<PAGE>
As filed with the Securities and Exchange Commission on May 7, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
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>
2733 152nd Ave., N.E., Redmond, Washington 98052
(425) 885-3500
(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
2733 152nd Ave., N.E., Redmond, Washington 98052
(425) 885-3500
(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>
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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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------
<CAPTION>
Title Of Each Class Of
Securities Proposed Maximum Aggregate
To Be Registered Offering Price(1) Amount Of Registration Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Common stock, par value
$0.001.................. $44,850,000 $12,468.30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE +
+CHANGED. THE UNDERWRITERS MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE +
+REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION +
+BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, +
+AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE +
+THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
SHARES
[LOGO OF DATA CRITICAL]
COMMON STOCK
------------
Data Critical Corporation is offering shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have our common stock quoted on the Nasdaq
National Market under the symbol "DCCA." We estimate that the initial public
offering price will be between $ and $ per share.
------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price $ $
Discounts and Commissions to Underwriters $ $
Proceeds to Data Critical $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------
NATIONSBANC MONTGOMERY SECURITIES LLC
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
WARBURG DILLON READ LLC
The date of this prospectus is , 1999
<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>
[Inside front gatefold of prospectus]
Page titled "Communications Solutions for Healthcare." Centered immediately
beneath the title are three bullet points for "StatView," "MobileView" and
"AlarmView." The word "AlarmView" is marked with an asterisk to indicate a
legend in the lower left hand side of the page that reads "subject to FDA
approval."
Immediately below the three bullet point headings are three horizontal rows. The
top row is labeled "ICU/CCU/OBSTETRICS/TRAUMA/ER" and contains six icons.
Starting from the left, the first icon is labeled "Bedside Monitors," which
shows four monitors linked in a square formation. That icon is connected to a
second icon to its right labeled "Patient Monitoring Network," which pictures
one large monitor. That icon is then connected to a third icon to its right that
is a drawing of a server labeled "WT Server," that is in turn connected to the
fourth icon labeled "Wireless Carrier." The "Wireless Carrier" icon depicts a
communications tower that is shown to transmit signals to an icon of a
MobileView receiving unit labeled "MobileView" on the far right side of the
page.
The "Wireless Carrier" icon is also connected to an icon slightly below and to
the right labeled "Internet" that is in turn linked to an icon of a personal
computer immediately below labeled "DataView PC Browser."
The second row is labeled "TELEMETRY/MEDICAL-SURGICAL/INTERMEDIATE
CARE/STEP-DOWN" and contains five icons. Starting from the left, there are two
icons, one showing three telemetry units labeled "Portable Monitors" and one
immediately below this showing two monitors labeled "Bedside Monitors." These
icons are both linked to a third icon of a monitor to the right labeled "Patient
Monitoring Network," which is linked to a fourth icon of a server to the right
labeled "WT Server." The "WT Server" icon is then connected to the last icon of
a transmitter to the right labeled "Transmitter" which is depicted as
transmitting signals to a StatView receiving unit labeled "StatView."
The third row is labeled "GENERAL FLOORS FOR PATIENT CARE" and contains a group
of four icons linked to two other icons. The group of four icons contains icons
labeled "IV Pump," "Pulse Oximeter," "Ventilator," and "Multi Parameter
Monitor," each linked to a separate icon of an AlarmView receiver labeled
"AlarmView." Each of the four AlarmView receiver icons is depicted as
transmitting a signal to both an AlarmView receiver labeled "AlarmView Receiver"
and a personal computer labeled "AlarmView Central."
<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
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<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................................................................. 29
Management............................................................... 43
Certain Transactions..................................................... 51
Principal Stockholders................................................... 52
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 56
Underwriting............................................................. 58
Legal Matters............................................................ 60
Experts.................................................................. 60
Additional Information................................................... 60
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. 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
This prospectus contains forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under "Risk Factors" and elsewhere in this
prospectus.
DATA CRITICAL CORPORATION
We design, manufacture, market and support open personal information
communications systems that provide individuals with mobile interactive access
to highly complex and life-critical data. Our market focus is the healthcare
industry, including hospital, clinical, extended care and home care markets.
Our 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.
Our systems interface with medical equipment manufactured by the following
companies with which we have entered into strategic alliances 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 alliance partners. Our systems are currently being used in more than
80 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
Our systems are designed to address the needs of caregivers, including
physicians and nurses, who are highly dependent on access to life-critical data
from remote locations. Our core systems, StatView and MobileView, are
architected using an open system methodology to aggregate data on a central
server prior to transmission. Below is a brief description of our systems:
. StatView is a wireless system designed for nurses that simultaneously
sends an alarm and patient data, such as vital signs and
electrocardiogram (ECG) waveforms, to the StatView receiving unit when an
individual patient bedside monitor measures certain critical thresholds.
The StatView system is based on a local area wireless network and serves
the needs of mobile individuals within a specified location. The data
transmitted includes patient name, bed number, heart rate and a six to
ten second ECG waveform.
4
<PAGE>
. MobileView transmits data similar to that collected by StatView from
individual patient bedside and telemetry monitors to physicians or other
caregivers at remote locations. The MobileView system uses digital
wireless technology on a wide area wireless network to provide caregivers
with immediate remote access to critical patient information, including
multiple ECGs, vital signs parameters and associated waveforms, and nurse
notes. Caregivers can also review data transmitted by MobileView systems
through a website by using our DataView Internet browser access solution.
. AlarmView is designed to deliver near real-time alarms from stand-alone
medical equipment to local wireless receivers. The AlarmView device
attaches to the back of non-networked patient monitors, infusion pumps
and other medical equipment and transmits alarms and critical patient
data to wireless receivers. This information can be archived on a central
server provided by us as part of the system. AlarmView is designed to
provide healthcare facilities and patients at home with the ability to
apply immediate alarm capabilities to at-risk patient situations, thereby
increasing efficiency and flexibility in providing alarm notification at
a relatively low-cost per unit. We intend to submit our AlarmView system
for approval by the U.S. Food and Drug Administration in the third
quarter of 1999, and expect to begin commercial selling of AlarmView
systems in the fourth quarter of 1999.
. We have completed development of the initial release of our Internet ECG
system, which is designed for consumers to view 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. The Internet ECG system is not yet
commercially available.
We believe that our systems reduce the overall costs of a healthcare
organization because they allow 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 increase the work
efficiency of healthcare professionals by providing immediate remote access to
critical care information, thereby allowing these professionals to respond more
rapidly and effectively to significant changes in patients' conditions. Our
systems are designed to open standards, use standard components and interface
with equipment manufactured by numerous medical device manufacturers, including
equipment currently deployed in hospitals. 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 personal information
communications systems to industries in which immediate access to critical
information is of high importance. Our strategy to accomplish this objective
includes:
. continuing to pursue strategic alliances
. increasing market penetration and generating follow-on sales
opportunities
. expanding internationally
. expanding the use of the Internet to link home health users
. 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 2733 152nd Avenue, NE, Redmond, WA 98052. Our telephone number
is (425) 885-3500 and our fax number is (425) 885-3377. Our website is located
at www.datacrit.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 and capital expenditures.
See "Use of Proceeds."
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. See "Capitalization" and Notes 6, 7 and 11 to the Financial
Statements.
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>
Quarter Ended
Year Ended December 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>
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. 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.
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 discussed below. We
undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
Historically, the healthcare industry has been slow to adopt advanced
communications solutions; therefore, the healthcare industry may not adopt our
solutions as quickly as anticipated, or at all.
We are currently focusing on sales to the healthcare industry. Thus, to be
successful, we must attract a significant number of customers in the hospital,
clinical, extended care and home care markets. We believe that the complex
nature of life-critical data transmission has hindered the development and
acceptance of communications solutions by the healthcare industry. Conversion
from traditional methods of communication may not occur as rapidly as we
expect. Healthcare industry participants may not accept the transmission of
critical data through networked medical monitoring equipment as readily as we
anticipate. Even if such conversion or acceptance does occur, healthcare
industry participants may use alternative products and services offered by
others.
We believe that we must gain significant market share 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 using our systems would adversely affect our business,
financial condition and results of operations.
Our success is highly dependent on sales, marketing and development alliances
with a small number of strategic alliance partners, and our inability to
maintain our current alliances or develop additional alliances would have a
negative impact on our business, financial condition and results of operations.
To be successful, we must establish and maintain strategic alliances with
leaders in a number of healthcare industry segments, including manufacturers
and distributors of patient-monitoring and other medical equipment. Such
alliances are critical to our success because they allow us to:
. increase our revenue
. extend the reach of our systems
. obtain specialized healthcare expertise
. develop and deploy new systems
. further enhance the Data Critical brand
Entering into strategic alliances is complicated because some of our current
and future partners may decide to compete with us. In addition, it may be
difficult to establish alliances with key participants in the healthcare
industry if we have already established alliances with their competitors.
Consequently, it is important
7
<PAGE>
that we be independent of any particular customer or partner. Moreover, some
potential partners may resist working with us until our systems have been
successfully introduced and have achieved significant market penetration.
Once we have established strategic alliances, we will depend on our partners'
ability 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.
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 be materially adversely affected.
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.
Our expenses for marketing, development and operations will increase
substantially, and our revenue may not increase as rapidly. As a result, our
business, financial condition and results of operations may be negatively
impacted.
We anticipate that our expenses will increase substantially in the
foreseeable future 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 we implement our system development and distribution
strategies, our business, financial condition and results of operations would
be materially adversely affected. 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 have a history of losses, expect future losses and 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 quarterly operating results depend significantly on the timing of
installations and sales mix by distribution channel; any fluctuation in demand
for our systems will cause a fluctuation in that quarter's operating results.
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
8
<PAGE>
substantially reduce revenue in that quarter. This would materially adversely
affect our operating results and could 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 strategic
alliance 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.
We have relied, and expect to continue to rely, on sales of our StatView system
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 the foreseeable
future. Any factors adversely affecting the pricing of, demand for or market
acceptance of our StatView system, such as competition or technological change,
could materially adversely affect our business, financial condition and results
of operations.
Due to rapid changes in the healthcare and communications industries, we may be
unable to maintain our technological leadership.
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 transmission of data in the healthcare
industry is a relatively new and evolving market. The pace of change in
information-dependent markets 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. 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 business is growing rapidly, and the development of 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 are moving our Redmond, Washington headquarters and
assembly plant into new facilities in Bothell, Washington in June 1999. 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 comprises 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 our failure to properly
manage our growth could adversely affect our business, financial condition and
results of operations.
Our end users are highly dependent on the timely and secure transmission of
critical medical data; any delays in transmission or security breaches could
have an adverse impact on our business, financial condition and results of
operations.
Our customer satisfaction and our business could be harmed if we or our
customers experience any system delays, failures or loss of data. We depend on
the efficient operation of wireless networks and the Internet for
9
<PAGE>
communication, and a major catastrophic event or other event beyond our control
could have a material adverse effect on our business, financial condition and
results of operations. A major security breach in the transmission of data on
our systems could damage our reputation or 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.
The FCC and the FDA regulate our systems, and any delays or difficulties in
obtaining required approvals or any unanticipated changes in these agencies'
regulations could adversely affect our business, financial condition and
results of operations.
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 U.S. Food and Drug Administration (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 the third quarter of 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.
Furthermore, we may expand sales of our systems to additional 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.
Lengthy sales and implementation cycles for our systems could adversely affect
our revenue growth.
A key element of our business strategy is to market our systems directly to
large healthcare organizations. We are unable to control many of the factors
that will influence our healthcare customers' buying decisions, including
capital budget cycles, installation dates and the adoption of our technology.
We expect that the typical sales and implementation process may be up to six
months or longer and will involve a significant technical evaluation and
commitment of capital and other resources by our customers.
10
<PAGE>
Our Internet ECG system and DataView Internet browser access solution are not
proven and may not be accepted by the home healthcare industry.
Our Internet ECG system and DataView Internet browser access solution are
still in the development stage, have not been commercially released and may
never be adequately developed and marketed by us. Developing and marketing our
Internet solutions to the home 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, home healthcare participants 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 or DataView
Internet browser access solution, and we cannot assure you that the home
healthcare industry will accept these systems. If we fail to develop or market
our Internet solutions, or if the home healthcare industry fails to accept our
Internet solutions, the future growth of our business would likely be adversely
affected.
The market for wireless data communications is highly competitive, and we
cannot assure you that we can effectively compete.
The market for selling wireless data communications systems is highly
competitive. Although we are not aware of any direct competitors that are
developing or selling products enabling wireless data transmission of medical
data, we must compete with traditional methods of patient monitoring, such as
direct patient oversight, monitoring through wired systems and voice
communications. 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
We expect that direct competitors will be drawn into the market if we are
successful in establishing a need for our systems. In addition, there is the
possibility that one or more of our strategic alliance partners or other
medical equipment manufacturers may decide to develop products that directly
compete with our systems. We cannot assure you that we will be able to compete
successfully against current or future competitors, or that competitive
pressures will not adversely affect our business, financial condition and
results of operations. Our potential competitors may develop products
comparable or superior to our systems or adapt more quickly than us to new
technologies, evolving industry standards, new product introductions or
changing customer requirements. Increased competition is likely to result in
price reductions, reduced gross margins and loss of market share, any one of
which could have a significant adverse effect on our business, financial
condition and results of operations. 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. Our
potential competitors may establish cooperative relationships among themselves
or with third parties to increase the ability of their products to address
customer needs and compete with our systems. We also expect that competition
will increase as a result of medical equipment, wireless and software industry
consolidation. As a result, we may not be able to effectively compete for
customers.
We cannot guarantee that our systems will operate without defects, and any
defect or problem with the accurate, timely or secure transmission of data may
negatively affect our business, financial condition and results of operations.
Although we test our systems, these systems may contain defects or result in
failures. In addition, our systems may experience problems in security,
availability, scalability or other critical features. These defects or problems
could result in the loss of or delay in generating revenue, loss of market
share, failure to achieve market acceptance, diversion of development
resources, injury to our reputation or increased insurance
11
<PAGE>
costs. Many of our strategic alliances involve providing critical information
technology services to our customers' businesses. If we fail to meet our end
users' expectations, our reputation could suffer and we could be liable for
damages. In addition, 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 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 be negatively
impacted.
Competition for personnel in the healthcare, wireless communications and
technology industries is intense. Attracting and retaining high-quality
employees will be an important factor in our continued success, and we cannot
be sure that we will be able to succeed in this area.
Competition for qualified personnel in research and development, sales and
marketing and support is intense, and we might not be able to hire and retain
sufficient numbers of such personnel. If we fail to hire and retain sufficient
numbers of sales, marketing and support personnel, our business, financial
condition and results of operations would be adversely affected. 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. 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. 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.
Our executive officers and other key personnel are critical to our business,
and these officers and other key personnel may not remain with us in the
future.
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, and Bradley Harlow, Vice
President and General Manager as well as other key employees. We face intense
competition for these people. We maintain key person life insurance on the life
of Jeffrey Brown in the amount of $1.0 million. We do not have employment
contracts with any of our employees.
We rely on third parties to manufacture key components of our systems, and any
extended interruption of supply could have an adverse effect on our business,
financial condition and results of operations.
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 effecting our business, financial condition and
results of operations.
12
<PAGE>
Our proprietary technology and access to proprietary information of third
parties are important to the success of our business. Our failure to protect
this technology and maintain access to the proprietary information of third
parties could significantly impair 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.
Changes in the healthcare industry could adversely affect our business.
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.
We face risks related to the year 2000.
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 on a stand-alone basis for their intended use 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 industry members 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
13
<PAGE>
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 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.
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. See "Underwriting." 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.
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
14
<PAGE>
. stockholders cannot call special meetings
. 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>
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. There are
currently no active negotiations, understandings, commitments or agreements
with respect to any acquisition. 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: (1)
on an actual basis; (2) 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; and (3) 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 net proceeds
therefrom. This table should be read in conjunction with Data Critical's
Financial Statements and the related Notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
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. See
Notes 6 and 7 to the Financial Statements.
. 60,786 additional shares of common stock available for issuance under our
1994 Stock Option Plans 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. See "Management--Stock Option Plans."
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: (1) the number of shares of common stock purchased from us; (2) the
total consideration paid to us and; (3) 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
Plans
. 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>
Year Ended Quarter Ended
September 30, Year Ended December 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>
September 30, December 31, 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
The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
discussed in the forward-looking statements as a result of various factors
including those set forth under "Risk Factors" and elsewhere in this
prospectus. You should read the following discussion with the Financial
Statements and their related Notes appearing elsewhere in this prospectus.
Overview
Data Critical commenced operations in April 1993 to develop communications
solutions for individuals requiring notification of 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 over the near term. 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 fourth quarter of 1999, 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, channel
partners and OEM arrangements. Our direct sales force regularly works together
with the sales teams of our strategic alliance 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,
20
<PAGE>
a subsidiary of Mallinckrodt Inc. Due to revenue variability between direct and
OEM sales channels, future variations in mix of sales between such channels
could have a significant impact on revenue.
Although a number of the components used in our systems are readily
available, certain of such 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>
Quarter
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 strategic alliance
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 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.
21
<PAGE>
The improvement in the gross margin percentage resulted primarily from cost
reductions on certain purchased components in the first quarter of 1999 and
from higher costs per system in the first quarter of 1998 due to certain
inefficiencies related to production start-up costs.
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.
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.
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
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.
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.
22
<PAGE>
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
strategic alliance 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.
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
high-margin product development contracts and software products.
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.
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.
23
<PAGE>
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.
The results of operations for any quarter are not necessarily indicative of
future quarterly results of operations. See "Risk Factors."
<TABLE>
<CAPTION>
Quarter 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 2.2 0.8
------- ------- ------- ------- --------
Net loss................ (602.6)% (446.1)% (75.1)% (67.8)% (48.1)%
======= ======= ======= ======= ========
</TABLE>
24
<PAGE>
A significant portion of our revenue has been, and will continue to be,
derived from substantial orders placed by large organizations after extended
evaluation. The timing of such orders and their installations could cause
material fluctuations in our operating results, particularly on a quarterly
basis. In addition, our quarterly operating results could vary significantly in
the future depending upon other factors, including:
. the mix of direct and indirect sales
. changes in operating expenses
. capital spending patterns of our customers
. demand for our systems
. the number, timing and significance of new systems and system enhancement
announcements by us and our competitors
. our ability to develop, introduce and market new and enhanced versions of
our systems on a timely basis
. increased competition
. personnel changes
. general economic factors
Due to the foregoing and other factors, quarterly revenue and operating
results have been and will continue to be difficult to forecast.
Our expense levels are based, in part, on our expectations of future revenue
levels. If revenue levels are below expectations, operating results are likely
to be materially adversely affected. In particular, since only a small portion
of our expenses vary with revenue in the short term, net income may be
disproportionately affected by a reduction in revenue. We currently intend to
increase our sales and marketing and customer support operations as well as
expand distribution channels. To the extent such expenses are not subsequently
followed by increased revenue, our business, financial condition and results of
operations could be materially and adversely affected.
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 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 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
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<PAGE>
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. 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 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 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
26
<PAGE>
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 implementing a new integrated management information system
primarily in order to manage our growth. We will test this new system for Year
2000 compliance before the end 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 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.
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
27
<PAGE>
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.
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.
28
<PAGE>
BUSINESS
We design, manufacture, market and support open personal information
communications systems that provide individuals with mobile interactive access
to highly complex and life-critical data. Our market focus is the healthcare
industry, including hospital, clinical, extended care and home care markets.
Our 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. 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
Data Critical's systems interface with medical equipment manufactured by
Hewlett-Packard Company, GE Marquette Medical Systems, Inc., Siemens Medical
Systems, Inc., Nellcor Puritan Bennett, a subsidiary of Mallinckrodt Inc., and
Protocol Systems, Inc. We have also entered into strategic alliances with these
parties to assist us in the facilitation of system development and in the
marketing and distribution of our systems. Our systems currently are being used
in more than 80 hospitals in 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 New
MO 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 that 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.
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.
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Wireless technology can be divided into two segments: circuit-switched, such
as traditional cellular telephones, and packet-switched, such as digital
wireless telephones. Circuit-switched communications involve a channel being
established and utilized continuously during communication. Due to the demands
of continuous transmission and reception, wireless circuit-switched
technologies are characterized by higher costs, larger reception devices and
shorter battery lives than wireless packet-switched technologies. Packet-
switched, or digital, communications involve breaking data down into segments
or packets, which are addressed to a specific recipient and travel
independently using different channels, and reassembling the data at the
receiving device back into the original transmission. A digital system
increases available bandwidth for wireless transmission of complex data,
including images and extended text. In addition, Internet access and fax and
paging services are among those capabilities enabled by digital wireless
technology. Frost & Sullivan expects revenue from wireless data services to
triple to more than $9 billion in 2000 from an estimated $3 billion in 1997.
Wireless LAN technology, which transmits data in a building or campus
environment, has evolved through successive generations of higher bandwidth
products to enable wireless data communications that approach the speed and
bandwidth of existing wired LANs. Historically, wireless LANs have been too
cost prohibitive and have lacked sufficient speed and throughput when
transmitting data and graphic intensive applications. Further, the lack of
industry standards prevented interoperability, and users were forced to adopt
proprietary solutions.
The benefits of traditional wireless systems include the following:
. mobility
. increased user efficiency
. flexibility of use
However, traditional wireless systems also have the following limitations:
. transmission latency
. lack of security
. unpredictable connection quality
. line of sight transmission restrictions
. lack of wireless data transmission standards
. limited geographic coverage
Dynamics of the 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 percent of the U.S. gross
domestic product. 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. As a result, the government and other
purchasers of healthcare have increasingly placed pressure on the healthcare
industry to improve the efficiency of healthcare while maintaining the quality
of care.
Underdeveloped Communications Technology in Hospitals
Underdeveloped information systems and communications procedures within
hospitals, specifically relating to critical care patient information,
contribute to the inefficiencies and high costs in the healthcare industry.
Caregivers must attend to several patients in various locations while
simultaneously accessing critical, time-sensitive 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 & Sullivan, the
worldwide hospital monitoring equipment market, which includes cardiac,
respiratory, blood gas, and neurological monitoring equipment, is estimated to
be
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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 to create integrated critical care patient communications networks.
While most hospitals operate in a decentralized nursing 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.
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 to lower cost settings. It is common for
hospitals to move patients, including those requiring more significant care,
from higher cost, higher care hospital areas such as intensive care units to
other less costly areas of the hospital. As a consequence, hospitals spend
significant capital to upgrade their monitoring equipment to accommodate this
patient migration. In addition, hospital discharge planners, physicians and
both managed care and insurance company case managers are referring an
increasing number of post-acute patients to long-term care settings, including
skilled nursing facilities. As a result, an increasing proportion of
intermediate, medical/surgical and subacute care is being delivered outside of
the acute care hospital setting.
Long-term care encompasses a range of related specialty healthcare services
provided to patients with medically complex needs who can be cared for outside
of the hospital environment but have lost some capacity for self-care because
of a chronic illness or condition. These patients can be cared for in nursing
homes, assisted living facilities, hospices or at home. According to the HCFA,
approximately $127 billion is projected to be spent on long-term care, provided
either in nursing facilities or at home, in the U.S. during 1999. In addition,
the HCFA estimates that as of December 1997, there were approximately 17,000
certified nursing facilities in the U.S. with 1.8 million beds providing care
to 1.6 million people. In many cases these patients require vital signs
monitoring comparable to what they would receive within a hospital. These
facilities, which are as cost- and resource-constrained as hospitals, are
confronted with the same need to monitor patients in a cost-effective and
timely manner.
Growth of Home Health and Personal Care
The U.S. Census Bureau estimates that approximately 13 percent of the U.S.
population is currently over the age of 65. Many members of this aging
population prefer the convenience of remaining at home, yet still have
significant real-time healthcare monitoring needs. According to the American
Heart Association, over 58 million Americans suffer from cardiovascular
disease, including 12 million who have coronary heart disease. Currently, only
a small portion of such high acuity patients can be monitored at home through
transtelephonic monitoring equipment.
The Internet as a Critical Healthcare Information Tool
The Internet has become a critical tool for obtaining and sharing information
and conducting business electronically given the recent and significant
proliferation of web users and websites. Increasingly, web users are accessing
healthcare-related information through the Internet. In 1998, 22 million adults
sought health and medical information on the Internet, and that number is
expected to reach 33 million by 2000. According to Jupiter Communications,
expenditures for online health and medical advertising are expected to grow to
approximately $356 million by 2003. In addition, there has been a rapid
proliferation of healthcare websites, including AOL Healthcare Channel, Thrive,
Mayo Health Oasis, OnHealth, America's Health Network and WebMD.
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This growth in Internet usage relating to healthcare has been fueled by a
number of factors, including:
. availability of online health resources
. increased consumer focus on individual healthcare
. more readily available Internet access
. improvements in network systems and infrastructure, including increased
bandwidth
. better encryption and improved security
Healthcare providers are increasingly seeking solutions to reduce costs while
maintaining or improving the quality of service provided to their patients.
Hospitals and other healthcare facilities have historically been slow to adopt
innovative communications technologies, but recent advances in wireless
technology related to the transmission of data and the size of devices for such
transmission offer greater applicability to caregivers.
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 life-critical data over existing wireless networks and through
the Internet. Our systems improve communications and decision-making both in
the hospital and in remote locations such as extended care facilities and the
home, thereby improving the delivery of patient care and reducing healthcare
costs.
Our solution provides the following key benefits:
Increased Work Efficiency. Our systems extend a hospital's existing patient
monitoring capability by providing a time-efficient means to monitor medical
equipment. In addition, our systems allow physicians to monitor critically-ill
patients and communicate from remote locations on a near real-time 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 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 hospital personnel.
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.
Improved Quality of Care. Our systems allow caregivers to attend to other
tasks while still reacting quickly to changes in patients' conditions. These
systems are designed to provide direct information in near real-time to enable
more accurate diagnosis, treatment and overall patient management. This rapid
response and direct access to patient information enabled by our systems helps
to provide improved care, even if caregiver-to-patient ratios decline.
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 interoperability of our systems
allows us to partner with various manufacturers of similar medical equipment.
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Security and Confidentiality. Certain of our systems include strict
authentication methods, data encryption technology and compression techniques.
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 alliance partners' patient monitoring
systems.
Our Strategy
Our objective is to be the leader in providing personal information
communications systems to industries that depend upon the interactive
transmission of complex and time-sensitive data to mobile individuals. The
principal elements of our strategy include the following:
Pursue Strategic Alliances. We are continuing to pursue strategic alliances
that will augment or expand our distribution channels and system offerings. In
the immediate term, we are pursuing partners for our AlarmView system. In
addition to our 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 to promote the use of our Internet ECG system and
DataView Internet browser access solution.
Increase Market Penetration and Generate Follow-On Sales Opportunities. The
target market for our systems includes approximately 5,000 hospitals and 50,000
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,
medical/surgical floors and obstetrics. Since commencing distribution of our
systems in late 1997, we have installed our systems in over 80 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 Home Health Users. Through our Internet
ECG system and the DataView Internet browser access solution, we expect to
expand our ability to rapidly provide complex data to home 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
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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.
Our Systems
We design our systems to address the needs of the healthcare industry.
Caregivers are highly dependent on access to complex and life-critical data and
would 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>
Systems Features and Benefits
- --------------------------------------------------------------------------------
<S> <C>
StatView . Hand-held unit that alerts caregivers within ten seconds when alarms
from patient monitors or other medical equipment are triggered
. Provides reminder pages and periodic updates on patients being
monitored
. Enables immediate responses to patient alarms
. Allows caregivers to monitor waveforms and vital signs while
performing tasks elsewhere in the hospital
- -----------------------------------------------------------------------------------------
MobileView . Uses digital wireless technology on a wide area network to provide
critical patient information to caregivers in remote locations
. 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
- -----------------------------------------------------------------------------------------
AlarmView . Connects stand-alone medical equipment to a wireless monitoring system
. Delivers and records alarms and other information collected by stand-
alone medical equipment
. Designed to allow rapid response to non-networked medical equipment
. Designed to increase efficiency and flexibility at a low cost per unit
</TABLE>
The Wireless Telemedicine (WT) Server
Our StatView and MobileView systems depend on our WT Server, which is
designed to collect, compress and encrypt critical data and waveforms 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
StatView
The StatView system is a local wireless system that alerts caregivers
(nurses) when alarms from monitors or systems are triggered. The StatView
system utilizes our WT Server to connect to a monitoring network, collect alarm
data from individual monitors and transmit the vital signs and waveforms
through a dedicated wireless transmitter network to the StatView receiver unit
held by the appropriate caregiver. Alarm events can
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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 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 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
MobileView
MobileView is a wide area wireless solution that uses digital wireless
technology to provide physicians access to critical information from a remote
location. The MobileView system also uses our WT Server and proprietary
software to collect data from individuals and store it for review and analysis
by a physician. The MobileView system is designed to allow a physician to
remotely obtain and review critical patient-care information such as ECGs,
vital signs parameters and associated waveforms, and nurse notes, thereby
reducing physician-nurse miscommunication and increasing physician efficiency
and decision-making quality. Caregivers can also review data transmitted by
MobileView through a website by using our DataView Internet browser access
solution. MobileView is designed to be easily integrated into a wide variety
of monitoring equipment and is compatible with our StatView system.
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<PAGE>
The following diagram illustrates a typical MobileView installation:
[CHART APPEARS HERE]
"MobileView System"
[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 immediately below it
labeled "Internet," that is in turn linked to an icon of a personal computer
to the far right labeled "DataView."]
The MobileView system has the following key features and benefits:
. delivers quality waveforms to remote locations
. enables faster clinical consultation and decision making
. transmits data securely
. integrates with StatView
. provides a dial-up, wireless connection to the WT Server and patient
monitoring network
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 real-time alarms and other information to
wireless receivers in less than ten seconds. As patient loads change, the
AlarmView transmitter can be 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 U.S. Food and Drug Administration in the
third quarter of 1999 and expect to begin commercial selling of AlarmView
systems in the fourth quarter of 1999.
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
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
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relay additional biofeedback, exercise training data and personal educational
information back to the consumer in near real-time. The Internet ECG system is
not yet commercially available. We intend to pursue agreements with Internet
portals for distribution of this system.
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
Direct
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 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 Protocol
agreement for an additional three year term.
Original Equipment Manufacturers
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
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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
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 life-
critical patient data. Our target customers include hospitals and physicians
primarily across the U.S., and to a lesser extent in Canada and Europe. 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 believe
that such groups would benefit from using the StatView and AlarmView systems,
as such use would assist in reducing costs and increasing productivity.
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 MobileView systems. We also target physicians who practice
outreach telemedicine.
Although we are currently selling only to hospitals, we are targeting the
long-term care facilities and home healthcare markets:
<TABLE>
<CAPTION>
Market Category System End User Market Size
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Hospitals StatView Nurses More than 5,000 hospitals
MobileView Physicians in the U.S. and 6,000
AlarmView Nurses hospitals internationally
- ----------------------------------------------------------------------------------------------
Long-Term Care
Facilities AlarmView Nurses Approximately 17,000
certified nursing facilities in
the U.S.
- ----------------------------------------------------------------------------------------------
Internet Healthcare Internet ECG Home Consumer More than 58 million
people with cardiovascular
disease in the U.S.
</TABLE>
Our systems are being used in more than 80 hospitals in 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
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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 alliance partners. We
currently have 15 sales territories in three regions supported by four
telephone direct sales account managers. In addition, our strategic alliance
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 alliance 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. 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, distributors 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 Redmond, Washington, but we expect to relocate to a new facility
in Bothell, Washington during the second quarter of 1999. Our facilities are
regulated by the U.S. Food and Drug Administration (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
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. 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 strategic alliance 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.
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 alliance
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, extended care facilities, 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, have one
pending patent application and license two patents and certain trade secrets
and other intellectual property rights from third parties. Our patents cover
specific paging technology related to waveform transmission. Our strategic
alliance 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.
40
<PAGE>
Government Regulation
Federal Communications Commission (FCC)
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 (FDA)
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 the third quarter of 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.
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.
41
<PAGE>
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 are located in Redmond, Washington where we
lease approximately 6,400 square feet under a lease that expires in June 1999.
We have recently agreed to lease approximately 17,000 square feet in new
facilities in Bothell, Washington beginning in June 1999. We also maintain an
office 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.
42
<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of Data Critical as of March 31, 1999
are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
David E. Albert, M.D............. 44 Chief Scientist and Chairman of the Board
Jeffrey S. Brown................. 39 President, Chief Executive Officer and Director
Bradley R. Harlow................ 41 Vice President and General Manager
Craig S. Kairis.................. 40 Vice President of Business Development
Robert W. Benson................. 43 Chief Financial 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 has served as Vice President and General Manager of Data
Critical since August 1997. Prior to joining Data Critical, he served as Vice
President of Worldwide Sales and Marketing at Instromedix, Inc., a producer of
transtelephonic ambulatory products, 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 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 has served as Vice President of Business Development of Data
Critical since February 1995. 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.
43
<PAGE>
Robert W. Benson joined Data Critical as Chief Financial Officer in July
1997. 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 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
44
<PAGE>
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. See "Stock
Plans."
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 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.
45
<PAGE>
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. ............................ $114,971 $25,000 --
Chief Scientist and Chairman of the Board
Jeffrey S. Brown.................................. 177,800 40,000 75,000
President and Chief Executive Officer
Bradley R. Harlow................................. 132,712 12,731 75,000
Vice President and General Manager
Craig S. Kairis................................... 85,240 25,000 32,500
Vice President of Business Development
Robert W. Benson.................................. 115,754 23,000 --
Chief Financial 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.
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>
46
<PAGE>
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.
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.
47
<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 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.
48
<PAGE>
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 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
49
<PAGE>
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
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.
50
<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, serves as our representative 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.
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 and 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 are each affiliated with
Ronald L. Kase, one of our directors. 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.
51
<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: (1) each person known by us
to own beneficially more than five percent of our common stock; (2) each of our
directors and named executive officers; and (3) 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,
2733 152nd Avenue, N.E., Redmond, WA 98052.
<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>
52
<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 New Enterprise VII, Limited Partnership, NEA Presidents
Fund, L.P. and NEA Ventures 1998, L.P., 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 subject to options
exercisable and vested within 60 days of March 31, 1999 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 subject to options exercisable and vested within 60 days of March
31, 1999 held by Mr. Middlemas. First Analysis Corporation, another
general partner of Apex Management Partnership, is also affiliated with
The Productivity Fund II, L.P. and Environmental Private Equity Fund II,
L.P., each a stockholder of Data Critical. This number does not reflect
194,220 shares and immediately exercisable warrants to purchase 10,795
shares held by The Productivity Fund II, L.P. or 317,787 shares and
immediately exercisable warrants to purchase 15,383 shares held by
Environmental Private Equity Fund II, L.P.
(4) Includes 451,250 shares held by Acacia Venture Partners, L.P. and 48,750
shares held by South Pointe Venture Partners, L.P. C. Ted Paff is a
general partner of both entities.
(5) Includes 237,873 shares subject to options exercisable and vested within
60 days of March 31, 1999.
(6) Includes 75,000 shares subject to options exercisable and vested within 60
days of March 31, 1999, upon the completion of this offering .
(7) Includes 15,625 shares subject to options exercisable and vested within 60
days of March 31, 1999.
(8) Includes 35,625 shares subject to options exercisable and vested within 60
days of March 31, 1999.
(9) Includes 6,250 shares subject to options exercisable and vested within 60
days of March 31, 1999.
(10) Includes 376,623 shares subject to options exercisable and vested within
60 days of March 31, 1999. 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).
53
<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 and 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. See
"Dividend Policy." 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. 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.
54
<PAGE>
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
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.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. Future
sales of substantial amounts of our common stock in the public market could
adversely affect the prevailing market price. Furthermore, since only a limited
number of shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale as described below, sales of
substantial amounts of Data Critical common stock in the public market after
the restrictions lapse could adversely affect the prevailing market price and
our ability to raise equity capital in the future.
Sales of Restricted Shares
Upon completion of this offering, we will have outstanding shares of
common stock. Of these shares, the shares sold in the offering, or
shares if the underwriters' over-allotment option is exercised in full, will be
freely tradable without restriction under the Securities Act, unless purchased
by affiliates of Data Critical as that term is defined in Rule 144 under the
Securities Act--generally, officers, directors or 10% stockholders.
The remaining shares outstanding are restricted securities within the
meaning of Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption
from registration under Rules 144 or 701 under the Securities Act, as
summarized below. Sales of the restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
Of the remaining shares of common stock outstanding, stockholders holding
shares have entered into "lock-up" agreements with the underwriters
generally providing that they will not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of Data Critical common stock or
any securities exercisable for or convertible into Data Critical common stock
owned by them for a period of 180 days after the effective date of the
registration statement filed with this offering without the prior written
consent of NationsBanc Montgomery Securities LLC. As a result of these
contractual restrictions, shares subject to lock-up agreements may not be sold
until lock-up agreements expire or are released. Taking into account the lock-
up agreements, and assuming NationsBanc Montgomery Securities LLC does not
release stockholders from these agreements, the following shares will be
eligible for sale in the public market at the following times:
. Beginning on the effective date of this prospectus, shares will be
immediately available for sale in the public market.
. Beginning 180 days after the effective date, approximately shares
will be eligible for sale pursuant to Rule 701 and approximately
additional shares will be eligible for sale pursuant to Rule 144.
. An additional shares will be eligible for sale pursuant to Rule 144
by . Shares eligible to be sold by affiliates pursuant to Rule 144
are subject to volume restrictions as described below.
In general, under Rule 144 a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of: (a) one
percent of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after the offering; or (b) the
average weekly trading volume of the common stock during the four calendar
weeks preceding the sale. Sales under Rule 144 are also subject to manner of
sale provisions and notice requirements and to the availability of current
public information about Data Critical. Under Rule 144(k), a person who is not
deemed to have been an affiliate of Data Critical at any time during the three
months preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least two years, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
56
<PAGE>
Options and Warrants
As of March 31, 1999, there were outstanding options for the purchase of
886,371 shares, of which options for the purchase of 355,855 shares were
exercisable. Of these, shares were subject to lock-up agreements. As of
March 31, 1999, there were outstanding warrants for the purchase of 371,471
shares of common stock, all of which were fully exercisable. Of these,
shares were subject to lock-up agreements. Upon expiration of the lock-up
agreements, any employee, officer, director of, or consultant to Data Critical
who purchased shares under a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the holding period, public information, volume limitation or notice
provisions of Rule 144. In addition, we intend to file registration statements
under the Securities Act as promptly as possible after the effective date to
register shares to be issued under our employee benefit plans. As a result, any
options exercised under any of our stock option plans or other benefit plan
after the effectiveness of such registration statement will also be freely
tradable in the public market, except that shares held by affiliates will still
be subject to the volume limitation, manner of sale, notice and public
information requirements of Rule 144 unless the shares are otherwise eligible
for resale under Rule 701. See "Risk Factors--Future sales by our existing
stockholders could adversely affect the market price of our common stock,"
"Management--Stock Plans" and "Description of Capital Stock--Registration
Rights."
