003
Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), as
amended from time to time (the "Line") and a Promissory Note dated April 10,
1997 in the original principal amount of One Hundred Thousand and 00/100 Dollars
($100,000.00) (the "Term Note) and collectively referred to as the "Notes". The
Notes, together with other promissory notes from Borrower to Lender, are
governed by the terms of a Business Loan Agreement, dated April 10, 1997, as
such agreement may be amended from time to time, between Borrower and Lender
(the "Loan Agreement'). 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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by a Commercial Security Agreement, dated April 10, 1997, and a
Collateral Assignment, Patent Mortgage and Security Agreement dated April 10,
1997.
Hereinafter, the above-described security documents and guaranties, 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. The paragraph entitled "Borrowing Base Formula" is hereby amended
in its entirety to read as follows:
Funds shall be advanced under Borrower's line of credit facility
according to a borrowing base formula, as determined by Lender on
a monthly basis, defined as follows: the lesser of (i) $500,000.00
minus the face amount of all outstanding letters of credit
(including drawn but unreimbursed letters of credit) or (ii)
seventy-five percent (75%) of Eligible Accounts Receivable minus
the face amount of all outstanding letters of credit (including
drawn but unreimbursed letters of credit). Eligible Accounts
Receivable shall be defined as those accounts that arise in the
ordinary course of Borrower's business, and shall include, but not
be limited to, those accounts outstanding less than 90 days from
the date of invoice, excluding all foreign, government, contra and
intercompany accounts, and exclude accounts wherein 50% or more of
the account is outstanding more than 90 days from the date of
invoice. Other than those accounts receivable from Hewlett Packard
Company and Marquette Medical Systems, which shall have a 60%
concentration limit, any account which alone exceeds 25% of total
accounts will be ineligible to the extent said account exceeds 25%
of total accounts. Lender shall also deem ineligible any credit
balances which are aged past 90 days, and accounts generated by
the sale of demonstration or promotional equipment. The standards
of eligibility shall be fixed from time to time by Lender, in
Lender's reasonable judgment, upon notification to Borrower.
Lender reserves the right to exclude any accounts, the collection
of which, Lender reasonably determines to be doubtful.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by
<PAGE>
Lender 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.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: LENDER:
DATA CRITICAL CORPORATION SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ Jo Surbrugg
Name: Robert W. Benson Name: Jo Surbrugg
Title: CFO Title: SVP
<PAGE>
EXHIBIT 10.8
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 15, 1997, by and
between Data Critical Corp. ("Borrower") whose address is 2733 152nd Avenue, NE,
Redmond, WA 98052, and Silicon Valley Bank ("Lender") whose address is 3003
Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), as
amended from time to time (the "Line") and a Promissory Note dated April 10,
1997 in the original principal amount of One Hundred Thousand and 00/100 Dollars
($100,000.00) (the "Term Note) and collectively referred to as the "Notes". The
Notes, together with other promissory notes from Borrower to Lender, are
governed by the terms of a Business Loan Agreement, dated April 10, 1997, as
such agreement may be amended from time to time, between Borrower and Lender
(the "Loan Agreement'). 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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by a Commercial Security Agreement, dated April 10, 1997, and a
Collateral Assignment, Patent Mortgage and Security Agreement dated April 10,
1997.
Hereinafter, the above-described security documents and guaranties, 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 Term Note.
-----------------------------
1. The Draw Period is hereby extended to November 26, 1997.
Accordingly, the first principal plus interest payment shall be
due on December 26, 1997, with all subsequent payments due on the
same day of each month thereafter. The final payment, due
November 26, 2000, will be for all outstanding principal plus all
accrued interest not yet paid.
B. Modification(s) to Loan Agreement.
----------------------------------
1. The paragraph entitled "Financial Covenants" is hereby amended in
its entirety to read as follows:
Borrower shall maintain on a monthly basis, beginning with the
month ending October 31, 1997, a minimum quick ratio of 1.50 to
1.00; a minimum Tangible Net Worth of $650,000.00, a maximum
total Debt to Tangible Net Worth ratio of 0.80 to 1.00 and a
minimum Liquidity Coverage ratio of 2.00 to 1.00. Furthermore,
Borrower shall not permit losses to exceed $650,000.00 for the
quarter ending December 31, 1997, $550,000.00 for the quarter
ending March 31, 1998 and $150,000.00 for the quarter ending June
30, 1998 and thereafter.
C. Waiver of Covenant Default.
---------------------------
1. Lender hereby waives Borrower's existing default under the Loan
Agreement by virtue of Borrower's failure to comply with the
Tangible Net Worth covenant as of the months ended May 31, 1997,
June 30, 1997, July 31, 1997, August 31, 1997 and September 30,
1997, the Quick Ratio covenant as of the month ended September
30, 1997 and the maximum loss covenant for the quarter ended
September 30, 1997. Lender's waiver of Borrowers compliance of
these covenants shall apply only to the foregoing periods.
Accordingly, for the month ending October 31, 1997 Borrower shall
be in compliance with the Quick Ratio covenant and the Tangible
Net Worth covenant, as amended herein and for the quarter ending
December 31, 1997, Borrower shall be in compliance with the
maximum loss covenant, as amended herein. Lender's agreement to
waive the above-described default (1) in no way shall be deemed
an agreement by the Lender to waive Borrower's compliance with
the above-described covenants as of all other dates and (2) shall
not limit or impair the Lender's right to demand strict
performance of these covenants as of all other dates and (3)
shall not limit or impair the Lenders right to demand strict
performance of all other covenants as of any date.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
<PAGE>
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: LENDER:
DATA CRITICAL CORPORATION SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ Jo Surbrugg
Name: Robert W. Benson Name: Jo Surbrugg
<PAGE>
EXHIBIT 10.9
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of April 14, 1998, however
effective as of April 9, 1998, by and between Data Critical Corp. ("Borrower")
whose address is 2733 152nd Avenue, NE, Redmond, WA 98052, and Silicon Valley
Bank ("Lender") whose address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), as
amended from time to time (the "Line") and a Promissory Note dated April 10,
1997 in the original principal amount of One Hundred Thousand and 00/100 Dollars
($100,000.00) ("Term Note #1) and being executed concurrently herewith, a
Promissory Note in the original principal amount of Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00) ("Term Note #2). The Line, Term Note #1 and
Term Note #2 are collectively referred to as the "Notes". The Notes, together
with other promissory notes from Borrower to Lender, are governed by the terms
of a Business Loan Agreement, dated April 10, 1997, as such agreement may be
amended from time to time, between Borrower and Lender (the "Loan Agreement').