57
<PAGE>
UNDERWRITING
Data Critical is offering the shares of common stock described in this
prospectus through a number of underwriters. NationsBanc Montgomery Securities
LLC, Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, and
Warburg Dillon Read LLC are the representatives of the underwriters. Data
Critical has entered into an underwriting agreement with the representatives.
Subject to the terms and conditions of the underwriting agreement, Data
Critical has agreed to sell to the underwriters, and the underwriters have each
agreed to purchase the number of shares of common stock listed next to its name
in the following table:
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
NationsBanc Montgomery Securities LLC...............................
Dain Rauscher Wessels...............................................
Warburg Dillon Read LLC.............................................
------
Total.............................................................
======
</TABLE>
The underwriters initially will offer shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
some dealers a concession of not more than $ per share. The underwriters
also may allow, and any dealers may reallow, a concession of not more than $
per share to some other dealers. If all the shares are not sold at the initial
public offering price, the underwriters may change the offering price and the
other selling terms. The common stock is offered subject to a number of
conditions, including:
.receipt and acceptance of our common stock by the underwriters
.the right to reject orders in whole or in part
Data Critical has granted an over-allotment option to the underwriters to buy
up to additional shares of common stock. These additional shares would
cover sales of shares by the underwriters which exceed the number of shares
specified in the table above. The underwriters have 30 days to exercise this
option. If the underwriters exercise this option, they will each purchase
additional shares approximately in proportion to the amounts specified in the
table above.
The following table summarizes the compensation and estimated expenses we
will pay:
<TABLE>
<CAPTION>
Per Share Without Over-allotment With Over-allotment
--------- ---------------------- -------------------
<S> <C> <C> <C>
Underwriting discounts
and commissions paid by
us...................... $ $ $
Expenses paid by us...... $ $ $
</TABLE>
Data Critical and holders of shares prior to this offering, as well as
holders of stock options and warrants to purchase shares, have entered
into lock-up agreements with the underwriters. Under those agreements, Data
Critical and those holders of stock, options and warrants may not dispose of or
hedge any Data Critical common stock or securities convertible into or
exchangeable for shares of Data Critical common stock. These restrictions will
be in effect for a period of 180 days after the date of this prospectus. At any
time and without notice, NationsBanc Montgomery Securities LLC may, in its sole
discretion, release all or some of the securities from these lock-up
agreements.
Data Critical will indemnify the underwriters against liabilities, including
liabilities under the Securities Act. If Data Critical is unable to provide
this indemnification, Data Critical will contribute to payments the
underwriters may be required to make in respect of those liabilities.
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include:
.short sales
.stabilizing transactions
.purchases to cover positions created by short sales
58
<PAGE>
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while this offering
is in progress.
The underwriters also may impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the common stock, including:
. over-allotment
. stabilization
. syndicate covering transactions
. imposition of penalty bids
As a result of these activities, the price of the common stock may be higher
than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National
Market, in the over-the-counter-market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of common stock offered by this prospectus.
Prior to this offering, there has been no public market for the common stock
of Data Critical. The initial public offering price will be negotiated between
Data Critical and the underwriters. Among the factors to be considered in such
negotiations are:
. the history of, and prospects for, Data Critical and the industry in
which it competes
. the past and present financial performance of Data Critical
. an assessment of Data Critical's management
. the present state of Data Critical's development
. the prospects for future earnings of Data Critical
. the prevailing market conditions of the applicable U.S. securities market
at the time of this offering
. market valuations of publicly traded companies that Data Critical and the
representatives believe to be comparable to Data Critical
. other factors deemed relevant
The underwriters, at our request, have reserved for sale to our employees,
customers, affiliates and strategic partners at the initial public offering
price up to five percent of the shares being offered by this prospectus. The
sale of these shares will be made by NationsBanc Montgomery Securities LLC. We
do not know if our employees, customers, affiliates, or strategic partners will
choose to purchase all or any portion of these reserved shares, but any
purchases they do make will reduce the number of shares available to the
general public.
59
<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.
60
<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>
December 31, Pro Forma
---------------- March 31, March 31,
1997 1998 1999 1999
------- ------- --------- ----------
(Note 1)
(Unaudited)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 865 $ 3,053 $ 1,840 $ 1,840
Accounts receivable, net of allowance
for doubtful accounts of $4, $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 au-
thorized; 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>
Quarter Ended
Year 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>
Quarter Ended
Year 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
expensed as incurred. Leasehold improvements are amortized over the lesser of
the term of the lease or the estimated useful life of the asset.
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.
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)
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 and
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. 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.
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 marketing and advertising the Company's products are
expensed in the period incurred.
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)
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 disclosure provisions of Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." In accordance with provisions of SFAS 123, the Company applies
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its stock
option plans.
The Company discloses the pro forma effect on net income as if it had
accounted for option grants under the "fair value" method. The fair-value-based
model values stock-based compensation using an accepted valuation model. Pro
forma compensation cost is measured at the grant date based upon the value of
the award and recognized over the service period, which is usually the vesting
period.
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 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.
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)
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 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
====== ====== ====
</TABLE>
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)
3. Property, Equipment and Software:
<TABLE>
<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 depre-
ciation................ 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 warran-
ties................... 5 374 458
Accrued payroll and ben-
efits.................. 50 218 173
------ ------ ------
$ 97 $1,610 $1,919
====== ====== ======
</TABLE>
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.
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.
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)
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 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............................... 4,904,690 $ 19,602
============ ==========
</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)
The preferred stock structure as of December 31, 1998 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Number of Liquidation
Shares Preference
--------- -----------
<S> <C> <C>
Series D mandatorily redeemable preferred stock.... 2,296,734 $9,739
Series C mandatorily redeemable preferred stock.... 1,187,809 4,477
Series B mandatorily redeemable preferred stock.... 1,232,646 5,141
Series A mandatorily redeemable preferred 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 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.
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.
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)
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.
Information relating to stock options outstanding and stock options
exercisable at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------ ------------------ ------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 272,769 $0.80 266,331 $0.80 528,873 $0.92
Granted................. 18,937 0.80 267,917 1.06 317,987 2.33
Exercised............... (2,250) 0.80 -- -- (593) 0.97
Canceled................ (23,125) 0.80 (5,375) 1.43 (9,845) 1.65
------- ----- ------- ----- ------- -----
Outstanding at end of
period................. 266,331 $0.80 528,873 $0.92 836,423 $1.45
======= ===== ======= ===== ======= =====
Exercisable at end of
period................. 154,657 $0.80 238,176 $0.80 339,624 $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.
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>
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)
8. Income Taxes:
At December 31, 1997 and 1998, the Company had net operating loss
carryforwards of approximately $7,571,000 and $12,846,000, respectively. The
Company is limited in its ability to use 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 $1,971,000, respectively. These carryforwards,
which may provide future tax benefits, expire from 2008 to 2018.
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 $ 4,368
Other................................................... 107 284
------- -------
Deferred tax assets...................................... 2,681 4,652
Valuation allowance...................................... (2,681) (4,652)
------- -------
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 term of the lease. The
Company's rent expense during 1996, 1997 and 1998 was $76,000, $124,000 and
$243,000, respectively.
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)
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. 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 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-16
<PAGE>
[Inside back cover of prospectus]
Page titled "Internet ECG" with the words "Under Development" immediately
beneath the title. The bottom right 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 left labeled "Home" that shows a home user holding
the Internet ECG transmitter to his 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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO OF DATA CRITICAL]
COMMON STOCK
----------------
Prospectus
, 1999
----------------
NationsBanc Montgomery Securities LLC
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
Warburg Dillon Read LLC
Until , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters 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 10.11 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.
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 2,843 shares of
common stock to employees at prices ranging from $0.80 to $1.60 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
II-1
<PAGE>
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* 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.7* Form of Loan Modification Agreement between Data Critical and Silicon
Valley Bank.
10.8* Form of Promissory Note between Data Critical and Silicon Valley Bank.
10.9 Facility Lease dated December 21, 1998 between S/I Northcreek II,
L.L.C. and Data Critical.
10.10 Amendment dated March 30, 1999 to the Facility Lease dated December 21,
1998 between S/I Northcreek II, L.L.C. and Data Critical.
10.11 Form of Indemnification Agreement between Data Critical and each of its
Officers and Directors.
10.12 1999 Stock Option Plan (adopted May 7, 1999).
10.13 1999 Directors' Stock Option Plan (adopted May 7, 1999).
10.14 1999 Employee Stock Purchase Plan (adopted May 7, 1999).
10.15 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>
- --------
* To be supplied 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Redmond,
State of Washington on May 7, 1999.
DATA CRITICAL CORPORATION
/s/ Jeffrey S. Brown
By: _________________________________
Jeffrey S. Brown
President and Chief Executive
Officer
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.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey S. Brown President, Chief Executive May 7, 1999
____________________________________ Officer and Director
Jeffrey S. Brown
/s/ Robert W. Benson Chief Financial Officer May 7, 1999
____________________________________
Robert W. Benson
/s/ David E. Albert Chief Scientist and Chairman May 7, 1999
____________________________________ of the Board
David E. Albert, M.D.
/s/ George M. Middlemas Director May 7, 1999
____________________________________
George M. Middlemas
/s/ Richard L. Earnest Director May 7, 1999
____________________________________
Richard L. Earnest
/s/ Ronald H. Kase Director May 7, 1999
____________________________________
Ronald H. Kase
/s/ David B. Swedlow Director May 7, 1999
____________________________________
David B. Swedlow
</TABLE>
II-4
<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* 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* Form of Loan Modification Agreement between Data Critical and Silicon
Valley Bank.
10.8* Form of Promissory Note between Data Critical and Silicon Valley Bank.
10.9 Facility Lease dated December 21, 1998 between S/I Northcreek II,
L.L.C. and Data Critical.
10.10 Amendment dated March 30, 1999 to the Facility Lease dated December 21,
1998 between S/I Northcreek II, L.L.C. and Data Critical.
10.11 Form of Indemnification Agreement between Data Critical and each of its
Officers and Directors.
10.12 1999 Stock Option Plan (adopted May 7, 1999).
10.13 1999 Directors' Stock Option Plan (adopted May 7, 1999).
10.14 1999 Employee Stock Purchase Plan (adopted May 7, 1999).
10.15 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>
- --------
* To be supplied by amendment.
+ Confidential treatment has been requested for the portions redacted 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>
_______________ Shares
Data Critical Corporation
Common Stock
Underwriting Agreement
dated ___________, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Representations and Warranties of the Company.......................................... 2
(a) Compliance with Registration Requirements................................................. 2
(b) Offering Materials Furnished to Underwriters.............................................. 2
(c) Distribution of Offering Material By the Company.......................................... 3
(d) The Underwriting Agreement................................................................ 3
(e) Authorization of the Common Shares........................................................ 3
(f) No Applicable Registration or Other Similar Rights........................................ 3
(g) No Material Adverse Change................................................................ 3
(h) Independent Accountants................................................................... 3
(i) Preparation of the Financial Statements................................................... 3
(j) Incorporation and Good Standing of the Company............................................ 4
(k) Capitalization and Other Capital Stock Matters............................................ 4
(l) Stock Exchange Listing.................................................................... 4
(m) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required 4
(n) No Material Actions or Proceedings........................................................ 5
(o) Intellectual Property Rights.............................................................. 5
(p) All Necessary Permits, etc................................................................ 5
(q) Title to Properties....................................................................... 6
(r) Tax Law Compliance........................................................................ 6
(s) Company Not an "Investment Company"....................................................... 6
(t) Insurance................................................................................. 6
(u) No Price Stabilization or Manipulation.................................................... 6
(v) Related Party Transactions................................................................ 6
(w) Year 2000................................................................................. 7
(x) ERISA Compliance.......................................................................... 7
Section 2. Purchase, Sale and Delivery of the Common Shares....................................... 7
Section 3. Additional Covenants................................................................... 9
(a) Representatives' Review of Proposed Amendments and Supplements............................ 9
(b) Securities Act Compliance................................................................. 9
(c) Amendments and Supplements to the Prospectus and Other Securities Act Matters............. 9
(d) Copies of any Amendments and Supplements to the Prospectus................................ 10
(e) Blue Sky Compliance....................................................................... 10
(f) Use of Proceeds........................................................................... 10
(g) Transfer Agent............................................................................ 10
(h) Earnings Statement........................................................................ 10
(i) Periodic Reporting Obligations............................................................ 10
(j) Agreement Not To Offer or Sell Additional Securities...................................... 10
(k) Future Reports to the Representatives..................................................... 11
Section 4. Payment of Expenses.................................................................... 11
Section 5. Conditions of the Obligations of the Underwriters...................................... 12
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Accountants' Comfort Letter............................................................... 12
(b) Compliance with Registration Requirements; No Stop Order; No Objection from NASD.......... 12
(c) No Material Adverse Change or Ratings Agency Change....................................... 12
(d) Opinion of Counsel for the Company........................................................ 13
(e) Opinion of Counsel for the Underwriters................................................... 13
(f) Officers' Certificate..................................................................... 13
(g) Bring-down Comfort Letter................................................................. 13
(h) Lock-Up Agreement from Certain Securityholders of the Company............................. 13
(i) Additional Documents...................................................................... 14
Section 6. Reimbursement of Underwriters' Expenses................................................ 14
Section 7. Effectiveness of this Agreement........................................................ 14
Section 8. Indemnification........................................................................ 14
(a) Indemnification of the Underwriters....................................................... 14
(b) Indemnification of the Company, its Directors and Officers................................ 15
(c) Notifications and Other Indemnification Procedures........................................ 16
(d) Settlements............................................................................... 17
Section 9. Contribution........................................................................... 17
Section 10. Default of One or More of the Several Underwriters..................................... 18
Section 11. Termination of this Agreement.......................................................... 19
Section 12. Representations and Indemnities to Survive Delivery.................................... 19
Section 13. Notices................................................................................ 20
Section 14. Successors............................................................................. 20
Section 15. Partial Unenforceability............................................................... 20
Section 17. General Provisions..................................................................... 21
</TABLE>
- iii -
<PAGE>
Underwriting Agreement
__________, 1999
NATIONSBANC MONTGOMERY SECURITIES LLC
DAIN RAUSCHER WESSELS, A DIVISION OF DAIN RAUSCHER INCORPORATED
WARBURG DILLON READ LLC
As Representatives of the several Underwriters
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
Introductory. Data Critical Corporation, a Delaware corporation (the
"Company), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] shares (the "Firm Common
Shares") of its Common Stock, par value $0.001 per share (the "Common Stock").
In addition, the Company has granted to the Underwriters an option to purchase
up to an additional [___] shares (the "Optional Common Shares") of Common Stock,
as provided in Section 2. The Firm Common Shares and, if and to the extent such
option is exercised, the Optional Common Shares are collectively called the
"Common Shares". NationsBanc Montgomery Securities LLC, Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, and Warburg Dillon Read LLC have agreed
to act as representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Common
Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-[___]), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares. Such registration statement,
as amended, including the financial statements, exhibits and schedules thereto,
in the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement". Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Common Shares, is called the "Prospectus"; provided,
however, if the Company has, with the consent of NMS, elected to rely upon Rule
434 under the Securities Act, the term "Prospectus" shall mean the Company's
prospectus subject to completion (each, a "preliminary prospectus") dated
__________, 1999 (such preliminary prospectus is called the "Rule 434
preliminary prospectus"), together with the applicable term sheet (the "Term
Sheet") prepared and filed by the Company with the Commission under Rules 434
and 424(b) under the Securities Act and all references in this Agreement to the
date of the Prospectus shall mean the date of the Term Sheet.
-1-
<PAGE>
All references in this Agreement to (i) the Registration Statement, the Rule
462(b) Registration Statement, a preliminary prospectus, the Prospectus or the
Term Sheet, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters as
follows:
Section 1. Representations and Warranties of the Company.
The Company hereby represents, warrants and covenants to each Underwriter
as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in all
material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Common
Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times on or prior to the First Closing Date
and the Second Closing Date, complied and will comply in all material respects
with the Securities Act and did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all subsequent
times on or prior to the First Closing Date and the Second Closing Date, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements
thereto, made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by the Representatives
expressly for use therein. There are no contracts or other documents required
to be described in the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has delivered
to each Representative one complete manually signed copy of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
-2-
<PAGE>
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as defined below) and the completion of the Underwriters' distribution of
the Common Shares, any offering material in connection with the offering and
sale of the Common Shares other than a preliminary prospectus, the Prospectus or
the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be purchased
by the Underwriters from the Company have been duly authorized for issuance and
sale pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is given
in the Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company (any such change is called a
"Material Adverse Change"); (ii) the Company has not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not in
the ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
capital stock or repurchase or redemption by the Company of any class of capital
stock.
(h) Independent Accountants. Arthur Andersen LLP, who have expressed their
opinion with respect to the financial statements (which term as used in this
Agreement includes the related notes thereto) and supporting schedules filed
with the Commission as a part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants as required
by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements filed
with the Commission as a part of the Registration Statement and included in the
Prospectus present fairly the consolidated financial position of the Company as
of and at the dates indicated and the results of their operations and cash flows
for the periods specified. The supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. Such
financial statements and supporting schedules have been prepared in conformity
with generally accepted accounting principles as applied in the United States
applied on a consistent basis throughout the periods involved, except as may be
expressly stated in the related
-3-
<PAGE>
notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Prospectus Summary--Summary Selected
Financial Data", "Selected Financial Data" and "Capitalization" fairly present
the information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement.
(j) Incorporation and Good Standing of the Company. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under this
Agreement. The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the State of Washington and each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for such
jurisdictions (other than the State of Washington) where the failure to so
qualify or to be in good standing would not, individually or in the aggregate,
result in a Material Adverse Change. All of the issued and outstanding capital
stock of the Company's subsidiary has been duly authorized and validly issued,
is fully paid and nonassessable and is owned by the Company free and clear of
any security interest, mortgage, pledge, lien, encumbrance or claim. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity other than the subsidiary, datacritical.com, inc., listed on
Exhibit 21 to the Registration Statement. The subsidiary conducts no operations,
has no revenues or liabilities and is not a significant subsidiary of the
Company as such as defined in Rule 1-02 or Regulation S-X.
(k) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if any,
pursuant to employee benefit plans described in the Prospectus or upon exercise
of outstanding options or warrants described in the Prospectus). The Common
Stock (including the Common Shares) conforms in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable and have been issued in compliance with federal
and state securities laws. None of the outstanding shares of Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company or its subsidiary other than those accurately described in the
Prospectus. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(l) Stock Exchange Listing. The Common Shares have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(m) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. Neither the Company nor its subsidiary is in violation of
its certificate of incorporation or bylaws or is in default (or, with the giving
of notice or lapse of time, would be in default) ("Default") under any
indenture, mortgage, loan or credit agreement, note, contract,
-5-
<PAGE>
franchise, lease or other instrument to which the Company or its subsidiary is a
party or by which either of them may be bound, or to which any of the property
or assets of the Company or its subsidiary is subject (each, an "Existing
Instrument"), except for such Defaults as would not, individually or in the
aggregate, result in a Material Adverse Change. The Company's execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the certificate of incorporation or bylaws of the Company or its
subsidiary, (ii) will not conflict with or constitute a breach of, or Default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, or require
the consent of any other party to, any Existing Instrument, except for such
conflicts, breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Change and (iii)
will not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or its subsidiary. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency, is
required for the Company's execution, delivery and performance of this Agreement
and consummation of the transactions contemplated hereby and by the Prospectus,
except such as have been obtained or made by the Company and are in full force
and effect under the Securities Act, applicable state securities or blue sky
laws and from the National Association of Securities Dealers, Inc. (the "NASD").
(n) No Material Actions or Proceedings. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company or its subsidiary,
(ii) which has as the subject thereof any officer or director of, or property
owned or leased by, the Company or its subsidiary or (iii) relating to
environmental or discrimination matters, where in any such case (A) there is a
reasonable possibility that such action, suit or proceeding might be determined
adversely to the Company or its subsidiary and (B) any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to result
in a Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with the
employees of the Company or its subsidiary exists or, to the best of the
Company's knowledge, is threatened or imminent.
(o) Intellectual Property Rights. The Company and its subsidiary owns or
possesses sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their businesses
as now conducted, and the expected expiration of any of such Intellectual
Property Rights would not result in a Material Adverse Change. Neither the
Company nor its subsidiary has received any notice of infringement or conflict
with asserted Intellectual Property Rights of others, which infringement or
conflict, if the subject of an unfavorable decision, would result in a Material
Adverse Change.
(p) All Necessary Permits, etc. The Company and its subsidiary possess such
valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies, including
but not limited to the U.S. Food and Drug Administration and the Federal
Communications Commission, necessary to conduct their respective businesses as
presently conducted, and neither the Company nor its subsidiary has received any
notice of proceedings relating to the revocation or modification of, or non-
compliance with, any such certificate, authorization or permit which, singly or
in the aggregate,
-5-
<PAGE>
if the subject of an unfavorable decision, ruling or finding, could result in a
Material Adverse Change.
(q) Title to Properties. The Company and its subsidiary have good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company. The real property, improvements, equipment and personal property held
under lease by the Company are held under valid and enforceable leases, with
such exceptions as are not material and do not materially interfere with the use
made or proposed to be made of such real property, improvements, equipment or
personal property by the Company.
(r) Tax Law Compliance. The Company and its subsidiary have filed all
necessary material federal, state and foreign income and franchise tax returns
and have paid all material taxes required to be paid by them and, if due and
payable, any related or similar assessment, fine or penalty levied against them.
The Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(i) above in respect of all
material federal, state and foreign income and franchise taxes for all periods
as to which the tax liability of the Company or its subsidiary have not been
finally determined.
(s) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Common Shares will not be, an "investment company" within the meaning of
Investment Company Act and will conduct its business in a manner so that it will
not become subject to the Investment Company Act.
(t) Insurance. Each of the Company and its subsidiary is insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiary against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or its subsidiary will
not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change. Neither the
Company nor its subsidiary has been denied any insurance coverage which it has
sought or for which it has applied.
(u) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Common Shares.
(v) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or its subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
-6-
<PAGE>
(w) Year 2000. All disclosure regarding year 2000 compliance that is
required to be described under the 1933 Act and 1933 Regulations (including
disclosures required by Staff Legal Bulletin No. 5) has been included in the
Prospectus. The Company will not incur significant operating expenses or costs
to ensure that its information systems will be year 2000 complaint, other than
as disclosed in the Prospectus.
(x) ERISA Compliance. Neither the Company nor its subsidiary has
established or maintained any "employee benefit plan" (as defined under the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
and published interpretations thereunder (collectively, "ERISA")). Neither the
Company nor its subsidiary has incurred or reasonably expects to incur any
liability related to ERISA.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
Section 2. Purchase, Sale and Delivery of the Common Shares.
The Firm Common Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Common Shares upon the terms herein set forth. On
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the
Underwriters agree, severally and not jointly, to purchase from the Company the
respective number of Firm Common Shares set forth opposite their names on
Schedule A. The purchase price per Firm Common Share to be paid by the several
Underwriters to the Company shall be $[___] per share.
The First Closing Date. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be made at
the offices of NMS, 600 Montgomery Street, San Francisco, California (or such
other place as may be agreed to by the Company and the Representatives) at 6:00
a.m. San Francisco time, on [T+3/4], or such other time and date not later than
10:30 a.m. San Francisco time, on [T+10] as the Representatives shall designate
by notice to the Company (the time and date of such closing are called the
"First Closing Date"). The Company hereby acknowledges that circumstances under
which the Representatives may provide notice to postpone the First Closing Date
as originally scheduled include, but are in no way limited to, any determination
by the Company or the Representatives to recirculate to the public copies of an
amended or supplemented Prospectus or a delay as contemplated by the provisions
of Section 10.
The Optional Common Shares; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Optional Common Shares from the Company
at the purchase price per share to be paid by the Underwriters for the Firm
Common Shares. The option granted hereunder is for use by the Underwriters
solely in covering any over-allotments in connection with the sale and
distribution of the Firm Common Shares. The option granted hereunder may be
exercised at any time (but not more than once) upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. Such notice shall set forth (i) the
aggregate number of Optional Common Shares as to which the Underwriters are
-7-
<PAGE>
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing Date;
and in such case the term "First Closing Date" shall refer to the time and date
of delivery of certificates for the Firm Common Shares and the Optional Common
Shares). Such time and date of delivery, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Representatives and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Optional Common
Shares are to be purchased, each Underwriter agrees, severally and not jointly,
to purchase the number of Optional Common Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) that bears the
same proportion to the total number of Optional Common Shares to be purchased as
the number of Firm Common Shares set forth on Schedule A opposite the name of
such Underwriter bears to the total number of Firm Common Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
Public Offering of the Common Shares. The Representatives hereby
advise the Company that the Underwriters intend to offer for sale to the public,
as described in the Prospectus, their respective portions of the Common Shares
as soon after this Agreement has been executed and the Registration Statement
has been declared effective as the Representatives, in its sole judgment, has
determined is advisable and practicable.
Payment for the Common Shares. Payment for the Common Shares shall be
made at the First Closing Date (and, if applicable, at the Second Closing Date)
by wire transfer of immediately available funds to the order of the Company.
It is understood that the Representatives have been authorized, for
their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Common Shares and any Optional Common Shares the Underwriters have agreed
to purchase. NMS, individually and not as the Representatives of the
Underwriters, may (but shall not be obligated to) make payment for any Common
Shares to be purchased by any Underwriter whose funds shall not have been
received by the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
Delivery of the Common Shares. The Company shall deliver, or cause to
be delivered, to the Representatives for the accounts of the several
Underwriters certificates for the Firm Common Shares at the First Closing Date,
against the irrevocable release of a wire transfer of immediately available
funds for the amount of the purchase price therefor. The Company shall also
deliver, or cause to be delivered, to the Representatives for the accounts of
the several Underwriters, certificates for the Optional Common Shares the
Underwriters have agreed to purchase at the First Closing Date or the Second
Closing Date, as the case may be, against the irrevocable release of a wire
transfer of immediately available funds for the amount of the purchase price
therefor. The certificates for the Common Shares shall be in definitive form and
registered in such names and denominations as the Representatives shall have
requested at least two full business days prior to the First Closing Date (or
the Second Closing Date, as the case may be) and shall be made available for
inspection on the business day preceding the First Closing Date (or the Second
Closing Date, as the case may be) at a location in New York City as
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the Representatives may designate. Time shall be of the essence, and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Common Shares are first
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered, copies of the Prospectus in such quantities and at
such places as the Representatives shall request.
Section 3. Additional Covenants.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Representatives' Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the later of the First
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection with
sales by an Underwriter or dealer (the "Prospectus Delivery Period"), prior to
amending or supplementing the Registration Statement (including any registration
statement filed under Rule 462(b) under the Securities Act) or the Prospectus,
the Company shall furnish to the Representatives for review a copy of each such
proposed amendment or supplement, and the Company shall not file any such
proposed amendment or supplement to which the Representatives reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the receipt
of any comments of, or requests for additional or supplemental information from,
the Commission, (ii) of the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to any
preliminary prospectus or the Prospectus, (iii) of the time and date that any
post-effective amendment to the Registration Statement becomes effective and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order at the
earliest possible moment. Additionally, the Company agrees that it shall comply
with the provisions of Rules 424(b), 430A and 434, as applicable, under the
Securities Act and will use its reasonable efforts to confirm that any filings
made by the Company under such Rule 424(b) were received in a timely manner by
the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Representatives or counsel for the Underwriters it
is otherwise necessary to amend or supplement the Prospectus to comply with law,
the Company agrees to promptly prepare (subject to Section 3(a) hereof), file
with the Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in
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the light of the circumstances when the Prospectus is delivered to a purchaser,
be misleading or so that the Prospectus, as amended or supplemented, will comply
with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The Company
agrees to furnish the Representatives, without charge, during the Prospectus
Delivery Period, as many copies of the Prospectus and any amendments and
supplements thereto as the Representatives may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application of) the
state securities or blue sky laws of those jurisdictions designated by the
Representatives, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Common Shares. The Company shall not be required to
qualify as a foreign corporation or to take any action that would subject it to
general service of process in any such jurisdiction where it is not presently
qualified or where it would be subject to taxation as a foreign corporation. The
Company will advise the Representatives promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the Common
Shares for offering, sale or trading in any jurisdiction or any initiation or
threat of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption, the
Company shall use its best efforts to obtain the withdrawal thereof at the
earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from the sale
of the Common Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [___] that satisfies the provisions of Section 11(a) of the Securities
Act.
(i) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act. Additionally, the Company shall report the use of proceeds from
the issuance of the Common Shares as may be required under Rule 463 under the
Securities Act.
(j) Agreement Not To Offer or Sell Additional Securities. During the period
of 180 days following the date of the Prospectus, the Company will not, without
the prior written consent of NMS (which consent may be withheld at the sole
discretion of NMS), directly or indirectly, sell, offer, contract or grant any
option to sell, pledge, transfer or establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose
of or transfer, or announce the offering of, or file any registration statement
under the Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of
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Common Stock (other than as contemplated by this Agreement with respect to the
Common Shares); provided, however, that the Company may issue shares of its
Common Stock or options to purchase its Common Stock, or Common Stock upon
exercise of options, pursuant to any stock option, stock bonus or other stock
plan or arrangement described in the Prospectus, but only if the holders of such
shares, options, or shares issued upon exercise of such options, agree in
writing not to sell, offer, dispose of or otherwise transfer any such shares or
options during such 180 day period without the prior written consent of NMS
(which consent may be withheld at the sole discretion of the NMS).
(k) Future Reports to the Representatives. During the period of five years
hereafter the Company will furnish to the Representatives at 600 Montgomery
Street, San Francisco, CA 94111 Attention: Matt Semler: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the NASD or any securities exchange; and (iii) as
soon as available, copies of any report or communication of the Company mailed
generally to holders of its capital stock.
NMS, on behalf of the several Underwriters, may, in its sole discretion,
waive in writing the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.
Section 4. Payment of Expenses. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of
the Company's counsel, independent public or certified public accountants and
other advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Representatives, preparing
and printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and exemptions,
(vii) the filing fees incident to, and the reasonable fees and expenses of
counsel for the Underwriters in connection with, the NASD's review and approval
of the Underwriters' participation in the offering and distribution of the
Common Shares, (viii) the fees and expenses associated with including the Common
Stock on the Nasdaq National Market, and (ix) all other fees, costs and expenses
referred to in Item 13 of Part II of the
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Registration Statement. Except as provided in this Section 4, Section 6, Section
8 and Section 9 hereof, the Underwriters shall pay their own expenses, including
the fees and disbursements of their counsel.
Section 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company set
forth in Section 1 hereof as of the date hereof and as of the First Closing Date
as though then made and, with respect to the Optional Common Shares, as of the
Second Closing Date as though then made, to the timely performance by the
Company of its covenants and other obligations hereunder, and to each of the
following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representatives
shall have received from Arthur Andersen LLP, independent public or certified
public accountants for the Company, a letter dated the date hereof addressed to
the Underwriters, in form and substance satisfactory to the Representatives,
containing statements and information of the type ordinarily included in
accountant's "comfort letters" to underwriters, delivered according to Statement
of Auditing Standards No. 72 (or any successor bulletin), with respect to the
audited and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representatives shall have received an additional [___] conformed copies of such
accountants' letter for each of the several Underwriters).
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD. For the period from and after effectiveness of this Agreement and
prior to the First Closing Date and, with respect to the Optional Common Shares,
the Second Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities Act)
in the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment
to the Registration Statement containing the information required by such
Rule 430A, and such post-effective amendment shall have become effective;
or, if the Company elected to rely upon Rule 434 under the Securities Act
and obtained the Representatives' consent thereto, the Company shall have
filed a Term Sheet with the Commission in the manner and within the time
period required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing Date
and, with respect to the Optional Common Shares, the Second Closing Date in the
judgment of the Representatives there shall not have occurred any Material
Adverse Change.
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<PAGE>
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and the Second Closing Date the Representatives shall have received the
favorable opinion of Venture Law Group, A Professional Corporation, counsel for
the Company, dated as of such Closing Date, the form of which is attached as
Exhibit A (and the Representatives shall have received an additional [___]
conformed copies of such counsel's legal opinion for each of the several
Underwriters).
(e) Opinion of Counsel for the Underwriters. On each of the First Closing
Date and the Second Closing Date the Representatives shall have received the
favorable opinion of Wilson Sonsini Goodrich & Rosati, counsel for the
Underwriters, dated as of such Closing Date, with respect to the matters set
forth in paragraphs (i), (vi) (with respect to subparagraph (i) only, (vii),
(viii), (ix), (x) (xi) and (xii) (with respect to the captions "Description of
Capital Stock" and "Underwriting" under subparagraph (i) only), and the next-to-
last paragraph of Exhibit A (and the Representatives shall have received an
additional [___] conformed copies of such counsel's legal opinion for each of
the several Underwriters).
(f) Officers' Certificate. On each of the First Closing Date and the Second
Closing Date the Representatives shall have received a written certificate
executed by the Chairman of the Board, Chief Executive Officer or President of
the Company and the Chief Financial Officer or Chief Accounting Officer of the
Company, dated as of such Closing Date, to the effect set forth in subsections
(b)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and prior
to such Closing Date, there has not occurred any Material Adverse Change;
(ii) the representations, warranties and covenants of the Company set
forth in Section 1 of this Agreement are true and correct with the same
force and effect as though expressly made on and as of such Closing Date;
and
(iii) the Company has complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and the
Second Closing Date the Representatives shall have received from Arthur Andersen
LLP, independent public or certified public accountants for the Company, a
letter dated such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than three business days prior to the First Closing Date or
Second Closing Date, as the case may be (and the Representatives shall have
received an additional [___] conformed copies of such accountants' letter for
each of the several Underwriters).
(h) Lock-Up Agreement from Certain Securityholders of the Company. On the
date hereof, the Company shall have furnished to the Representatives an
agreement in the form of Exhibit B hereto executed by each director, officer and
each beneficial owner of Common Stock (as defined and determined according to
Rule 13d-3 under the Exchange Act, except that a one hundred eighty day period
shall be used rather than the sixty day period set forth therein), and
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<PAGE>
such agreement shall be in full force and effect on each of the First Closing
Date and the Second Closing Date.
(i) Additional Documents. On or before each of the First Closing Date and
the Second Closing Date, the Representatives and counsel for the Underwriters
shall have received such information, documents and opinions as they may
reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Common Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Common Shares, at any time prior
to the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 4, Section 6, Section
8 and Section 9 shall at all times be effective and shall survive such
termination.
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement
is terminated by the Representatives pursuant to Section 5, Section 7, Section
10 or Section 11, or if the sale to the Underwriters of the Common Shares on the
First Closing Date is not consummated because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse the Representatives
and the other Underwriters (or such Underwriters as have terminated this
Agreement with respect to themselves), severally, upon demand for all out-of-
pocket expenses that shall have been reasonably incurred by the Representatives
and the Underwriters in connection with the proposed purchase and the offering
and sale of the Common Shares, including but not limited to fees and
disbursements of counsel, printing expenses, travel expenses, postage, facsimile
and telephone charges.
Section 7. Effectiveness of this Agreement.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company to any Underwriter,
except that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of
any Underwriter to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
Section 8. Indemnification.
(a) Indemnification of the Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling
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person may become subject, under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or any
amendment thereto, including any information deemed to be a part thereof
pursuant to Rule 430A or Rule 434 under the Securities Act, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Common Stock or the offering contemplated hereby,
and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by clause
(i) or (ii) above, provided that the Company shall not be liable under this
clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the fees and disbursements of counsel chosen
by NMS) as such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the
Representatives expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided, further, that with respect to any preliminary prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Common Shares, or any person controlling such Underwriter, if copies
of the Prospectus were timely delivered to the Underwriter pursuant to Section 2
and a copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required by law so
to have been delivered, at or prior to the written confirmation of the sale of
the Common Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The indemnity agreement set forth in this Section
8(a) shall be in addition to any liabilities that the Company may otherwise
have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any
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such director, officer or controlling person may become subject, under the
Securities Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Representatives expressly for use therein; and
to reimburse the Company, or any such director, officer or controlling person
for any legal and other expense reasonably incurred by the Company, or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The Company hereby acknowledges that the only
information that the Underwriters have furnished to the Company expressly for
use in the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) are the statements set forth (A) in the
table in the first paragraph under the caption "Underwriting" in the Prospectus,
and (B) in the tenth paragraph under the caption "Underwriting" in the
Prospectus concerning stabilization; and the Underwriters confirm that such
statements are correct. The indemnity agreement set forth in this Section 8(b)
shall be in addition to any liabilities that each Underwriter may otherwise
have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
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subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (NMS in the case of Section 8(b) and Section 9), representing
the indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
Section 9. Contribution.
If the indemnification provided for in Section 8 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Common Shares pursuant to this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriters, on the other hand, in connection with the offering of the
Common Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the Common
Shares pursuant to this Agreement (before deducting expenses) received by the
Company, and the total underwriting discount received by the Underwriters, in
each case as set
-17-
<PAGE>
forth on the front cover page of the Prospectus (or, if Rule 434 under the
Securities Act is used, the corresponding location on the Term Sheet) bear to
the aggregate initial public offering price of the Common Shares as set forth on
such cover. The relative fault of the Company, on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact or any such
inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.
Section 10. Default of One or More of the Several Underwriters. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on Schedule A
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-
-18-
<PAGE>
defaulting Underwriters, to purchase the Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Common
Shares and the aggregate number of Common Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Common Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Common Shares are not made within 48 hours
after such default, this Agreement shall terminate without liability of any
party to any other party except that the provisions of Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive such
termination. In any such case either the Representatives or the Company shall
have the right to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 11. Termination of this Agreement. Prior to the First Closing
Date this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq National Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, New York,
Delaware or California authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective substantial
change in United States' or international political, financial or economic
conditions, as in the judgment of the Representatives is material and adverse
and makes it impracticable to market the Common Shares in the manner and on the
terms described in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Representatives there shall have
occurred any Material Adverse Change; or (v) the Company shall have sustained a
loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the judgment of the Representatives may interfere materially
with the conduct of the business and operations of the Company regardless of
whether or not such loss shall have been insured. Any termination pursuant to
this Section 11 shall be without liability on the part of (a) the Company to any
Underwriter, except that the Company shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 4 and
6 hereof, (b) any Underwriter to the Company, or (c) of any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
Section 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on
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<PAGE>
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, as the case may be, and will
survive delivery of and payment for the Common Shares sold hereunder and any
termination of this Agreement.
Section 13. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-249-5558
Attention: Richard A. Smith
with a copy to:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: Jeffrey Lapic, Esq.
If to the Company:
Data Critical Corporation
19820 North Creek Parkway
Suite 100
Bothell, Washington 98011
Facsimile:
Attention: Jeff Brown, President and Chief Executive Officer
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 14. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Common Shares as such from any of the Underwriters merely by reason of
such purchase.
Section 15. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
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<PAGE>
Section 16. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. Consent to
Jurisdiction. Any legal suit, action or proceeding arising out of or based upon
this Agreement or the transactions contemplated hereby ("Related Proceedings")
may be instituted in the federal courts of the United States of America located
in the City and County of San Francisco or the courts of the State of California
in each case located in the City and County of San Francisco (collectively, the
"Specified Courts"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a "Related Judgment"), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum. Each party not located in the United States
irrevocably appoints CT Corporation System, which currently maintains a San
Francisco office at 49 Stevenson Street, San Francisco, California 94105, United
States of America, as its agent to receive service of process or other legal
summons for purposes of any such suit, action or proceeding that may be
instituted in any state or federal court in the City and County of San
Francisco.
Section 17. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
DATA CRITICAL CORPORATION
By:
------------------------------
Jeff Brown
President and
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives in San Francisco, California as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
--------------------------------
DAIN RAUSCHER WESSELS, A Division of Dain Rauscher Incorporated
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
WARBURG DILLON READ LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
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<PAGE>
SCHEDULE A
Number of Firm
Common Shares to
Underwriters be Purchased
NationsBanc Montgomery Securities LLC......... [______]
Dain Rauscher Wessels......................... [______]
Warburg Dillon Read LLC....................... [______]
Total.................................... [______]
<PAGE>
EXHIBIT B
FORM OF LOCK UP AGREEMENT
NationsBanc Montgomery Securities LLC
Dain Rauscher Wessels
Warburg Dillon Read
c/o NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
RE: Data Critical Corporation (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Offering") for which you will act as the
representatives (the "Representatives") of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, raising additional capital for its
operations. The undersigned acknowledges that you and the other underwriters
are relying on the representations and agreements of the undersigned contained
in this letter in carrying out the Offering and in entering into underwriting
arrangements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of NationsBanc
Montgomery Securities LLC (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale) pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, as amended, or otherwise dispose of
any shares of Common Stock, options or warrants to acquire shares of Common
Stock, or securities exchangeable or exercisable for or convertible into shares
of Common Stock currently or hereafter owned either of record or beneficially
(as defined in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by
the undersigned, or publicly announce the undersigned's intention to do any of
the foregoing, for a period commencing on the date hereof and continuing to a
date 180 days after the first date any of the Common Stock to be sold in the
Offering is released by you for sale to the public. The undersigned also agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock held
by the undersigned except in compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
Dated: ________________, 19
Printed Name of Holder
By: _______________________
Signature
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
B-1
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DATA CRITICAL CORPORATION
The undersigned, Jeffrey S. Brown and Craig E. Sherman, hereby certify
that:
1. They are the duly elected President and Secretary, respectively, of
Data Critical Corp., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 12, 1998 under the name
Data Critical Corporation.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this corporation is Data Critical Corporation (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle. The name
of its registered agent at such address is Corporation Service Corporation.
ARTICLE III
The duration of the Corporation is perpetual.
ARTICLE IV
The purpose of the Corporation is to (i) develop, sell and otherwise deal
in wireless communication products and services, and (ii) engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
<PAGE>
ARTICLE V
Authorized Capital
------------------
The authorized number of shares of all classes of stock which the
Corporation shall have the authority to issue is twenty million two hundred
thousand (20,200,000) shares, divided into classes designated as follows: (i)
fifteen million (15,000,000) shares of common stock, par value $.001 per share
(the "Common Stock"); and (ii) five million two hundred thousand (5,200,000)
shares of preferred stock, par value $.01 per share (the "Preferred Stock").
The shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is authorized to fix the number of shares
of any series of Preferred Stock and to determine the designation of any such
series. The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges and restrictions granted to and imposed upon any
wholly unissued series of Preferred Stock and to increase or decrease (but not
below the number of shares of such Series then outstanding) the number of shares
of any such series subsequent to the issuance of shares of that series.
The designations, powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, for each class of stock of the Corporation
shall be as follows:
1. Number of Shares. The series of preferred stock designated and known
----------------
as "Series A Convertible Participating Preferred Stock" (hereinafter "Series A
Preferred Stock") shall consist of 187,500 shares, the series of preferred stock
designated and known as "Series B Convertible Participating Preferred Stock"
(hereinafter "Series B Preferred Stock") shall consist of 1,232,657 shares, the
series of preferred stock designated and known as "Series C Convertible
Participating Preferred Stock" (hereinafter "Series C Preferred Stock") shall
consist of 1,187,817 shares, and the series of preferred stock designated and
known as "Series D Convertible Participating Preferred Stock" (hereinafter
"Series D Preferred Stock") shall consist of 2,450,000 shares. The term
"Preferred Stock" used herein without reference to the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock or the Series D
Preferred Stock shall mean all of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock,
share for share alike and without distinction as to series, except as otherwise
expressly provided or as the context otherwise requires.
2. Voting.
------
2A. General. Except as may be otherwise provided in these terms of
-------
the Preferred Stock or by law, the Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the stockholders of the Corporation. Each share of
Preferred Stock shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
(including fractions of a share) into which each such share of Preferred Stock
is then convertible.
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<PAGE>
3. Dividends.
---------
3A. Series D Preferred Stock. The holders of the Series D Preferred
------------------------
Stock shall be entitled to receive, out of funds legally available therefor,
annual dividends at the rate per annum of $.32 per share (annually a "Series D
Accrued Dividend" and collectively the "Series D Accruing Dividends"). Series D
Accruing Dividends shall accrue from day to day, whether or not earned or
declared, and shall be cumulative.
3B. Series C Preferred Stock. The holders of the Series C Preferred
------------------------
Stock shall be entitled to receive, out of funds legally available therefor,
annual dividends at the rate per annum of $.256 per share (annually a "Series C
Accrued Dividend" and collectively the "Series C Accruing Dividends"). Series C
Accruing Dividends shall accrue from day to day, whether or not earned or
declared, and shall be cumulative.
3C. Series B Preferred Stock. The holders of the Series B Preferred
------------------------
Stock shall be entitled to receive, out of funds legally available therefor,
annual dividends at the rate per annum of $.256 per share (annually a "Series B
Accrued Dividend" and collectively the "Series B Accruing Dividends"). Series B
Accruing Dividends shall accrue from day to day, whether or not earned or
declared, and shall be cumulative. Series D Accruing Dividends, Series C
Accruing Dividends and Series B Accruing Dividends are referred to herein
collectively as the "Accruing Dividends."
3D. Series A Preferred Stock and Common Stock. The holders of the
-----------------------------------------
Series A Preferred Stock shall be entitled to receive, out of funds legally
available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Series A Preferred Stock, as being
equal to the number of shares of Common Stock (including fractions of a share)
into which each share of Series A Preferred Stock is then convertible). No
dividends shall be declared or paid on the Series A Preferred Stock or Common
Stock: (i) at a rate in excess of the dividends declared and paid on any of the
Series D Preferred Stock, Series C Preferred Stock or the Series B Preferred
Stock, and (ii) unless all Series D Accruing Dividends, Series C Accruing
Dividends and Series B Accruing Dividends have been paid in full to the holders
of the Series D Preferred Stock, Series C Preferred Stock and the Series B
Preferred Stock.
4. Liquidation.
-----------
4A. Series D Liquidation Preference. Upon any liquidation,
-------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of Series D Preferred Stock shall first be entitled,
before any distribution or payment is made upon any stock ranking on liquidation
junior to the Series D Preferred Stock (including, without limitation, shares of
Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock), to be paid an amount equal to the greater of (i) $4.00 per
share in the case of each share of Series D Preferred Stock, plus, in the case
of each share of Series D Preferred Stock, an amount equal to all Series D
Accruing Dividends unpaid thereon, computed to the date payment thereof is made
available, or (ii) such amount per share as would have been
-3-
<PAGE>
payable had each such share of Series D Preferred Stock been converted to Common
Stock pursuant to paragraph 6 immediately prior to such liquidation, dissolution
or winding up, and the holders of Series D Preferred Stock shall not be entitled
to any further payment, such amount payable with respect to one share of Series
D Preferred Stock being sometimes referred to as the "Series D Liquidation
Preference Payment" and with respect to all shares of Series D Preferred Stock
being sometimes referred to as the "Series D Liquidation Preference Payments."
If upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Series D Preferred Stock shall be insufficient to permit payment in full to the
holders of Series D Preferred Stock of the Series D Liquidation Preference
Payments, then the entire assets of the Corporation to be so distributed shall
be distributed ratably, based upon Series D Liquidation Preference Payments,
among the holders of Series D Preferred Stock.
4B. Series C Liquidation Preference. Upon any liquidation,
-------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
immediately after the holders of Series D Preferred Stock shall have been paid
in full the Series D Liquidation Preference Payments, the holders of the shares
of Series C Preferred Stock shall first be entitled, before any distribution or
payment is made upon any stock ranking on liquidation junior to the Series C
Preferred Stock (including, without limitation, shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock), to be paid an amount equal to the
greater of (i) $3.20 per share in the case of each share of Series C Preferred
Stock, plus, in the case of each share of Series C Preferred Stock, an amount
equal to all Series C Accruing Dividends unpaid thereon, computed to the date
payment thereof is made available, or (ii) such amount per share as would have
been payable had each such share of Series C Preferred Stock been converted to
Common Stock pursuant to paragraph 6 immediately prior to such liquidation,
dissolution or winding up, and the holders of Series C Preferred Stock shall not
be entitled to any further payment, such amount payable with respect to one
share of Series C Preferred Stock being sometimes referred to as the "Series C
Liquidation Preference Payment" and with respect to all shares of Series C
Preferred Stock being sometimes referred to as the "Series C Liquidation
Preference Payments". If upon such liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Series C Preferred Stock (after payment in full of the
Series D Liquidation Preference Payments) shall be insufficient to permit
payment in full to the holders of Series C Preferred Stock of the Series C
Liquidation Preference Payments, then the entire assets of the Corporation to be
so distributed shall be distributed ratably, based upon Series C Liquidation
Preference Payments, among the holders of Series C Preferred Stock.
4C. Series B Liquidation Preference. Upon any liquidation,
-------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
immediately after the holders of Series C Preferred Stock shall have been paid
in full the Series C Liquidation Preference Payments, the holders of the shares
of Series B Preferred Stock shall be entitled, before any distribution or
payment is made upon any stock ranking on liquidation junior to the Series B
Preferred Stock (including, without limitation, shares of Common Stock and
Series A Preferred Stock), to be paid an amount equal to the greater of (i)
$3.20 per share in the case of each share of Series B Preferred Stock, plus, in
the case of each share of Series B Preferred Stock, an
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<PAGE>
amount equal to all Series B Accruing Dividends unpaid thereon (whether or not
declared) and any other dividends declared but unpaid thereon, computed to the
date payment thereof is made available, or (ii) such amount per share as would
have been payable had each such share of Series B Preferred Stock been converted
to Common Stock pursuant to paragraph 6 immediately prior to such liquidation,
dissolution or winding up, and the holders of Series B Preferred Stock shall not
be entitled to any further payment, such amount payable with respect to one
share of Series B Preferred Stock being sometimes referred to as the "Series B
Liquidation Preference Payment" and with respect to all shares of Series B
Preferred Stock being sometimes referred to as the "Series B Liquidation
Preference Payments". If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Series B Preferred Stock (after payment in full of the
Series D Liquidation Preference Payments and the Series C Liquidation Preference
Payments) shall be insufficient to permit payment in full to the holders of
Series B Preferred Stock of the Series B Liquidation Preference Payments, then
the entire assets of the Corporation to be so distributed shall be distributed
ratably, based upon Series B Liquidation Preference Payments, among the holders
of Series B Preferred Stock.
4D. Series A Liquidation Preference. Upon any liquidation,
-------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
immediately after the holders of Series D Preferred Stock shall have been paid
in full the Series D Liquidation Payments, the holders of Series C Preferred
Stock shall have been paid in full the Series C Liquidation Preference Payments
and the holders of Series B Preferred Stock shall have been paid in full the
Series B Liquidation Preference Payments, the holders of the shares of Series A
Preferred Stock shall first be entitled, before any distribution or payment is
made upon any stock ranking on liquidation junior to the Series A Preferred
Stock (including, without limitation, shares of Common Stock), to be paid an
amount equal to the greater of (i) $ .80 per share in the case of each share of
Series A Preferred Stock, plus, in the case of each share of Series A Preferred
Stock, an amount equal to any dividends declared but unpaid thereon, computed to
the date payment thereof is made available, or (ii) such amount per share as
would have been payable had each such share of Series A Preferred Stock been
converted to Common Stock pursuant to paragraph 6 immediately prior to such
liquidation, dissolution or winding up, and the holders of Series A Preferred
Stock shall not be entitled to any further payment, such amount payable with
respect to one share of Series A Preferred Stock being sometimes referred to as
the "Series A Liquidation Preference Payment" and with respect to all shares of
Series A Preferred Stock being sometimes referred to as the "Series A
Liquidation Preference Payments". If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Series A Preferred Stock (after payment in
full of the Series D Liquidation Preference Payments, the Series C Liquidation
Preference Payments and the Series B Liquidation Preference Payments) shall be
insufficient to permit payment in full to the holders of Series A Preferred
Stock of the Series A Liquidation Preference Payments, then the entire assets of
the Corporation to be so distributed shall be distributed ratably, based upon
Series A Liquidation Preference Payments, among the holders of Series A
Preferred Stock.
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<PAGE>
4E. Distribution to Holders of Common Stock. Upon any liquidation,
---------------------------------------
dissolution or winding up of the Corporation, immediately after the holders of
Series D Preferred Stock shall have been paid in full the Series D Liquidation
Payments, the holders of Series C Preferred Stock shall have been paid in full
the Series C Liquidation Preference Payments, the holders of Series B Preferred
Stock shall have been paid in full the Series B Liquidation Preference Payments,
and the holders of Series A Preferred Stock shall have been paid in full the
Series A Liquidation Preference Payments, the remaining net assets of the
Corporation available for distribution shall be distributed ratably among the
holders of Common Stock.
4F. Deemed Liquidation. For purposes of this paragraph 4, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to
occur if the Corporation shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Corporation is
disposed of; provided that this subparagraph 4F shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the
Corporation. In the event of a deemed liquidation as described above, if the
consideration received by the Corporation is other than cash, its value will be
deemed its fair market value. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or The Nasdaq
Stock Market, the value shall be deemed to be the average of the closing prices
of the securities on such exchange over the thirty-day period ending three (3)
days prior to the closing;
(B) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value shall
be the fair market value thereof, as mutually determined by the Corporation and
the holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in subparagraph 4F(i) to reflect the approximate fair
market value thereof, as mutually determined by the Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
4G. Notice of Liquidation, Dissolution or Winding Up. Written notice
------------------------------------------------
of liquidation, dissolution or winding up, stating a payment date and the place
where said payments shall be made, shall be given by mail, postage prepaid, or
by telex to non-U.S. residents, not less
-6-
<PAGE>
than 20 days prior to the payment date stated therein, to the holders of record
of Preferred Stock, such notice to be addressed to each such holder at its
address as shown by the records of the Corporation.
5. Restrictions. At any time when shares of Preferred Stock are
------------
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least two-thirds of the then outstanding shares of Preferred Stock, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
together as a single series, the Corporation will not:
5A. Additional Classes of Stock. Create or authorize the creation of
---------------------------
any additional class or series of shares of stock unless the same ranks junior
to the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, or the Series D Preferred Stock with respect to voting,
dividends, conversion or upon liquidation, or increase the authorized amount of
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock or the Series D Preferred Stock, or increase the authorized
amount of any additional class or series of shares of stock unless the same
ranks junior to the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock or the Series D Preferred Stock with respect to voting,
dividends, conversion or upon liquidation, or create or authorize any obligation
or security convertible into shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock or into
shares of any other class or series of stock unless the same ranks junior to the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Series D Preferred Stock with respect to voting, dividends,
conversion or upon liquidation, whether any such creation, authorization or
increase shall be by means of amendment to the Certificate of Incorporation or
by merger, consolidation or otherwise.
5B. Liquidation, Merger or Sale of Assets. Consent to any
-------------------------------------
liquidation, dissolution or winding up of the Corporation or consolidate or
merge into or with any other entity or entities or sell or transfer all or
substantially all its assets.
5C. Certificate of Incorporation and By-laws. Amend, alter or repeal
----------------------------------------
its Certificate of Incorporation or By-laws in a manner which materially
adversely affects the holders of Preferred Stock.
5D. Dividends and Distributions. Purchase or set aside any sums for
---------------------------
the purchase of, or pay any dividend or make any distribution on, any shares of
stock other than the Series D Preferred Stock, the Series C Preferred Stock or
the Series B Preferred Stock, except for dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock and except for the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the
-7-
<PAGE>
termination of employment of such former employee and the purchase price does
not exceed the original issue price paid by such former employee to the
Corporation for such shares.
5E. Redemption. Redeem or otherwise acquire any shares of Preferred
----------
Stock except as expressly authorized in paragraph 7.
6. Conversions. The holders of shares of Preferred Stock shall have the
-----------
following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of this
----------------
paragraph 6, the holder of any share or shares of Preferred Stock shall have the
right, at its option at any time, to convert any such shares of Preferred Stock
(except that upon any liquidation of the Corporation the right of conversion
shall terminate at the close of business on the business day fixed for payment
of the amount distributable on the Preferred Stock) into such number of fully
paid and nonassessable shares of Common Stock as is obtained by (A) in the case
of the Series A Preferred Stock, (i) multiplying the number of shares of Series
A Preferred Stock so to be converted by $ .80 and (ii) dividing the result by
the conversion price of $.80 per share or, in case an adjustment of such price
has taken place pursuant to the further provisions of this paragraph 6, then by
the conversion price as last adjusted and in effect at the date any share or
shares of Series A Preferred Stock are surrendered for conversion, (B) in the
case of the Series B Preferred Stock, (i) multiplying the number of shares of
Series B Preferred Stock so to be converted by $3.20 and (ii) dividing the
result by the conversion price of $3.20 per share or, in case an adjustment of
such price has taken place pursuant to the further provisions of this paragraph
6, then by the conversion price as last adjusted and in effect at the date any
share or shares of Series B Preferred Stock are surrendered for conversion, (C)
in the case of the Series C Preferred Stock, (i) multiplying the number of
shares of Series C Preferred Stock so to be converted by $3.20 and (ii) dividing
the result by the conversion price of $3.20 per share or, in case an adjustment
of such price has taken place pursuant to the further provisions of this
paragraph 6, then by the conversion price as last adjusted and in effect at the
date any share or shares of Series C Preferred Stock are surrendered for
conversion, and (D) in the case of the Series D Preferred Stock, (i) multiplying
the number of shares of Series D Preferred Stock so to be converted by $4.00 and
(ii) dividing the result by the conversion price of $4.00 per share or, in case
an adjustment of such price has taken place pursuant to the further provisions
of this paragraph 6, then by the conversion price as last adjusted and in effect
at the date any share or shares of Series D Preferred Stock are surrendered for
conversion. The conversion prices set forth in clauses A(ii), B(ii), C(ii) and
D(ii) hereof or such price as last adjusted, are referred to herein collectively
as the "Conversion Prices". Such rights of conversion shall be exercised by the
holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be converted to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of the Preferred Stock) at any time during its usual business hours on the date
set forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
-8-
<PAGE>
6B. Issuance of Certificates; Time Conversion Effected. Promptly
--------------------------------------------------
after the receipt of the written notice referred to in subparagraph 6A and
surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Preferred Stock. To the extent permitted by law, such conversion
shall be deemed to have been effected and the Conversion Price for such shares
shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation and the certificate
or certificates for such share or shares shall have been surrendered as
aforesaid, and at such time the rights of the holder of such share or shares of
Preferred Stock shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No fractional
------------------------------------------------
shares shall be issued upon conversion of Preferred Stock into Common Stock and
no payment or adjustment shall be made upon any conversion on account of any
cash dividends on the Common Stock issued upon such conversion. At the time of
each conversion, the Corporation shall pay, out of assets legally available
therefor, in cash an amount equal to all dividends (excluding Series D Accruing
Dividends, Series C Accruing Dividends and Series B Accruing Dividends) declared
and unpaid on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B. In case the number of shares of Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 6A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Preferred Stock
represented by the certificate or certificates surrendered which are not to be
converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
-------------------------------------------------
provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than a Conversion Price in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or sale, such Conversion Price
shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale (including the number of shares of Common Stock then issued
or issuable upon conversion of all issued and outstanding shares of Preferred
Stock) multiplied by the then existing Conversion Price and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately
-9-
<PAGE>
after such issue or sale (including the number of shares of Common Stock then
issued or issuable upon conversion of all issued and outstanding shares of
Preferred Stock).
For purposes of this subparagraph 6D, the following subparagraphs
6D(1) to 6D(7) shall also be applicable:
6D(1). Issuance of Rights or Options. In case at any time the
-----------------------------
Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities")
whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible Securities (determined
by dividing (i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be
less than a Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be
deemed to be outstanding. Except as otherwise provided in subparagraph
6D(3), no adjustment of such Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise
of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
6D(2). Issuance of Convertible Securities. In case the
----------------------------------
Corporation shall in any manner issue (whether directly or by assumption in
a merger or otherwise) or sell any Convertible Securities, whether or not
the rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (i) the
total amount received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than a
Conversion
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<PAGE>
Price in effect immediately prior to the time of such issue or sale, then
the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of such Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible Securities
is made upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of a Conversion Price have been or are to
be made pursuant to other provisions of this subparagraph 6D, no further
adjustment of such Conversion Price shall be made by reason of such issue
or sale.
6D(3). Change in Option Price or Conversion Rate. Upon the
-----------------------------------------
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in subparagraph 6D(1) or 6D(2),
or the rate at which Convertible Securities referred to in subparagraph
6D(1) or 6D(2) are convertible into or exchangeable for Common Stock shall
change at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the Conversion
Prices in effect at the time of such event shall forthwith be readjusted to
the Conversion Prices which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold, but only if as
a result of such adjustment the Conversion Prices then in effect hereunder
are thereby reduced; and on the expiration of any such Option or the
termination of any such right to convert or exchange such Convertible
Securities, the Conversion Prices then in effect hereunder shall forthwith
be increased to the Conversion Prices which would have been in effect at
the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration
or termination, never been issued.
6D(4). Stock Dividends. In case the Corporation shall declare a
---------------
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for dividends or distributions upon the
Common Stock, adjustments for which are made under paragraph 6F), Options
or Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
6D(5). Consideration for Stock. In case any shares of Common
-----------------------
Stock, Options or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any
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<PAGE>
shares of Common Stock, Options or Convertible Securities shall be issued
or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed
to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Corporation, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any Options
shall be issued in connection with the issue and sale of other securities
of the Corporation, together comprising one integral transaction in which
no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
6D(6). Record Date. In case the Corporation shall take a record
-----------
of the holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D(7). Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purpose of
this subparagraph 6D.
6E. Certain Issues of Common Stock and Other Events Excepted.
--------------------------------------------------------
Anything herein to the contrary notwithstanding, the Corporation shall not be
required to make any adjustment of the Conversion Prices in the case of the
issuance on or after February 17, 1995 by the Corporation or its predecessor of
(i) up to an aggregate of 2,150,000 shares (appropriately adjusted to reflect
the occurrence of any event described in subparagraph 6F) of Common Stock to
directors, officers, employees or consultants of the Corporation in connection
with their service to the Corporation, including, but not limited to, the
issuance of shares of Common Stock upon the exercise of options granted or to be
granted under the 1994 Data Critical Corp. Stock Option Plan, the 1999 Data
Critical Corp. Stock Option Plan, the 1999 Data Critical Corp. Directors Stock
Option Plan and the 1999 Data Critical Corp. Employees Stock Purchase Plan.
(ii) Capital stock, or options or warrants to purchase capital stock,
issued to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings or similar transactions.
(iii) Shares of Common Stock or Preferred Stock issuable upon
exercise of warrants outstanding as of the date of this Certificate of
Designations,
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<PAGE>
(iv) Capital stock or warrants or options to purchase capital stock
issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors of the
Corporation,
(v) Shares of Common Stock issued or issuable upon conversion of the
Series A, Series B, Series C or Series D Preferred Stock, and
(vi) Shares of Common Stock issued or issuable in a public offering
prior to or in connection with which all outstanding shares of Series A, Series
B, Series C and Series D Preferred Stock will be converted to Common Stock.
6F. Subdivision or Combination of Common Stock. In case the
------------------------------------------
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Prices in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Prices in effect immediately prior to such combination shall be
proportionately increased.
6G. Reorganization or Reclassification. If any capital
----------------------------------
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately therefore receivable upon the conversion of such share
or shares of Preferred Stock, 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 therefore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the Conversion Prices) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Failure to Redeem. If the Corporation fails, for any reason or
-----------------
for no reason, to redeem on any Redemption Date (as defined in paragraph 7) all
of the shares of Preferred Stock required to be redeemed on such Redemption Date
in accordance with the terms and conditions of paragraph 7, the Conversion Price
then in effect for any series of Preferred Stock so unredeemed shall be
immediately reduced to an amount equal to 90% thereof. Thereafter, until such
redemption has been made in full in accordance with such terms and conditions,
such Conversion Prices shall be further reduced on the 90th day following such
Redemption Date and at the end of each 90-day period thereafter to an amount
equal to 90% of the Conversion Price in effect immediately prior to each such
reduction.
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<PAGE>
6I. Notice of Adjustment. Upon any adjustment of a Conversion Price,
--------------------
then and in each such case the Corporation shall give written notice thereof, by
first class mail, postage prepaid, or by telex or telecopier to non-U.S.
residents, addressed to each holder of shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, which notice shall
state the Conversion Price resulting from such adjustment, setting forth in
reasonable detail the method upon which such calculation is based.
6J. Other Notices. In case at any time:
-------------
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the
holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
--- ----
holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or reclassification
of the capital stock of the Corporation, or a consolidation or merger of
the Corporation with or into, or a sale of all or substantially all its
assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by
first class mail, postage prepaid, or by telex or telecopier to non-U.S.
residents, addressed to each holder of any shares of Preferred Stock at the
address of such holder as shown on the books of the Corporation, (a) at least 20
days' prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 20 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto
and such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times reserve
--------------------
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Preferred Stock as herein provided, such number
of shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Preferred Stock. The Corporation covenants that all
shares of Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and charges
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<PAGE>
with respect to the issue thereof, and, without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the Conversion Prices in
effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Prices if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by its Certificate of
Incorporation.
6L. No Reissuance of Preferred Stock. Shares of Preferred Stock
--------------------------------
which are converted into shares of Common Stock as provided herein shall not be
reissued.
6M. Issue Tax. The issuance of certificates for shares of Common
---------
Stock upon conversion of Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6N. Closing of Books. The Corporation will at no time close its
----------------
transfer books against the transfer of any Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Preferred
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
6O. Definition of Common Stock. As used in this paragraph 6, the
--------------------------
term "Common Stock" shall mean and include the Corporation's authorized Common
Stock, par value $.001 per share, as constituted on the date of filing of these
terms of the Preferred Stock, and shall also include any capital stock of any
class of the Corporation thereafter authorized which shall neither be limited to
a fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends nor entitled to a preference in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 6G.
6P. Mandatory Conversion. If at any time the Corporation shall
--------------------
effect a firm commitment underwritten public offering of shares of Common Stock
in which (i) the aggregate price paid for such shares by the public shall be at
least $10,000,000 and (ii) the public offering price per share in such offering
is at least $2.00 per share, then effective upon the closing of the sale of such
shares by the Corporation pursuant to such public offering, all outstanding
shares of
-15-
<PAGE>
Preferred Stock shall automatically and without any further action on the part
of the Corporation convert to shares of Common Stock.
6Q. No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this paragraph 6 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment.
7. Redemption. The shares of Preferred Stock shall be redeemed as
----------
follows:
7A(1). Mandatory Redemption of Series D Preferred Stock. On January
------------------------------------------------
31, 2002, and on each of the next two anniversaries thereafter (the "Redemption
Dates", and each a "Redemption Date"), the Corporation shall redeem any
outstanding shares of Series D Preferred Stock according to the percentages
listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Date of Redemption Percentage of Shares of
- ------------------------------ Series D Preferred Stock
then Outstanding to be Redeemed
----------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<S> <C>
January 31, 2002 33-1/3% of all the shares of Series D Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2003 50% of all the shares of Series D Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2004 100% of all the shares of Series D Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
</TABLE>
7A(2). Mandatory Redemption of Series C Preferred Stock. On each
------------------------------------------------
Redemption Date, and after redemption in full of all shares of Series D
Preferred Stock to be redeemed pursuant to subparagraph 7A(1), the Corporation
shall redeem any outstanding shares of Series C Preferred Stock according to the
percentages listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Date of Redemption Percentage of Shares of
- ------------------------------ Series C Preferred Stock
then Outstanding to be Redeemed
----------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<S> <C>
January 31, 2002 33-1/3% of all the shares of Series C Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
January 31, 2003 50% of all the shares of Series C Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2004 100% of all the shares of Series C Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
</TABLE>
7A(3). Mandatory Redemption of Series B Preferred Stock. On each
------------------------------------------------
Redemption Date, and after redemption in full of all shares of Series D
Preferred Stock and all shares of Series C Preferred Stock to be redeemed on
each such date pursuant to subparagraphs 7A(1) and 7A(2), respectively, the
Corporation shall redeem any outstanding shares of Series B Preferred Stock
according to the percentages listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Date of Redemption Percentage of Shares of
- ------------------------------ Series B Preferred Stock
then Outstanding to be Redeemed
----------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------------
January 31, 2002 33-1/3% of all the shares of Series B Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2003 50% of all the shares of Series B Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2004 100% of all the shares of Series B Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
</TABLE>
7A(4). Mandatory Redemption of Series A Preferred Stock. On each
------------------------------------------------
Redemption Date, and after redemption in full of all shares of Series D
Preferred Stock, all shares of Series C Preferred Stock and all shares of Series
B Preferred Stock to be redeemed on each such date pursuant to subparagraphs
7A(1), 7A(2) and 7A(3), respectively, the Corporation shall redeem any
outstanding shares of Series A Preferred Stock according to the percentages
listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Date of Redemption Percentage of Shares of
- ------------------------------ Series A Preferred Stock
then Outstanding to be Redeemed
----------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------------
January 31, 2002 33-1/3% of all the shares of Series A Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2003 50% of all the shares of Series A Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
January 31, 2004 100% of all the shares of Series A Preferred Stock then
outstanding
- -------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
7B. Redemption Price and Payment. The shares of Series D Preferred
----------------------------
Stock to be redeemed on any Redemption Date shall be redeemed by paying for each
share in cash an amount equal to $4.00 per share plus, in the case of each
share, an amount equal to all dividends, declared but unpaid thereon, plus all
Series D Accruing Dividends, whether or not declared, computed to such
Redemption Date, such amount being referred to as the "Series D Redemption
Price". The shares of Series C Preferred Stock to be redeemed on any Redemption
Date shall be redeemed by paying for each share in cash an amount equal to $3.20
per share plus, in the case of each share, an amount equal to all dividends,
declared but unpaid thereon, plus all Series C Accruing Dividends, whether or
not declared, computed to such Redemption Date, such amount being referred to as
the "Series C Redemption Price". The shares of Series B Preferred Stock to be
redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to $3.20 per share plus, in the case of each share, an
amount equal to all dividends, declared but unpaid thereon, plus all Series B
Accruing Dividends, whether or not declared, computed to such Redemption Date,
such amount being referred to as the "Series B Redemption Price". The shares of
Series A Preferred Stock to be redeemed on any Redemption Date shall be redeemed
by paying for each share in cash an amount equal to $ .80 per share plus, in the
case of each share, an amount equal to all dividends, declared but unpaid
thereon, computed to such Redemption Date, such amount being referred to as the
"Series A Redemption Price." The Series D Redemption Price, the Series C
Redemption Price, the Series B Redemption Price and the Series A Redemption
Price are herein collectively referred to as the "Redemption Price." Such
payment shall be made in full on the applicable Redemption Date to the holders
entitled thereto.
7C. Redemption Mechanics. At least 20 but not more than 30 days prior
--------------------
to each Redemption Date, written notice (the "Redemption Notice") shall be given
by the Corporation by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, to each holder of record (at the close
of business on the business day next preceding the day on which the Redemption
Notice is given) of shares of Preferred Stock notifying such holder of the
redemption and specifying the Redemption Price, such Redemption Date, the number
of shares of Preferred Stock to be redeemed from such holder (computed on a pro
rata basis in accordance with the number of such shares held by all holders
thereof) and the place where said Redemption Price shall be payable. The
Redemption Notice shall be addressed to each holder at his address as shown by
the records of the Corporation. From and after the close of business on a
Redemption Date, unless there shall have been a default in the payment of the
Redemption Price, all rights of holders of shares of Preferred Stock (except the
right to receive the Redemption Price) shall cease with respect to the shares to
be redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Preferred Stock to be redeemed on such
Redemption Date, the holders of such shares shall share ratably in any funds
legally available for redemption of such shares according to the respective
amounts which would be payable to them if the full number of shares to be
redeemed on such Redemption Date were actually redeemed, provided, however: (i)
all shares of Series D Preferred Stock to be redeemed on any Redemption Date
shall be redeemed in full before any shares of Series C Preferred Stock, Series
B Preferred Stock or Series A Preferred
-18-
<PAGE>
Stock to be redeemed on such Redemption Date shall be so redeemed; (ii) all
shares of Series C Preferred Stock to be redeemed on any Redemption Date shall
be redeemed in full before any shares of Series B Preferred Stock or Series A
Preferred Stock to be redeemed on such Redemption Date shall be so redeemed; and
(iii) all shares of Series B Preferred Stock to be redeemed on such Redemption
Date shall be redeemed in full before any shares of Series A Preferred Stock to
be redeemed on such Redemption Date shall be so redeemed. The shares of
Preferred Stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Preferred Stock, such funds will be used,
at the end of the next succeeding fiscal quarter, to redeem the balance of such
shares, or such portion thereof for which funds are then legally available, on
the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares
---------------------------------------------------
of Preferred Stock redeemed pursuant to this paragraph 7 or otherwise acquired
by the Corporation in any manner whatsoever shall be canceled and shall not
under any circumstances be reissued; and the Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce accordingly
the number of authorized shares of Preferred Stock.
7E. Waiver of Redemption. For any redemption pursuant to
--------------------
subparagraphs 7A(1), 7A(2), 7A(3) or 7A(4), the holders of a majority of shares
of Common Stock issuable upon conversion of outstanding shares of any series of
Preferred Stock covered by any such subparagraph may, by written notice given to
the Company not later than ten (10) days preceding a Redemption Date, waive the
redemption to occur on such Redemption Date. Any waiver given pursuant to this
paragraph 7E shall be given by each series voting separately. The waiver by the
holders of one series of Preferred Stock shall be effective only with respect to
such series of Preferred Stock and shall not abrogate the requirement to redeem
the shares of any other series of Preferred Stock as required herein. Any such
waiver may pertain to one or more Redemption Dates and may also be conditioned
upon waiver by the holders of each other series of Preferred Stock.
8. Amendments. No provision of these terms of the Preferred Stock may be
----------
amended, modified or waived without the written consent or affirmative vote of
the holders of at least two-thirds of the shares of Common Stock issuable upon
the conversion of Preferred Stock, voting together as a single series, and the
written consent or affirmative vote of the holders of at least a majority of the
shares of Preferred Stock comprising each series thereof.
ARTICLE VI
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
-19-
<PAGE>
ARTICLE VII
(A) The Board of Directors of the Corporation shall divide the directors
into three classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the first annual meeting of
stockholders following the date this Article VII becomes effective (the
"Effective Date") or any special meeting in lieu thereof, the term of office of
- ---------------
the second class to expire at the second annual meeting of stockholders after
the Effective Date or any special meeting in lieu thereof, and the term of
office of the third class to expire at the third annual meeting of stockholders
or any special meeting in lieu thereof. At each annual meeting of stockholders
or special meeting in lieu thereof following such initial classification,
directors elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders or special meeting in lieu thereof after their election and until
their successors are duly elected and qualified.
(B) Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation, and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall, if reasonably possible, be apportioned by the Board of
Directors between the three classes of directors so as to ensure that no one
class has more than one director more than any other class. To the extent
reasonably possible, consistent with the foregoing rule, any newly created
directorships shall be added to those classes whose terms of office are to
expire at the latest dates following such allocation and newly eliminated
directorships shall be subtracted from those classes whose terms of office are
to expire at the earliest dates following such allocation, unless otherwise
provided for from time to time by resolution adopted by a majority of the
directors then in office, although less than a quorum. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law, may exercise the powers of the full Board of Directors until
the vacancy is filled. Vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of directors
shall be filled by a vote of the majority of the directors then in office,
though less than a quorum, or by a sole remaining director. Any director or the
entire Board of Directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors.
ARTICLE VIII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
-20-
<PAGE>
(B) The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VIII, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VIII shall eliminate or reduce the effect of this Article VIII
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VIII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision."