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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by a Commercial Security Agreement, dated April 10, 1997, and a
Collateral Assignment, Patent Mortgage and Security Agreement dated April 10,
1997.
Hereinafter, the above-described security documents and guaranties, 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 Term Note.
1. The principal amount of the Note is hereby increased to One
Million and 00/100 Dollars ($1,000,000.00).
2. Payable in one payment of all outstanding principal plus all
unpaid interest on April 8, 1999. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of
each payment date beginning May 8, 1998, and all subsequent
interest payments will be due on the same day of each month
thereafter.
3. The interest rate to be applied to the unpaid principal balance
of the Note is hereby decreased, effective as of this date, to
three-quarters of one percentage point (0.750%) over the Lender's
current Index.
B. Modification(s) to Loan Agreement.
1. The paragraph entitled "Financial Covenants" is hereby amended in
its entirety to read as follows:
Borrower shall maintain on a monthly basis, beginning with the
month ending April 30, 1998, a minimum quick ratio of 1.50 to
1.00; a minimum Tangible Net Worth of $1,500,000.00, and a
minimum Liquidity Coverage ratio of 1.75 to 1.00. Furthermore,
Borrower shall not permit losses to exceed $1,600,000.00 for the
quarter ended March 31, 1998, $500,000.00 for the quarter ending
June 30, 1998 and $250,000.00 for the quarter ending September
30, 1998. Borrower shall not incur a loss beginning with the
quarter ending December 31, 1998 and thereafter.
For purposes of the foregoing, Liquidity Coverage shall be
defined as cash (and equivalents) plus availability under
Borrower's line of credit facility divided by outstandings under
Borrower's equipment term loan facilities. The Liquidity Coverage
covenant shall pertain to Borrowers equipment term loan
facilities only.
Quick Ratio is a ratio of "Quick Assets" to "Current
Liabilities". Quick Assets is, on any date, the Borrower's
consolidated, unrestricted cash, cash equivalents, net billed
accounts receivable and investments with maturities of less than
one (1) year determined according to GAAP. Current Liabilities is
the aggregate amount of Borrowers Debt which matures within one
(1) year.
<PAGE>
2. The first sentence of the paragraph entitled "Borrowing Base
Formula" is hereby amended in its entirety to read as follows:
Funds shall be advanced under Borrower's line of credit facility
according to a Borrowing Base Formula as determined by Lender on
a monthly basis, defined as follows: the lesser of (i)
$1,000,000.00 minus the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit) or
(ii) seventyfive (75%) of Eligible Accounts Receivable minus the
face amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit),
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 to Lender a fee in the amount of
Five Thousand and 00/100 Dollars ($5,000.00) (the "Loan Fee") plus all out-of-
pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon (i) Borrowers payment of the Loan Fee and (ii) Borrower's
execution and delivery of the Promissory Note of even date herewith.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: LENDER:
DATA CRITICAL CORPORATION SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ Peter Palsson
Name: Robert W. Benson Name: Peter Palsson
Title: CFO Title: Vice President
<PAGE>
EXHIBIT 10.10
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 8, 1998 by, and
between Data Critical Corp. ("Borrower") whose address is 2733 152nd Avenue, NE,
Redmond, WA 98052, and Silicon Valley Bank ("Lender") whose address is 3003
Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), as
amended from time to time (the "Line") and a Promissory Note dated April 10,
1997 in the original principal amount of One Hundred Thousand and 00/100 Dollars
($100,000.00) ("Term Note #1) and a Promissory Note, dated April 14, 1998 in the
original principal amount of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) ("Term Note #2). The Line has been modified pursuant to, among
other documents, a Loan Modification Agreement, dated April 14, 1998, pursuant
to which, among other things, the principal amount was increased to One Million
and 00/100 Dollars ($1,000,000.00). The Line, Term Note #1 and Term Note #2 are
collectively referred to as the "Notes". The Notes, together with other
promissory notes from Borrower to Lender, are governed by the terms of a
Business Loan Agreement, dated April 10, 1997, as such agreement may be amended
from time to time, between Borrower and Lender (the "Loan Agreement"). 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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by a Commercial Security Agreement, dated April 10, 1997, and a
Collateral Assignment, Patent Mortgage and Security Agreement dated April 10,
1997.
Hereinafter, the above-described security documents and guaranties, 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. Clarification of Existing Indebtedness.
1. To clarify any inconsistencies in the Existing Loan Documents to
the original Notes referenced above, the original principal
amount of each Note is hereby restated as follows:
(a The Line had an original principal amount of Five Hundred
Thousand and 00/100 Dollars ($500,000.00). The Line was increased
to One Million and 00/100 Dollars ($1,000,000.00) pursuant to a
Loan Modification Agreement dated April 14,1998.
(b) Term Note #1 has an original principal amount of One Hundred
Thousand and 00/100 Dollars ($100,000.00).
(c) Term Note #2 has an original principal amount of Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00).
B. Modification(s) to Loan Agreement.
1. The paragraph entitled "Borrowing Base Formula" is hereby amended
in part to provide that in addition to the Eligible Accounts
Receivable defined therein, those accounts for which the account
debtor is a hospital and are outstanding less than 120 days from
the date invoice shall be deemed eligible.
C. Waiver of Covenant Defaults.
1. Lender hereby waives Borrower's existing default under the Loan
Agreement by virtue of Borrower's failure to comply with the
quick ratio covenant as of the month ended February 28, 1998.
Lenders waiver of Borrower's compliance of this covenant shall
apply only to the foregoing period. Accordingly, for the month
ended March 31, 1998, Borrower shall have been in compliance with
this covenant.
Lender's agreement to waive the above-described default (1) in no
way shall be deemed an agreement by the Lender to waive
Borrower's compliance with the above-described covenant as of all
other dates and (2) shall not limit or impair the Lenders right
to demand strict performance of this covenant as of all other
dates
<PAGE>
and (3) shall not limit or impair the Lender's right to demand
strict performance of all other covenants as of any date.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: LENDER: -
DATA CRITICAL CORPORATION SILICON VALLEY BANK
By: /s/ Jeffrey S. Brown By: /s/ Peter Palsson
Name: Jeffrey S. Brown Name: Peter Palsson
Title: President, CEO Title: Vice President
<PAGE>
EXHIBIT 10.11
-------------
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of September 1, 1998 by
and between Data Critical Corp. ("Borrower") and Silicon Valley Bank ("Lender").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to,
among other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00). The
Line has been modified pursuant to, among other documents, a Loan Modification
Agreement, dated April 14, 1998, pursuant to which, among other things, the
principal amount was increased to One Million and 00/100 Dollars
($1,000,000.00). The Note, together with other promissory notes from Borrower
to Lender, are governed by the terms of a Business Loan Agreement, dated April
10, 1997, as such agreement may be amended from time to time, between Borrower
and Lender (the "Loan Agreement"). 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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by a Commercial Security Agreement, dated April 10, 1997, and an
Intellectual Property Security Agreement dated April 10, 1997.