-21-
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Redmond, Washington on May 7,1999.
/s/ Jeffrey S. Brown
-----------------------------------------------
Jeffrey S. Brown, President
/s/ Craig E. Sherman
-----------------------------------------------
Craig E. Sherman, Secretary
-22-
<PAGE>
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DATA CRITICAL CORPORATION
THE UNDERSIGNED, JEFFREY S. BROWN AND CRAIG E. SHERMAN, HEREBY CERTIFY THAT:
1. They are the duly elected and acting President and Secretary,
respectively, of Data Critical Corporation, a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 12, 1998.
3. The Certificate of Incorporation of this corporation was amended and
restated on May 7, 1999.
4. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this corporation is Data Critical Corporation (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805,County of New Castle. The name
of its registered agent at such address is Corporation Service Corporation.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
------------ ---------------
The total number of shares which the Corporation is authorized to issue is
Twenty-Eight Million (28,000,000) shares, each
<PAGE>
with a par value of $0.001 per share. Twenty-Five Million (25,000,000) shares
shall be Common Stock and Three Million (3,000,000) shares shall be Preferred
Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
(A) The Board of Directors of the Corporation shall divide the directors
into three classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the first annual meeting of
stockholders following the date this Article VI becomes effective (the
"Effective Date") or any special meeting in lieu thereof, the term of office of
- ---------------
the second class to expire at the second annual meeting of stockholders after
the Effective Date or any special meeting in lieu thereof, and the term of
office of the third class to expire at the third annual meeting of stockholders
or any special meeting in lieu thereof. At each annual meeting of stockholders
or special meeting in lieu thereof following such initial classification,
directors elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders or special meeting in lieu thereof after their election and until
their successors are duly elected and qualified.
(B) Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation, and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall, if reasonably possible, be apportioned by the Board of
Directors between the three classes of directors so as to ensure that no one
class has more than one director more than any other class. To the extent
reasonably possible, consistent with the foregoing rule,
-2-
<PAGE>
any newly created directorships shall be added to those classes whose terms of
office are to expire at the latest dates following such allocation and newly
eliminated directorships shall be subtracted from those classes whose terms of
office are to expire at the earliest dates following such allocation, unless
otherwise provided for from time to time by resolution adopted by a majority of
the directors then in office, although less than a quorum. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law, may exercise the powers of the full Board of Directors until
the vacancy is filled. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
ARTICLE VII
The vote of the stockholders of the Corporation which shall be required to
approve any Business Combination (as defined below) shall be as set forth in
this Article VII.
(A) In addition to any affirmative vote required by law, any other
provision of this Certificate of Incorporation or otherwise, and except as
otherwise expressly provided in paragraph (B) or (F) of this Article VII, none
of the following transactions shall be consummated unless and until such
transaction shall have been approved by the affirmative vote of the holders of
at least 66-2/3 percent of the combined voting power of the outstanding shares
of stock of all classes and series of the Corporation entitled to vote generally
in the election of directors ("Capital Stock"):
-------------
(1) any merger or consolidation of the Corporation or any material
Subsidiary (as defined below) with or into (a) any corporation which is an
Interested Shareholder (as defined below) or (b) any other corporation which is
or after such merger or consolidation would be an Interested Shareholder; or
(2) any sale, License (as defined below), lease, exchange, mortgage,
pledge, transfer or other disposition (whether in one transaction or a series of
transactions) to or with any Interested Shareholder of any material asset or
assets of the Corporation; or
(3) the issuance or transfer by the Corporation or any Subsidiary
(whether in one transaction or a series of transactions) to an Interested
Shareholder of any securities of the Corporation or any Subsidiary in exchange
for cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value (as defined below) of $50,000,000 or more; or
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or any material Subsidiary; or
(5) any reclassification of any securities of the Corporation
(including any reverse stock split), any recapitalization of the Corporation,
any merger or consolidation of the Corporation with or into any of its
Subsidiaries, or any other transaction (whether or not with or involving any
Interested Shareholder), which has the effect, directly or indirectly, of
increasing
-3-
<PAGE>
the proportionate share of the outstanding shares of any class of stock or
series thereof of the Corporation or of any Subsidiary directly or indirectly
Beneficially Owned (as defined below) by any Interested Shareholder or as a
result of which the stockholders of the Corporation would cease to be
stockholders of a corporation having, as part of its certificate of
incorporation provisions to the same effect as this Article VII and the
provisions of Article VII hereof relating to amendments or changes to this
Article VII.
The term "Business Combination" as used in this Article VII shall mean any
--------------------
transaction or proposed transaction which is referred to in any one or more of
the foregoing subparagraphs (1) through (5) of this paragraph (A) of this
Article VII.
(B) The provisions of paragraph (A) of this Article VII shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such vote, if any, as is required by law and any other
Article hereof or any agreement between the Corporation and any national
securities exchange or otherwise, if all of the conditions specified in either
of the following subparagraphs (1) or (2) are satisfied:
(1) such Business Combination shall have been approved by a majority
of the Disinterested Directors (as defined below) or, in the case of a License,
approved by a majority of the Disinterested Directors or a committee of
Disinterested Directors designated by the Board of Directors; or
(2) if all the conditions specified in each of the following
subparagraphs (a), (b), (c), (d) and (e) are satisfied:
(a) the aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of any
consideration, other than cash to be received per share by holders of Capital
Stock in such Business Combination, shall be at least equal to the higher of the
following:
(i) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees and other
expenses) paid by the Interested Shareholder involved in such Business
Combination for any shares of Capital Stock acquired by it during the five-year
period immediately prior to the consummation date of such Business Combination;
and
(ii) the Fair Market Value per share of Capital Stock on the
Determination Date (as defined below) in respect of such Interested Shareholder,
the Announcement Date (as defined below) or the consummation date of such
Business Combination, whichever is highest;
provided, however, that the prices referred to in the foregoing clauses (i)
and (ii) of this subparagraph (a) shall be adjusted to reflect fairly any stock
dividend, stock split, reverse stock split, combination of shares,
recapitalization, reorganization or similar event affecting the number of shares
of Capital Stock outstanding and the market price per share of outstanding
-4-
<PAGE>
shares of Capital Stock which has occurred after the date as of which such price
is determined; and
(b) unless otherwise specifically required by law, the holders
of shares of Capital Stock shall have the right, at their option, to receive
payment in cash as the consideration for their shares in the Business
Combination, if cash was previously paid by the Interested Shareholder involved
in such Business Combination in order to acquire any shares of Capital Stock or
any interest in shares of Capital Stock within the two-year period immediately
prior to the Announcement Date; and
(c) after the Determination Date in respect of the Interested
Shareholder involved in such Business Combination and prior to the consummation
of such Business Combination:
(i) if regular dividends have been paid by the Corporation,
except as approved by a majority of the Disinterested Directors, there shall
have been no failure to declare and pay at the regular date therefor any
dividend (whether or not cumulative);
(ii) there shall have been no reduction in the annual rate
of dividends, if any, paid on the Capital Stock (except as necessary to reflect
any subdivision of the Capital Stock), except as approved by a majority of the
Disinterested Directors;
(iii) there shall have been an increase in such annual rate
of dividends as necessary to reflect any reclassification (including any reverse
stock split or combination of shares), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of outstanding
shares of the Capital Stock, unless the failure to increase such annual rate is
approved by a majority of the Disinterested Directors; and
(iv) such Interested Shareholder shall have not have become
the beneficial owner of additional shares of Capital Stock except as part of the
transaction which results in such Interested Shareholder becoming an Interested
Shareholder; and
(d) after the Determination Date in respect of the Interested
Shareholder involved in such Business Combination, such Interested Shareholder
shall not have received the benefit, directly or indirectly (except as a
stockholder of the Corporation, in proportion to its stockholdings), of any
loans, advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise;
and
(e) a proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing or revising such Act, rules or regulations) shall, at the
Corporation's expense, be mailed to stockholders of the Corporation at least 30
days prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act,
rules or regulations or subsequent provisions), and the Disinterested Directors,
if there are any at the
-5-
<PAGE>
time, shall have been provided a reasonable opportunity to state their views
therein with respect to such proposed Businesses Combination and to include
therewith an opinion of an independent investment banking or appraisal firm
selected by the Disinterested Directors with respect to such Business
Combination.
(C) For the purposes of this Article VII:
(1) An "Affiliate" of a person shall mean any person who, directly or
---------
indirectly, controls, is controlled by or is under common control with such
person.
(2) "Announcement Date" with respect to any Business Combination
-----------------
means the date on which the proposal of such Business Combination is first
publicly announced.
(3) An "Associate" shall mean
---------
(a) with respect to a corporation or association, any officer or
director thereof or of a subsidiary thereof;
(b) with respect to a partnership, any general partner thereof or
any limited partner thereof having a ten percent ownership interest in such
partnership;
(c) with respect to any other trust or an estate, any officer or
trustee thereof or of any subsidiary thereof;
(d) with respect to any other trust or an estate, any trustee,
executor or similar fiduciary and any person who has a substantial interest as a
beneficiary of such trust or estate.
(e) with respect to a natural person, the spouses and children
thereof and any other relative thereof or of the spouse thereof who has the same
home; and
(f) any Affiliate of any such person.
(4) A person shall be a "Beneficial Owner" of, or have "Beneficial
---------------- ----------
Ownership" of or "Beneficially Own," any Capital Stock over which such person or
- --------- ----------------
any of its Affiliates or Associates, directly or indirectly, through any
contract, arrangement, understanding or relationship, has or shares or, upon the
exercise of any conversion right, exchange right, warrant, option or similar
interest (whether or not then exercisable), would have or share either (a)
voting power (including the power to vote or to direct the voting) of such
security or (b) investment power (including the power to dispose or direct the
disposition) of such security. For the purposes of determining whether a person
is an Interested Shareholder, the number of shares of Capital Stock deemed to be
outstanding shall include any shares Beneficially Owned by such Person even
though not actually outstanding, but shall not include any other shares of
Capital Stock which are not outstanding but which may be issuable to other
persons pursuant to any
-6-
<PAGE>
agreement, arrangement or understanding, or upon exercise of any conversion
right, exchange right, warrant, option or similar interest.
(5) "Consolidated Transaction Reporting System" shall mean the system
-----------------------------------------
of reporting securities information operated under the authority of Rule 11Aa3-1
under the Securities Exchange Act of 1934, as such rule may from time to time be
amended, and any successor rule or rules.
(6) "Determination Date" in respect of an Interested Shareholder shall
------------------
mean the date on which such Interested Shareholder first became an Interested
Shareholder.
(7) "Disinterested Director" shall mean any member of the Board of
----------------------
Directors of the Corporation who is not an Affiliate or Associate of, and was
not directly or indirectly a nominee of, any Interested Shareholder involved in
such Business Combination or any Affiliate or Associate of such Interested
Shareholder and who (a) was a member of the Board of Directors of the
Corporation prior to the time that such Interested Shareholder became an
Interested Shareholder or (b) is a successor of a Disinterested Director and was
nominated to succeed a Disinterested Director by a majority of the Disinterested
Directors on the Board of Directors at the time of his nomination. Any
reference to "Disinterested Directors" shall refer to a single Disinterested
-----------------------
Director if there is only one Disinterested Director. Any reference to an
approval, designation or determination by a majority of the Disinterested
Directors shall mean such approval, designation or determination by a committee
of the Board of Directors comprised of all Disinterested Directors and
exercising its authority as a committee of the Board to the extent permissible
by law.
(8) "Fair Market Value" as of any particular date shall mean (a) in
-----------------
the case of stock, the average of the closing sale price during the 90 trading
days immediately preceding the date in question of a share of such stock on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange, the average of the last sale prices at 4:00 p.m.
New York time during the 90 trading days immediately preceding the date in
question reported in the Consolidated Transaction Reporting System or, if such
stock is not reported, the average of the highest reported bid and the lowest
reported asked quotations for a share of such stock furnished by the National
Association of Securities Dealers Automated Quotation System or any successor
quotation reporting system or, if quotations are not available in such system,
as furnished by the National Quotation Bureau Incorporated or, if quotations are
not available in such system, any similar organization furnishing quotations
and, if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Disinterested Directors in good faith, and (b) in the case of property other
than cash or stock, the fair market value of stock or property, as the case may
be, on the date in question as determined by a reputable investment banking or
appraisal firm in good faith (such firm to be engaged solely on behalf of the
stockholders other than the Interested Shareholder, to be paid a reasonable fee
for their services by the Corporation upon receipt of such opinion and which fee
shall not be contingent on the consummation of the action or transaction, to be
a firm which has not previously been associated with or rendered substantial
services to or acted as manager of an
-7-
<PAGE>
underwriting or as agent for the Interested Shareholder or any other person
whose stock in the Corporation or any Subsidiary the Interested Shareholder
beneficially owns or controls, and to be selected by a majority of the
Disinterested Directors) and which value has been approved by a majority of the
Disinterested Directors in good faith.
(9) "Interested Shareholder" shall mean any person, other than the
----------------------
Corporation, any Subsidiary or any employee benefit plan of the Corporation or
any Subsidiary, who or which (a) is the Beneficial Owner, directly or
indirectly, of shares of Capital Stock which are entitled to cast five percent
or more of the total votes which all of the then outstanding shares of Capital
Stock are entitled to cast in the election of directors or is an Affiliate or
Associate of any such person, or (b) acts with any other person as a
partnership, limited partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of securities of the Corporation, and such group
is the Beneficial Owner, directly or indirectly, of shares of Capital stock
which are entitled to cast five percent or more of the total votes which all of
the then outstanding shares of Capital Stock are entitled to cast in the
election of directors, and any reference to a particular Interested Shareholder
involved in a Business Combination shall also refer to any Affiliate or
Associate thereof, any predecessor thereto and any other person acting as a
member of a partnership, limited partnership, syndicate or group with such
particular Interested Shareholder within the meaning of the foregoing clause (b)
of this subparagraph (9).
(10) "License" shall mean a material license which is not granted in
-------
standard commercial transactions and is not generally available to commercial
customers of the Corporation.
(11) A "person" shall mean any individual, firm, corporation (which
------
shall include a business trust), partnership, joint venture, trust or estate,
association or other entity.
(12) "Subsidiary" shall mean any corporation or partnership of which a
----------
majority of any class of its equity securities or partnership interest is owned,
directly or indirectly, by the Corporation.
(D) A majority of the Disinterested Directors shall have the power and
duty to determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Article VII,
including, without limitation (1) whether a person is an Interested Shareholder,
(2) the number of shares of Capital Stock Beneficially Owned by any person, (3)
whether a person is an Affiliate or Associate of another person, (4) whether the
requirements of paragraph (2) of this Article VII have been met with respect to
any Business Combination, and (5) whether two or more transactions constitute a
"series of transactions" for purposes of paragraph (A) of this Article VII. The
----------------------
good faith determination of a majority of the Disinterested Directors on such
matters shall be conclusive and binding for all purposes of this Article VII.
(E) Nothing contained in this Article VII shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
-8-
<PAGE>
ARTICLE VIII
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each share
held. No stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE IX
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Second Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE XI
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE XII
Meetings of stockholders may be held within or without the State of Delaware,
as the Bylaws may provide. The books of the Corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the Bylaws of the Corporation.
ARTICLE XIII
The Corporation shall have perpetual existence.
ARTICLE XIV
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
If the General Corporation Law of Delaware is hereafter amended to authorize,
with the approval of a corporation's stockholders, further reductions in the
liability of the
-9-
<PAGE>
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XIV shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XV
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the Corporation
to provide indemnification) though bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to a corporation, its stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XV shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
* * *
-10-
<PAGE>
The foregoing Second Amended and Restated Certificate of Incorporation has
been duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Redmond, Washington, on May 7, 1999.
------------
/s/ Jeffrey S. Brown
---------------------------------------
Jeffrey S. Brown, President
/s/ Craig E. Sherman
---------------------------------------
Craig E. Sherman, Secretary
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS
OF
DATA CRITICAL CORPORATION
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Registered Office.
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Corporation Service Corporation.
1.2 Other Offices.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 Place Of Meetings.
-----------------
Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 Annual Meeting.
--------------
The annual meeting of stockholders shall be held on such date, time
and place, either within or without the State of Delaware, as may be designated
by resolution of the Board of Directors each year. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 Special Meeting.
---------------
(a) A special meeting of the stockholders may be called at any time
by the Board of Directors, the chairman of the board or the president.
(b) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
notice of meeting given in accordance with Section 2.2(b). Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be selected pursuant
<PAGE>
to such notice of meeting (i) by or at the direction of the board of directors
or (ii) by any stockholder of the corporation who is a stockholder of record at
the time of giving of notice provided for in this paragraph, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in Section 2.5.
2.4 Notice of Stockholder's Meetings; Affidavit Of Notice.
-----------------------------------------------------
All notices of meetings of stockholders shall be in writing and shall
be sent or otherwise given in accordance with this Section 2.4 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting (or such longer or
shorter time as is required by Section 2.5 of these Bylaws, if applicable). The
notice shall specify the place, date, and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.5 Advance Notice of Stockholder Nominees.
--------------------------------------
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the corporation
may be made at a meeting of stockholders by or at the direction of the board of
directors or by any stockholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than sixty (60) days nor more than ninety
(90) days prior to the meeting; provided, however, that in the event that less
than sixty (60) days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or re-
election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the corporation's books,
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<PAGE>
of such stockholder and (ii) the class and number of shares of the corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
director shall furnish to the secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 2.5. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded.
2.6 Quorum.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or (b)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 Conduct Of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.9 Voting.
------
(a) The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.11 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to
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<PAGE>
voting rights of fiduciaries, pledgors and joint owners of stock and to voting
trusts and other voting agreements).
(b) Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 Waiver Of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 Record Date For Stockholder Notice; Voting.
------------------------------------------
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If the Board
of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.12 Proxies.
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the
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<PAGE>
stockholder and filed with the secretary of the corporation, but no such proxy
shall be voted or acted upon after three (3) years from its date, unless the
proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 Number Of Directors.
-------------------
Upon the adoption of these Bylaws, the number of directors
constituting the entire Board of Directors shall be seven. Thereafter, this
number may be changed by a resolution of the Board of Directors or of the
stockholders, subject to Section 3.4 of these Bylaws. No reduction of the
authorized number of directors shall have the effect of removing any director
before such director's term of office expires.
3.3 Election, Qualification And Term Of Office Of Directors.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
The Board of Directors of the corporation shall divide the directors
into three classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the first annual meeting of
stockholders following the date these Bylaws become effective (the "Effective
---------
Date") or any special meeting in lieu thereof, the term of office of the second
- ----
class to expire at the second annual meeting of stockholders after the Effective
Date or any special meeting in lieu thereof and the term of office of the third
class to expire at the third annual meeting of stockholders or any special
meeting in lieu thereof. At each annual meeting of shareholders or special
meeting in lieu thereof following such initial classification, directors elected
to succeed those directors whose terms expire shall be elected for a term of
office to
-5-
<PAGE>
expire at the third succeeding annual meeting of shareholders or special meeting
in lieu thereof after their election and until their successors are duly elected
and qualified.
Elections of directors need not be by written ballot.
3.4 Resignation And Vacancies.
-------------------------
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
A vacancy created by the removal of a director by the vote of the stockholders
or by court order may be filled only by the affirmative vote of a majority of
the shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a majority of the
quorum. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
Unless otherwise provided in the certificate of incorporation or
these Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors
-6-
<PAGE>
chosen by the directors then in office as aforesaid, which election shall be
governed by the provisions of Section 211 of the General Corporation Law of
Delaware as far as applicable.
3.5 Place Of Meetings; Meetings By Telephone.
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 Quorum.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the
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<PAGE>
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 Waiver Of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 Board Action By Written Consent Without A Meeting.
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the
board or committee may be executed by telex, telecopy or other facsimile
transmission, and such facsimile shall be valid and binding to the same extent
as if it were an original.
3.11 Fees And Compensation Of Directors.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
3.12 Approval Of Loans To Officers.
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall
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be deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
3.13 Removal Of Directors.
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 Chairman Of The Board Of Directors.
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
----------
4.1 Committees Of Directors.
-----------------------
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the corporation, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (a) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property
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and assets, (d) recommend to the stockholders a dissolution of the corporation
or a revocation of a dissolution, or (e) amend the Bylaws of the corporation;
and, unless the board resolution establishing the committee, the Bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 Meetings And Action Of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 Appointment Of Officers.
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
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5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 Removal And Resignation Of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 Vacancies In Offices.
--------------------
Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
5.6 Chief Executive Officer.
-----------------------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in
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the office of president of a corporation and such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
5.8 Vice Presidents.
---------------
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by
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<PAGE>
the Board of Directors, shall render to the president, the chief executive
officer, or the directors, upon request, an account of all his or her
transactions as chief financial officer and of the financial condition of the
corporation, and shall have other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
5.11 Representation Of Shares Of Other Corporations.
----------------------------------------------
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by the person
having such authority.
5.12 Authority And Duties Of Officers.
--------------------------------
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
--------------------------------------------------------------------
6.1 Indemnification Of Directors And Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or was
a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 Indemnification Of Others.
-------------------------
The corporation shall have the power, to the maximum extent and in
the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments,
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fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.2, an
"employee" or "agent" of the corporation (other than a director or officer)
includes any person (a) who is or was an employee or agent of the corporation,
(b) who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (c) who was an employee or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.3 Payment Of Expenses In Advance.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 Insurance.
---------
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses
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were incurred or other amounts were paid, which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance And Inspection Of Records.
-------------------------------------
The corporation shall, either at its principal executive offices or
at such place or places as designated by the Board of Directors, keep a record
of its stockholders listing their names and addresses and the number and class
of shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 Inspection By Directors.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and records,
the stock ledger, and the stock list and to make copies or extracts therefrom.
The Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 Annual Statement To Stockholders.
--------------------------------
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
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ARTICLE VIII
GENERAL MATTERS
---------------
8.1 Checks.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 Execution Of Corporate Contracts And Instruments.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares.
--------------------------------------
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or vice-
president, and by the chief financial officer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon
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partly paid shares of the same class, but only upon the basis of the percentage
of the consideration actually paid thereon.
8.4 Special Designation On Certificates.
-----------------------------------
If the corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 Dividends.
---------
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
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The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include but
not be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 Fiscal Year.
-----------
The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors and may be changed by the Board of Directors.
8.9 Seal.
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 Transfer Of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 Stock Transfer Agreements.
-------------------------
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 Registered Stockholders.
-----------------------
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact
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that such power has been so conferred upon the directors shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal
Bylaws.
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EXHIBIT 4.2
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
February 22, 1995
TO: (i) each of the several
Purchasers named in Schedule I to the
Series B Convertible Participating
Preferred Stock Purchase Agreement of
even date herewith and (ii) each
person who is a party to that certain
Registration Agreement dated
April 27, 1993
Dear Sirs:
This will confirm that in consideration of: (i) the agreement of the
Purchasers to purchase an aggregate of at least 2,500,000 shares (the "Series B
Preferred Shares") of Series B Convertible Participating Preferred Stock, $.01
par value, of Data Critical Corp., an Oklahoma corporation (the "Company"),
pursuant to the Series B Convertible Participating Preferred Stock Purchase
Agreement of even date herewith (the "Purchase Agreement") between the Company
and the Purchasers and as an inducement to the Purchasers to consummate the
transactions contemplated by the Purchase Agreement, and (ii) the agreement by
each person who is a party to that certain Registration Agreement, dated April
27, 1993 (the "Registration Agreement") to amend and restate the Registration
Agreement in its entirety, the Company and each party hereto hereby covenants
and agrees that the Registration Agreement is hereby amended and restated in its
entirety to read as set forth herein and that each party hereto shall be subject
to all of the rights, benefits and obligations of the Registration Agreement as
so amended and restated.
1. Certain Definitions. As used in this Agreement, the following terms
--------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
------------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value, of the Company,
-------------
as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-------------------
conversion of the Preferred Shares and exercise of the Warrants.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
-------------
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Preferred Shares" shall mean: (i) the Series B Preferred Shares and
-----------------
(ii) the shares of Series A Convertible Participating Preferred Stock, $.01 par
value, of the Company issued by the Company pursuant to that certain Preferred
Stock Purchase Agreement, dated April 27, 1993, between the Company and ML
Oklahoma Venture Partners, Limited Partnership.
"Registration Expense" shall mean the expenses so described in Section 8.
----------------------
"Restricted Stock" shall mean the Conversion Shares, excluding Conversion
------------------
Shares which have been: (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
----------------
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
------------------
"Warrants" shall mean Common Stock Purchase Warrants exercisable for shares
----------
of Common Stock of the Company issued by the Company on September 23, 1994
pursuant to a certain Bridge Loan Agreement, dated such date, among the Company
and the other parties named therein.
2. Restrictive Legend. Each certificate representing Preferred Shares,
-------------------
Warrants or Conversion Shares shall, except as otherwise provided in this
Section 2 or in Section 3, be stamped or otherwise imprinted with a legend
substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE
LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Testa, Hurwitz Thibeault shall
be satisfactory) the securities represented thereby may be publicly sold without
registration under the Securities Act and any applicable state securities laws.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
----------------------------
Preferred Shares, Warrants or Conversion Shares (other than under the
circumstances described in Sections 4, 5 or 6), the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel satisfactory to
the
<PAGE>
Company (it being agreed that Testa, Hurwitz & Thibeault shall be satisfactory)
to the effect that the proposed transfer may be effected without registration
under the Securities Act and any applicable state securities laws, whereupon the
holder of such stock shall be entitled to transfer such stock in accordance with
the terms of its notice; provided, however, that no such opinion of counsel
------------------
shall be required for a transfer to one or more partners of the transferor (in
the case of a transferor that is a partnership) or to an affiliated corporation
(in the case of a transferor that is a corporation). Each certificate for
Preferred Shares, Warrants or Conversion Shares transferred as above provided
shall bear the legend set forth in Section 2, except that such certificate shall
not bear such legend if: (i) such transfer is in accordance with the provisions
of Rule 144 (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 3 shall not apply to securities which are not
required to bear the legend prescribed by Section 2 in accordance with the
provisions of that Section.
4. Required Registration. (a) At any time, or from time to time, the
---------------------
holders of Restricted Stock constituting at least 40% of the total shares of
Restricted Stock then outstanding may request the Company to register under the
Securities Act all or any portion of the shares of Restricted Stock held by such
requesting holder or holders for sale in the manner specified in such notice,
provided that the shares of Restricted Stock for which registration has been
- --------
requested shall constitute at least 20% of the total shares of Restricted Stock
originally issued if such holder or holders shall request the registration of
less than all shares of Restricted Stock then held by such holder or holders (or
any lesser percentage if the reasonably anticipated aggregate price to the
public of such public offering would exceed $5,000,000). For purposes of this
Section 4 and Sections 5, 6, 13(a) and 13(d), the term "Restricted Stock" shall
be deemed to include the number of shares of Restricted Stock which would be
issuable to a holder of Preferred Shares and/or Warrants upon conversion and
exercise of all Preferred Shares and/or Warrants held by such holder at such
time, provided, however, that the only securities which the Company shall be
-------- -------
required to register pursuant hereto shall be shares of Common Stock, and
provided, further, however, that, in any underwritten public offering
- -------- ------- -------
contemplated by this Section 4 or Sections 5 and 6, the holders of Preferred
Shares and warrants shall be entitled to sell such Preferred Shares and warrants
to the underwriters for conversion, exercise and sale of the shares of Common
Stock issued upon conversion or exercise thereof. Notwithstanding anything to
the contrary contained herein, no request may be made under this Section 4
within 120 days after the effective date of a registration statement filed by
the Company covering a firm commitment underwritten public offering in which the
holders of Restricted Stock shall have been entitled to join pursuant to
Sections 5 or 6 and in which there shall have been effectively registered all
shares of Restricted Stock as to which registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the Company shall
immediately notify all holders of Restricted Stock from whom notice has not been
received and shall use its best efforts to register under the Securities Act,
for public sale in accordance with the method of disposition specified in such
notice from requesting holders, the number of shares of Restricted Stock
specified in such notice (and in all notices received by the Company from other
holders within 30 days after the giving of such notice by the Company). If such
method of disposition shall be an underwritten public offering, the holders of a
majority of the shares of Restricted Stock to be sold in
<PAGE>
such offering may designate the managing underwriter of such offering, subject
to the approval of the Company, which approval shall not be unreasonably
withheld or delayed. The Company shall be obligated to register Restricted Stock
pursuant to this Section 4 on two occasions only, provided, however, that such
-------- -------
obligation shall be deemed satisfied only when a registration statement covering
all shares of Restricted Stock specified in notices received as aforesaid, for
sale in accordance with the method of disposition specified by the requesting
holders, shall have become effective and, if such method of disposition is a
firm commitment underwritten public offering, all such shares shall have been
sold pursuant thereto.
(c) The Company shall be entitled to include in any registration statement
referred to in this Section 4, for sale in accordance with the method of
disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall be
an underwritten public offering), such inclusion would adversely affect the
marketing of the Restricted Stock to be sold. Except for registration statements
on Form S-4, S-8 or any successor thereto, the Company will not file with the
Commission any other registration statement with respect to its Common Stock,
whether for its own account or that of other stockholders, from the date of
receipt of a notice from requesting holders pursuant to this Section 4 until the
completion of the period of distribution of the registration contemplated
thereby.
5. Incidental Registration. If the Company at any time (other than
-----------------------
pursuant to Section 4 or Section 6) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of its Restricted Stock, the Company will use its best efforts to
cause the Restricted Stock as to which registration shall have been so requested
to be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit the
sale or other disposition by the holder of such Restricted Stock so registered.
In the event that any registration pursuant to this Section 5 shall be, in whole
or in part, an underwritten public offering of Common Stock, the number of
shares of Restricted Stock to be included in such an underwriting may be reduced
(pro rata among the requesting holders based upon the number of shares of
Restricted Stock owned by such holders) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein, provided,
--------
however, that such number of shares of Restricted Stock shall not be reduced if
- -------
any shares are to be included in such underwriting for the account of any person
other than the Company or requesting holders of Restricted Stock, and provided,
--------
further, however, that in no event may less than one-third of the total number
- ------- -------
of shares of Common Stock to be included in such underwriting be made available
for shares of Restricted Stock. Notwithstanding the foregoing provisions, the
Company may withdraw any registration statement referred to in this Section 5
without thereby incurring any liability to the holders of Restricted Stock.
6. Registration on Form S-3. If at any time (i) a holder or holders of
------------------------
Preferred Shares, Warrants or Restricted Stock request that the Company file a
registration statement on
<PAGE>
Form S-3 or any successor thereto for a public offering of all or any portion of
the shares of Restricted Stock held by such requesting holder or holders, the
reasonably anticipated aggregate price to the public of which would exceed
$250,000, and (ii) the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares, then the Company shall use its best
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of shares of Restricted Stock specified in such
notice. Whenever the Company is required by this Section 6 to use its best
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 4 (including but not limited to the requirement that
the Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration, provided, however, that there shall be no
-----------------
limitation on the number of registrations on Form S-3 which may be requested and
obtained under this Section 6, and provided, further, however, that the
---------------------------
requirements contained in the first sentence of Section 4(a) shall not apply to
any registration on Form S- which may be requested and obtained under this
Section 6.
7. Registration Procedures. If and whenever the Company is required by
------------------------
the provisions of Sections 4, 5 or 6 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 4,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers, intended
method of disposition set forth in such registration statement for such period,
(c) furnish to each seller of Restricted Stock and to each underwriter
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided, however, that the Company shall not for any such purpose be required
- ------------------
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
<PAGE>
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(a) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such seller,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters or by
such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(h) make available for inspection by each seller of Restricted Stock,
any underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby and 120 days
after the effective date thereof.
<PAGE>
In connection with each registration hereunder, the sellers of Restricted
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying with
--------
Sections 4, 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance and fees and
disbursements of one counsel for the sellers of Restricted Stock, but excluding
any Selling Expenses, are called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Restricted Stock are
called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution. (a) In the event of a registration
--------------------------------
of any of the Restricted Stock under the Securities Act pursuant to Sections 4,
5 or 6, the Company will indemnify and hold harmless each seller of such
Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
-------- -------
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such
<PAGE>
seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
- -------- -------
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
- -------- ------- -------
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such ' registration statement bears to the total
public offering price of all securities sold thereunder, but not in any event to
exceed the proceeds received by such seller from the sale of Restricted Stock
covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
--------
however, that, if the defendants in
- -------
<PAGE>
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder
of Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Capital Stock. If, and as often as, there is any change in
------------------------
the Capital Stock of the Company by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Capital Stock as so
changed.
11. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
<PAGE>
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
12. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
13. Miscellaneous.
--------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or telex,
addressed as follows:
if to the Company or any other party hereto, at the address of such
party set forth beneath such party signature to this Agreement;
if to any subsequent holder of Preferred Shares, Warrants or
Restricted Stock, to it at such address as may have been furnished to the
Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares, warrants
or Restricted Stock) or to the
<PAGE>
holders of Preferred Shares, Warrants or Restricted Stock (in the case of the
Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Oklahoma.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of at least two-thirds of the outstanding shares of Restricted Stock.
(e) This 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.
(f) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, each holder of
Restricted Stock who is a party to this Agreement shall agree not to sell
publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 90 days following the effective date 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 this Agreement, all other persons selling shares of Common Stock
in such offering, all persons holding in excess of 1% of the capital stock of
the Company on a fully diluted basis and all executive officers and directors of
the Company shall also have agreed not to sell publicly their Common Stock under
the circumstances and pursuant to the terms set forth in this Section 13(f).
(g) Notwithstanding the provisions of Section 7 (a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not to
exceed 60 days in any 24-month period if there exists at the time material non-
public information relating to the Company which, in the reasonable opinion of
the Company, should not be disclosed
(h) The Company shall not grant to any third party any registration
rights more favorable than or inconsistent with any of those contained herein,
so long as any of the registration rights under this Agreement remains in
effect.
(i) if any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) Any Additional Purchaser (as that term is defined in the Purchase
Agreement) may become a party to this Agreement by the execution of a
counterpart of this Agreement by the Company and such Additional Purchaser.
<PAGE>
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
DATA CRITICAL CORP.
By: /s/
Jeffrey S. Brown, President
AGREED TO AND ACCEPTED as of the date first above written.
PURCHASERS:
APEX INVESTMENT FUND II, L.P.
BY: Apex Management Partnership, its
General Partner
By: George M. Middlemas, General Partner
---------
<PAGE>
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Effective September 18, 1996, pursuant to Amendment No. 3 to that certain
Series B Convertible Participating Preferred Stock Purchase Agreement, executed
by Data Critical Corp. and the holders of more than two-thirds of the
outstanding shares of Restricted Stock, the Amended and Restated Registration
Rights Agreement was amended as follows:
I. Definition of Preferred Shares. The definition of "Preferred Shares"
--------------------------------
was amended to read in its entirety as follows:
"Preferred Shares" shall mean: (i) the Series B Preferred Shares;
-------------------------
(ii) the shares of Series A Convertible Participating Preferred Stock, $.01
par value, of the Company issued by the Company pursuant to that certain
Preferred Stock Purchase Agreement, dated April 27, 1993, between the
Company and ML Oklahoma Venture Partners, Limited Partnership; and (iii)
the shares of Series C Convertible Participating Preferred Stock, $.01 par
value, of the Company issued by the Company pursuant to the terms of that
certain Series C Convertible Participating Preferred Stock Purchase
Agreement.
2. Definition of Warrants. The definition of "Warrants" was amended to
------------------------
read in its entirety as follows:
"Warrants' shall mean Common Stock Purchase Warrants exercisable for
-----------
shares of Common Stock of the Company issued by the Company: (i) on
September 23, 1994, pursuant to a certain Bridge Loan Agreement, dated such
date, among the Company and the other parties named therein; (ii) on April
13, 1995 pursuant to a certain Warrant Agreement, dated such date, between
the Company and Spencer Trask Incorporated, and the assignees thereto; and
(iii) on July 10, 1996 pursuant to a certain Product Development Agreement,
dated such date, among the Company, Nomadics, Inc. and Colin Cumming.
The foregoing set forth all amendments in effect through September 27,
1996.
<PAGE>
AMENDMENT NO. 2 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Effective February 19, 1998, pursuant to a Memorandum of Action of
Shareholders, executed by the holders of more than two-thirds of the outstanding
shares of Restricted Stock (as defined in the Registration Rights Agreement),
the Amended and Restated Registration Rights Agreement was amended as follows:
1. Definition of Preferred Shares. The definition of "Preferred Shares"
------------------------------------
was amended to read in its entirety as follows:
"Preferred Shares" shall mean: (i) the Series B Preferred Shares; (ii)
-------------------
the shares of Series A Convertible Participating Preferred Stock, $.01 par
value, of the Company issued by the Company pursuant to that certain
Preferred Stock Purchase Agreement, dated April 27, 1993, between the
Company and ML Oklahoma Venture Partners, Limited Partnership; (iii) the
shares of Series C Convertible Participating Preferred Stock, $.01 par
value, of the Company issued by the Company pursuant to the terms of that
certain Series C Convertible Participating Preferred Stock Purchase
Agreement; and (iv) the shares of Series D Convertible Participating
Preferred Stock, $.01 par value, of the Company issued by the Company
pursuant to the terms of that certain Series D Convertible Participating
Preferred Stock Purchase Agreement, dated February 26, 1998.
2. Definition of Warrants. The definition of "Warrants" was amended to
------------------------
read in its entirety as follows:
"Warrants" shall mean Common Stock Purchase Warrants exercisable for
-----------
shares of Common Stock of the Company issued by the Company: (i) on
September 23, 1994, pursuant to a certain Bridge Loan Agreement, dated such
date, among the Company and the other parties named therein; (ii) on April
13, 1995 pursuant to a certain Warrant Agreement, dated such date, between
the Company and Spencer Trask Incorporated, and the assignees thereto;
(iii) on July 10, 1996 pursuant to a certain Product Development Agreement,
dated such date, among the Company, Nomadics, Inc. and Colin Cumming; and
(iv) pursuant to that certain Bridge Loan Agreement, dated as of November
4, 1997, by and among the Company and the other parties named therein.
The foregoing set forth all amendments in effect through March 2, 1998.