Hereinafter, the above-described security documents and guaranties, 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. The paragraph entitled "Financial Covenants" is hereby amended,
in part, to permit Borrower to incur quarterly losses, provided
such losses do not exceed $1,500,000.00 beginning the fiscal
quarter ending September 30, 1998, decreasing to $800,000.00 for
the fiscal quarter ending March 31, 1999, further decreasing to
$400,000.00 for the fiscal quarter ending June 30, 1999 and
breakeven or profitable thereafter.
2. Lender acknowledges that Borrower is revising its fiscal year end
from September 30 to December 31.
B. Waiver of Covenant Defaults.
----------------------------
1. Lender hereby waives Borrower's existing default under the Loan
Agreement by virtue of Borrower's failure to comply with the
quarterly loss covenant as of the fiscal quarter ended June 30,
1998. Lender's waiver of Borrower's compliance of this covenant
shall apply only to the foregoing period. Accordingly, for the
fiscal quarter ending September 30, 1998, Borrower shall have
been in compliance with this covenant, as amended herein.
Lender's agreement to waive the above-described default (1) in no
way shall be deemed an agreement by the Lender to waive
Borrower's compliance with the above-described covenant as of all
other dates and (2) shall not limit or impair the
<PAGE>
Lender's right to demand strict performance of this covenant as
of all other dates and (3) shall not limit or impair the Lender's
right to demand strict performance of all other covenants as of
any date.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
DATA CRITICAL CORP. SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ Jo Surbrugg
-------------------------- -----------------------------
Name: Robert W. Benson Name: Jo Surbrugg
------------------------ ---------------------------
Title: CFO Title: SVP
----------------------- --------------------------
2
<PAGE>
EXHIBIT 10.12
-------------
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of February 12, 1999,
by and between Data Critical Corp. ("Borrower") and Silicon Valley Bank
("Lender").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to,
among other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00). The
Line has been modified pursuant to, among other documents, a Loan Modification
Agreement, dated April 14, 1998, pursuant to which, among other things, the
principal amount was increased to One Million and 00/100 Dollars
($1,000,000.00). The Note, together with other promissory notes from Borrower
to Lender, are governed by the terms of a Business Loan Agreement, dated April
10, 1997, as such agreement may be amended from time to time, between Borrower
and Lender (the "Loan Agreement"). 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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by a Commercial Security Agreement, dated April 10, 1997, and an
Intellectual Property Security Agreement dated April 10, 1997.
Hereinafter, the above-described security documents and guaranties, 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 the Note.
----------------------------
1. The amount of the Line is hereby increased to One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00).
B. Modifications to the Business Loan Agreement
--------------------------------------------
1. Letter of Credit Sublimit. The first sentence under Letter of
Credit Sublimit is hereby amended as follows: Subject to the
terms and conditions of this Agreement, Lender agrees to issues
or cause to be issued under Borrower's line of credit facility,
letters of credit for the account of Borrower in an aggregate
face amount not to exceed (i) the lesser of the $1,500,000.00 of
the Borrowing Base Formula minus (ii) the then outstanding
principal balance of the line of credit facility; provided that
the face amount of outstanding letters of credit (including drawn
but unreimbursed letters of credit) shall not in any case exceed
Three Hundred Forty Thousand and 00/100 Dollars ($340,000.00).
2. The paragraph entitled "Borrowing Base Formula" is hereby amended
in part to provide that if the Adjusted Quick Ratio is less than
1.50 but greater then 1.20, the advance rate will be 60% against
invoices.
<PAGE>
3. The paragraph entitled "Financial Covenants" is hereby amended,
in part, to permit Borrower to incur quarterly losses, provided
such losses do not exceed $1,500,000.00 beginning the fiscal
quarter ending September 30, 1998, decreasing to $800,000.00 for
the fiscal quarter ending March 31, 1999, further decreasing to
$600,000.00 for the fiscal quarter ending June 30, 1999 and
breakeven or profitable thereafter.
The quick ratio of 1.50 to 1.00 is hereby replaced with the
Adjusted Quick Ratio. The Adjusted Quick Ratio is defined as
cash and equivalents plus receivables divided by current
liabilities less deferred revenues. Borrower shall maintain a
minimum Adjusted Quick Ratio of 1.50 : 1.00 for the term of the
Loan except for quarters ending June 30, 1999 and September 30,
1999, the minimum Adjusted Quick Ratio shall be 1.20 : 1.00.
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 to Lender a fee in the amount of
--------------------
$1,250.00 (the "Loan Fee") plus all out of pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
DATA CRITICAL CORP. SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ John Balbach
---------------------------- ------------------------------
Name: Robert W. Benson Name: John Balbach
-------------------------- ----------------------------
Title: CFO Title: AVP
------------------------- ---------------------------
2
<PAGE>
EXHIBIT 10.13
-------------
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 26, 1999, by
and between Data Critical Corp. ("Borrower") and Silicon Valley Bank ("Lender").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to,
among other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00). The
Line has been modified pursuant to, among other documents, a Loan Modification
Agreement, dated February 12, 1999, pursuant to which, among other things, the
principal amount was increased to One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00). The Note, together with other promissory notes from
Borrower to Lender, are governed by the terms of a Business Loan Agreement,
dated April 10, 1997, as such agreement may be amended from time to time,
between Borrower and Lender (the "Loan Agreement"). 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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by a Commercial Security Agreement, dated April 10, 1997, and an
Intellectual Property Security Agreement dated April 10, 1997.
Hereinafter, the above-described security documents and guaranties, 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 the Note.
----------------------------
1. Payable in one payment of all outstanding principal plus all
accrued unpaid interest on April 8, 2000. In addition, Borrower
will pay regular monthly payments of all accrued unpaid interest
due as of each payment date beginning April 8, 1999, and all
subsequent interest payments are due on the same day of each
month thereafter.
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 to Lender a fee in the amount of
--------------------
Five Thousand and 00/100 Dollars ($5,000.00) (the "Loan Fee") plus all out of
pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this
<PAGE>
Loan Modification Agreement in no way shall obligate Lender 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
Lender and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Lender 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.
8. CONDITION. The effectiveness of this Loan Modification Agreement is
---------
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
DATA CRITICAL CORP. SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ John Balbach
----------------------- -------------------------
Name: Robert W. Benson Name: John Balbach
--------------------- -----------------------
Title: CFO Title: AVP
-------------------- ----------------------
2
<PAGE>
EXHIBIT 10.14
-------------
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 6, 1999, by and
between Data Critical Corp. ("Borrower") and Silicon Valley Bank ("Lender").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to,
among other documents, a Promissory Note, dated April 10, 1997, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the
"Line"), a Promissory Note, dated April 10, 1997, in the original principal
amount of One Hundred Thousand and 00/100 Dollars ($100,000.00) (the"Term Note
#1") and a Promissory Note dated April 14, 1998, in the original principal
amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (the "Term
Note #2"). The Line , Term Note #1 and Term Note #2 are hereby sometimes
referred to as the "Notes". The Line has been modified pursuant to, among other
documents, a Loan Modification Agreement, dated February 12, 1999, pursuant to
which, among other things, the principal amount was increased to One Million
Five Hundred Thousand and 00/100 Dollars ($1,500,000.00). The Notes, together
with other promissory notes from Borrower to Lender, are governed by the terms
of a Business Loan Agreement, dated April 10, 1997, as such agreement may be
amended from time to time, between Borrower and Lender (the "Loan Agreement").
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 Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by a Commercial Security Agreement, dated April 10, 1997, and an
Intellectual Property Security Agreement dated April 10, 1997.
Hereinafter, the above-described security documents and guaranties, 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 the Term Note #1.
-----------------------------------
1. The principal amount of the Term Note #2 is hereby decreased to
Forty Nine Thousand Seven Hundred Forty Five and 11/100 Dollars
($49,745.11).
B. Modification(s) to the Term Note #2.
------------------------------------
1. The principal amount of the Term Note #3 is hereby decreased to
One Hundred Sixty Six Thousand Six Hundred Seven and 46/100
Dollars ($166,607.46).
C. Modification(s) to the Loan Agreement.
--------------------------------------
1. The paragraph entitled "Financial Covenants" is hereby amended,
in part, to permit Borrower to incur quarterly losses, provided
such losses do not exceed $1,030,000.00 through the fiscal
quarter ending March 31, 1999, decreasing to $950,000.00 for the
fiscal quarter ending June 30, 1999, further decreasing to
$350,000.00 for the fiscal quarter ending September 30, 1999.
Thereafter, Borrower shall breakeven or be profitable.
<PAGE>
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 to Lender a fee in the amount of
--------------------
Five Hundred and 00/100 Dollars ($500.00) (the "Loan Fee") plus all out of
pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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.
8. CONDITION. The effectiveness of this Loan Modification Agreement is
---------
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
DATA CRITICAL CORP. SILICON VALLEY BANK
By: /s/ Robert W. Benson By: /s/ Peter Palsson
---------------------------- --------------------------------
Name: Robert W. Benson Name: Peter Palsson
-------------------------- -----------------------------
Title: CFO Title: Vice President
------------------------- -----------------------------
2
<PAGE>
EXHIBIT 10.15
PROMISSORY NOTE
<TABLE>
<CAPTION>
<S> <C> <C>
Borrower: DATA CRITICAL CORP. Lender: Silicon Valley Bank, a California chartered bank
2733 152nd Avenue NE Pacific Northwest Loan Production Office
Redmond, WA 98062 916 118th Avenue, S.E., Suite 250
Bellevue, WA 98006
Principal Amount: $100,000.00 Initial Rate: 11.000% Date of Note: April 10, 1997
</TABLE>
PROMISE TO PAY. DATA CRITICAL CORP. ("Borrower") promises to pay to Silicon
Valley Bank, a California chartered bank ("Lender"), or order, In lawful money
of the United States of America, the principal amount of One Hundred Thousand &
00/100 Dollars ($100,000.00) or so much as may be outstanding, together with
Interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan In accordance with the following payment
schedule:
The Draw Period shall begin as of this date and shall end on October 10,
1997 (the "Draw Period"). During the Draw Period, Borrower shall pay
regular monthly payments of all accrued unpaid Interest due as of each
payment date, beginning May 10, 1997 and all subsequent interest payments
will be due on the same day of each month thereafter. The outstanding
principal balance on October 10, 1997, will be payable In thirty-six (36)
even payments of principal plus interest due as of each payment date,
beginning November 10, 1997 and all subsequent payments of principal plus
interest shall be due on the same day of each month thereafter. The final
payment, due October 10, 2000, will be for all outstanding principal plus
all accrued Interest not yet paid.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index'). This is the rate Lender charges, or would charge, on go-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each time the prime rate is adjusted by
Silicon Valley Bank. The Index currently is 8.500% per annum. The interest rate
to be applied to the unpaid principal balance of this Note will be at a rate of
2.500 percentage points over the Index, resulting In an initial rate of 11.000%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrowers obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be In default If any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrowers ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding Is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This Includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrowers financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 7.500
percentage
<PAGE>
points over the Index. The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by Lender
In the State of Washington. If there Is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of King County,in the State
of Washington. Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. This Note shall be governed by and construed In accordance
with the laws of the State of Washington.
through the end of the Draw Period
LINE OF CREDIT. This Note evidences a straight line of credit. /Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements as on this Note
or by Lender's internal records, including daily computer print-outs Lender will
have no obligation to advance funds under this Note if, (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent: (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; or (d) Borrower has applied funds provided pursuant
to this Note for purposes other than those authorized by Lender.
REQUEST TO DEBIT ACCOUNTS. Borrower will regularly deposit funds received in
accounts maintained by Borrower with Lender. Borrower hereby requests and
authorizes Lender to debit any accounts Borrower has with Lender, specifically,
without limitation, Account Number for payments of principal and interest owing
on the loan and any other obligations owing by Borrower to Lender. Lender will
notify Borrower of all debits which Lender makes against any of Borrower's
accounts, Any such debits against Borrower's accounts in no way shall be deemed
a set-off.
ADVANCE RATE. At any time from the date hereof through the end of the Draw
Period, Borrower may request Advances (each, an "Advance" and collectively the
"Advances") from Lender in an aggregate amount not to exceed the principal
amount of this Note. To evidence the Advances, Borrower shall deliver to Lender,
at the time of each advance request, an invoice for the equipment to be
purchased, such invoices shall be less than go days old. The Advances shall be
used only to purchase equipment and shall not exceed eighty percent (80%) of the
invoice amount of such equipment approved from time to time by Lender. Software
may, however, constitute up to twenty five percent (25%) of aggregate Advances.