<PAGE>
EXHIBIT 10.1
CONFIDENTIAL TREATMENT REQUESTED
TERMINATION AND LICENSE AGREEMENT
THIS TERMINATION AND LICENSE AGREEMENT (the "Agreement"), made and entered
into as of the 16th day of September, 1997 by and between Hewlett-Packard
Company, a California corporation ("HP"), and Data Critical Corp., an Oklahoma
corporation ("DCC").
WHEREAS, on April 4, 1994, HP and DCC entered into that certain Software
License Agreement (the "1994 License Agreement"), pursuant to which HP was
granted a license to sell certain Listed Products (as hereinafter defined)
developed by DCC under the 1994 License Agreement;
WHEREAS, the parties desire to terminate the 1994 License Agreement and
enter into this Agreement;
WHEREAS, on August 29, 1995, U.S. Patent No.5,446,678, "Transmission of
Information Over an Alphanumeric Paging Network" (the "Patent"), was issued to
HP;
WHEREAS, DCC has commenced an interference action before the U.S. Patent
and Trademark Office (the "PTO") between a patent application owned by DCC (U.S.
Patent Application Serial Number 08/5749883, filed December 28, 1995) and the
Patent (the "Interference"); and
WHEREAS, in order to mitigate the possibility that the Interference may
frustrate the objectives of the business arrangements being undertaken by the
parties, the parties desire to settle the Interference and license the Patent
and HP Technology (as defined herein), on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. Definitions.
1.1. 1994 License Agreement shall have the meaning given such term
----------------------
in the recitals to this Agreement.
1.2. Copy shall mean a material object, including a phonorecord, in
----
which a work is fixed by any method now known or later developed, and from which
the work can be communicated, either directly or with the aid of a machine or
device. The term "copy" includes the material object, including a phonorecord,
in which a work is first fixed.
1.3. FDA shall mean the U.S. Food and Drug Administration.
---
1.4. HP Technology shall mean HP's ECG file format and any and all
-------------
software, embodied in Listed Products already in DCC's possession and
<PAGE>
any additional information and materials mutually agreed to be necessary to
perform the features and functions of such Listed Products.
1.5. Installed Base shall mean those customers for whom Listed
--------------
Products have been sold and/or installed, or to whom HP has invoiced for sales,
as of the date of this Agreement.
1.6. License shall mean the licenses granted under Section 3 of this
-------
Agreement.
1.7. Licensed Products shall mean any product covered by the Patent
-----------------
or any claim thereunder or utilizing, embodying or incorporating HP Technology.
1.8. Listed Products shall mean PalmVue and ECG-STAT as described in
---------------
Exhibit A to the 1994 Agreement
1.9. New Installations shall mean sales of Listed Products by DCC
-----------------
after the date of this Agreement, except for sales resulting from Pending
Orders. A New Installation does not include sales to customers of distributors
of DCC.
1.10. Pending Orders shall mean orders which have been received for
--------------
Listed Products by HP as of the date of this Agreement and have not been
delivered or invoiced.
1.11. Processor System shall mean a central processing unit ("CPU")
----------------
and one or more co-processors (e.g., math or graphics co-processors) associated
with the CPU.
1.12. Regulatory Permits shall mean any and all Federal, state or
------------------
municipal approvals, permits, licenses, waivers, clearances and other similar
rights received by HP in connection with the manufacture, use, sale or
distribution of the Listed Products, including but not limited to:
(a) the 510(k) file and all rights and obligations associated with
the marketing and distribution of Listed Products;
(b) the pre-market notification filed with the FDA, including, but
not limited to, all related correspondence, all safety and
effectiveness data, all performance testing data, all labeling
and all hazards analysis;
(c) the "decision to market" letter from the FDA;
(d) acknowledgment of receipt from the FDA, assigning a number to
the file;
(e) the "letter of substantial equivalence" from the FDA.
1.13. Subscriber shall mean the purchaser and/or licensee of a Copy.
----------
2
<PAGE>
1.14. Term shall be that period from the date of this Agreement until the
----
time of termination of this Agreement, solely as provided herein.
1.15. Use or Using of a Licensed Product shall mean:
------------
(i) copying some or all of a Copy of the Licensed Product into memory
accessible by one Processor System, solely for the purpose of making
the Copy accessible to that Processor System for execution of the
Licensed Product (specifically not including making other Copies of
the Licensed Product in disk storage or other permanent storage) and
causing that Processor System to execute the Licensed Product; and
(ii) causing the Processor System of a Product to execute the Licensed
Products which have been copied into its memory.
2. Termination of 1994 License Agreement.
2.1. Termination. HP and DCC hereby agree to terminate the 1994 License
-----------
Agreement, and no provision thereof shall survive except as provided herein. HP
and DCC agree that termination as provided herein does not constitute an event
of termination under Section 15 of the 1994 License Agreement but is termination
by mutual agreement.
2.2. Intellectual Property Rights. The licenses and rights granted to or
----------------------------
accrued to HP under the 1994 License Agreement, including, but not limited to,
the rights to use, sell or distribute the Listed Products under Section 6 of the
1994 License Agreement, and the rights to use trademarks of DCC under such
section, are hereby terminated.
2.3. Not-yet Delivered Orders. HP will either install or cancel any
------------------------
orders which have been placed but not yet delivered on or before October 31,
1997. All orders which have been so installed will become "installed orders
under warranty" and DCC shall be responsible for warranty service.
Notwithstanding termination of the 1994 Agreement, HP shall have the right to
install Products in any accounts listed on Annex A for which orders were placed,
and not yet delivered as of the date of this Agreement who elect to take
delivery from HP.
2.4. Surviving Terms. Section 14 of the 1994 License Agreement shall
---------------
survive termination of the 1994 License Agreement only with respect to any
claims, actions or breaches arising prior to the date of this Agreement. HP
shall also pay DCC any royalties which had accrued under the 1994 License
Agreement but which were unpaid as of the date of this Agreement.
3. License.
3.1. Patent License. Subject to the payment of royalties and DCC's
--------------
performance hereunder, HP hereby grants to DCC and DCC hereby accepts during the
Term, a worldwide, non-
3
<PAGE>
exclusive license under the subject matter disclosed and claimed in the Patent,
including any continuations, continuations-in-part, reissues and extensions
thereof, to the date of expiry thereof, to make, have made, use, sell and
distribute any product or methods covered by the Patent or any of the claims
thereunder.
3.2. Additional License. Subject to DCC's performance of its obligations
------------------
hereunder, HP hereby grants to DCC and DCC hereby accepts during the Term, a
worldwide, non-exclusive license under HP's copyright and trade secret rights in
HP Technology to make, have made, use, sell and distribute any product
incorporating, utilizing, or embodying, in whole or in part, HP Technology.
3.3. Sublicensing. DCC shall have the right to sublicense any of the
------------
rights and licenses granted in this Section 3, provided, however, any sales or
distribution of those Products described in Exhibit A to the 1994 Agreement
(PalmVue and ECG Stat and not CardioPager) shall be made by sublicensees or
distributors of DCC only if such products are identified to the recipient as
products of DCC and not as products identified to the recipient as that of the
sublicensee or distributor.
3.4. Supply of SDN Interface Cards. HP shall supply DCC with its
-----------------------------
reasonable requirements in accordance with DCC's ongoing regular estimates of
SDN Interface Cards (Product number 78360B, with options AO1, CO1,C02, C03, and
CO5) and relating software for the listed products. The purchase price for such
cards and software will be HP standard list price.
4. Trademarks.
4.1. Licensed Marks. The trademarks licensed under this Agreement are
--------------
"PALMVUE" and "PALMVUE system" and design, as set forth on Annex "B" (the
"Marks").
4.2. License. HP hereby grants to DCC and DCC hereby accepts during the
-------
Term a non-exclusive, worldwide license under HP's trademark rights to affix the
Marks on, and otherwise use the Marks in connection with and in sales and
promotional literature relating to DCC products that are compatible with HP
patient monitoring products.
4.3. ECGStat. The trademark "ECGStat" owned by DCC, shall be used only
-------
with DCC products compatible with HP patient monitoring products.
4.4. Quality Control. HP shall have the right to exercise quality control
---------------
over DCC's use of the Marks. Upon HP's written request, DCC shall make
available for inspection by HP a representative sample of each product in
connection with which any of the Marks is used by DCC. If (i) HP determines
that a particular product does not meet HP's quality standards, (ii) HP notifies
DCC in writing of the specific nature of the quality issue, and (iii) DCC does
not cure such nonconformance within sixty (60) days of such notice, then HP
shall have the right to terminate the trademark license with respect to that
product upon sixty (60) days notice.
4
<PAGE>
4.5. Ownership. DCC shall not claim ownership of the Marks and shall not
---------
register the Marks in any country without consent of HP. Any rights from DCC's
use of the Marks shall inure to the benefit of HP.
4.6. No Representation of Non-Infringement. Although HP believes that it
-------------------------------------
has trademark rights in the Marks and does not believe that HP's use of the
Marks has infringed rights of any third party, HP makes no representation that
use of the Marks will not infringe rights of a third party.
5. No Other Rights Granted. Apart from the license and distribution rights
explicitly enumerated in this Agreement, this Agreement does not include a grant
to DCC of any other right license or interest in, any Intellectual Property
rights of HP, nor any ownership right, tide or interest, nor any security
interest or other interest in any intellectual property rights of HP.
6. Royalties. In consideration of the Patent License, HP shall receive the
compensation provided for in this Section 6.
6.1. Initial Payment. DCC agrees to pay HP within five (5) business days
---------------
after execution of this Agreement and on each anniversary of the effective date
of this Agreement while the Patent remains in force, the sum of $[*] in
consideration of the rights and licenses granted herein, other than in
healthcare and medical applications.
6.2. Running Royalties. In addition to the royalty payable under Section
-----------------
6.1, DCC shall pay HP a royalty of $[*] for each Processor System on which a
Copy of a Licensed Product is Used by a Subscriber in healthcare or medical
applications. Such payment shall be required once for each purchase or license
of a Copy by a Subscriber and shall be due and payable the twentieth (20th) day
following the calendar quarter in which the Subscriber purchased and/or licensed
the Copy. If a Subscriber Uses more than one Licensed Product on a single
Processor System, the total amount of royalties payable to HP relating to that
Processor System of the Subscriber shall be $[*]. Such royalty payment shall be
accompanied by a report identifying each Copy sold and/or licensed during the
quarter for which payments are made.
The following example illustrates this royalty arrangement Consider a
system that includes (i) a single dispatch station that is used for ECG-STAT and
PALMVUE applications, and (ii) 20 palmtop computers (7 of which are used for
ECG-STAT alone, 8 of which are used for PALMVUE alone, and 5 of which are used
for both applications). In this example, the royalty due shall be $[*] for the
dispatch station and $[*] for each of the 20 palmtops, resulting in a total one-
time royalty of $[*].
7. Settlement of Interference. DCC shall take whatever action is necessary to
--------------------------
terminate with prejudice the Interference, and DCC abandon U.S. Patent
Application Serial No.08/579,983. DCC shall not, in that proceeding or in any
proceeding in which the validity, scope of the claims, or ownership of the
Patent is at issue, dispute HP's ownership or priority of the Patent and the
5
[*] Confidential treatment requested.
<PAGE>
inventions claimed therein; provided that, if an individual is compelled by law
to give testimony as to facts that may relate to such issues, such testimony
shall not be a breach of this Agreement. The foregoing notwithstanding, nothing
herein shall constitute or be construed as an admission as to, or prevent DCC
from contesting, the prior art status of the Patent relative to any DCC patent
or patent application in any proceeding other than those identified above.
8. Regulatory Matters. Promptly upon execution of this Agreement, the
parties shall work together, at DCC's expense, to establish DCC as a
manufacturer of the Licensed Products so that DCC can manufacture the Licensed
Products and, when appropriate utilize letters to file for modifications to such
Licensed Products. Promptly upon execution of this agreement, HP shall deliver
to DCC a copy of all documents listed in section 1.12 above.
9. Product Development. DCC shall upgrade the PalmVue Critical Care product
by completing version 2.0 thereof within 6 months. The parties agree to devote
reasonable efforts to work together to upgrade such product from its current 052
platform to Microsoft Windows NT. HP intends to make reasonable efforts to
provide DCC with remote query capability (over a network or through a dial-up
connection) to the Tracemaster ECG management system and, at HP'S discretion,
which will not be unreasonably withheld if necessary to DCC's development work,
its follow-on ECG management products, as well as any component of HP Technology
necessary to complete such development.
10. Customer Support. DCC shall provide, and bear the expense of, customer
service support for the Listed Products, including support for customers which
are under warranty by HP, as set forth in Annex "A," and honor the warranty
terms given by HP, for the duration of such warranty, to the Installed Base and
for Pending Orders. For all New Installations, DCC shall be under no obligation
to provide a warranty in conformity with that of HP's warranty. A list of all
customers in the Installed Base is set forth in Annex "A." HP shall have no
responsibility for customer support of products sold by DCC. This customer
support obligation is conditioned upon DCC having received access to all aspects
of HP Technology.
11. Compensation to DCC. In consideration for the performance of the
customer support required by this Agreement, HP shall pay DCC the amount of $[*]
for each customer in the Installed Base, provided, however, that such amount
shall be pro-rated based on the difference between the ship date of the Listed
Product and the date of expiration of the HP warranty therefor. Such payment
shall be due and payable within thirty-five (35) days of the date of this
Agreement.
12. Listed Product Versions for Other Companies. DCC shall have the right to
develop versions of the Listed Products for use with products manufactured by
other companies; however, DCC agrees that any such versions shall be labeled as
DCC products and not as products of such other companies.
13. CardioPager Development. DCC shall develop and offer for sale an HP-
compatible version of DCC's CardioPager product within six (6) months of the
date of this Agreement. Each
6
[*] Confidential treatment requested.
<PAGE>
upgrade of such version shall contain the most current release of CardioPager
software, provided that it is technically feasible, clinically appropriate and
DCC shall have been provided with all access to HP equipment and software
necessary to do so.
14. Termination.
14.1. Termination. Either party may terminate this Agreement only if the
-----------
other party fails to perform any of its obligations under this Agreement and
fails to remedy said breach within thirty (30) days after being given written
notice of specific failure or default and termination by the other party.
14.2. Effect of Termination. In the event that this Agreement is
---------------------
terminated for whatever reason,
(i) any and all rights granted to DCC under this Agreement shall
terminate;
(ii) the obligations of either party to make payments, to the extent
that such obligations pertain to activities conducted prior to
terminate on, shall survive termination; and
(iii) except as specially provided herein, neither party hereunder shall
be discharged or relieved from any liability or obligation existing
prior to such termination.
14.3. Other Effects of Termination. Notwithstanding the provisions of
----------------------------
Section 14.2(i), any termination of this Agreement shall not affect the
provisions of Section 2 of this Agreement.
15. Miscellaneous Provisions.
15.1. Further Action. Without further consideration, each patty hereby
--------------
agrees to execute and deliver, and to cause its officers, trustees, employees,
and agents to execute and deliver, such other instruments, and to take such
other action as the other parties may reasonably request to more effectively
convey, transfer, vest and put in possession, the rights granted hereunder, and
to assist in the recordation of same as necessary, all in such form and
substance as the requesting parties may reasonably request.
7
<PAGE>
15.2. Binding Agreement. This Agreement shall be binding upon and shall
-----------------
inure to the benefit of the legal representatives, administrators, successors
and any permitted assigns and licensees of the parties hereto.
15.3. Governing Law. This Agreement shall be deemed to have been made
-------------
under, and shall be construed and interpreted in accordance with, the laws of
the State of California No conflicts-of-law rule or law which might refer such
construction and interpretation to the laws of another state, republic or
country shall be considered.
15.4. Savings Clause. Both parties especially agree in contract that
--------------
neither party intends to violate any public policy, statutory or common law,
rule, regulation, treaty or decision of any government agency or executive body
thereof of any country or community association of countries; that if any word,
sentence, paragraph or clause of combination thereof of this Agreement is found,
by a court or executive body with judicial powers having jurisdiction over this
Agreement or any of its parties hereto, in a final unappealed order to be in
violation of any such provision in any country or community or association of
countries, such words, sentences, paragraphs or clauses or combination shall be
inoperative in such country or community or association of countries, and the
remainder of this Agreement shall remain binding upon the parties hereto.
15.5. Entire Agreement. The terms and conditions herein contained,
----------------
including all Annexes hereto, constitute the entire agreement between the
parties and supersede all previous communications whether oral or written
between the parties hereto with respect to the subject matters hereof, and no
other previous agreement or understanding varying or extending the same shall be
binding upon either party hereto. Notwithstanding the foregoing, this Agreement
shall not be construed to terminate any confidentiality or non-disclosure
agreement currently in effect between the parties.
15.6. No Waiver. The parties covenant and agree that if either party
---------
fails or neglects for any reason to take advantage of any of the terms provided
for the termination of this Agreement or if either party, having the right to
declare this Agreement terminated, shall fail to do so, any such failure or
neglect by either party shall not be a waiver or be deemed or be construed to be
a waiver of any cause for the termination of this Agreement subsequently
arising, or as a waiver of any of the terms, covenants or conditions of this
Agreement or of the performance thereof. None of the terms, covenants and
conditions of this Agreement may be waived by any party except by written
consent by all the parties.
15.7. Expenses. Each party is responsible for its own expenses related to
--------
the execution of the Agreement.
15.8. Amendment. No amendment or modification to this Agreement shall be
---------
effective unless it is in writing and signed by duly authorized representatives
of both parties.
8
<PAGE>
15.9. Notices. Any nonce required or permitted to be given to another
-------
party hereto shall be given by sending such notice by registered mail or
certified mail, postage prepaid to the address set forth below, or to such other
address as that party may designate by like notice:
If to DCC: Data Critical Corp.
---------
2733 152nd Ave., N.E.
Redmond, Washington 98052
Attention: Jeffrey S. Brown, President
If to HP: Hewlett-Packard Company
--------
3000 Minuteman Road
Andover, Massachusetts 01810
Attention: Bill Koppes, HP PMD Product Line
Manager
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement by their duly authorized officers on the date specified above.
HP: HEWLETT-PACKARD COMPANY
- --
By: /s/ Bill Koppes
----------------------------------------
Bill Koppes, Product Line Manager, PMD
DCC: DATA CRITICAL CORP.
- ---
By: /s/ Jeffrey Brown
----------------------------------------
Jeffrey S. Brown, President
9
<PAGE>
EXHIBIT 10.2
CONFIDENTIAL TREATMENT REQUESTED
DISTRIBUTION AND LICENSE AGREEMENT
THIS DISTRIBUTION AND LICENSE AGREEMENT (the "Agreement"), made and
entered into as of the 23rd day of January, 1997, by and between Data Critical
Corp., an Oklahoma corporation ("DCC"), and Marquette Medical Systems, Inc., a
Wisconsin corporation ("Marquette").
WHEREAS, Marquette and DCC desire to establish a business relationship
related to the distribution of certain products of DCC;
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. Definitions.
1.1. Copy shall mean a material object, including a phonorecord,
----
in which a work is fixed by any method now known or later developed, and from
which the work can be communicated, either directly or with the aid of a machine
or device. The term "copy" includes the material object, including a
phonorecord, in which a work is first fixed.
1.2. Documentation (in lower case) shall mean textual and/or
-------------
graphic material, perceivable directly by humans and/or with the aid of a device
or machine, relating to a computer program; (when capitalized) the term shall
mean documentation relating to the Licensed Software (except for design
documentation relating to Licensed Software).
1.3. Escrow Agent shall mean Data Securities International, or
------------
such other software escrow agent approved by Marquette and DCC.
1.4. Executable Code means a series of one or more instructions
---------------
executable after suitable processing by a computer or other programmable
machine, without compilation or assembly, relating to Licensed Software.
1.5. Export Laws shall have the meaning given such term in
-----------
Section 15.
1.6. Forecast shall have the meaning given such term in Section
--------
5.1.
1.7. Intellectual Property Rights shall mean any and all rights
----------------------------
to exclude existing from time to time in a specified jurisdiction under patent
law, copyright law, moral rights law, trade secret law, trademark law, unfair
competition law, or other similar rights.
1.8. Licensable Activity shall mean any activity encompassed by
-------------------
one or more Intellectual Property Rights, e.g., an activity which, absent a
license, would give rise to liability for infringement (or inducement of
infringement or contributory infringement) of the Intellectual Property
Right(s).
1.9. Licensed Marks shall mean those trademarks described in
--------------
Annex "A" hereto.
<PAGE>
1.10. Licensed Software shall mean the software described in Annex
-----------------
"A" hereto.
1.11. Person shall mean a natural person, a corporation (for profit
------
or not-for-profit), an association, a partnership (general or limited), a joint
venture, a trust, a government or political department, subdivision, or agency,
or any other entity.
1.12. Prescribed Term shall mean terms, conditions and warranties
---------------
implied by law and to some contracts for the supply of goods and services which
the law expressly provides:
(a) may not be excluded, restricted or modified; or
(b) may be excluded, restricted or modified only to a limited
extent.
1.13. Processor System shall mean a central processing unit ("CPU")
----------------
and one or more co-processors (e.g., math or graphics co-processors) associated
with the CPU.
1.14. Products shall mean the products and Licensed Software listed
--------
on Annex "A."
1.15. Source Code shall mean the source code of Licensed Software.
-----------
1.16. Source Code Escrow Package shall have the meaning given in
--------------------------
Section 17.
1.17. Term shall have the meaning given in Section 7.
----
1.18. Territory shall be worldwide.
---------
1.19. Trademark Use means use of a Licensed Mark in accordance with
-------------
and subject to Section 2.7.
1.20. Use or Using of a Product shall mean the performance of the
------------
following steps only:
(a) copying some or all of a Copy of the Licensed Software into memory
accessible by one Processor System, solely for the purpose of making the
Copy accessible to that Processor System for execution of the Licensed
Software (specifically not including making other Copies of the Licensed
Software in disk storage or other permanent storage) and causing that
Processor System to execute the Licensed Software; and
(b) causing the Processor System of a Product to execute the computer
programs which have been copied into its memory.
1.21. User shall mean each Person who Uses a Product.
----
2
<PAGE>
1.22. Warranty Period shall mean the period ending one (1) year
---------------
following the sale or lease of a Product by Marquette.
2. Appointment of Distributorship/Grant of License.
2.1. Appointment. DCC hereby appoints Marquette as its non-exclusive
-----------
distributor of the Products in the Territory and Marquette hereby accepts such
appointment, on the basis of each and all of the covenants, agreements, terms
and conditions of this Agreement.
2.2. License Rights Granted. Subject to the terms and conditions of
----------------------
this Agreement, DCC hereby grants to Marquette and Marquette hereby accepts a
non-exclusive license (the "License") during the Term, under any and all
Intellectual Property Rights owned or otherwise assertable by DCC, to engage on
the following Licensable Activities:
(a) sell, license, sublicense and distribute Copies of the
Executable Code of the Licensed Software and of the User Documentation for
the purpose of Use of such Licensed Software with patent monitoring devices
manufactured by Marquette; and
(b) Trademark Use of the Licensed Marks.
2.3. Sublicensing. Except for the grant of non-transferable, non-
------------
exclusive sublicenses to Users to Use the Products, Marquette shall have no
right to grant sublicenses of the rights conferred by this Agreement.
2.4. Sales Agreements. Any form of agreement used by Marquette in
----------------
connection with the sale, lease or sublicense of the Products must be approved
by DCC, which approval shall not be unreasonably withheld, and such agreement
shall include:
(a) restrictions on Use to those required by this Agreement;
(b) a disclaimer of any warranty or representation made by DCC to
the customer of Marquette;
(c) an exclusion of incidental, consequential, special, punitive, or
exemplary damage remedies against DCC;
(d) a limitation of DCC's maximum liability substantially as set
forth in this Agreement; and
(e) restrictions on exportation no less restrictive than that set
forth in Section 15.
2.5. No Other Rights Granted. Apart from the license and
-----------------------
distribution rights enumerated in this Agreement, this Agreement does not
include a grant to Marquette of any right,
3
<PAGE>
license or interest in, any trademarks of DCC, the right to engage in any
Licensable Activity, nor any ownership right, title, or interest, nor any
security interest or other interest, in any Intellectual Property Rights
relating to the Products nor in any Copy of any part of the Licensed Software or
any other software utilized in the Products.
2.6. DCC Right to Market Products. Notwithstanding the appointment
----------------------------
of Marquette as a distributor for DCC, DCC shall retain the rights to market,
sell, lease, grant licenses to, and otherwise commercially exploit, the Products
without restriction.
2.7. Licensed Marks.
--------------
(a) The Licensed Marks shall be used only in connection with the
sale, license, sublicense or distribution of the Products described in
Annex "A" and may not be used to identify any other product, whether
or not licensed under this Agreement. Marquette shall cause
appropriate indicia of DCC's ownership of the Licensed Marks to appear
on or within each of the Products, on all packaging materials bearing
the Licensed Marks, and on all advertising using the Licensed Marks.
(b) Marquette may use its own trademarks in conjunction with the
Licensed Marks.
(c) DCC is familiar with Marquette's advertising practices; in
view of that familiarity, Marquette need not obtain DCC's prior
approval of proposed advertising using the Licensed Marks, but shall
instead furnish DCC with representative samples of such advertising
from time to time or as reasonably requested by DCC. DCC may, in its
business judgment at any time and/or from time to time, give notice to
Marquette that subsequent advertising will require prior approval by
DCC.
(d) Marquette acknowledges the validity of DCC's ownership,
right, title and interest in and to the Licensed Marks, including
DCC's rights to register or to have registered as the owner of any or
all of the Licensed Marks under the laws of any jurisdiction. All use
of any of the Licensed Marks by Marquette shall inure to the sole
benefit of DCC in any and all jurisdictions.
(e) Marquette shall not at any time do or suffer to be done any
act or thing which will in any way impair the rights of DCC in and to
such Licensed Marks. If in the reasonable business judgment of DCC any
act or failure to act by Marquette constitutes a danger to the value
or validity or ownership of any of the Licensed Marks, then DCC may in
lieu of or in addition to any other remedy available to it (including
termination of the License) give notice to Marquette describing the
danger and may suspend in whole or in part Marquette's right to use
the Licensed Marks,
4
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effective on Marquette's receipt of the notice. The suspension shall
continue until DCC reasonably determines that the danger no longer
exists.
2.8. No Removal of Legends. Marquette will not remove any copyright
---------------------
or proprietary-rights legend from Copies or Products provided by DCC to
Marquette.
3. Terms of Sales to Marquette/[*].
3.1. Purchase and Purchase Price. Subject to the terms hereof, DCC
---------------------------
shall sell to Marquette, and Marquette shall purchase from DCC, the Products.
DCC agrees to sell the Products to Marquette at the prices set forth in Annex
"A" hereto. Not less than ninety (90) days prior to the end of the Initial Term
or any Successive Term of this Agreement, DCC shall give Marquette written
notice of any price changes. All Product prices shall be exclusive of any
applicable sales, use, excise and similar taxes, and transportation, rigging,
drayage, handling charges, insurance costs, installation costs, training expense
and other expenses associated with the delivery or installation of the Products
ordered by Marquette.
3.2. [*]
4. Obligations of Marquette.
4.1. Generally. Marquette shall at all times and at its own cost and
---------
expense use its best efforts to promote vigorously the sale of the Products and
to exploit and service the market in the Territory.
4.2. Conduct of Business and Expenses. Marquette shall conduct its
--------------------------------
business consistent with the provisions of this Agreement and all applicable
laws which may in any way relate to the sale or distribution of the Products in
the Territory. Marquette shall be responsible for all expenses incurred in
connection with the operation of its business and its activities hereunder,
[*] Confidential treatment requested.
5
<PAGE>
including without limitation all expenses for appropriate and customary
advertising, promotional items and trade shows, and all communication, travel
and accommodations; and shall be responsible for all acts, omissions and
expenses of its officers, agents, employees and representatives.
4.3. Regulatory Support/Installation and Training. Marquette shall
--------------------------------------------
provide support to DCC in the application process for any regulatory approvals
that are required to market the Products. Marquette shall further be
responsible for the installation of all Products and the training of employees
of Marquette customers.
5. Ordering and Shipping Products.
5.1. Requirements Forecast. During the Term hereof, at least ninety
---------------------
(90) days prior to each anniversary of the date of this Agreement, Marquette
shall submit to DCC a twelve (12) month forecast (the "Forecast") of its
estimated Product requirements and anticipated shipping dates. Such forecasts
shall be non-binding and are solely for purposes of facilitating DCC's planning.
The parties shall use reasonable efforts to meet with each other (or confer by
telephone) at mutually agreeable intervals to discuss such forecasts. Upon
receiving such forecasts, DCC shall advise Marquette of DCC's production
capacity and raw materials lead times (or the production capacity and raw
materials lead times of its contract manufacturers), and identify any
particularly long lead time for raw materials that it or its contract
manufacturer must order.
5.2. Purchase Orders. Purchase orders issued by Marquette from time
---------------
to time shall specify quantities, prices, delivery requirements and destination.
The purchase orders shall constitute Marquette's commitment to purchase the
Products indicated in the purchase order and shall be the sole method of making
actual purchase commitments for the Products (except for the terms of Section
5.6, which constitute an order subject to the conditions specified therein).
Each order by Marquette shall be by firm purchase order in writing, with telexed
or faxed purchase orders confirmed within one (1) week, specifying: (i) those
types of Products ordered by Marquette, (ii) the quantity of each Product to be
purchased, (iii) shipping instructions, and (iv) requested delivery dates. DCC
shall be deemed to have accepted all orders by Marquette unless DCC within ten
(10) business days after receipt of such order rejects the order in writing
stating the reason for rejection and making a good faith effort to modify the
order so that it can be accepted on some reasonable basis. DCC shall return
Marquette's purchase order acknowledgment copy promptly after acceptance by DCC.
The parties acknowledge that for convenience Marquette's standard form of
purchase order may be used, however, in the event of any conflict between the
terms of any such purchase order or any other purchase order and the terms of
this Agreement, the terms of this Agreement shall govern.
5.3. Delivery of Products. If the amount of Products ordered is
--------------------
within the amounts of Product estimated to be ordered by Marquette pursuant to
the Forecast and the estimated shipping dates thereunder, DCC shall deliver to
Marquette all Products ordered by Marquette within sixty (60) days of the date
the purchase order is received by DCC. If the amount of Products ordered is
6
<PAGE>
above the amounts of Products to be ordered by Marquette at the times specified
in the Forecast, DCC shall deliver such excess Products ordered within one
hundred-twenty (120) days of the date the purchase order is received by DCC.
DCC shall endeavor to deliver Products in quantities to meet Marquette's orders,
but DCC nevertheless reserves the right to allot its production as it deems
best. Marquette agrees that any failure to supply those amounts of Products
which may be agreed upon from time to time, or making only partial shipment, or
no shipment at all, against any order of Marquette, will not make DCC liable or
responsible to Marquette to any extent, although a nonperformance will be taken
into account by DCC in evaluating the performance of Marquette within the
context of Section 4.1 of this Agreement.
5.4. Risk of Loss. All Products purchased by Marquette shall be sold
------------
f.o.b. DCC's plant (or the plant of DCC's contract manufacturer, if shipment is
from the manufacturer's plant). In the event of conflict between the terms of
any individual invoice and the terms of this Agreement, the terms of this
Agreement shall govern. Delivery of any order hereunder shall be deemed to
occur upon DCC's shipment of the Products from its plant or its manufacturer's
plant.
5.5. Payment Terms. Following the date of receipt of invoice for
-------------
Products from DCC, Marquette shall pay DCC as follows: (i) if Marquette pays
within thirty (30) days of receipt of the invoice, Marquette will pay the
invoice price less three percent (3%); (ii) if Marquette pays after ten (10)
days of receipt of the invoice, Marquette will pay the entire invoice price.
5.6. Initial Order/Purchase. Marquette agrees to purchase at least
----------------------
twelve (12) CardioPager Systems (CP08 or greater) on or before the end of the
six month period beginning with the date DCC receives 510(k) clearance for
CardioPager from the Food and Drug Administration. The Number of systems which
Marquette shall be required to purchase, however, shall be reduced by the number
of CardioPager Systems, sold by DCC during such six-month period, for Use with
Patient monitoring devices manufactured by Marquette.
6. Obligations of DCC.
6.1. Marketing and Sales Support. DCC agrees to support Marquette's
---------------------------
marketing and sales activities in every reasonable way. Without limiting the
generality of the foregoing, DCC agrees:
(a) To make available to Marquette, free of charge, a reasonable
quantity of Product literature and promotional material used by DCC.
Marquette is hereby authorized to reproduce this literature and material,
and to make needed translations thereof, as may be appropriate in the
Territory, at Marquette's expense.
(b) To promptly answer any queries concerning the Products or
applications thereof which Marquette may submit to DCC in connection with
the proposed marketing campaigns or contemplated sales.
7
<PAGE>
6.2. Technical Support. DCC shall provide, at no additional cost
-----------------
to Marquette technical and other related assistance to enable Marquette to
provide customer service; provided, however, DCC shall not be required to
perform maintenance or technical support directly to Marquette customers and
further shall not be required to disclose to Marquette any trade secrets, source
code or other proprietary information. Except for the obligations of DCC
described in Section 6.4 or any technical assistance which requires travel by
DCC personnel, Marquette shall bear the expense of such travel as well as
lodging expenses for such DCC personnel.
6.3. Marquette Labels. DCC shall mark the Products shipped to
----------------
Marquette with such labels, colors and other trademarks consistent with
Marquette's specifications. The expense of creating and applying such labels
shall be borne by Marquette.
6.4. Initial Installation Sites. DCC will provide, at no additional
--------------------------
cost to Marquette technical assistance in connection with the installation under
IRB for systems at Baylor Hospital in Dallas, Texas and St. Luke's Hospital in
Milwaukee, Wisconsin. DCC shall be solely responsible for travel and lodging
expense for its personnel in providing such technical assistance.
6.5. Regulatory Cooperation. DCC shall cooperate with Marquette in
----------------------
efforts to obtain regulatory approval of the Products.
6.6. Product Changes. DCC retains the right, in its sole discretion,
---------------
to upgrade or modify the Products from time to time and, in such event, upgraded
Products shall be sold to Marquette only on such prices as the parties may
mutually agree upon.
7. Term. The term of this Agreement shall commence upon execution and,
unless earlier terminated as provided herein, shall have an initial term (the
"Initial Term") of one (1) year, subject to all of the terms and conditions set
forth herein. This Agreement shall be extended for two additional one year terms
(each a "Successive Term") unless either party informs the other not less than
sixty (60) days prior to the end of the Initial Term or any Successive Term that
this Agreement shall be terminated. The Initial Term plus any Successive Term(s)
shall be referred to herein as the "Term".
8. Warranty.
8.1. Standard Warranty. DCC's obligations with respect to the
-----------------
Products are strictly limited to DCC's Standard Warranty as determined from time
to time. Marquette agrees to cooperate with DCC in carrying out DCC's Standard
Warranty with Marquette's sales force in the Territory, in accordance with
procedures which may be mutually agreed upon in writing between DCC and
Marquette from time to time.
8
<PAGE>
8.2. Modification of Products. Marquette will not modify any of the
------------------------
Products without the specific written permission of DCC, which permission will
not unreasonably be withheld if such modifications would be important to meet
market or legal requirements within the Territory while, at the same time, not
adversely affecting performance of the Products. Any modifications to the
Products by Marquette pursuant to this Section 8.1 will fall outside DCC's
Standard Warranty, and will be the sole responsibility of Marquette.
9. Defects or Errors.
9.1. Correction of Defects. DCC agrees to correct, as soon as
---------------------
practical (but in no event later than thirty (30) days), free of charge, any
material defect or error in the Products occurring during the Warranty Period,
provided:
(a) Marquette notifies DCC of such defect or error during the
Warranty Period; and
(b) the defect or error is not due to:
(i) operator error;
(ii) the User's computer hardware, electrical or mechanical
equipment, communications equipment or peripheral devices not sold by
DCC to the User;
(iii) a modification to the Products carried out by a person
other than by DCC unless that particular modification was carried out
with the written approval of DCC; or
(iv) defective or abnormal operation of the Products by the
User.
9.2. ISO 9000/GMP. To maintain Marquette standards for ISO 9000 and
Good Manufacturing Practices, DCC acknowledges that Marquette utilizes a
corrective action request ("CAR") system to ensure that product defects are
investigated for cause. DCC shall provide Marquette with a written CAR response
within (30) days of the receipt of any returned Product sold to Marquette. In
addition, any particular Product returned to DCC for the same defect three (3)
times shall be deemed a "lemon" and shall be replaced with a new replacement
Product at no cost to Marquette.
10. Disclaimer of Warranties and Representations. EXCEPT FOR THE
WARRANTIES REFERRED TO IN SECTION 8, DCC DISCLAIMS ANY AND ALL WARRANTIES,
CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WITH
RESPECT TO THE PRODUCTS OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED
WARRANTIES OR CONDITIONS OF TITLE, NONINFRINGEMENT, MERCHANTABILITY, OR FITNESS
OR SUITABILITY FOR ANY PURPOSE (WHETHER OR NOT DCC KNOWS, HAS REASON
9
<PAGE>
TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE),
WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR
BY COURSE OF DEALING. IN ADDITION, DCC EXPRESSLY DISCLAIMS ANY WARRANTY OR
REPRESENTATION TO ANY PERSON OTHER THAN MARQUETTE (AND ANY PERSON CLAIMING
RIGHTS DERIVED FROM THE MARQUETTE'S RIGHTS) WITH RESPECT TO THE PRODUCTS OR ANY
PART THEREOF.
11. Allocation of Risk.
11.1. Exclusion of Incidental and Consequential Damages. Independent
-------------------------------------------------
of, several from, and to be enforced independently of any other enforceable or
unenforceable provision of this Agreement, OTHER THAN FOR INFRINGEMENT OF ONE
PARTY'S INTELLECTUAL PROPERTY RIGHTS BY ANOTHER PARTY (INCLUDING ANY ENGAGEMENT
IN LICENSABLE ACTIVITIES BY MARQUETTE BEYOND THE SCOPE OF THE LICENSE RIGHTS),
NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING
RIGHTS DERIVED FROM THE OTHER PARTY'S RIGHTS) FOR INCIDENTAL, CONSEQUENTIAL,
SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES OF ANY KIND - including lost profits,
loss of business, or other economic damage, and further including injury to
property - ARISING FROM THE USE OF THE PRODUCTS OR AS A RESULT OF BREACH OF ANY
TERM OF THIS AGREEMENT, REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY
LIABLE WAS ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY
THEREOF.