BUSINESS LOAN AGREEMENT. This Note is subject to and shall be governed by all
the terms and conditions of the Business Loan Agreement of even date, between
Borrower and Lender. which Business Loan Agreement is incorporated herein by
reference.
LOAN FEE. This Note is subject to a loan fee in the amount of One Thousand and
00/100 Dollars ($1,000.00) plus all out-of-pocket expenses.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
DATA CRITICAL CORP
By: /s/ - Jeffrey S. Brown
Title: President, CEO
<PAGE>
Variable Rate Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
(WA-D20 DATACR12.LN G21.OVL] 3.23(c) 1997 CFI ProServices, Inc.
All rights reserved
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
<S> <C>
Borrower: DATA CRITICAL CORP. Lender: Silicon Valley Bank, a California chartered bank
2733 152nd Avenue NE Pacific Northwest Loan Production Office
Redmond, WA 98052 915 118th Avenue, S.E., Suite 250
Bellevue, WA 98005
</TABLE>
LOAN TYPE. This is a Variable Rate (2,500%. over SILICON VALLEY BANK PRIME RATE,
making an initial rate of 11.000%), Non-Revolving Line of Credit Loan to a
Corporation for $100,000.00 due on October 10, 2000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[_] Personal, Family, or Household Purposes or Personal Investment.
[X] Business (Including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: To support working
capital requirements.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $100,000.00 as follows:
Undisbursed Funds: $100,000.00
Note Principal: $100,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $ 1,000.00
$1,000.00 Loan Fees
Total Charges Paid in Cash: $ 1,000.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED APRIL 10, 1997.
BORROWER:
DATA CRITICAL CORP.
By: /s/ Jeffrey S. Brown
- ------------------------
Name: Jeffrey S. Brown
- -----------------------
Title: President, CEO
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off.,
[WA-120 DATACRI2.LN G21.OVL] Ver. 3.23 (c) 1997 CFI ProServices,
Inc. All rights reserved
<PAGE>
EXHIBIT 10.17
PROMISSORY NOTE
<TABLE>
<S> <C>
Borrower: DATA CRITICAL CORP. Lender: Silicon Valley Bank, a California chartered bank
2733 152nd Avenue NE Pacific Northwest Loan Production Office
Redmond, WA 98052 915 118th Avenue, S.E., Suite 250
Bellevue, WA 98005
</TABLE>
<TABLE>
<S> <C> <C>
Principal Amount: $500,000.00 Initial Rate: 10.500% Date of Note: April 10, 1997
</TABLE>
PROMISE TO PAY. DATA CRITICAL CORP. ("Borrower") promises to pay to Silicon
Valley Bank, a California chartered bank ("Lender"), or order, in lawful money
of the United States of America, the principal amount of Five Hundred Thousand &
00/100 Dollars ($500,000.00) or so much as may be outstanding, together with
Interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid Interest on April 9, 1998. in addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning May 9, 1997,
and all subsequent Interest payments are due on the same day of each month after
that. Interest on this Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each time the prime rate is adjusted by
Silicon Valley Bank. The Index currently is 8.500% per annum. The interest rate
to be applied to the unpaid principal balance of this Note will be at a rate of
2.000 percentage points over the Index, resulting in an initial rate of 10.500%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 7.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Washington. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of King County, the State of Washington. Lender and Borrower hereby waive
the right to any jury trial in any action, proceeding, or
<PAGE>
counterclaim brought by either Lender or Borrower against the other. This Note
shall be governed by and construed in accordance with the laws of the State of
Washington.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrowers accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; or (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender.
REQUEST TO DEBIT ACCOUNTS. Borrower will regularly deposit funds received in
accounts maintained by Borrower with Lender. Borrower hereby requests and
authorizes Lender to debit any accounts Borrower has with Lender, specifically,
without limitation, Account Number ______________________________ for payments
of principal and interest owing on the loan and any other obligations owing by
Borrower to Lender. Lender will notify Borrower of all debits which Lender makes
against any of Borrower's accounts. Any such debits against Borrower's accounts
in no way shall be deemed a set-off.
BUSINESS LOAN AGREEMENT. This Note is subject to and shall be governed by all
the terms and conditions of the Business Loan Agreement of even date, between
Borrower and Lender, which Business Loan Agreement is incorporated herein by
reference.
LOAN FEE. This Note is subject to a loan fee in the amount of Five Thousand and
00/100 Dollars ($5,000.00) plus all out-of-pocket expenses.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
DATA CRITICAL CORP.
By: /s/
Jeffrey S. Brown
President, CEO
<PAGE>
EXHIBIT 10.18
PROMISSORY NOTE
<TABLE>
<S> <C>
Borrower: DATA CRITICAL CORP. Lender: Silicon Valley Bank, a California state chartered bank
2733 152nd Avenue NE Washington Loan Production Office
Redmond, WA 98052 915 118th Avenue, Suite 250
Bellevue, WA 98005
</TABLE>
<TABLE>
<S> <C> <C>
Principal Amount: $250,000.00 Initial Rate: 9.500% Date of Note: April 14, 1998
</TABLE>
PROMISE TO PAY. DATA CRITICAL CORP. ("Borrower") promises to pay to Silicon
Valley Bank, a California state chartered bank ("Lender"), or order, in lawful
money of the United States of America, the principal amount of Two Hundred Fifty
Thousand & 00/100 Dollars ($250,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
The Draw Period shall begin as of this date and shall end on October 14, 1998
(the "Draw Period"). Borrower shall pay regular monthly payments of all accrued
unpaid interest due as of each payment date, beginning May 14, 1998 and all
subsequent interest payments will be due on the same day of each month
thereafter. The outstanding balance on October 14, 1998, will be payable in
thirty-six (36) even payments of principal plus interest due as of each payment
date, beginning November 14, 1998 and all subsequent payments of principal plus
interest shall be due on the same day of each month thereafter. The final
payment, due October 14, 2001, will be for all outstanding principal plus all
accrued interest not yet paid.
The annual interest rate for this Note is computed on a 365/360 basis, that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each time the prime rate is adjusted by
Silicon Valley Bank. The Index currently is 8.500% per annum. The interest rate
to be applied to the unpaid principal balance of this Note will be at a rate of
1.000 percentage point over the Index, resulting in an initial rate of 9.500%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 6.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject
<PAGE>
to any limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or nor there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law,. Borrower also will
pay any court costs, in addition to all other sums provided by law. This Note
has been delivered to Lender and accepted by Lender in the State of Washington.*
If there is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of King County, the State of Washington. Lender and
Borrower hereby waive the right to any jury trial in any action, proceeding, or
counter claim brought by either Lender or Borrower against the other. (Initial
Here) RB /s/ This Note shall be governed by and construed in accordance with
the laws of the State of Washington. *California
LINE OF CREDIT. This Note evidences a straight line of credit/ through the draw
period. Once the total amount of principal has been advanced, Borrower is not
entitled to further loan advances. Advances under this Note, as well as
directions for payment from Borrower's accounts, may be requested orally or in
writing by Borrower or by an authorized person. Lender may, but need not,
require that all oral requests be confirmed in writing. Borrower agrees to be
liable for all sums either: (a) advanced in accordance with the instructions of
an authorized person or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.
REQUEST TO DEBIT ACCOUNTS. Borrower will regularly deposit funds received from
its business activities in accounts maintained by Borrower at Silicon Valley
Bank. Borrower hereby requests and authorizes Lender to debit any of Borrower
accounts with Lender, specifically, without limitation.
Account Number 3300051876 for payments of principal and interest owing on the
loan and any other obligations owing by Borrower to Lender. Lender will notify
Borrower of all debits which Lender make, against Borrower's accounts. Any such
debits against Borrower's accounts in no way shall be deemed a set-off.
BUSINESS LOAN AGREEMENT. This Note is subject to and shall be governed by all
their terms and conditions of the Business Loan Agreement April 10, 1997,
between Borrower and Lender, as such agreement may be amended from time to time,
which Business Loan Agreement is incorporated herein by reference.
PAYMENT OF LOAN FEE. This Note is subject to a loan fee in the amount of Two
Thousand Five Hundred and 00/100 Dollars ($2,500.00) plus all out-of-pocket
expenses.
ADVANCE RATE. At any time from the date hereof through the end of the Draw
Period, Borrower may request Advances (each an "Advance" and collectively the
"Advances") from Lender in an aggregate amount no to exceed the principal amount
of this Note. To evidence the Advances, Borrower shall deliver to Lender, at the
time of each advance request, an invoice for the equipment to be purchased, such
invoices shall be less than 90 days old. The Advances shall be used only to
purchase equipment and shall not exceed ninety percent (90%) of the invoice
amount of such equipment approved from time to time by Lender. Software may,
constitute up to forty percent (40%) of aggregate Advances, excluding the Sales
force tracking system, which Lender shall allow up to seventy-five percent (75%)
of total costs to be considered soft costs.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its fights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERM OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
DATA CRITICAL CORP.
By: /s/ Robert W. Benson
Name: Robert W. Benson
Title: CFO
<PAGE>
EXHIBIT 10.19
DATA CRITICAL CORPORATION
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of June 14, 1999,
by and between Michael E. Singer ("Employee") and Data Critical Corporation, a
Delaware corporation (the "Company").
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall have a term of five (5) years (the "Original Term"). During the first
year of the Original Term, the Company may only terminate this Agreement for
Cause (as defined in Section 6 below). Thereafter, subject to Section 5, this
Agreement may be terminated by either party, with or without cause, on thirty
(30) days' written notice to the other party. This Agreement may be extended for
an additional one (1) year term after the end of the Original Term if the
parties mutually agree in writing to such extension.
2. Duties.
(a) Position. Employee shall be employed as the Company's Chief
Financial Officer, and as such will have responsibility for the Company's
finance, accounting and treasury functions, mergers and acquisitions, investor
relations, oversight of human resources and other operational duties that may
change from time to time. Employee will report to the Company's Chief Executive
Officer.
(b) Obligations to the Company. Employee agrees to the best of his
ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Employee pursuant
to the express and implicit terms hereof, and to the reasonable satisfaction of
the Company. During the term of Employee's employment relationship with the
Company, Employee further agrees that he will devote all of his or her business
time and attention to the business of the Company, the Company will be entitled
to all of the benefits and profits arising from or incident to all such work
services and advice, Employee will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company's Board of
Directors, and Employee will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of the Company.
Nothing in this Agreement will prevent Employee from accepting speaking or
presentation engagements in exchange for honoraria or from serving on boards of
charitable organizations, or from owning no more than 1% of the outstanding
equity securities of a corporation whose stock is listed on a national stock
exchange or the Nasdaq National Market. Employee will comply with and be bound
by the Company's operating policies, procedures and practices from time to time
in effect during the term of Employee's employment.
3. At-Will Employment. Except as provided in Section 1 above, the Company
and Employee acknowledge that Employee's employment is and shall continue to be
at-will, as defined under applicable law, and that Employee's employment with
the Company may be terminated by either party at any time for any or no reason.
If Employee's employment
<PAGE>
terminates for any reason, Employee shall not be entitled to any payments,
benefits, damages, award or compensation other than as provided in this
Agreement. The rights and duties created by this Section 3 may not be modified
in any way except by a written agreement executed by the Chief Executive Officer
of the Company.
4. Compensation. For the duties and services to be performed by Employee
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, stock options, bonuses and other benefits described below in this
Section 4.
(a) Salary. Employee shall receive a minimum monthly salary of
$13,333, which is equivalent to $160,000 on an annualized basis. Employee's
salary shall be reviewed on at least an annual basis. Employee's monthly salary
will be payable pursuant to the Company's normal payroll practices. In the
event this Agreement is extended beyond the Original Term, the base salary shall
be reviewed at the time of such extension by the Board, its Compensation
Committee or the Chief Executive Officer of the Company, and any increase will
be effective as of the date determined appropriate by the Board, its
Compensation Committee or the Chief Executive Officer.
(b) Bonus
(i) If Employee is still employed by the Company, the Company
shall issue Employee 7,500 shares of the Company's Common Stock on July 15,
1999. Employee shall surrender these shares to the Company for cancellation if
he leaves his employment with the Company prior to December 31, 1999. Employee
acknowledges that he shall be liable for the payment of income taxes related to
receipt of these shares.
(ii) For each calendar year beginning in the year 2000, Employee
shall be eligible to receive a bonus based on achievement of goals to be
determined by the Company's Board of Directors.
(c) Stock Options and Other Incentive Programs.