11.2. Maximum Aggregate Liability. Independent and several from, and
---------------------------
to be enforced independently of any other enforceable or unenforceable provision
of this Agreement, and further, except as provided in Section 11.5, IN NO EVENT
SHALL DCC'S AGGREGATE LIABILITY TO MARQUETTE (INCLUDING LIABILITY TO ANY PERSON
OR PERSONS WHOSE CLAIM OR CLAIMS ARE BASED ON OR DERIVED FROM A RIGHT OR RIGHTS
CLAIMED BY MARQUETTE), WITH RESPECT TO ANY AND ALL CLAIMS AT ANY AND ALL TIMES
ARISING FROM OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, IN CONTRACT,
TORT, OR OTHERWISE, EXTEND BEYOND THE OBLIGATION TO CORRECT DEFECTS IN PRODUCTS
AS PROVIDED IN SECTION 9.
11.3. Intentional Risk Allocation. DCC and Marquette each
---------------------------
acknowledge that the provisions of this Agreement were negotiated to reflect an
informed, voluntary allocation between them of all risks (both known and
unknown) associated with the transactions associated with this Agreement. The
warranty disclaimers and limitations in this Agreement are intended to limit the
circumstances of liability. The remedy limitations, and the limitations of
liability, are separately intended to limit the forms of relief available to the
parties.
10
<PAGE>
11.4. Prescribed Term. Where a Prescribed Term is implied into this
---------------
Agreement, the liability of DCC to Marquette for a breach thereof is limited to
the correction of the Products as provided in Section 9.
11.5 Product Liability Indemnification. In recognition of the fact
---------------------------------
that Marquette will not have control of the manufacture of Products, DCC agrees
to indemnify and hold harmless Marquette, its directors, officers, employees and
consultants, and parent, subsidiary or affiliated companies, from and against
any and all third-party claims, demands, actions, liabilities, fines, penalties,
judgments, costs and expenses of whatever kind, whether based on contract,
negligence, strict liability or statutory liability, including, without
limitation, attorney's fees and costs of defense, solely arising out of the
manufacture of Products by DCC.
The indemnity obligation hereinbefore set out is subject to the
following conditions:
(a) The Products sold by Marquette are sold pursuant to
sales agreements which contain the terms required by Section 2.4;
(b) DCC is notified by Marquette of any claim or potential
claim as soon as reasonably practicable
(c) DCC may deal with any claim,and shall, if so requests,
have the conduct, at its own expense, of any subsequent legal
proceedings in respect thereof, provided that DCC shall keep
Marquette and its counsel fully informed at all times as to any claim
for which DCC shall conduct the defense;
(d) Marquette, its employees, servants or agents will
afford DCC reasonable assistance in connection with any such claim or
proceedings; and
(e) No admission of liability or offer of settlement is
made without the consent of DCC, such consent not to be unreasonably withheld
12. Non-Disclosure.
12.1. Confidentiality. It is anticipated that either party may
---------------
receive confidential information of the other ("Confidential Information").
Accordingly, each party agrees as follows, concerning the Confidential
Information of the other, during the pendency of this Agreement, and for a
period of five (5) years following termination of this Agreement:
(a) The party receiving Confidential Information of a disclosing party
shall not reproduce or disclose such Confidential Information in any form
except with the prior written consent of the disclosing party;
11
<PAGE>
(b) Confidential Information shall remain the property of the
disclosing party and the party receiving such Confidential Information
shall use such Confidential Information only for the purpose of performing
its obligations under this Agreement, and shall return such Confidential
Information upon request of the disclosing party; and
(c) The receiving party shall use precautions in protecting the
Confidential Information of the disclosing party at least as stringent as
it uses to protect its own proprietary and confidential information.
12.2. Scope of Confidential Information. It is understood that the
---------------------------------
term Confidential Information does not include information:
(a) which is independently developed by the receiving party or
lawfully received free of restriction from another source having the right
to so furnish such information; or
(b) after it has become generally available to the public without
breach of this Agreement by the receiving party; or
(c) which at the time of disclosure to the receiving party was
known to such party free of restriction and evidenced by documentation in
such party's possession; or
(d) which the disclosing party agrees in writing is free of such
restrictions.
12.3. Standard for Confidentiality. Each party additionally agrees
----------------------------
that, with respect to any third party that participates in the performance of
this Agreement, the party to this Agreement contacting such third party shall
ensure that the third party is contractually bound to protect all proprietary
aspects of the Agreement to at least the same degree as DCC or Marquette are
bound. Further, the party to this Agreement contracting such third party shall
furnish a copy of any and all secrecy agreements signed by third parties which
pertains to this Agreement, if requested to do so by the other party to this
Agreement.
13. Infringement.
13.1. Notice of Claim/Rights of Parties. If the sale or use of the
---------------------------------
Products results in a claim for patent infringement against Marquette, the party
to this Agreement first having notice of a claim or potential claim shall
promptly notify the other party in writing, which notice shall set forth the
facts of such claim in reasonable detail. Marquette shall have the primary
right at its expense to conduct and control the defense of any such claim using
counsel of its choice. DCC shall have the right at its expense to be
represented by independent counsel in a such proceeding subject to Marquette's
right of control.
12
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13.2. Third Party Infringement. With regard to the use of the
------------------------
Intellectual Property Rights covered by this Agreement, DCC shall have the sole
right to institute an action for infringement, misuse, misappropriation, theft
or breach of confidence against a third party. All recoveries, whether by
judgment, award, decree or settlement, from infringement or misuse of the
Intellectual Property shall belong to DCC.
14. No Access to Source Code/No Reverse Engineering. Except for the
limited circumstances of Section 17, DCC is under no obligation to provide
Marquette with a copy of any source code or DCC's internal design specification
for any Products or related materials. Marquette shall not reverse assemble or
decompile the Licensed Software, in whole or in part.
15. Export Controls.
15.1. Cooperation. Marquette shall cooperate with DCC as reasonably
-----------
necessary to permit DCC to comply with the laws and administrative regulations
of the United States relating to the control of exports of commodities and
technical data ("Export Laws").
15.2. No Violation of Export Laws. Marquette hereby assures DCC that
---------------------------
Marquette will not export or re-export directly or indirectly (including via
remote access) any part of the Products (including any Confidential Information)
to any country for which a validated license is required for such export or re-
export under the Export Laws without first obtaining such a validated license.
15.3. Specific Export Prohibitions. Without limiting the generality
----------------------------
of the other provisions of this Section 15, Marquette assures DCC that it does
not intend to and will not knowingly, without the prior written consent, if
required, of the Office of Export Administration of the U.S. Department of
Commerce, Washington, D.C. 20230, transmit directly or indirectly, any
Confidential Information or Products to (a) Afghanistan, Iraq, the People's
Republic of China or any Group Q, S, W, Y or Z country specified in Supplement
No. 1 to Section 370 of the Export Administration Regulations issued by the U.S.
Department of Commerce, or (b) any citizen or resident of any of the
aforementioned countries.
15.4. Indemnification. Marquette shall defend DCC against any and
---------------
all claims, and indemnify DCC against any and all losses or expenses, arising
from or otherwise in respect of any asserted violation of the Export Laws by
Marquette or any breach of this Section 15 by Marquette.
16. Force Majeure. If either DCC or Marquette shall be unable, by
reason of any event referred to herein as "force majeure," to carry out its
obligations under this Agreement, either wholly or in part, the party so failing
shall give notice and full particulars of such event or events in writing to the
other party as soon as possible after the occurrence of any such event, and
thereupon such obligation shall be suspended during the continuance of such
cause which, however, shall be remedied or removed with all possible dispatch;
and the obligations, terms and conditions of this
13
<PAGE>
Agreement (except for the expiration date of the Term hereof) shall be extended
for such period as may be reasonably necessary for the purpose of making good
any suspension so caused, provided that no claim for suspension shall be made by
either party when the period of suspension so caused shall be less than ten (10)
consecutive business days. The events referred to herein as "force majeure"
shall include fire, casualty, unavoidable accident, failure of the usual sources
of supply, strikes, labor conditions, lockouts, war, acts of God, the enactment
of any federal, state or municipal law or ordinance or the issuance of any
executive or judicial order, whether federal, state or municipal, or of any
other legally constituted authority, accidents to machinery or any other cause
not within the control of the party claiming relief from any of the requirements
of this Agreement and that, by the exercise of due diligence, the party is
unable to prevent or overcome. Mere inability to make any payment of money
required hereunder shall not constitute an event of "force majeure."
17. Source Code Escrow.
17.1. Source Code Escrow Package Definition. The term "Source Code
-------------------------------------
Escrow Package" means the following:
(a) a complete copy in machine-readable form of the Source Code
and Executable Code of the Licensed Software;
(b) a complete copy of any existing User Documentation; and
(c) complete instructions for compiling and linking every part
of the Source Code into Executable Code, for purposes of enabling
verification of the completeness of the Source Code as provided below.
Such instructions shall include precise identification of all
compilers, library packages, and linkers used to generate Executable
Code.
17.2. Delivery of Source Code Into Escrow. DCC shall deliver a
-----------------------------------
Source Code Escrow Package to the Escrow Agent, provided that DCC, Marquette and
the Escrow Agent shall first enter into a supplementary escrow agreement
("Escrow Agreement") acceptable to all parties. DCC and Marquette shall use
their best efforts to enter into such an Escrow Agreement prior to the delivery
of the Source Code Escrow Package. Notwithstanding the terms of this Agreement,
the Escrow Agreement shall control in the event of any conflict with this
Agreement.
17.3. Delivery of New Source Code Into Escrow. When and if from time
---------------------------------------
to time DCC provides Marquette with an upgrade version of the Licensed Software,
and Marquette shall have requested escrow as provided herein, DCC shall within
ten (10) business days thereafter deposit with the Escrow Agent, a Source Code
Escrow Package for the upgrade version, and give Marquette notice of such
delivery.
17.4. Escrow Fees. All fees and expenses charged by the Escrow Agent
-----------
will be bourne by Marquette. DCC shall not be required to reimburse Marquette
for any such fees, expenses,
14
<PAGE>
or other charges billed to Marquette by the Escrow Agent except as may be
otherwise expressly agreed in writing by DCC.
18. Publicity. Unless waived by DCC, any press release or public
statement by Marquette concerning the Products shall contain a statement that
the Products are distributed pursuant to rights granted to Marquette by DCC and
shall also describe the business engaged in by DCC.
19. Termination.
19.1. Termination. Either party may terminate this Agreement if the
-----------
other party fails to perform any of its obligations under this Agreement and
fails to remedy said breach within thirty (30) days after being given written
notice of specific failure or default and termination by the other party.
19.2. Effect of Termination. In the event that this Agreement is
---------------------
terminated for whatever reason,
(a) any and all rights granted to Marquette under this Agreement
shall terminate;
(b) each party will deliver to the other party within twenty (20)
days of termination all copies in its possession or control of the other
party's Confidential Information;
(c) Marquette's obligations to make payments, and DCC's obligations
to fulfill orders, to the extent that such obligations pertain to
activities conducted prior to termination, shall survive termination;
(d) except as specially provided herein, neither party hereunder
shall be discharged or relieved from any liability or obligation existing
prior to such termination; and
(e) unless the agreements between Marquette and any purchaser of
Products contain greater restrictions, no rights of purchasers of Products
from Marquette prior to termination of this Agreement shall be affected
thereby.
19.3. Unsold Marquette Inventory. Upon termination of this Agreement
--------------------------
for any reason other than termination by DCC under Section 19.1, DCC shall; (i)
elect to repurchase from Marquette any and all Products in Marquette's inventory
at the time of such termination (provided, however, DCC shall not be required in
such instance to purchase inventory consisting of Products which Marquette
purchased pursuant to Section 5.6, which Products Marquette shall be entitled to
sell pursuant to (ii) below), or (ii) notify Marquette that the Term of this
Agreement shall continue until all Products in Marquette inventory are sold. In
the event of such termination and DCC's election to extend the Term of this
Agreement to enable Marquette to sell unsold inventory, DCC
15
<PAGE>
shall have no further obligations under Sections 3.1, 3.2, 5.1, 5.2, 5.3, 6.1,
or 6.3 of this Agreement. The repurchase price to Marquette will be the net
price paid by Marquette, but not including freight and transportation charges.
20. Arbitration.
20.1. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof will be settled by arbitration in Denver,
Colorado, before and in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The award rendered in that arbitration will
be binding on the parties hereto, and judgment upon the award can be entered by
any court having jurisdiction thereof. Without detracting from the generality
of the foregoing, the following specific provisions will also apply:
(a) The proceedings will be held by a panel of three arbitrators,
each party having the right to select one arbitrator, with the third to be
selected in accordance with the Rules of the American Arbitration
Association;
(b) The parties, by mutual agreement, can also provide that all or
part of the arbitration proceedings be held outside of Denver, Colorado; in
this event, the parties will equally bear any special expenses resulting
from that decision;
(c) Before rendering their final decision, the arbitrators will
first act as friendly, disinterested parties for the purpose of helping the
parties reach compromise settlements on the points in dispute; and
(d) The costs of the arbitration will be in the discretion of the
arbitrators, provided, however, that no party is obliged to pay more than
its own costs, the costs of the arbitrator it has nominated, and the cost
of the third arbitrator.
20.2 Site of Arbitration. If the party making claim of arbitration
-------------------
under Section 20.1 DCC, the site of arbitration shall be Milwaukee, Wisconsin.
If Marquette is the party making such claim, the site shall be Oklahoma City,
Oklahoma.
21. Miscellaneous Provisions.
21.1. Independent Contractor. The parties acknowledge and understand
----------------------
that each party is an independent contractor. This Agreement shall not create
nor be construed to create an employee/employer, agent/principal, partnership or
joint venture or any other relationship between DCC and Marquette other than
that of independent contractor. Further, neither party has any authority
whatsoever to represent to any party that it is the other's attorney-in-fact or
to act on behalf of or bind the other party in any capacity or way.
16
<PAGE>
21.2. Further Action. Without further consideration, each party
--------------
hereby agrees to execute and deliver, and to cause its officers, trustees,
employees, and agents to execute and deliver, such other instruments, and to
take such other action as the other parties may reasonably request to more
effectively convey, transfer, vest, and put in possession, the rights granted
hereunder, and to assist in the recordation of same as necessary, all in such
form and substances as the requesting parties may reasonably request.
21.3. Binding Agreement. This Agreement shall be binding upon and
-----------------
shall inure to the benefit of the legal representatives, administrators,
successors and any permitted assigns and licensees of the parties hereto.
21.4. Governing Law. This Agreement and all Product sales agreements
-------------
between Marquette and any purchaser of Products shall be deemed to have been
made under, and shall be construed and interpreted in accordance with the laws
of the State of Washington. No conflicts-of-law rule or law which might refer
such construction and interpretation to the laws of another state, republic, or
country shall be considered.
21.5. Savings Clause. Both parties especially agree in contract that
--------------
neither party intends to violate any public policy, statutory or common law,
rule, regulation, treaty or decision of any government agency or executive body
thereof of any country or community association of countries; that if any word,
sentence, paragraph or clause of combination thereof of this Agreement is found,
by a court or executive body with judicial powers having jurisdiction over this
Agreement or any of its parties hereto, in a final unappealed order to be in
violation of any such provision in any country or community or association of
countries, such words, sentences, paragraphs or clauses or combination shall be
inoperative in such country or community or association of countries, and the
remainder of this Agreement shall remain binding upon the parties hereto.
21.6. Entire Agreement. The terms and conditions herein contained,
----------------
including all the annexes and schedules hereto, constitute the entire agreement
between the parties and supersede all previous communications whether oral or
written between the parties hereto with respect to the subject matters hereof,
and no other previous agreement or understanding varying or extending the same
shall be binding upon either party hereto.
21.7. No Waiver. The parties covenant and agree that if either party
---------
fails or neglects for any reason to take advantage of any of the terms provided
for the termination of this Agreement or if either party, having the right to
declare this Agreement terminated, shall fail to do so, any such failure or
neglect by either party shall not be a waiver or be deemed or be construed to be
a waiver of any cause for the termination of this Agreement subsequently
arising, or as a waiver of any of the terms, covenants or conditions of this
Agreement or of the performance thereof. None of the terms, covenants and
conditions of this Agreement may be waived by any party except by written
consent by all the parties.
21.8. Expenses. Each party is responsible for its own expenses
--------
related to the execution of the Agreement.
17
<PAGE>
21.9. Amendment. No amendment or modification to this Agreement
---------
shall be effective unless it is in writing and signed by duly authorized
representatives of both parties.
21.10. Notices. Any notice required or permitted to be given to
-------
another party hereto shall be given by sending such notice by registered mail or
certified mail, postage prepaid to the address set forth below, or to such other
address as that party may designate by like notice:
If to DCC: Data Critical Corp.
---------
2733 152nd Ave. N.E.
Redmond, Washington 98052
Attention: Jeffrey S. Brown, President and Chief
Executive Officer
If to Marquette: Marquette Medical Systems, Inc.
---------------
8200 W. Tower Avenue
Milwaukee, Wisconsin 53223
Attention: Fred Robertson, Division President,
Patient Monitoring
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement by their duly authorized officers on the date specified above.
DCC: DATA CRITICAL CORP.
- ---
By: /s/ David E. Albert
---------------------------------------------
David E. Albert, Chairman of the Board
MARQUETTE: MARQUETTE MEDICAL SYSTEMS, INC.
- ---------
By: /s/ Fred Robertson, M.D.
---------------------------------------------
Fred Robertson, M.D., Division President,
Patient Monitoring
18
<PAGE>
EXHIBIT 10.3
CONFIDENTIAL TREATMENT REQUESTED
[LETTERHEAD OF MARQUETTE MEDICAL SYSTEMS APPEARS HERE]
ADDENDUM
This Addendum (the "Addendum"), made and entered into as of the 14th day, of
September 1998, is additive to the Distribution And License Agreement
("Agreement") dated January 23rd, 1997 by and between Data Critical Corp.
("DCC") a Delaware corporation, and Marquette Medical Systems ("Marquette"), a
Wisconsin corporation. It also updates the Letter Agreement (the "Letter") dated
October 13, 1997 between Brad Harlow and Marquette.
WHEREAS, Marquette and DCC desire to continue their business relationship
outlined in the Agreement and Letter related to the distribution of certain
products of DCC;
NOW, THEREFORE, in consideration of the premises, the parties agree to the
following:
1. IMPACT.wf(TM)
1.1 Specifications for IMPACT.wf Version 2.0 Software. See Attachment A.
1.2 Pricing for IMPACT.wf. See Attachment B. There is no longer special
pricing for Columbia/HCA customers.
1.3 Purchase Orders. Marquette will place such Purchase Orders as needed to
fulfill customer demand for IMPACT.wf. Once a P.O. that includes IMPACT.wf
is booked at Marquette, a corresponding P.O. to DCC will be sent within 10
working days.
1.4 Distribution Requirements to Maintain Exclusivity.
a) Marquette agrees to promote and endorse the IMPACT.wf with all
telemetry sales. The IMPACT.wf will be included as an option or as a
direct line item for all telemetry system quotations.
b) Marquette agrees to quarterly sales targets, as specified in Section
1.5, of a minimum number of iMPACT.wf systems from DCC. If Marquette does
not purchase the minimum number of systems in any quarter, DCC may, at its
sole discretion, immediately cancel the exclusivity provided Marquette as
defined in Section 1.8 below. Credit for systems that exceed the minimum
requirements for any quarter can be carried forward into the next quarter.
The average purchase price shall be equal to or greater than [*] per
system.
[*] Confidential treatment requested
1 of 3
<PAGE>
1.5 Minimum Quarterly IMPACT.wf Systems Sales Targets. For Q4'98, commencing
October 1, 1998, the minimum number shall be [*] systems per quarter. For
Q1'99, the minimum shall be [*] systems per quarter. For Q2'99, the minimum
shall be [*] systems per quarter. For Q3'99, the minimum shall be [*]
systems per quarter. For Q4'99, the minimum: shall be [*] systems per
quarter.
1.6 Monthly Listing of Telemetry Quotations. For as long as DCC provides
exclusivity as specified in Section 1.8, Marquette will, on a monthly basis,
forward a list of all customers that received Telemetry/IMPACT.wf quotations
in the U.S.
1.7 Regulatory. Marquette assumes responsibility to obtain, as promptly as
reasonably possible, FDA clearance for a 510k submission and Canadian
medical device clearance. All regulatory testing and compliance testing
necessary will be performed by Marquette. DCC will make documentation on
Version 2.0 available to Marquette as needed to aid in regulatory approvals.
DCC shall be solely responsible for identifying, and obtaining, at its sole
cost and expense, all necessary frequency broadcast clearances from the
United States Federal Communications Commission (FCC) which are required for
the development, manufacture, or sale of the DCC products in the United
States. DCC and Marquette will work together on a best-effort basis to
establish a plan that will provide all necessary frequency broadcast
clearances from the Industry Canada regulatory agency which are required for
the development, manufacture, or sale of the DCC products in Canada.
1.8 Exclusivity for IMPACT.wf Version 2.0 Software. DCC will not offer for
sale the Marquette-specific feature of Version 2.0 software (i.e. APEX-
initiated waveform paging only) to any other manufacturer during the Term of
this Agreement unless Marquette violates the Distribution Requirements or is
in default/breach of any portion of the Agreement, Addendum or Letter.
1.9 Software Upgrade for Existing Customers. Marquette shall have the right
to upgrade software at existing customers at no charge from DCC. DCC will
provide, at its Redmond facility, one training session for Marquette Service
on the proper procedure to upgrade both the Software and Receiver software.
Any additional work required of DCC to complete desired software upgrades
shall be provided to Marquette at a negotiated rate. Marquette shall be
responsible for the purchase of all specialized equipment (such as cables,
electrostatic mats, etc.) needed to properly complete the software upgrade.
[*] Confidential treatment requested.
2 of 3
<PAGE>
2. Notices
2.1 Notices. Any notice required or permitted to be given to another party
hereto shall be given by sending such notice by registered mail or certified
mail, postage prepaid, to the address set forth below, or to such other
address as that party may designate by like notice:
If to DCC: Data Critical Corp.
2733 152nd Avenue NE
Redmond, WA 98052
Attn: Brad Harlow, VP & General Manager
If to Marquette: Marquette Medical Systems, Inc.
8200 W. Tower Avenue
Milwaukee, WI 53223
Attn: Gary Close, Sr. Vice President
In Witness Whereof, the parties hereto have executed and delivered this Addendum
by their duly authorized officers on the date specified above:
DCC: Data Critical Corp.
By: /s/ Brad R. Harlow
-----------------------------------
Brad R. Harlow, VP & General Manager
MARQUETTE: Marquette Medical Systems, Inc.
By: /s/ Gary Close
-----------------------------------
Gary Close, Sr. Vice President
3 of 3
<PAGE>
EXHIBIT 10.9
THIS LEASE ("Lease") dated as of the 21st day of December, 1998, is made by and
between S/I NORTHCREEK II, LLC, a Washington limited liability company
("Landlord"), and DATA CRITICAL CORPORATION, a Delaware corporation ("Tenant").
ARTICLE I: DEFINITIONS
1.01 Defined Terms. The following terms shall have the meanings specified
in this Section, unless otherwise specifically provided. Other terms may be
defined in other parts of the Lease.
Landlord: S/I Northcreek II, LLC
Landlord's Address: c/o Schnitzer Northwest
11830 N.E. 195th Street
Bothell, Washington 98011
Attn: Dan Ivanoff
Tenant: Data Critical Corporation
___________________
___________________
Tenant's Address: Prior to Lease Commencement:
2733 152nd Ave. N.E.
Redmond, Washington 98052
Attn: Chief Financial Officer
After Lease Commencement:
At the Premises
19820 North Creek Parkway
Bothell, Washington 98011
Attn: Chief Financial Officer
Project: North Creek Technology Campus I
Property: Approximately 5.09 acres constituting the real property
described in Exhibit "A" and depicted on the Project Site
Plan attached as Exhibit "B."
Building: That certain two story concrete tilt-up office building
designated as Building E on the Project Site Plan
attached hereto as Exhibit B with a rentable area of
approximately 67,471 square feet to be constructed by
Landlord on the Property.
<PAGE>
Premises: Approximately 17,000 rentable square feet of first floor
office area, as shown on the Floor Plan attached as
Exhibit "C."
Term: Commencing upon the Commencement Date (as defined in
Section 4.01) and expiring five (5) years (60 months)
thereafter.
Scheduled Commencement
Date: June 1, 1999
Base Rent: (a) Initial Term
Months Rent PRSF (Mo.) Monthly Installments
1 - 36 $1.2000 $20,400.00*
37 - 60 $1.3305 $22,617.00*
Prepaid Rent: $20,400.00, applicable to Month 1*
Tenant's Share of Building: 25.20%*
Tenants Share of Project: 5.93%*
Surface Parking Spaces: 57 surface parking spaces adjacent to the Building
shall be provided for the non-exclusive use of
Tenant, its employees and visitors.
Security Deposit: $22,617.00
*To be adjusted to reflect actual square footage of the Premises, as verified by
Landlord's and Tenant's architect upon substantial completion.
Exhibits: Exhibit A: Legal Description of Property
Exhibit B: Project Site Plan
Exhibit C: Floor Plan
Exhibit D: Work Schedule
Exhibit E-1: List of Plans and Specifications for Base
Building Shell and Sitework
Exhibit E-2 Outline Specifications to Base Building
Shell and Design/Build Mechanical and
Electrical Systems
Exhibit F: Lease Confirmation
Exhibit G: Estoppel Certificate
Exhibit H: Rules and Regulations
Exhibit I: Form of Letter of Credit
<PAGE>
ARTICLE II: PREMISES AND COMMON AREAS LEASED
2.01 Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, subject to the provisions of this Lease, certain premises
("Premises") to be located within that certain building ("Building") to be
constructed by Landlord as more fully described in Section 3.01 below on the
real property ("Property") legally described in Exhibit A attached hereto and by
this reference incorporated herein, which Property is a portion of the "Project"
identified in Section 1.01. The Property, the Building to be built on the
Property and the location of the Building within the Project are more
particularly shown on the Project Site Plan attached hereto as Exhibit B. The
location of the Premises in the Building is shown on the Floor Plans attached
hereto as Exhibit C. The term "Rentable Area of the Premises", as used in this
Lease, will be determined using the "Standard Method for Measuring Floor Area in
Office Buildings (reprinted June 1996) by BOMA International for a multi-tenant
Building. The proposed Project Site Plan for the Project attached hereto as
Exhibit B is attached for location reference purposes only and shall not
constitute a representation by Landlord to be the final plan of the Project or
to require Landlord to build any improvements or to otherwise comply with said
Project Site Plan. Tenant acknowledges that, except as otherwise expressly set
forth in this Lease, neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the Premises, the Building, the
Common Areas or the Project or their suitability for the conduct of Tenant's
business.
2.02 Common Areas. In addition to the Premises, Tenant shall have the non-
exclusive right to use in common with other tenants and/or occupants of the
Property and Project, the following areas appurtenant to the Building: parking
areas and facilities, roadways, sidewalks, walkways, parkways, plazas, levees,
driveways and landscaped areas and similar areas and facilities situated within
the exterior areas of the Property and Project and not otherwise designated for
the exclusive or restricted use by Landlord and/or individual tenants of other
buildings located within the Property and Project (collectively, "Common
Areas"). Tenant acknowledges that Landlord shall have no obligation to construct
or complete any additional buildings within the Project or improvements to the
Common Areas. Tenant's right to utilize the Common Areas shall at all times be
subject to Landlord's reserved rights therein as described in Section 17.04
hereof, the Rules and Regulations referred to in Section 17.15 hereof and all
covenants, conditions and restrictions ("CC&Rs") now or hereafter affecting or
encumbering the Project.
ARTICLE III: IMPROVEMENTS
3.01 Construction of Building and Premises.
(a) Completion Schedule. Attached hereto as Exhibit D is a schedule
(the "Work Schedule") setting forth the estimated timetable for the planning,
permitting, construction and completion of the Building and the Premises.
<PAGE>
(b) Building and Premises Plans. A list of the plans and outline
specifications for the sitework and base Building shell are attached hereto as
Exhibit E-1 and E-2 and by this reference incorporated herein (the "Building
Plans"). Landlord's architect, in cooperation with Tenant and its consultants,
shall prepare space plans, working drawings and specifications for the
improvements to the office area of the Premises (the "Office Plans") which shall
be subject to the approval of Landlord and Tenant in accordance with the Work
Schedule. The Building Plans and the Office Plans are together referred to
herein as the "Plans."
(c) Construction of Building and Premises. Landlord shall work with
Sierra Construction Company or other contractor chosen by Landlord (the
"Contractor") for construction of the Building and the improvements to the
Premises. It is the intent of Landlord and Tenant that Landlord shall enter into
a separate or supplemental guaranteed maximum price contract with Contractor for
construction of the office improvements to the Premises and that Contractor will
competitively bid the subcontracts to qualified subcontractors with final
subcontracts being awarded by Contractor after review by Landlord and Tenant.
After the Office Plans have been prepared, and approved by the parties, final
pricing has been approved by Landlord and building permits have been issued,
Landlord shall cause the Building and the Premises to be constructed by the
Contractor in accordance with the Plans. Landlord shall supervise the completion
of such work and shall use its good faith efforts to secure substantial
completion of the work in accordance with the Work Schedule. The cost of such
work shall be paid as provided in Paragraph 3.01(d) below.
(d) Payment for Construction of Building and Premises
(1) Subject to Sections 3.01(d)(2) and (3) below, Landlord
shall pay for the following costs in connection with the construction of the
Building:
(aa) Payment of the cost of preparing the Plans,
including mechanical, electrical, plumbing and structural drawings and of
all other aspects necessary to complete the Plans.
(bb) The payment of plan check, permit and license fees
relating to construction of the Building.
(cc) Construction of the Building on a "turn-key" basis.
(2) Landlord shall pay the following amounts with respect to
improvement of the Premises:
(aa) Landlord will pay up to the sum of $27.00 per
rentable square foot of the Premises (estimated to be $459,000.00 based
upon the projected rentable office area of 17,000) ("Tenant Improvement
Allowance"), which Tenant Improvement Allowance is for application to all
costs associated with the design and improvement of the Building and the
Premises other than as included in the Building Plans ("Tenant Improvement
Costs"), including without limitation, WSST, space planning, construction
drawings, fees and permits and hard
<PAGE>
costs (as such hard costs are reflected in the construction contract and
changes thereto) incurred by Landlord in connection with the improvement of
the Premises. To the extent the Tenant Improvement Costs exceed the Tenant
Improvement Allowance (and any Additional Allowance elected to be used by
Tenant pursuant to Subsection 3.01(d)(2)(bb) below), such excess shall be
paid by Tenant into Landlord's construction account simultaneously with
execution by Landlord of the construction contract for the same.
(bb) At Tenant's written election to Landlord at the time
of Landlord's entering into of the construction contract for the Tenant
Improvements, Landlord shall fund up to an additional $10.00 per rentable
square foot of the Premises (estimated to be $170,000 based upon a rentable
area of 17,000 square feet) (the "Additional Allowance") toward the cost of
the Tenant Improvements in excess of the per square foot allowance provided
in (aa) above; provided, that, as a condition to Landlord's obligation to
fund such excess improvements, Landlord and Tenant shall enter into an
amendment to this Lease so as to increase the Base Rent for the Premises by
an amount necessary to amortize the total amount of the Additional
Allowance paid by Landlord pursuant to this Subsection (bb) over the
initial Term of this Lease at an 11.47% effective annual amortization rate;
and; provided, further, that, as a condition to Landlord's obligation to
fund such Additional Allowance, Tenant shall cause the Letter of Credit
issued to Landlord pursuant to Section 17.25 below to be increased by an
amount (the "Additional LC Amount") equal to the Additional Allowance,
which Additional LC Amount will be decreased upon each annual renewal of
the Letter of Credit by an amount equal to the principal portion of the
Additional Allowance which has been amortized during the prior twelve (12)
month period (based upon amortization of the entire Additional Allowance
over the initial Term at the 11.47% effective amortization rate) if Tenant
has not been in default under this Lease during the prior twelve (12) month
period:
(3) Tenant will, at its sole cost and expense, pay for any
improvements to the Premises not expressly included in the Plans and shall
arrange for the installation of all racking and equipment associated with
its business. Costs associated with Tenant's equipment, layout and design
are also the sole responsibility of Tenant.
(e) Delay in Completion. If there shall be a delay in substantial
completion of the Building or the Premises or the issuance of a certificate
of occupancy for the same as a result of:
(1) Tenant's failure to approve any item or perform any other
obligation in accordance with and by the date specified in the Work
Schedule within five (5) business days after receipt of notice from
Landlord;
(2) Tenant's request for changes in materials, finishes or
installations other than those readily available; provided, however,
Landlord shall inform Tenant of the failure of any requested materials,
finishes or installations to be readily available and Tenant shall have the
right to approve substitutions to minimize any such delay;
<PAGE>
(3) Tenant's request to deviate from the Plans; or
(4) Tenant's unreasonable interference with Landlord's
construction of the Building or the Premises during Tenant's work within
the Premises (whether such work is performed by Tenant or its contractor or
by Landlord or its contractor on Tenant's behalf);
(each a "Tenant Delay") then the Commencement Date of the Term of the Lease
shall be accelerated by the number of days of such delay.
3.02 Completion and Delivery. The term "substantial completion" as used in
the Lease shall mean the date of substantial completion of the Building and
Premises pursuant to the Plans such that Tenant may commence the installation of
any of Tenant's equipment and occupy the Premises for the conduct of its
business (subject to the completion of any additional construction to be
performed by Tenant). The Building and the Premises shall be deemed
substantially complete notwithstanding the fact that minor details of
construction, mechanical adjustments or decorations which do not materially
interfere with Tenant's use and enjoyment of the Building remain to be performed
(items normally referred to as "punch list" items). Certification by Landlord's
architect (the "Project Architect") as to the substantial completion of the
Premises shall be conclusive and binding upon Landlord and Tenant. By taking
occupancy of the Premises, Tenant shall be deemed to have accepted the Premises
and the Building as substantially complete except that Tenant may, within ten
(10) days after entering into possession of the Premises, provide Landlord with
a list of incomplete and/or corrective items. Landlord shall diligently
complete, as soon as reasonably possible, any items of work and adjustment on
such list as are not completed upon substantial completion of the Premises.
Landlord shall use reasonable efforts to achieve substantial completion of the
Building and Premises by no later than May 28, 1999.
ARTICLE IV: TERM
4.01 Term. The Term of this Lease shall commence ("Commencement Date") on
the later to occur of (a) the date of substantial completion of the Premises, or
(b) the date of receipt of a certificate of occupancy or other applicable
governmental permit allowing Tenant to occupy the Premises; provided, however,
that the Commencement Date shall be subject to adjustment for delays in
completion of the Building or the Premises attributable to Tenant, as more
particularly set forth in Section 3.01(e) of this Lease. The Term shall expire
upon the date set forth in Section 1.01, unless sooner terminated as hereinafter
provided. Notwithstanding the above, Landlord agrees to use its good faith
efforts to allow Tenant limited access to the Building and Premises at least
twenty-one (21) days prior to the Commencement Date or otherwise as mutually
agreed by Landlord and Tenant; provided, that Tenant's entry into the Building
and Premises during such period shall be limited to installation of furniture,
fixtures and equipment; provided, further that such early entry by Tenant shall
in no way interfere with or cause delays in Landlord's construction; and
provided, further that such early entry by Tenant shall be at Tenant's sole risk
and Tenant shall be deemed to have waived and released Landlord, its agents,
employees and contractors from and with respect to any personal injury or
property damage
<PAGE>
resulting from, during or in connection with such early occupancy by Tenant,
except to the extent resulting from the intentional conduct or gross negligence
of Landlord.
4.02 Notice of Commencement Date. Landlord shall inform Tenant of the
estimated date of substantial completion at least five (5) days prior to such
date. Upon ascertaining the date of substantial completion and the Commencement
Date, Landlord shall deliver to Tenant a written confirmation in the form
attached hereto as Exhibit F ("Lease Confirmation") of said dates of substantial
completion and the Commencement Date. The Lease Confirmation shall be binding
upon Tenant unless Tenant objects to the Notice in a writing delivered to
Landlord within five (5) days of Tenant's receipt of said Notice of
Commencement.
4.03 Conditional Option to Extend. Subject to Landlord's election pursuant
to Subsection 4.03(d) below, Landlord hereby grants Tenant the right to extend
the term of the Lease for one additional period of five (5) years (such extended
period is hereinafter referred to as the "Extended Term") on the same terms and
conditions contained in the Lease, except that (i) Base Rent for the Extended
Term shall be as set forth hereinbelow, and (ii) no additional options to extend
shall apply following the expiration of the Extended Term. Written notice of
Tenant's exercise of its option to extend ("Option to Extend") the Term of this
Lease for the Extended Term must be given to Landlord no less than twelve (12)
months prior to the date the Term of the Lease would otherwise expire. If Tenant
is in material default under this Lease, Tenant shall have no right to extend
the Term of this Lease until such default is cured; provided, that the period of
time within which said option may be exercised shall not be extended or enlarged
by reason of Tenant's inability to exercise said option because of a default. In
the event Tenant validly exercises its Option to Extend the Term of this Lease
as herein provided, Base Rent shall be adjusted as of the commencement date of
the Extended Term as follows:
(a) Within thirty (30) days after exercise of its Option to Extend by
Tenant, Landlord shall provide Tenant with Landlord's determination of the fair
market Base Rent for the Extended Term, including periodic increases as dictated
by the current market ("Landlord's Determination of Base Rent for Extended
Term"). Tenant shall provide notice to Landlord within ten (10) days after
receipt of such notice from Landlord as to whether Tenant accepts Landlord's
Determination of Base Rent for Extended Term. In the event Tenant does not agree
to Landlord's Determination of Base Rent for Extended Term, Landlord and Tenant
shall attempt to agree upon Base Rent for the Premises for the Extended Term,
such rent to be the fair market rental value of the Premises for the Extended
Term, as defined in Subsection (c) below. If the parties are unable to agree
upon the Base Rent for the Extended Term by the date three (3) months prior to
the commencement of the Extended Term, then within ten (10) days thereafter each
party, at its own cost and by giving notice to the other party, shall appoint a
real estate appraiser with at least five (5) years full-time commercial real
estate appraisal experience in the area in which the Premises are located to
appraise and set Base Rent for the Extended Term. If a party does not appoint an
appraiser within ten (10) days after the other party has given notice of the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set Base Rent for the Extended Term. If each party shall
have so appointed an appraiser, the two appraisers shall meet promptly
<PAGE>
and attempt to set the Base Rent for the Extended Term. If the two appraisers
are unable to agree within thirty (30) days after the second appraiser has been
appointed, they shall attempt to select a third appraiser meeting the
qualifications herein stated within ten (10) days after the last day the two
appraisers are given to set Base Rent. If the two appraisers are unable to agree
on the third appraiser within such ten (10) day period, either of the parties to
this Lease, by giving five (5) days notice to the other party, may apply to the
then presiding judge of the Superior Court of King County for the selection of a
third appraiser meeting the qualifications stated in this paragraph. Each of the
parties shall bear one-half (1/2) of the cost of appointing the third appraiser
and of paying the third appraiser's fee. The third appraiser, however selected,
shall be a person who has not previously acted in any capacity for either party.