(i) In connection with the commencement of Employee's
employment, the Board of Directors shall grant to Employee an option to purchase
100,000 shares of the Company's Common Stock, which will have an exercise price
of $7.00, the fair market value on the date of the grant. Twenty-five percent
(25%) of the option shares shall be vested and immediately exercisable on the
date of grant. Twenty-five percent (25%) of the remaining option shares will
vest on the one-year anniversary of commencement of employment, and the
remainder will vest quarterly over the following three years. Vesting will, of
course, depend on Employee's continued employment with the Company. If, during
the term of his employment, Employee dies or suffers a Disability (as defined in
Section 7 below), the option shares shall become full vested and exercisable. In
the event of a sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, or other change in
control (a "Change in Control"), the exercisability of each outstanding option
shall automatically be accelerated completely so that one hundred percent (100%)
of the number of shares of Common Stock covered by such Option shall be fully
vested.
-2-
<PAGE>
(ii) The Board of Directors shall also grant to Employee an
option to purchase 75,000 shares of the Company's Common Stock, which will have
an exercise price of $7.00, the fair market value on the date of the grant. This
option will become fully vested and exercisable on the earlier of (1) five (5)
years after the date of grant or (2) on the date of consummation of a Sale of
the Company (as defined below) or (3) on a Pro Rata basis on the date (or dates)
of consummation of Acquisition(s) by the Company (as defined below) having a
Fair Market Value (as defined below) of $60 million or more.
As used herein, "Acquisition by the Company" means any
purchase of assets, merger, acquisition, acquisition of any interest in any
joint venture, partnership, limited liability company or any other form of
acquisition of all or any part of another business by the Company, and "Sale of
the Company" means a transaction or series of related transactions whereby,
directly or indirectly, control of the Company or all or substantially all of
its business or assets is acquired by or merged with another entity in a sale or
exchange of stock, merger or consolidation, sale of assets or other similar
transaction. As used herein, a "Transaction" means an Acquisition by the Company
or a Sale of the Company.
As used herein, "Fair Market Value" means the sum of (1)
cash paid or payable, fair market value of marketable equity securities or
interests, fair value of unmarketable equity securities or interests, face
amount of straight and convertible debt instruments or obligations issued or
issuable (including any amounts paid into escrow) from the Company or any entity
affiliated with the Company in connection with aTransaction, (2) the amount of
indebtedness (excluding trade payables) of an acquired company assumed directly
or indirectly by the Company or any entity affiliated with the Company in
connection with a Transaction and (3) the fair value of contingent future
payment obligations (e.g. earn-outs) arising in connection with a Transaction.
Fair Market Value will be determined at the time the Company reaches a
definitive agreement for a Transaction.
As used herein, "Pro Rata" means the Fair Market Value of
any Transaction divided by $60 million.
For example, if the Company consummates an Acquisition by
the Company with a Fair Market Value of $20 million, followed by an Transaction
with a Fair Market Value of $10 million, Employee's option will become vested
with respect to 25,000 shares and then 12,500 shares, for an aggregate vesting
of 37,500 shares or fifty percent (50%) of the shares subject to the option.
Vesting will, of course, depend on Employee's continued employment with the
Company.
(iii) Both of Employee's options will be incentive stock options
to the maximum extent allowed by the Internal Revenue Code of 1986, as amended,
and will be subject to the terms of the Company's 1999 Stock Plan and the Stock
Option Agreement between Employee and the Company. Subject to the discretion of
the Company's Board of Directors, you may be eligible to receive additional
grants of stock options or purchase rights from time to time in the future, on
such terms and subject to such conditions as the Board of Directors shall
determine as of the date of any such grant.
-3-
<PAGE>
(d) Additional Benefits. Employee will be eligible to participate in
the Company's employee benefit plans of general application, including without
limitation, those plans covering medical, disability and life insurance in
accordance with the rules established for individual participation in any such
plan and under applicable law. Employee will be eligible for vacation and sick
leave in accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company generally provides
to its other employees of comparable position and responsibility.
(e) Reimbursement of Expenses.
(i) Employee shall be authorized to incur on behalf and for the
benefit of, and shall be reimbursed by, the Company for reasonable expenses,
provided that such expenses are substantiated in accordance with Company
policies.
(ii) In addition, the Company will reimburse Employee for (1)
reasonable expenses incurred in making two trips from San Francisco to the
Seattle area to look for housing, (2) the rental of an apartment in the Seattle
area from June 1999 through the end of July 1999, (3) reimbursement of expenses
incurred up to an aggregate of $2,000 for weekend trips from Seattle to San
Francisco until Employee's family relocates to the Seattle area and (4)
reasonable relocation expenses incurred for Employee and his family to move from
San Francisco to the Seattle area (collectively, "Moving Expenses"). The
Company will gross up Employee's reimbursement of Moving Expenses for any income
taxes incurred by Employee thereon.
(iii) The Company shall reimburse Employee for up to $6,000 in
hourly legal and accounting fees incurred by Employee in connection with (i)
entering into this Agreement and (ii) analyzing the tax consequences of
compensation paid to Employee upon consummation of a change of control
transaction of the Company.
5. Termination of Employment and Severance Benefits.
(a) Termination of Employment. This Agreement may be terminated
during its Original Term (or any extension thereof) upon the occurrence of any
of the following events:
(i) The Company's determination in good faith that it is
terminating Employee for Cause (as defined in Section 6 below) ("Termination for
Cause");
(ii) The Company's determination that it is terminating Employee
without Cause, which determination may be made by the Company at any time at the
Company's sole discretion, for any or no reason ("Termination Without Cause");
(iii) The effective date of a written notice sent to the Company
from Employee stating that Employee is electing to terminate his or her
employment with the Company ("Voluntary Termination");
-4-
<PAGE>
(iv) A change in Employee's status such that a Constructive
Termination (as defined in Section 5(b)(iv) below) has occurred; or
(v) Following Employee's death or Disability (as defined in
Section 7 below).
(b) Severance Benefits. Employee shall be entitled to receive
severance benefits upon termination of employment only as set forth in this
Section 5(b):
(i) Voluntary Termination. If Employee's employment terminates
by Voluntary Termination, then Employee shall not be entitled to receive payment
of any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(ii) Involuntary Termination. If Employee's employment is
terminated under Section 5(a)(ii) or 5(a)(iv) (such termination, an "Involuntary
Termination"), Employee will be entitled to receive payment of severance
benefits equal to Employee's regular salary for one year (the "Severance
Period"). Such payments shall be made at the time of termination. Employee will
receive payment(s) for all salary and unpaid vacation accrued as of the date of
Employee's termination of employment, and Employee's benefits will be continued
under the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of termination and in accordance
with applicable law. (iii)
(iii) Termination for Cause. If Employee's employment is
terminated for Cause, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(iv) Constructive Termination. "Constructive Termination" shall
be deemed to occur if (A)(1) there is a change in Employee's position that in
Employee's reasonable judgment represents a substantial reduction in status,
title, position or responsibilities, (2) a reduction of Employee's base
compensation or (3) Employee's refusal to relocate to a facility or location
more than 30 miles from the Company's current location; and (B) within the 30-
day period immediately following such material change or reduction Employee
elects to terminate his employment voluntarily.