(b) Within thirty (30) days after the selection of the third
appraiser, a majority of the appraisers shall set Base Rent for the Extended
Term. If a majority of the appraisers are unable to set Base Rent within the
stipulated period of time, the three appraisals shall be added together and
their total divided by three (3). The resulting quotient shall be the Base Rent
for the Premises during the Extended Term. If, however, the low appraisal and/or
the high appraisal is/are more than ten percent (10%) lower and/or higher than
the middle appraisal, the low appraisal and/or the high appraisal shall be
disregarded. If only one (1) appraisal is disregarded, the remaining two (2)
appraisals shall be added together and their total divided by two (2), and the
resulting quotient shall be Base Rent for the Premises during the Extended Term.
(c) For purposes of the appraisal, the term "-fair market rental
value-" shall mean the price that a ready and willing tenant would pay, as of
the Extended Term commencement date, as rent to a ready and willing landlord of
premises comparable to the Premises in the Bothell market, if such premises were
exposed for lease on the open market for a reasonable period of time; including
any rent increases over the Extended Term to the extent normal under then
current market conditions; provided, that Base Rent for any applicable Extended
Term shall not be less than the Base Rent in effect during the month immediately
preceding the commencement of such Extended Term.
<PAGE>
(d) Notwithstanding anything in this Section 4.03 to the contrary,
in the event Microvision, Inc., its successors or assigns, exercises its right
to expand into all or a portion of the Premises, Landlord may, by written notice
to Tenant within thirty (30) days after receipt of notice of Tenant's election
to exercise its Option to Extend, elect to cancel and void Tenant's Option to
Extend, in which event Tenant shall vacate the Premises at the expiration of the
initial Term and; provided that Tenant timely vacates the Premises, Landlord
shall reimburse Tenant for Tenant's actual out-of-pocket moving expenses up to a
maximum of $3.00 per rentable square foot of the Premises. In the event Landlord
makes the election to cancel and void the Option to Extend pursuant to this
Subsection (d), Landlord will use good faith efforts to relocate Tenant to other
comparable space in Schnitzer North Creek, to the extent available and owned by
Landlord or its affiliates, on mutually acceptable terms and conditions. For
purposes of this Subsection (d), the term "moving expenses" shall include the
actual costs incurred in connection with a physical move to a location not more
than fifty (50) miles from the Property, including breakdown and packing, moving
and set-up at the Premises, necessary technical and support services in
connection with the disconnection of electrical and computer equipment and
reinstalling such equipment at the relocated premises and printing services
required to replace inventory of tenant's printed materials, including without
limitation, stationary, brochures, and business cards, all as evidenced by
invoices or other written substantiation submitted to Tenant.
ARTICLE V: RENT
5.01 Base Rent. The Base Rent ("Base Rent") shall be as set forth in
Section 1.01. The Base Rent shall be paid in advance on the first day of each
and every month during the Term to Landlord at the address set forth in Section
1.01 hereof or at such other place as Landlord may direct in writing, without
any prior demand therefor and without any abatement, deduction or setoff
whatsoever, except as expressly allowed by this Lease. If the Term commences on
any day other than the first day of a calendar month and/or ends on any day
other than the last day of a calendar month, Base Rent for the fraction(s) of a
month at the commencement and/or upon the expiration of the Term shall be
prorated based upon the actual number of days in such fractional month(s).
Simultaneously with execution of this Lease, Tenant shall pay Landlord the
Prepaid Rent identified in Section 1.01, which Prepaid Rent shall be applied by
Landlord to Base Rent for the period identified in Section 1.01.
5.02 Additional Rent. In addition to Base Rent, Tenant shall pay to
Landlord all sums of money or other charges required to be paid by the Tenant
under this Lease (except Base Rent and the Prepaid Rent), including but not
limited to Operating Expenses (as defined in Article VI hereof) (all such sums
being herein deemed "Additional Rent"), and whether or not same are designated
"Additional Rent" and whether or not same are payable in lawful money of the
United States of America without deduction, set-off or abatement whatsoever,
except as expressly allowed by this Lease. Any Additional Rent provided for in
this Lease shall become due with the next monthly installment of Base Rent
unless otherwise provided. The term "Rent" as used in this Lease shall refer
collectively to "Base Rent" and "Additional Rent."
5.03 Late Payment. If any payment of Rent is not received by Landlord
within three (3) business days after written notice from Landlord to Tenant that
the same is past due, Tenant shall pay
<PAGE>
to Landlord a late payment charge equal to five percent (5%) of the amount of
such delinquent payment of Rent in addition to the installment of Rent then
owing, regardless of whether or not a notice of default has been given by
Landlord. In addition, Tenant shall pay interest on such late payment and late
charge from and after the expiration of thirty (30) days following the due date
of the late payment at an interest rate equal to the lesser of (a) the
prevailing prime (reference) rate as published by SeaFirst Bank (or any
successor bank) at its Seattle main branch office, or any successor rate of
interest, plus three (3) percentage points, or (b) the maximum rate permitted by
applicable law (hereafter the "Default Rate"), until such amounts are paid.
Landlord and Tenant recognize that the damages which Landlord will suffer as a
result of Tenant's failure to timely pay Rent are difficult or impracticable to
ascertain, and agree that said interest and late charge are a reasonable
approximation of the damages which Landlord will suffer in the event of Tenant's
late payment. This provision shall not relieve Tenant from payment of Rent at
the time and in the manner herein specified. Acceptance by Landlord of any such
interest and late charge shall not constitute a waiver of Tenant's default with
respect to said overdue amount, nor shall it prevent Landlord from exercising
any other rights or remedies available to Landlord.
5.04 Security Deposit. Simultaneously with execution of this Lease, Tenant
shall deposit with Landlord the sum specified as a Security Deposit in Section
1.01 of this Lease. Landlord shall pay Tenant the remaining balance thereof,
without any liability for interest thereon, within thirty (30) days after the
expiration or prior termination of the Lease Term, or any extension thereof, if
and only if Tenant has fully performed all of its obligations under the terms of
this Lease. Landlord shall be entitled to withdraw from the deposit the amount
of any unpaid Base Rent, Additional Rent or other charges not paid to Landlord
when due, and Tenant shall immediately re-deposit an amount equal to that so
withdrawn within ten (10) days of demand.
ARTICLE VI: ADDITIONAL RENT AND CHARGES
6.01 Operating Expenses. In addition to Base Rent and other sums payable
by Tenant under this Lease, Tenant shall pay to Landlord, as Additional Rent,
Tenant's Share of the Operating Expenses (as such term is defined below).
(a) Estimated Expenses. Upon the Commencement of the Lease Term,
and thereafter prior to the commencement of each calendar year occurring wholly
or partially within the Term, Landlord shall estimate the annual Operating
Expenses payable by Tenant pursuant to this provision, and Tenant shall pay to
Landlord on the first day of each month in advance, one-twelfth (1/12th) of
Tenant's Share of such estimated amount. In the event that during any calendar
year of the Term, Landlord determines that the actual Operating Expenses for
such year will exceed the estimated Operating Expenses, Landlord may revise such
estimate by written notice to Tenant, and Tenant shall pay to Landlord,
concurrently with the regular monthly rent payment next due following the
receipt of the revised estimate, an amount equal to one monthly installment
thereof multiplied by the number of months expired during such calendar year to
and including the month of such payment. Subsequent installments shall be
payable concurrently with the regular monthly Base Rent due for the balance of
the calendar year and shall continue until the next calendar year's estimate is
rendered. Within ninety (90) days following the end of each year, Landlord shall
provide Tenant
<PAGE>
with a written statement of the actual total Operating Expenses for such year
and there shall be an adjustment made to account for any difference between
Tenant's Share of the actual and the estimated Operating Expenses for the
previous year. If Tenant has overpaid the amount of Operating Expenses owing
pursuant to this provision, Landlord shall, provided Tenant is not in default
hereunder, credit such overpayment to Tenant's account. If Tenant has underpaid
the amount of Operating Expenses owing pursuant to this provision, Tenant shall
pay the total amount of such deficiency to Landlord as Additional Rent with the
next payment of Base Rent due under this Lease following delivery of written
notice of said deficiency from Landlord to Tenant. Landlord shall keep its books
of account and records concerning Operating Expenses in compliance with
generally accepted accounting principles and retain the same for two (2) years
after the calendar year for which they were prepared. Unless Tenant objects in
writing regarding specific discrepancies in the Operating Expense calculations
for any calendar year within twelve (12)months after receipt of Landlord's final
calculations for such calendar year, Tenant shall be deemed to have approved the
same and to have waived the right to object to such calculations.
(b) Defined Terms.
(i) Operating Expenses Inclusions. For purposes of this Lease,
"Operating Expenses" means an amount equivalent to the total of all reasonable
expenses and costs actually incurred by Landlord in connection with the
ownership, operation, management, maintenance and repair of the Building, the
Property, and the Common Areas, including, without limitation:
A. The costs of operating, maintaining, repairing and
replacing the Common Areas, the Building and the Premises, including but not
limited to: gardening and landscaping; painting; lighting; sanitary control;
personal property taxes; public liability insurance and property damage
insurance; utilities for Common Areas; licenses and fees for Common Area
facilities; sweeping; removal of snow and ice, trash, rubbish, garbage and other
refuse; repairing, restriping and resurfacing of parking area; and maintenance
of and property taxes on personal property, machinery and equipment used in
Common Area maintenance.
B. All Real Property Taxes (as defined below) assessed
against the Project or Property, as applicable, including land, Building and
improvements thereon or thereto.
C. All premiums for fire, extended coverage and other
insurance (including earthquake and flood insurance if Landlord deems
appropriate) the Landlord reasonably deems necessary and keeps in force on or
with respect to the Project, Property or Building of which the Premises are a
part and commercially reasonable deductibles payable in connection therewith.
D. The cost of operating, maintaining, repairing and
replacing any electrical, mechanical, automatic fire sprinkler and other
utilities systems serving the Premises which serve the Premises in common with
the entire Building.
E. The cost of maintenance and repair of the roof, exterior
walls, membrane, foundation, and other exterior portions of the Building.
<PAGE>
F. Reasonable property management fees, which may be payable
to Landlord or a third party property manager and cost of operation of
management office at the Property, including rent and onsite and common area
expenses.
G. Costs of replacements and improvements which are
necessary to adequately maintain or protect the Project or Building and/or which
are required by law or governmental regulation enacted after the date of this
Lease, which are of a capital nature (as determined by GAAP accounting) to the
extent amortization over the useful life thereof is applicable to the periods
during the Lease Term.
H. Any other costs levied, assessed or imposed by or at the
direction of, or resulting from statutes or regulations or interpretations
thereof promulgated by any federal or governmental authority in connection with
the use or occupancy of the Project.
I. Assessments made on or with respect to the Property made
pursuant to any covenants, conditions and restrictions and/or owner's
associations affecting the Property.
J. Reasonable reserves for replacement of improvements
located on the Property or Common Areas.
K. Compensation (including wages, employer-paid taxes and
benefits) of employees and contractors engaged in the operation and maintenance
of the Property and/or Building;
(ii) Operating Expense Exclusions. Notwithstanding the foregoing,
Operating Expenses to be reimbursed by Tenant shall not include:
A. Expenses which are separately metered or calculated for
the Premises or other leased area of the Building, which expenses shall be
billed separately to Tenant or such other tenant, as applicable.
B. Costs incurred in connection with the initial
construction or design of the Building or to correct defects in the original
construction or design of the Building.
C. Costs incurred because of Landlord's negligence or breach
of any legal obligation (including any obligation of Landlord under any lease of
space in the Building), or the negligence, willful misconduct or breach of any
legal obligation committed by any other tenant in the Building.
D. Amounts paid which are materially in excess of the fair
market value of services or materials provided in exchange therefor.
E. Depreciation.
<PAGE>
F. Costs, fines or penalties incurred due to violation by
Landlord of any applicable law.
G. Expenses incurred by Landlord in respect of individual
tenants and/or the improvement or renovation of tenants' leasehold improvements,
including leasing commissions, attorneys' fees arising from lease disputes and
other specific costs incurred for the account of, separately billed to and paid
by specific tenants.
H. Repairs or replacements to the extent that the cost of
the same is recoverable by the Landlord pursuant to original construction
warranties.
I. Interest on debt or capital retirement of debt, and costs
of capital improvements except as expressly provided above.
Additional Rent payable by Tenant which would not otherwise be due until
after the date of the expiration or earlier termination of the Lease shall, if
the exact amount is uncertain at the time this Lease expires or terminates, be
paid by Tenant to Landlord upon such expiration or termination in an amount to
be determined by Landlord, with an adjustment to be made once the exact amount
is known.
(iii) Tenant's Share. For purposes of this Lease, "Tenant's Share"
with respect to any applicable Operating Expense means (a) the percentage
obtained by dividing the Rentable Area of the Premises by the aggregate Rentable
Area of all premises available for lease, whether leased or not, in the
Building, or (b) the percentage obtained by dividing the gross building area of
the Building by the aggregate gross building area of all buildings located (or
proposed to be located) on the Project, as reasonably determined by Landlord
with respect to the applicable Operating Expenses. Notwithstanding the above,
Landlord shall have the right, but not the obligation, to reallocate Tenant's
Share with respect to any applicable item of Operating Expense in the event
Landlord determines, in the exercise of reasonable discretion, that such
reallocation is necessary in order to equitably allocate such Operating
Expense(s) among parties benefited thereby.
(iv) Real Property Taxes. For purposes of this Lease, "Real Property
Taxes" shall consist of all transit charges, housing fund assessments, real
estate taxes and all other taxes relating to the Building, Property and/or the
Project, as applicable, all other taxes which may be levied in lieu of real
estate taxes, all assessments, assessment bonds, levies, fees and other
governmental charges, including, but not limited to, charges for traffic
facilities and improvements, water service studies, and improvements or amounts
necessary to be expended because of governmental orders, whether general or
special, ordinary or extraordinary, unforeseen as well as foreseen, of any kind
and nature for public improvements, services, benefits, or any other purpose,
which are assessed, levied, confirmed, imposed or become a lien upon the
Building or the Property or become payable during the Term (or which become
payable after the expiration or earlier termination hereof and are attributable
in whole or in part to any period during the Term hereof), together with all
reasonable costs and expenses incurred by Landlord in successfully contesting,
resisting or appealing any such taxes, rates, duties, levies or assessments.
"Real Property Taxes" shall exclude any franchise, estate, inheritance or
succession transfer tax of Landlord, or any federal or state income, profits or
revenue tax or charge upon the net
<PAGE>
income of Landlord from all sources; provided, however, that if at any time
during the Term there is levied or assessed against Landlord a federal, state or
local tax or excise tax on rent, or any other tax however described on account
of rent or gross receipts or any portion thereof, Tenant shall pay one hundred
percent (100%) of the Tenant's Share of any said tax or excise applicable to
Tenant's Rent as Additional Rent. Landlord shall provide Tenant with a copy of
Landlord's tax statement for each year and the computation used to determine
Tenant's Share of the same.
(v) Tenant Audit. Tenant shall have the right, not more frequently
than once in any twelve (12) month period, upon reasonable advanced notice and
during regular business hours to audit Operating Expenses for which Tenant is
responsible to reimburse Landlord under the terms of this Lease. Landlord shall
cooperate with any such audit. Landlord shall maintain complete books and
records as required to establish Operating Expenses and other charges payable by
Tenant hereunder. Such books and records shall be retained for not less than
three years. Such books and records may be audited for up to 12 months after
such Operating Expenses and other charges are due from Tenant. If it shall be
determined as a result of any such audit that Tenant has overpaid any Operating
Expenses or other charges, Landlord shall promptly refund to Tenant the amount
of such overpayment. If the amount of such overpayment exceeds 10% of Tenant's
Share of Operating Expenses for the accounting period in question, Landlord
shall promptly pay the reasonable cost of such audit to Tenant upon Tenant's
submission of appropriate documentation of such costs. Notwithstanding the
above, in the event Landlord disputes the results of Tenant's audit, Landlord
may conduct a separate audit and the parties agree to submit any dispute or
discrepancy to determination by binding arbitration.
6.02 Tenant's Personal Property Taxes. Tenant shall pay or cause to be
paid, prior to delinquency, any and all taxes and assessments levied upon all
trade fixtures, inventories and other real or personal property placed or
installed in and upon the Premises by Tenant. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Building is increased by the inclusion
therein of a value placed upon such real or personal property or trade fixtures
of Tenant, and if Landlord pays the taxes based upon such increased assessment,
Tenant shall, upon demand, repay to Landlord the taxes so levied or the portion
of such taxes resulting from such increase in the assessment.
ARTICLE VII: INSURANCE
7.01 Landlord's Insurance. During the Term, Landlord shall procure and
maintain in full force and effect with respect to the Building, a customary
policy or policies of all-risk insurance written by a reputable insurance
company authorized to do business in the State of Washington (including
sprinkler leakage, vandalism and malicious mischief coverage, and any other
endorsements required by the holder of any fee or leasehold mortgage). If the
annual premiums charged Landlord for such casualty insurance exceed the standard
premium rates because the nature of Tenant's operations results in increased
exposure, then Tenant shall, upon receipt of appropriate premium invoices,
reimburse Landlord for such increased amount. Landlord shall have the right, at
its option, to keep and maintain in full force and effect during the Term such
other insurance in such amounts and on such terms as Landlord and/or any first
mortgagees or the beneficiary of any first trust deed against the Building, the
Property and/or the Project may reasonably require from time to time in form, in
amounts and for
<PAGE>
insurance risks against which a prudent Landlord would protect itself, including
but not limited to rental abatement, earthquake and flood insurance.
7.02 Public Liability. Tenant shall, at its own cost and expense, keep and
maintain in full force during the Term and any other period of occupancy of the
Premises by Tenant, a policy or policies of commercial liability insurance,
written by a reputable insurance company authorized to do business in the State
of Washington in form and content acceptable to Landlord insuring Tenant's
activities with respect to the Premises, the Common Areas and the Project for
loss, damage or liability for personal injury or death of any person or loss or
damage to property occurring in, upon or about the Premises in an amount of not
less than Three Million Dollars ($3,000,000) combined single limit or such
larger amounts as may hereafter be reasonably requested by Landlord. The policy
shall insure the hazards of the Premises and Tenant's operations therein, shall
include independent contractor and contractual liability coverage (covering the
indemnity contained in Section 7.08 hereof) and shall (a) name Landlord as an
additional insured; (b) contain a cross-liability provision and; (c) contain a
provision that the insurance provided hereunder shall be primary and non-
contributing with any other insurance available to Landlord.
7.03 Tenant's Property and Other Insurance. Tenant shall, at its own cost
and expense, keep and maintain in full force during the Term and any other
period of occupancy of the Premises, a policy or policies of standard form
property insurance insuring against the perils of fire, extended coverage,
vandalism, malicious mischief, special extended coverage ("all risk") and
sprinkler leakage. This insurance policy shall be upon all property owned by
Tenant, for which Tenant is legally liable or that was installed at Tenant's
expense, and which is located in the Premises, including without limitation,
furniture, fittings, installations, fixtures (other than the improvements
installed by Landlord), and any other personal property, in the amount of not
less than one hundred percent (100%) of the full replacement costs thereof. This
insurance policy shall also insure direct or indirect loss of Tenant's earning
attributable to Tenant's inability to use fully or obtain access to the
Premises.
7.04 Form of Insurance/Certificates. All policies shall be written in a
form satisfactory to Landlord and shall be taken out with insurance companies
licensed in the state in which the Building is located and holding a General
Policy Holder's Rating of "A" and a financial rating of "X" or better, as set
forth in the most current issues of Best's Insurance Guide. Tenant shall furnish
to Landlord, prior to Tenant's entry into the Premises and thereafter within ten
(10) days following the expiration of each such policy, a certificate of
insurance (or renewal thereof) issued by the insurance carrier of each policy of
insurance carried by Tenant pursuant hereto. Said certificates shall expressly
provide that such policies shall not be cancelable or subject to reduction of
coverage below the minimum amounts required by this Lease or required by any
lender having an interest in the Building or otherwise be subject to
modification except after thirty (30) days prior written notice to the parties
named as insured in this Section 7.04.
7.05 Tenant's Failure. If Tenant fails to maintain any insurance required
in the Lease, Tenant shall be liable for any loss or cost resulting from said
failure, and Landlord shall have the right to obtain such insurance on Tenant's
behalf and at Tenant's sole expense. This Section 7.05 shall not be deemed to be
a waiver of any of Landlord's rights and remedies under any other section of
this Lease.
<PAGE>
If Landlord obtains any insurance which is the responsibility of Tenant to
obtain under this Article VII, Landlord shall deliver to Tenant a written
statement setting forth the cost of any such insurance and showing in reasonable
detail the manner in which it has been computed and Tenant shall promptly remit
said amount as Additional Rent to Landlord.
7.06 Waiver of Subrogation. Any all-risk policy or policies of fire,
extended coverage or similar casualty insurance which either party obtains in
connection with the Building, the Premises or Tenant's personal property therein
shall include a clause or endorsement denying the insurer any rights of
subrogation against the other party to the extent rights have been waived by the
insured prior to the occurrence of injury or loss. Landlord and Tenant waive any
rights of recovery against the other for injury or loss due to hazards covered
by insurance containing such a waiver of subrogation clause or endorsement to
the extent of the injury or loss covered thereby.
7.07 Tenant's Properties and Fixtures. Tenant assumes the risk of damage
to any furniture, equipment, machinery, goods, supplies or fixtures which are or
remain the property of Tenant or as to which Tenant retains the right of removal
from the Premises, except to the extent due to the negligent act or omission or
willful misconduct of Landlord, and/or its agent or employees. Tenant shall not
do or keep anything in or about the Premises (except those things Tenant
presently does and keeps in connection with the uses set forth in Section 10.01)
which will in any way tend to increase insurance rates paid by Landlord and
maintained with respect to the Premises and/or the Project unless Tenant pays
directly to Landlord the increase cost of the premiums. In no event shall Tenant
carry on any activities which would invalidate any insurance coverage maintained
by Landlord. If Tenant's occupancy or business in, or on, the Premises, whether
or not Landlord has consented to the same, results in any increase in premiums
for the insurance carried by Landlord with respect to the Building and/or the
Project, Tenant shall pay any such increase in premiums as Additional Rent
within ten (10) days after being billed therefore by Landlord. In determining
whether increased premiums are a result of Tenant's use of the Building, a
schedule issued by the organization computing the insurance rate on the Building
and/or the Project showing the various components of such rate shall be
conclusive evidence of the several items and charges which make up such rate.
Tenant shall promptly comply with all reasonable requirements of the insurance
underwriters and/or any governmental authority having jurisdiction thereover,
necessary for the maintenance of reasonable fire and extended insurance for the
Building and/or the Project.
<PAGE>
7.08 Indemnification.
(a) (i) Tenant, as a material part of the consideration to be
rendered to Landlord, and subject to subsection (b) below, hereby
indemnifies and agrees to defend and hold Landlord, the Premises and the
Project harmless from and against (i) any and all liability, penalties,
losses, damages, costs and expenses, demands, causes of action, claims,
judgments or appeals arising from any injury to any person or persons or
any damage to any property as a result Tenant's or Tenants' officers,
employees, agents, assignees, subtenants, concessionaires, licensees,
contractors or invitees' use, maintenance, occupation, operation or control
of the Premises during the Term, or resulting from any breach or default in
the performance of any obligation to be performed by Tenant hereunder or
for which Tenant is responsible under the terms of the Lease or pursuant to
any governmental or insurance requirement, or arising from any act,
neglect, fault or omission of Tenant or any of Tenant's officers,
employees, agents, servants, subtenants, concessionaires, licensees,
contractors or invitees, and (ii) from and against all reasonable legal
costs and charges, including attorneys' and other professional fees,
incurred in and about any of such matters and the defense of any action
arising out of the same or in discharging the Property and/or Premises or
any part thereof from any and all liens, charges or judgments which may
accrue or be placed thereon by reason of any act or omission of the Tenant,
except and to the extent as may arise out of the negligence or willful
misconduct of Landlord and/or its agents or employees.
(ii) Landlord, as a material part of the consideration to be
rendered to Tenant, and subject to subsection (b) below, hereby indemnifies
and agrees to defend and hold Tenant and the Premises harmless from and
against (i) any and all liability, penalties, losses, damages, costs and
expenses, demands, causes of action, claims, judgments or appeals arising
from any injury to any person or persons or any damage to any property as a
result Landlord's or Landlord's' officers, employees, agents, assignees,
subtenants, concessionaires, licensees, contractors or invitees' use,
maintenance, occupation, operation or control of the Building, Common Areas
or Project during the Term, or resulting from any breach or default in the
performance of any obligation to be performed by Landlord hereunder or for
which Landlord is responsible under the terms of the Lease or pursuant to
any governmental or insurance requirement, or arising from any act,
neglect, fault or omission of Landlord or any of Landlord's officers,
employees, agents, servants, subtenants, concessionaires, licensees,
contractors or invitees, and (ii) from and against all legal costs and
charges, including attorneys' and other professional fees, incurred in and
about any of such matters and the defense of any action arising out of the
same or in discharging Tenant from any and all liens, charges or judgments
which may accrue or be placed thereon by reason of any act or omission of
the Landlord, except and to the extent as may arise out of the negligence
or willful misconduct of Tenant and/or its agents or employees.
(b) In the event of the concurrent negligence of Tenant, its
sublessees, assignees, invitees, agents, employees, contractors, or licensees on
the one hand and the negligence of Landlord, its agents, employees or
contractors on the other hand, which concurrent negligence results in injury or
damage to persons or property of any nature and howsoever caused, and relates to
the construction,
<PAGE>
alteration, repair, addition to, subtraction from, improvement to or maintenance
of the Common Areas or Premises such that RCW 4.24.115 is applicable, Tenant's
obligation to indemnify Landlord as set forth in this Section 7.08 shall be
limited to the extent of Tenant's negligence and that of Tenant's officers,
sublessees, assignees, invitees, agents, employees, contractors or licensees,
including Tenant's proportional share of costs, attorneys' fees and expenses
incurred in connection with any claim, action or proceeding brought with respect
to such injury or damage. LANDLORD AND TENANT EACH HEREBY WAIVE AND AGREE THAT
THEY WILL NOT ASSERT THEIR INDUSTRIAL INSURANCE IMMUNITY UNDER TITLE 51 RCW IF
SUCH ASSERTION WOULD BE INCONSISTENT WITH THE RIGHT OF THE OTHER PARTY TO
INDEMNIFICATION PURSUANT TO THIS SECTION 7.08. THE PARTIES AGREE THAT THIS
PROVISION WAS MUTUALLY NEGOTIATED.
(c) In no event shall Landlord, its agents, employees and/or
contractors be liable for any personal injury or death or property damage caused
by other lessees or persons in or about the Premises or the Property, or caused
by public or quasi-public work, or for consequential damages arising out of any
loss of the use of the Premises or any equipment or facilities therein by Tenant
or any person claiming through or under Tenant, except to the extent any such
injury or damage is due to the negligent act or omission or willful misconduct
of Landlord and/or its agents and employees.
7.09 Damage to Tenant's Property. Notwithstanding the provisions of
Section 7.08 to the contrary, Landlord, its agents, employees and/or contractors
shall not be liable for (i) any damage to property of Tenant entrusted to
employees or security officers of the Building or the Property, (ii) loss or
damage to any property of Tenant by theft or otherwise, or (iii) any damage to
property of Tenant resulting from fire, explosion, falling substances or
materials, steam, gas, electricity, water or rain which may leak from any part
of the Building, the Common Areas or the Property or from the pipes, appliances
or plumbing work therein or from the roof, street, or subsurface or from any
other place or resulting from dampness or any other cause, except to the extent
Landlord receives consideration for such damage or injury from a third party.
Neither Landlord nor its agents shall be liable for interference with light or
other incorporeal hereditaments. Tenant shall give prompt notice to Landlord in
case Tenant is or becomes aware of fire or accidents in the Building, the Common
Areas or any other portion of the Project or of defects therein in the fixtures
or equipment.
ARTICLE VIII: REPAIRS AND MAINTENANCE
8.01 Landlord Repairs and Maintenance. Subject to Landlord's right to
reimbursement from Tenant pursuant to Section 6.01 hereof, to the extent
applicable, Landlord shall at its expense maintain in good condition and repair
the structural portions of the Building including without limitation the
foundation, roof, drains, downspouts, gutters, exterior walls, floors,
elevators, heating, air conditioning, ventilation and other utility and
mechanical systems of the Building and Common Areas of the Property. Landlord
will use good faith efforts to give Tenant prior notice of the making of any
such repairs which will likely interfere with Tenant's operations within the
Premises or Building. Landlord shall not be liable for any failure to make any
repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need for such repairs or
maintenance is given to Landlord by Tenant. Except as set forth in Article XI
hereof, there shall be no
<PAGE>
abatement of Rent and, except for the negligence or willful misconduct of
Landlord and/ or its agents or employees, no liability of Landlord by reason of
any injury to or interference with Tenant's business arising from the making of
any repairs, alterations or improvement in or to any portion of the Premises or
in or to fixtures, appurtenances and equipment therein; provided, that Landlord,
its employees, agents and contractors use reasonable efforts not to unreasonably
interfere with Tenant's business in exercise of Landlord's rights or obligations
hereunder. Except as may otherwise be expressly set forth herein, Tenant affirms
that neither Landlord nor any agent, employee or officer of Landlord has made
any representation regarding the condition of the Premises, the Building, the
Common Areas or the Project. In the event Landlord fails to make any such
repairs or otherwise meet its obligations under this Section, Tenant may, upon
not less than twenty (20) days' notice to Landlord, perform such task or repair
and Landlord shall promptly reimburse Tenant for the reasonable cost of the same
upon demand; provided, that in no event shall Tenant take any such action on
behalf of Landlord with respect to any repairs which may affect occupancy or
quiet enjoyment of other tenants of the Building.
8.02 Utilities and Services. Subject to reimbursement pursuant to Section
6.01 above, Landlord shall furnish or cause to be furnished to the Premises
lines for water, electricity, sewage, and telephone. Tenant shall pay before
delinquency, at its sole cost and expense, all charges for water, gas, heat,
electricity, power, telephone service, sewer service charges and other utilities
or services charged or attributable to the Premises; provided, however, that if
any such services or utilities shall be billed to Landlord and are not
separately billed to the Premises, Tenant shall pay to Landlord as Additional
Rent, an amount equal to that proportion of the total charges therefor which the
Rentable Area of the Premises bears to the rentable area of leased area covered
by such charges; provided, further that the cost of any such charges not paid
directly by Tenant to the utility companies shall not exceed the cost of such
service were Tenant to purchase them directly from the appropriate utility
companies.
8.03 Tenant Repairs and Maintenance. Except as otherwise set forth in
Sections 8.01 and 8.02 above, Tenant shall, at Tenant's sole cost and expense,
keep and maintain the entire Premises, including but not by way of limitation,
all interior walls, doors, ceiling, fixtures, furnishings, drapes, specialty
lamps, light bulbs, starters and ballasts, subfloors, carpets and floor
coverings to the extent serving the Premises exclusively, in good repair and in
a clean and safe condition. Upon expiration of the Term, Tenant shall surrender
the Premises to Landlord in the same condition as when leased, reasonable wear
and tear and damage by fire or other casualty not required to be repaired
pursuant to this Lease excepted.
8.04 Non-liability of Landlord. Notwithstanding anything to the contrary
contained in Sections 8.01 or 8.02 above or elsewhere in this Lease, except as
caused by the negligence or willful misconduct of Landlord and/or its agents and
employees, Landlord shall not be in default hereunder or be liable for any
damages directly or indirectly resulting from, nor shall the Rent herein
reserved be abated or rebated by reason of (a) the interruption or curtailment
of the use of the Premises as a result of the installation of any equipment in
connection with the Premises; or (b) any failure to furnish or delay in
furnishing any services required to be provided by Landlord; or (c) the
limitation, curtailment, rationing or restriction of the use of water or
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or Project; provided, that Landlord uses
reasonable
<PAGE>
efforts to remedy any interruption in the furnishing of such services so as to
minimize any interference with the use of the Premises by Tenant.
8.05 Inspection of Premises. Landlord, at reasonable times and, except
for emergencies, upon a minimum of 24 hours' notice, may enter the Premises to
complete construction undertaken by Landlord on the Premises, to inspect, clean,
improve or repair the same, to inspect the performance by Tenant of the terms
and conditions hereof, show the Premises to prospective purchasers, tenants and
lenders and for all other purposes as Landlord shall reasonably deem necessary
or appropriate; provided, that Landlord shall use reasonable efforts not to
interfere with Tenant's business in exercise of Landlord's rights hereunder.
Tenant hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises and any other loss in, upon or about the Premises, arising from
exercise by Landlord of its rights hereunder except as otherwise provided in
Section 8.01 or Article XI hereof.
ARTICLE IX: FIXTURES, PERSONAL PROPERTY AND ALTERATIONS
9.01 Fixtures and Personal Property. Tenant, at Tenant's expense, may
install any necessary trade fixtures, equipment and furniture in the Premises,
provided that such items are installed and are removable without damage to the
structure of the Premises. Landlord reserves the right to approve or disapprove
of any interior improvements which are visible from outside the Premises or
which violate any covenants, conditions or restrictions affecting the Property.
Such improvements must be submitted for Landlord's written approval prior to
installation, or Landlord may remove or replace such items at Tenant's sole
expense. Said trade fixtures, equipment and furniture shall remain Tenant's
property and shall be maintained in good condition while on the Premises and
removed by Tenant upon the expiration or earlier termination of the Lease. As a
covenant which shall survive the expiration or earlier termination of the Lease,
Tenant shall repair, at Tenant's sole expense, all damage caused by the
installation or removal of said trade fixtures, equipment, furniture or
temporary improvements. If Tenant fails to remove the foregoing items prior to
or upon the expiration or earlier termination of this Lease, Landlord, at its
option and without liability to Tenant for loss thereof, may keep and use them
or remove any or all of them and cause them to be stored or sold in accordance
with applicable law, and Tenant shall, upon demand of Landlord, pay to Landlord
as Additional Rent hereunder all costs and expenses incurred by Landlord in so
storing and/or selling said items. In the event any such fixtures, equipment,
and/or furniture of Tenant are sold by Landlord, the proceeds of such sale shall
be applied, first, to all expenses of Landlord incurred in connection with
storage and sale; second, to any amounts owed by Tenant to Landlord under this
Lease or otherwise, and, third, the remainder, if any, shall be paid to Tenant.
9.02 Alterations. Tenant shall not make or allow to be made any material
alterations, additions or improvements to the Premises (defined as alterations,
additions or improvements costing in excess of $5,000.00), or alterations,
additions or improvements which affect the structural or mechanical systems of
the Building, either at the inception of the Lease or subsequently during the
Term, without obtaining the prior written consent of Landlord, which consent
shall not be unreasonably withheld. Tenant shall deliver to Landlord the
contractor's name, references and state license number, as well as full and
complete plans and specifications of all such alterations, additions or
improvements,
<PAGE>
and any subsequent modifications or additions to such plans and specifications,
and no proposed work shall be commenced or continued by Tenant until Landlord
has received and given its written approval of each of the foregoing. Landlord
shall either approve or disapprove any proposed alteration, addition or
improvement on or before fifteen (15) days following receipt of all of the
foregoing items. Landlord does not expressly or implicitly covenant or warrant
that any plans or specifications submitted by Tenant are accurate, safe or
sufficient or that the same comply with any applicable laws, ordinances,
building codes, or the like. Further, Tenant shall indemnify and hold Landlord
and the Building harmless from any loss, cost or expense, including attorneys'
fees and costs, incurred by Landlord as a result of any defects in design,
materials or workmanship resulting from Tenant's alterations, additions or
improvements to the Premises. All alterations, additions or improvements shall
remain the property of Tenant until termination of the Lease, at which time they
shall, unless otherwise elected by Landlord by written notice to Tenant, be and
become the property of Landlord. Landlord shall, at the time Tenant seeks
Landlord's approval of any such alterations, additions or improvements, notify
Tenant whether Landlord will, at the expiration or earlier termination of this
Lease, require Tenant to remove any partitions, counters, railings and/or other
improvements installed by Tenant during the Term. Tenant shall repair all damage
resulting from such removal or, at Landlord's option, shall pay to Landlord all
costs arising from such removal. All repairs, alterations, additions and
restorations by Tenant hereinafter required or permitted shall be done in a good
and workmanlike manner and in compliance with all applicable laws and
ordinances, building codes, by-laws, regulations and orders of any federal,
state, county, municipal or other public authority and of the insurers of the
Premises. If required by Landlord, Tenant shall secure at Tenant's own cost and
expense a completion and lien indemnity bond or other adequate security in form
and substance reasonably satisfactory to Landlord. Tenant shall reimburse
Landlord for Landlord's reasonable charges (including any professional fees
incurred by Landlord and a reasonable administrative fee as established by
Landlord from time to time) for reviewing and approving or disapproving plans
and specifications for any proposed alterations.