(v) Termination by Reason of Death or Disability. In the event
that Employee's employment with the Company terminates as a result of Employee's
death or Disability (as defined in Section 7 below), Employee or Employee's
estate or representative will receive all salary and unpaid vacation accrued as
of the date of Employee's death or Disability and any other benefits payable
under the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of death or Disability and in
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accordance with applicable law. In addition, Employee's estate or representative
will receive the amount of Employee's target bonus for the fiscal year in which
the death or Disability occurs to the extent that the bonus has been earned as
of the date of Employee's death or Disability, as determined by the Board of
Directors or its Compensation Committee based on the specific corporate and
individual performance targets established for such fiscal year.
6. Definition of Cause. For purposes of this Agreement, "Cause" for
Employee's termination will exist at any time after the happening of one or more
of the following events:
(a) Employee's willful misconduct or gross negligence in performance
of his duties hereunder, including Employee's refusal to comply in any material
respect with the legal directives of the Company's Board of Directors so long as
such directives are not inconsistent with the Employee's position and duties,
and such refusal to comply is not remedied within 10 working days after written
notice from the Company, which written notice shall state that failure to remedy
such conduct may result in Termination for Cause;
(b) Dishonest or fraudulent conduct, a deliberate attempt to do an
injury to the Company, or conduct that materially discredits the Company or is
materially detrimental to the reputation of the Company, including conviction of
a felony; or
(c) Employee's incurable material breach of any element of the
Company's Confidential Information and Invention Assignment Agreement, including
without limitation, Employee's theft or other misappropriation of the Company's
proprietary information.
7. Definition of Disability. For purposes of this Agreement,
"Disability" shall mean that Employee has been unable to perform his duties
hereunder as the result of his incapacity due to physical or mental illness, and
such inability, which continues for at least one hundred twenty (120)
consecutive calendar days or one hundred fifty (150) calendar days during any
consecutive twelve-month period, if shorter, after its commencement, is
determined to be total and permanent by a physician selected by the Company and
its insurers and acceptable to Employee or to Employee's legal representative
(with such agreement on acceptability not to be unreasonably withheld).
8. Confidentiality Agreement. Employee shall sign, or has signed, a
Proprietary Information and Inventions Agreement (the "Confidentiality
Agreement") substantially in the form attached hereto as Exhibit A. Employee
hereby represents and warrants to the Company that he has complied with all
obligations under the Confidentiality Agreement and agrees to continue to abide
by the terms of the Confidentiality Agreement and further agrees that the
provisions of the Confidentiality Agreement shall survive any termination of
this Agreement or of Employee's employment relationship with the Company.
9. Noncompetition Covenant. Employee hereby agrees that he shall not,
during the term of his employment pursuant to this Agreement and until the later
of (a) one year after termination of Employee's employment with the Company or
(b) the end of the Severance Period, if any, do any of the following without the
prior written consent of the Company's Board of Directors:
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(a) Compete. Carry on any business or activity (whether directly or
indirectly, as a partner, stockholder, principal, agent, director, affiliate,
employee or consultant) relating to wireless telecommunications products or
services or medical equipment or products, in each case that directly compete
with the Company's products or services then commercially available or under
development during the term of Employee's employment, or engage in any other
activities that conflict with Employee's obligations to the Company.
(b) Solicit Business. Solicit or influence or attempt to influence
any client, customer or other person either directly or indirectly, to direct
his or its purchase of the Company's products and/or services to any person,
firm, corporation, institution or other entity in competition with the business
of the Company.
(c) Solicit Personnel. Solicit or influence or attempt to influence
any person employed by the Company to terminate or otherwise cease his
employment with the Company or become an employee of any competitor of the
Company. This Section 9(c) is to be read in conjunction with Section 6 of the
Confidential Information and Invention Assignment Agreement executed by
Employee.
10. Limitation on Stock Option Acceleration Benefits.
The Company shall use its best efforts to obtain approval of the terms of
this Agreement from at least seventy-five percent (75%) of the Company's
stockholders prior to the Company's initial public offering. If the Company is
unable to obtain such stockholder approval, or if notwithstanding such
stockholder approval any stock option acceleration benefits provided to Employee
under this Agreement (i) constitute "parachute payments" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) are subject to the excise tax imposed by Section 4999 of the Code ("Excise
Tax"), then the Company shall reimburse Employee for the full amount of the
Excise Tax imposed upon Employee as a direct result of such parachute payments
(which shall include a "gross up" for income taxes on the amounts reimbursed by
the Company such that Employee shall have no liability as a result of the
imposition of any Excise Tax).
11. Conflicts. Employee represents that his performance of all the terms
of this Agreement will not breach any other agreement to which Employee is a
party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he is entering into or has
entered into an employment relationship with the Company of his or her own free
will and that he has not been solicited as an employee in any way by the
Company.
12. Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to
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the benefit of, and be enforceable by, Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
13. Miscellaneous Provisions.
(a) No Duty to Mitigate. Employee shall not be required to mitigate
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
(b) Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the parties.
(c) Sole Agreement. This Agreement, including any Exhibits hereto,
constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(d) Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Washington, without giving effect to the principles of conflict of laws.
(f) Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in
connection with this Agreement will be finally settled by binding arbitration in
Seattle, Washington in accordance with the rules of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply Washington law, without reference to rules of conflicts
of law or rules of statutory arbitration, to the resolution of any dispute.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for
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preliminary or interim equitable relief, or to compel arbitration in accordance
with this paragraph, without breach of this arbitration provision. This Section
13(h) shall not apply to the Confidentiality Agreement.
(i) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
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The parties have executed this Agreement the date first written above.
DATA CRITICAL CORPORATION
By: /s/ Jeffrey S. Brown
--------------------
Title: President and Chief Executive Officer
Address: 2733 152nd Avenue, N.E.
Redmond, Washington 98052
Fax: (425) 885-3500
MICHAEL E. SINGER
Signature: /s/ Michael E. Singer
---------------------
Address: 3048 Jackson Street
San Francisco, California 94115
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EXHIBIT A
PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT
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Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Seattle, Washington
August 5, 1999