9.03 Liens. Tenant shall promptly file and/or record, as applicable, all
notices of completion provided for by law, and shall pay and discharge all
claims for work or labor done, supplies furnished or services rendered at the
request of Tenant or at the request of Landlord on behalf of Tenant, and shall
keep the Premises and Property free and clear of all mechanics' and
materialmen's liens in connection therewith. Landlord shall have the right, and
shall be given ten (10) business days written notice by Tenant prior to
commencement of the work, to post or keep posted on the Premises, or in the
immediate vicinity thereof, any notices of non-responsibility for any
construction, alteration, or repair of the Premises by Tenant. If any such lien
is filed, Tenant shall cause same to be discharged of record within twenty (20)
days following written notice thereof, or if Tenant disputes the correctness or
validity of any claim of lien, Landlord may, in its reasonable discretion,
permit Tenant to post or provide security in a form and amount acceptable to
Landlord to insure that title to the Property remains free from the lien
claimed. If said lien is not timely discharged Landlord may, but shall not be
required to, take such action or pay such amount as may be necessary to remove
such lien and Tenant shall pay to Landlord as Additional Rent any such amounts
expended by Landlord, together with interest thereon at the Default Rate (as
defined in Section 5.04 hereof), within ten (10) days after notice is received
from Landlord of the amount expended by Landlord.
<PAGE>
ARTICLE X: USE AND COMPLIANCE WITH LAWS
10.01 General Use and Compliance with Laws. Tenant shall only use the
Premises for general office purposes, software and hardware integration,
warranty service and storage appurtenant thereto, and uses customarily
incidental thereto (but not to include any production activities unless approved
by Landlord, which approval shall not be unreasonably withheld) and for no other
use without the prior written the consent of Landlord. Tenant shall, at
Tenant's sole cost and expense, comply with all requirements of municipal,
county, state, federal and other applicable governmental authorities now or
hereafter in force pertaining to Tenant's business operations, alterations
and/or specific use of the Premises and/or the Project, and shall secure any
necessary permits therefore and shall faithfully observe in the use of the
Premises and the Project, all municipal, county, state, federal and other
applicable governmental entities' requirements which are now or which may
hereafter be in force. Except as otherwise provided herein, Tenant, in Tenant's
use and occupancy of the Premises, shall not subject or permit the Premises
and/or the Project to be used in any manner which would tend to damage any
portion thereof, or which would increase the cost of any insurance paid by
Landlord with respect thereto unless Tenant agrees to pay for such increased
insurance cost. Tenant shall not do or permit anything to be done in or about
the Premises, the Common Areas and/or the Project which will in any way obstruct
or interfere with the rights of other tenants or occupants of the Common Areas
and/or the Project or use or allow the Premises or any portion of the Project to
be used for any improper, immoral, unlawful or objectionable purpose, nor shall
Tenant cause, maintain or permit a nuisance in, on or about the Premises, the
Common Areas and/or the Project. Tenant shall comply with all covenants and
obligations in the CC&R's which affect the use and operation of the Premises,
the Common Areas and/or the Project. Tenant shall have access to the Premises
on a 7-day a week, 24 hour a day basis.
10.02 Hazardous Materials. Tenant shall not cause or permit any Hazardous
Materials (as defined hereinbelow) to be brought upon, kept or used in or about
the Building, the Property, the Common Areas and/or the Project by Tenant, its
agents, employees, contractors, licensees or invitees, except such Hazardous
Materials that are typical in Tenant's business and that are at all times, used,
kept and stored in the manner that complies with all laws, rules, regulations
and ordinances now or hereafter regulating any such Hazardous Materials. If
Tenant breaches the covenants and obligations set forth herein or, if the
presence of Hazardous Materials on, in or about the Building, the Property or
the Common Areas caused by Tenant, its agents, employees, contractors, licensees
or invitees results in contamination of all or any portion of the Project or any
other property, whether or not adjacent thereto, then Tenant shall indemnify,
defend and hold Landlord free and harmless from and against any and all claims,
judgments, damages, penalties, fines, costs, liabilities and losses (including,
without limitation, sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees) which arise during or after the Term as a
result of such contamination. This indemnification by Tenant of Landlord shall
include, without limitation, any and all costs incurred with any investigation
of site conditions and any cleanup, remedial, removal or restoration work
required by any federal, state or local governmental agency or political
subdivision because of the presence of such Hazardous Materials caused by
Tenant, its agents, employees, contractor, licensees and/or invitees in, on or
about the Building, the Common Areas or the soil or ground water on or under the
Property. The provisions of this Section 10.02 shall survive the expiration or
earlier termination of this Lease. For purposes of the Lease, the term
<PAGE>
"Hazardous Materials" shall mean the following: (a) those substances included
within the definitions of "hazardous substances," "pollutant," or "contaminant"
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Sections 9601 et. seq. as heretofore or hereafter amended, the
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regulations
promulgated pursuant to such Act and state laws and regulations similar to or
promulgated pursuant to such Act; (b) any material, waste or substance which is
(i) petroleum, (ii) asbestos, (iii) flammable explosive, or (iv) radioactive;
and (c) such other substances, materials and wastes which are or become
regulated as hazardous or toxic under federal, state or local law.
10.03 To the actual knowledge of Landlord, Landlord represents and
warrants that (i) the Property, Building and Premises do not contain any
Hazardous Materials in violation of applicable laws, and (ii) Landlord has
complied with all mandatory requirements of federal, state and local
environmental laws, statutes, ordinances, regulations and orders pertaining to
health, environmental conditions or hazardous substances, including without
limitation those defined as "Hazardous Materials" ("Environmental Laws").
Landlord covenants and agrees to comply with all Environmental Laws regulating
Hazardous Materials found in, on or about the Property. Landlord and Tenant
shall promptly give written notice to the other party of any alleged or actual
violation of any Environmental Law affecting the Property (including the
Building and Premises). If a violation of an Environmental Law occurs or is
discovered, Landlord may, at Landlord's option, either (i) remedy such violation
(except for violations caused by Tenant) as soon as reasonably possible without
cost or expense to Tenant, or (ii) give sixty (60) days written notice to Tenant
of Landlord's option to cancel and terminate this Lease. If Landlord's remedy
under Section (i) above will take more than two hundred seventy (270) days to
complete based on Landlord's reasonable estimate and such violation and/or
remediation will materially affect Tenant's ability to conduct its business in
the Premises, then Tenant may elect to terminate this Lease upon thirty (30)
days written notice. Tenant shall cooperate with Landlord in connection with the
remedy, including but not limited to the approval and/or execution of required
remediation plans. Landlord shall indemnify, defend and hold Tenant free and
harmless from and against any and all claims, judgments, damages, penalties,
fines, costs, liabilities and losses (including without limitation, sums paid in
settlement of claims, attorneys' fees, consultant fees and expert fees) which
arise during or after the Lease Term as a result of contamination existing upon
commencement of the Lease Term by no fault of Tenant, or as otherwise results
directly from Landlord's acts or omissions.
10.04 Landlord's Representations. To induce Tenant to execute this Lease,
and in addition to the other representations and warranties of Landlord
contained in this Lease, Landlord warrants and represents as of the date hereof,
that (i) it is the owner of the Property with good and marketable title to the
Building, (ii) it has full right and lawful authority to enter into and perform
Landlord's obligations under this Lease for the full Term, and (iii) this Lease,
the Building, the Premises and any improvements constructed by Landlord, do not,
to the best of Landlord's knowledge, violate any applicable law without
limitation, zoning, building and energy codes, or the provisions of any
instrument or agreement executed by Landlord that places any restrictions,
encumbrances or burdens on the Property.
<PAGE>
10.05 Signs. The Tenant shall not paint, display, inscribe, place or
affix any sign, picture, advertisement, notice, lettering, or direction on any
part of the outside of the Building or the Project or visible from the outside
of the Premises, the Building or the Project, except as first approved by
Landlord or as may be set forth in the Plans. Subject to approval by any owners
association having authority to approve signage on the Property and the City of
Bothell, Landlord shall provide (a) a space on the concrete monument base and
enclosure on the landscaping strip in the front of the Building which is shared
with other tenants of the Building for Tenant procured signage, and (b) a space
on the exterior of the Building in a location acceptable to Landlord and Tenant
for the display of a Tenant- procured sign; provided that the size of such sign
shall be subject to Landlord's approval as to size, design and color, which such
approval shall not be unreasonably withheld.
ARTICLE XI: DAMAGE AND DESTRUCTION
11.01 Reconstruction. If the Building is damaged or destroyed during the
Term, Landlord shall, except as hereinafter provided, diligently repair or
rebuild it to substantially the condition in which it existed immediately prior
to such damage or destruction. If Landlord is obligated or elects to repair or
restore as herein provided, Landlord shall be obligated to make repair or
restoration of only those portions of the Premises which were initially provided
at Landlord's expense or as part of the original installation by Landlord for
Tenant and the repair and/or restoration of other items within the Premises
shall be the obligation of the Tenant. If (i) all or part of the Building is
damaged or destroyed through no fault or act of Tenant or Tenant's access to the
Building or parking area is materially obstructed or hindered through fault or
act of Landlord, and (ii) Landlord's repair will take more than two hundred
seventy (270) days to complete, based on Landlord's reasonable estimate, then
Tenant may elect to terminate this Lease effective as of the date of such event
by written notice to Landlord given within twenty (20) days from the date of
receipt by Tenant of written notice of such determination by Landlord.
11.02 Rent Abatement. Rent due and payable hereunder shall be abated
proportionately during any period in which, by reason of any such damage or
destruction, there is, for a period in excess of 48 hours, substantial
interference with the operation of Tenant's business in the Premises or a
material obstruction or hindrance of Tenant's access to the Premises or parking
areas. Such abatement shall continue for the period commencing with such damage
or destruction and ending with substantial completion by Landlord of the work of
repair or reconstruction which Landlord is obligated or undertakes to do. Except
for abatement of rent as contemplated above, Tenant shall not be entitled to any
claim, compensation or damages for loss in the use in the whole or any part of
the Premises (including loss of business) and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
11.03 Excessive Damage or Destruction. If the Building or the Premises is
damaged or destroyed to the extent that it cannot, with reasonable diligence, be
fully repaired or restored by Landlord within the earlier of (i) one hundred
twenty (120) days after the date of the damage or destruction, or (ii) the
expiration of the Term hereof Landlord may terminate this Lease by written
notice to Tenant within thirty (30) days of the date of the damage or
destruction. If Landlord does not
<PAGE>
elect to terminate the Lease pursuant to the above provision, this Lease shall
remain in full force and effect and Landlord shall diligently repair and restore
the damage as soon as reasonably possible.
11.04 Uninsured Casualty. Notwithstanding anything contained herein to
the contrary, in the event of damage to or destruction of all or any portion of
the Building, which damage or destruction is not fully covered by the insurance
proceeds received by Landlord under the insurance policies required under
Article 7.01 hereinabove, Landlord may terminate this Lease by written notice to
Tenant given within sixty (60) days after the date of notice to Landlord that
said damage or destruction is not so covered.
11.05 Waiver. With respect to any damage or destruction which Landlord is
obligated to repair or may elect to repair under the terms of this Article 11,
and to the extent permitted by law, Tenant hereby waives any rights to terminate
this Lease pursuant to rights otherwise accorded by law to tenants, except as
expressly otherwise provided herein.
11.06 Mortgagee's Right. Notwithstanding anything herein to the contrary,
if the holder of any indebtedness secured by a mortgage or deed of trust
covering the Property, the Building and/or the Project requires that the
insurance proceeds be applied to such indebtedness, then Landlord shall have the
right to terminate this Lease by delivering written notice of termination to
Tenant within fifteen (15) days after such requirement is made. Upon any
termination of this Lease under the provisions hereof, the parties shall be
released without further obligation to the other from date possession of the
Premises is surrendered to Landlord, except for items which are theretofore
accrued and are then unpaid.
11.07 Damage Near End of Term. Notwithstanding anything to the contrary
contained in this Article XI, in the event the Premises or the Building are
subject to excessive damage (as defined in Section 11.03) during the last
twenty-four (24) months of the Term, Landlord may elect to terminate this Lease
by written notice to Tenant within thirty (30) days after the date of such
damage.
<PAGE>
ARTICLE XII: EMINENT DOMAIN
12.01 Eminent Domain. In the event the whole of the Premises, Building or
Property, or such part thereof as shall substantially interfere with Tenant's
use and occupation thereof, shall be taken for any public or quasi-public
purpose by any lawful power or authority by exercise of the right of
appropriation, condemnation or eminent domain, or is sold in lieu of or to
prevent such taking, either party shall have the right to terminate this Lease
effective as of the date possession is required to be surrendered to said
authority. Except as provided below, Tenant shall not assert any claim against
Landlord or the taking authority for any compensation because of such taking,
and Landlord shall be entitled to receive the entire amount of any award without
deduction for any estate or interest of Tenant in the Premises. Nothing
contained in this Section 12.01 shall be deemed to give Landlord any interest in
any separate award made to Tenant for the taking of personal property and
fixtures belonging to Tenant or for Tenant's moving expenses. In the event the
amount of property or the type of estate taken shall not substantially interfere
with the conduct of Tenant's business, Landlord shall be entitled to the entire
amount of the award without deduction for any estate or interest of Tenant,
Landlord shall promptly proceed to restore the Building to substantially their
same condition prior to such partial taking less the portion thereof lost in
such condemnation, and the Base Rent shall be proportionately reduced by the
time during which, and the portion of the Premises which, Tenant shall have been
deprived of possession on account of said taking and restoration.
ARTICLE XIII: DEFAULT
13.01 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" on the part of the Tenant with or without
notice from Landlord:
(a) Tenant shall fail to pay on or before the due date any
installment of Rent or other payment required pursuant to this Lease within
five (5) business days after receipt of written notice from Landlord (which
notice shall be deemed to run concurrently with any notice required by
applicable eviction and/or unlawful detainer statutes);
(b) Tenant shall fail to comply with any term, provision, or
covenant of this Lease, other than the payment of Rent or other sums of
money due hereunder, and such failure is not cured within twenty (20) days
after written notice thereof to Tenant (said notice being in lieu of, and
not in addition to, any notice required as a prerequisite to an unlawful
detainer or similar action for possession of the Premises); provided that
if the nature of such cure is such that a longer cure period is necessary,
Tenant shall only be in default if Tenant shall have failed to commence
such cure within said twenty (20) day period and thereafter to have
diligently prosecuted such cure to completion;
(c) Tenant shall file a petition or be adjudged a debtor or
bankrupt or insolvent under the United States Bankruptcy Code, as amended,
or any similar law or statute of the United States or any State; or a
receiver or trustee shall be appointed for all or substantially all of the
assets of Tenant and such appointment or petition, if involuntary, is not
dismissed within sixty (60) days of filing; or
<PAGE>
(d) Tenant shall make an assignment for the benefit of
creditors.
13.02 Remedies.
(a) Upon the occurrence of any Event of Default set forth in
this Lease, in addition to any other remedies available to Landlord at law or in
equity, Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder. In the event that Landlord shall elect to so
terminate this Lease, then Landlord may recover from Tenant: (i) any unpaid rent
which as been earned at the time of such termination plus interest at the rates
contemplated by this Lease; plus (ii) the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably avoided
plus interest at the rates contemplated by this Lease; plus (iii) the worth at
the time of award of the amount by which the unpaid rent for the balance of the
Term after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided, plus (iv) any other amount necessary to
compensate Landlord for all the damage proximately caused by Tenant's failure to
perform Tenant's obligation under this Lease or which in the ordinary course of
things would be likely to result therefrom, including, but not limited to, costs
to reimprove the Premises, or portions thereof, for a new tenant and leasing
commissions. As used in Subsections 13.02(a) (iii) above, the "worth at the time
of award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).
(b) In the event of any such default by Tenant, Landlord
shall also have the right with or without terminating this Lease, to re-enter
the Premises and remove all persons and property from the Premises; such
property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of the Tenant. No re-entry or taking possession of
the Premises by Landlord pursuant to this Section 13.02(b) shall be construed as
an acceptance of a surrender of the Premises or an election to terminate this
Lease unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
(c) In the event of the vacation or abandonment of the
Premises by Tenant or in the event that Landlord shall elect to re-enter as
provided above or shall take possession of the Premises pursuant to legal
proceedings or pursuant to any notice provided by law, then if Landlord does not
elect to terminate this Lease as provided above, Landlord may from time to time,
without terminating this Lease, either recover all Rent as it becomes due or
relet the Premises or any part thereof for the Term of this Lease on terms and
conditions as Landlord at its sole discretion may deem advisable with the right
to make alterations and repairs to the Premises.
In the event that Landlord shall elect to so relet, the rents
received by Landlord from such reletting shall be applied: first to the payment
of any indebtedness other than Rent due hereunder from Tenant to Landlord;
second to the payment of any costs of such reletting; third, to the payment of
the cost of any alterations and repairs to the Premises; fourth, to the payment
of Rent due and unpaid hereunder; and the residual, if any, shall be held by
Landlord and applied to payment of future Rent as the same shall become due and
payable hereunder. Should that portion of such rents received from such
reletting during the month which is applied to the payment of Rent be less than
the Rent payable
<PAGE>
during that month by Tenant hereunder, then Tenant shall pay any such deficiency
to Landlord immediately upon demand therefor by Landlord. Such deficiency shall
be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as is
certain, any of the costs and expenses incurred by Landlord in such reletting or
in making such alterations and repairs not covered by the rents received from
such reletting.
(d) Except as may be contrary to conflict of remedy
principals, all rights, options and remedies of Landlord contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any one or
all of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any Rent or other
payments due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant. Notwithstanding the
above, Landlord shall use good faith efforts to mitigate its damages due to
Tenant's default by attempting to re-let the Premises on fair market terms as
reasonably determined by Landlord.
13.03 Landlord's Default. Landlord shall not be in default unless
Landlord fails to perform its obligations under this Lease within thirty (30)
days after receipt of written notice thereof by Tenant, or if such failure is
not reasonably capable of being cured within such thirty (30) day period,
Landlord shall not be in default unless Landlord has failed to commence the cure
and diligently pursue the cure to completion. If Landlord defaults, Tenant may
pursue any remedy now or hereafter available to Tenant under the laws of
judicial decisions of the State of Washington; provided, that in no event shall
Tenant have the remedy to terminate this Lease except upon final adjudication of
competent jurisdiction authorizing such default.
13.04 Waiver of Consequential Damages. Landlord and Tenant waive any
claim for consequential damages that one party may have against the other for
breach of or failure to perform or observe the requirements and obligations
created by this Lease. By way of illustration only and not by way of limitation,
consequential damages shall include lost profits, lost business opportunities,
interference with business or contractual expectancies, loss of equity and other
speculative or remote damages.
ARTICLE XIV: FILING OF PETITION
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Section 14.01 Tenant's Bankruptcy.
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Landlord and Tenant (as either debtor or debtor-in-possession) agree that
if a petition ("Petition") is filed by or against tenant under any chapter of
Title 11 of the United States Code (the "Bankruptcy Code"), the following
provisions shall apply:
<PAGE>
(a) Adequate protection for Tenant's obligations accruing
after filing of the Petition and before this Lease is rejected or assumed shall
be provided within fifteen (15)days after filing in the form of a security
deposit equal to three months' Basic Rent and Additional Rent and other Lease
charges, to be held by the court or an escrow agent approved by Landlord and the
court.
(b) The sum of all amounts payable by Tenant to Landlord
under this Lease constitutes reasonable compensation for the occupancy of the
Premises by Tenant.
(c) Tenant or Trustee shall give Landlord at least 30 days
written notice of any abandonment of the Premises or any proceeding relating to
administrative claims. If Tenant abandons without notice, Tenant or Trustee
shall stipulate to entry of an order for relief from stay to permit Landlord to
reenter and relet the Premises.
(d) If Tenant failed to timely and fully perform any of its
obligations under this Lease before the filing of the Petition, whether or not
Landlord has given Tenant written notice of that failure and whether or not any
time period for cure expired before the filing of the Petition, Tenant shall be
deemed to have been in default on the date the Petition was filed for all
purposes under the Bankruptcy Code.
(e) For the purposes of Section 365(b)(1) of the Bankruptcy
Code, prompt cure of defaults shall mean cure within 30 days after assumption.
(f) For the purposes of Section 365(b)(1) and 365(f)(2) of
the Bankruptcy Code, adequate assurance of future performance of this Lease by
Tenant, Trustee or any proposed assignee will require that Tenant, Trustee or
the proposed assignee deposit three months of Basic Rent and Additional Rent
into an escrow fund (to be held by the court or an escrow agent approved by
Landlord and the court) as security for such future performance. In addition, if
this Lease is to be assigned, adequate assurance of future performance by the
proposed assignee shall require that: (i) the assignee have a tangible net worth
not less than the tangible net worth of Tenant as of the Commencement Date or
that such assignee's performance be unconditionally guaranteed by a person or
entity that has a tangible net worth not less than the tangible net worth of
Tenant as of the Commencement Date; (ii) the assignee demonstrate that it
possesses a history of success in operating a business of similar size and
complexity in a similar market as Tenant's business; and (iii) assignee assume
in writing all of Tenant's obligations relating to the Premises or this Lease.
(g) If Tenant or Trustee intends to assume and/or assign this
Lease, Tenant or Trustee shall provide Landlord with 30 days written notice of
the proposed action, separate from and in addition to any notice provided to all
creditors. Notice of a proposed assumption shall state the assurance of prompt
cure, compensation for loss and assurance of future performance to be provided
to Landlord. Notice of a proposed assignment shall state: (i) the name, address,
and federal tax identification and registration numbers of the proposed
assignee; (ii) all of the terms and conditions of the proposed assignment, and
(iii) the assignee's proposed adequate assurance of future performance to be
provided to Landlord.
<PAGE>
(h) If Tenant is in default under this Lease when the
Petition is filed, Landlord shall not be required to provide Tenant or Trustee
with services or supplies under this Lease or otherwise before Tenant assumes
this Lease, unless Tenant compensates Landlord for such services and supplies in
advance.
ARTICLE XV: ASSIGNMENT AND SUBLETTING
15.01 Prohibition. Tenant shall have the right to assign, mortgage,
pledge or otherwise transfer or encumber this Lease, in whole or in part, or
sublet, assign, or permit occupancy by any party other than Tenant of all or any
part of the Premises, subject to the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Tenant shall at the time the Tenant
requests the consent of Landlord, deliver to Landlord such information in
writing as Landlord may reasonably require respecting the proposed assignee or
subtenant including, without limitation, the name, address, nature of business,
ownership, financial condition and standing of such proposed assignee or
subtenant and Landlord shall have not less than twenty (20) business days after
receipt of all required information to elect one of the following: (a) consent
to such proposed assignment, encumbrance or sublease, (b) refuse such consent,
or (c) elect to terminate the Lease, in the case of a proposed assignment, or
elect to terminate the Lease with respect to the portion of the Premises
proposed to be subleased, as applicable. In addition, a condition to Landlord's
consent to any assignment, sublease or encumbrance of this Lease shall be the
delivery to Landlord of a true copy of the fully executed instrument of
assignment, transfer or encumbrance and an agreement executed by the assignee,
sublessee or other transferee in form and substance satisfactory to Landlord and
expressly enforceable by Landlord, whereby the assignee assumes and agrees to be
bound by the terms and provisions of this Lease and perform all the obligations
of Tenant hereunder with respect to the assigned or subleased portion of the
Premises. No assignment or subletting by Tenant shall relieve Tenant of any
obligation under this Lease, including Tenant's obligation to pay Base Rent and
Additional Rent hereunder. Any purported assignment or subletting contrary to
the provisions hereof without consent shall be void. The consent by Landlord to
any assignment or subletting shall not constitute a waiver of the necessity for
such consent to any subsequent assignment of subletting.
15.02 Excess Rental. If pursuant to any assignment or sublease, Tenant
receives rent, either initially or over the term of the assignment or sublease,
in excess of the Rent called for hereunder, or in the case of this sublease of a
portion of the Premises in excess of such Rent fairly allocable to such portion,
after appropriate adjustments to assure that all other payments called for
hereunder are appropriately taken into account, Tenant shall pay to Landlord, as
Additional Rent hereunder, fifty percent (50%) of the excess of each such
payment of rent received by Tenant after its receipt.
15.03 Scope. The prohibition against assigning or subletting contained in
this Article XV shall be construed to include a prohibition against any
assignment or subletting by operation of law. If this Lease be assigned, or if
the underlying beneficial interest of Tenant is transferred, or if the Premises
or any part thereof be sublet or occupied by anybody other than Tenant, Landlord
may collect rent from the assignee, subtenant or occupant and apply the net
amount collected to the Rent herein reserved and apportion any excess rent so
collected in accordance with the terms of the immediately
<PAGE>
preceding paragraph, but no such assignment, subletting, occupancy or collection
shall be deemed a waiver of this covenant, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein contained. No
assignment or subletting shall affect the continuing primary liability of Tenant
(which, following assignment, shall be joint and several with the assignee), and
Tenant shall not be released from performing any of the terms, covenants and
conditions of this Lease.
15.04 Waiver. Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee or failure of Landlord to take action against any assignee or
sublease, Tenant hereby agrees that Landlord may, at its option, and upon not
less than ten (10) days' notice to Tenant, proceed against Tenant without having
taken action against or joined such assignee or sublessee, except that Tenant
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.
15.05 Change in Control. If Tenant is a partnership, a withdrawal of or
change in partners, in one or more transfers, owning more than a fifty percent
(50%) interest in the partnership, shall constitute a voluntary assignment and
shall be subject to the provisions of this Article XV. If the Tenant is a
corporation, a transfer of fifty percent (50%) or more of the corporation's
stock or assets in one or more transfers to a single party and/or its
affiliates, or a change in the control of such company pursuant to a merger,
consolidation, sale of assets or otherwise, shall be deemed for the purposes
hereof to be an assignment of this Lease, and shall be subject to the provisions
of this Article XV. Notwithstanding anything in this Lease to the contrary,
Landlord's prior consent shall not be required for any assignment, sublease or
other transfer of Tenant's interest in the Premises or the Lease to any
corporation with which Tenant may merge or consolidate or become affiliated as a
parent, subsidiary, holding company or otherwise, or to an entity in which
Tenant has a controlling interest; provided, that such successor entity has a
tangible net worth and associated proportions of current and fixed assets with
corresponding associated proportions of current and long-term liabilities the
same or better than that of Tenant, all as substantiated and approved by
Landlord. Neither shall the restrictions of this Section apply to the sale of
shares of Tenant in connection with a public offering under NYSC, NASDAQ or AMEX
ARTICLE XVI: ESTOPPEL CERTIFICATE, ATTORNMENT AND SUBORDINATION
16.01 Estoppel Certificates. Within ten (10) business days after request
therefor by Landlord, or if on any sale, assignment or hypothecation by Landlord
of Landlord's interest in the Property, the Project and/or the Premises, or any
part thereof, an estoppel certificate shall be required from Tenant, Tenant
shall deliver, in recordable form, a certificate in the form attached hereto as
Exhibit G, or in such other form as requested by Landlord, to any proposed
mortgagee or purchaser, and to Landlord, certifying (if such be the case) that
this Lease is in full force and effect, the date of Tenant's most recent payment
of Rent, and that Tenant has no defenses or offsets outstanding, or stating
those claimed by Tenant, and any other information contained in such Exhibit G
or reasonably requested by Landlord or such proposed mortgagee or purchaser.
Tenant's failure to deliver said statement within said period shall, at
Landlord's option be an Event of Default hereunder and shall in any event be
conclusive upon Tenant that: (i) this Lease is in full force and effect,
without modification
<PAGE>
except as may be represented by Landlord; (ii) there are no uncured defaults in
Landlord's performance and Tenant has no right to offset, counterclaim or
deduction against Rent hereunder; and (iii) no more than one period's Base Rent
has been paid in advance.
16.02 Attornment. Tenant shall, in the event any proceedings are brought
for the foreclosure of, or in the event of exercise of the power of sale under,
any mortgage or deed of trust made by Landlord, its successors or assigns,
encumbering the Building, or any part thereof or in the event of termination of
a ground lease, if any, and if so requested, attorn to the purchaser upon such
foreclosure or sale or upon any grant of a deed in lieu of foreclosure and
recognize such purchaser as Landlord under this Lease; provided, that such
purchaser recognizes Tenant's rights under this Lease and agrees not to disturb
Tenant's quiet possession of the Premises for so long as Tenant is not in
default hereunder.
16.03 Subordination. The rights of Tenant hereunder are and shall be, at
the election of any mortgagee or the beneficiary of a deed of trust encumbering
the Property and or Building, automatically subject and subordinate to the lien
of such mortgage or deed of trust, or the lien resulting from any other method
of financing or refinancing, now or hereafter in force against the Property
and/or the Building, and to all advances made or hereafter to be made upon the
security thereof; provided, however, that notwithstanding such subordination, so
long as Tenant is not in default under any of the terms, covenants and
conditions of the Lease, neither the Lease nor any of the rights of Tenant
hereunder shall be terminated or subject to termination by any trustee's sale,
any action to enforce the security, or by any proceeding or action in
foreclosure. If requested, Tenant agrees to execute such documentation as may be
required by Landlord or its lender to further effect the provisions of this
Article and other reasonable requirements of Landlord's lender; provided, that
(a) any such documentation contains a provisions to the effect that so long as
Tenant is not in default under this Lease beyond any applicable cure period,
Tenant's possession and enjoyment of the Property will not be disturbed, and (b)
that upon foreclosure of any such mortgage or deed of trust or other proceeding
or action for the enforcement thereof, or of any sale thereunder, this Lease
shall remain in full force and effect and the rights and possession of Tenant
under this Lease shall not be disturbed..
16.04 Recording. Tenant covenants and agrees with Landlord that Tenant
shall not record this Lease or any memorandum thereof without Landlord's prior
written consent. Notwithstanding the provisions of Section 16.03, in the event
that Landlord or its lender requires this Lease or a memorandum thereof to be
recorded in priority to any mortgage, deed of trust or other encumbrance which
may now or at any time hereafter affect in whole or in part the Building, the
Property or the Project, and whether or not any such mortgage, deed of trust or
other encumbrance shall affect only the Building, the Property or the Project,
or shall be a blanket mortgage, deed of trust or encumbrance affecting other
premises as well, the Tenant covenants and agrees with Landlord that the Tenant
shall execute promptly upon request from Landlord any certificate, priority
agreement or other instrument which may from time to time be requested to give
effect thereto.
<PAGE>
ARTICLE XVII: MISCELLANEOUS
17.01 Notices. All notices required to be given hereunder shall be in
writing and mailed postage prepaid by certified or registered mail, return
receipt requested, or by personal delivery, to the appropriate address indicated
in Section 1.01 hereof or at such other place or places as either Landlord or
Tenant may, from time to time, respectively, designate in a written notice given
to the other. Notices shall be deemed sufficiently served upon the earlier of
actual receipt or the expiration of three (3) days after the date of mailing
thereof.
17.02 Successors Bound. This Lease and each of its covenants and conditions
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective assignees, subject to the provisions hereof. Whenever in this
Lease a reference is made to Landlord, such reference shall be deemed to refer
to the person in whom the interest of Landlord shall be vested, and Landlord
shall have no obligation hereunder as to any claim arising after the transfer of
its interest in the Building. Any successor or assignee of the Tenant who
accepts an assignment of the benefit of this Lease and enters into possession or
enjoyment hereunder shall thereby assume and agree to perform and be bound by
the covenants and conditions thereof. Nothing herein contained shall be deemed
in any manner to give a right of assignment without the prior written consent of
Landlord pursuant to, or otherwise as provided in, Article XV hereof.
17.03 Waiver. No waiver of any default or breach of any covenant by either
party hereunder shall be implied from any omission by either party to take
action on account of such default if such default persists or is repeated, and
no express waiver shall affect any default other than the default specified in
the waiver and said waiver shall be operative only for the time and to the
extent therein stated. Waivers of any covenant, term or condition contained
herein by either party shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by
either party to or of any act by either party requiring further consent or
approval shall not be deemed to waive or render unnecessary their consent or
approval to or of any subsequent similar acts.
17.04 Subdivision and Easements. Landlord reserves the right to: (a)
subdivide the Project and/or Property; (b) alter the boundaries of the Property;
and (c) grant easements on the Property and/or Project and dedicate for public
use portions thereof; provided, however, that no such grant or dedication shall
materially interfere with Tenant's use of the Premises. Tenant hereby consents
to such subdivision, boundary revision, and/or grant or dedication of easements
and agrees from time to time, at Landlord's request, to execute, acknowledge and
deliver to Landlord, in accordance with Landlord's instructions, any and all
documents, instruments, maps or plats necessary to effectuate Tenant's consent
thereto.
17.05 Landlord's Reserved Rights in Common Areas. Landlord reserves the
right from time to time, provided that Tenant's use and enjoyment of the
Premises is not materially and adversely affected thereby, to: (a) install,
use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant
meters and equipment for service to other parts of the Building above the
ceiling surfaces, below the floor surfaces, within the walls and in the central
core areas, and to relocate any pipes, ducts,
<PAGE>
conduit, wires and appurtenant meters in the Building which are so located or
located elsewhere outside the Building; (b) make changes to the Common Areas
and/or the parking facilities located thereon, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas and walkways; (c) close temporarily all or any
portion of the Common Areas and/or the Building in order to perform any of the
foregoing or any of Landlord's obligations under this Lease, so long as
reasonable access to the Building remains available during normal business
hours; and (d) alter, relocate or expand, and/or to add additional structures
and improvements to, or remove same from, all or any portion of the Common Areas
or other portions of the Project; provided, that Landlord shall repair any
damage to the Premises resulting from the exercise by Landlord of its rights
hereunder and provided, further that no such changes shall materially affect the
useability of the Premises by Tenant, the visibility of or access to the
Premises or reduce available parking provided to the Premises pursuant to
Section 1.01.
17.06 Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the Rent herein stipulated shall be deemed to be other
than on account of the Rent, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
provided in this Lease.
17.07 Limitation of Landlord's Liability. The obligations of Landlord under
this Lease do not constitute personal obligations of the individual partners,
directors, officers, employees or shareholders of Landlord or its partners, and
Tenant shall look solely to the Property, and the rents and profits therefrom,
for satisfaction of any liability in respect of this Lease and will not seek
recourse against the individual partners, directors, officers, employees or
shareholders of Landlord or its partners or any of their personal assets for
such satisfaction, except for actions of such individuals to the extent
constituting fraud or criminal misconduct.
17.08 Time. Time is of the essence of every provision hereto.
17.09 Attorneys' Fees. In the event either party requires the services of an
attorney in connection with enforcing the terms of this Lease or in the event
suit is brought for the recovery of any Rent due under this Lease or the breach
of any covenant or condition of this Lease, or for the restitution of the
Premises to Landlord and/or eviction of Tenant during the Term of this Lease, or
after the expiration thereof, the prevailing party will be entitled to a
reasonable sum for attorneys' fees, witness fees and other court costs, both at
trial and on appeal.
17.10 Captions and Article Numbers. The captions, article and section
numbers and table of contents appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or intent or such sections or articles of this Lease nor in any way affect
this Lease.
<PAGE>
17.11 Severability. If any term, covenant, condition or provision of this
Lease, or the application thereof to any person or circumstance, shall to any
extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions or provisions
of this Lease, or the application thereof to any person or circumstance, shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
17.12 Applicable Law. This Lease, and the rights and obligations of the
parties hereto, shall be construed and enforced in accordance with the laws of
the state of Washington.
17.13 Submission of Lease. The submission of this document for examination
and negotiation does not constitute an offer to lease, or a reservation of or
option for leasing the Premises. This document shall become effective and
binding only upon execution and delivery hereof by Landlord and Tenant. No act
or omission of any officer, employee or agent of Landlord or Tenant shall alter,
change or modify any of the provisions hereof.
17.14 Holding Over. Should Tenant, or any of its successors in interest,
hold over the Premises or any part thereof after the expiration or earlier
termination of this Lease without Landlord's prior written consent, such holding
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over shall constitute and be construed as tenancy at sufferance only, at a
monthly rent equal to one hundred fifty percent (150%) of the Base Rent owed
during the final month of the Term of this Lease and otherwise upon the terms
and conditions in the Lease, so far as applicable. Should Tenant, or any of its
successors in interest, hold over the Premises or any part thereof after the
expiration or earlier termination of this Lease with Landlord's prior written
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consent, such holding over shall constitute and be construed as a tenancy from
month to month only, at a fair market monthly rent as agreed by Landlord and
Tenant and otherwise upon the terms and conditions of this Lease, so far as
applicable. The acceptance by Landlord of Rent after such expiration or early
termination shall not result in a renewal or extension of this Lease. The
foregoing provisions of this Section 16.14 are in addition to and do not affect
Landlord's right of re-entry or any other rights of Landlord hereunder or as
otherwise provided by law. If Tenant fails to surrender the Premises on the
expiration of this Lease and/or to remove all Tenant's fixture and/or personal
property pursuant to Section 9.01 hereof, Tenant shall indemnify and hold
Landlord harmless from and against all loss or liability resulting directly and
proximately therefrom, including without limitation, any claim made by any
succeeding tenant resulting from such failure to surrender by Tenant and any
attorneys' fees and costs incurred by Landlord with respect to any such claim.
17.15 Rules and Regulations. At all times during the Term, Tenant shall
comply with Rules and Regulations for the Building and the Project, as set forth
in Exhibit H attached hereto, together with such amendments thereto as Landlord
may from time to time reasonably adopt and enforce in a non-discriminatory
fashion.
17.16 Parking. Unless Tenant is in default hereunder, Tenant shall be
entitled to the number of vehicle parking spaces designated in Section 1.01
hereof for the non-exclusive use of Tenant, its employees, visitors and
customers, the location of which shall be determined by Landlord upon completion
of the Building. All parking spaces shall be available for the common use of the
tenants, subtenants and invitees of the Project on a nonexclusive basis, subject
to any reasonable restrictions
<PAGE>
from time to time imposed by Landlord. Tenant shall not use or permit its
officers, employees or invitees to use more than the number of spaces designated
in Section 1.01 or any spaces which have been specifically reserved by Landlord
to other tenants or for such other uses as have been designated by appropriate
governmental entities as being restricted to certain uses. Tenant shall at all
times comply and cause its officers, employees and invitees to comply with any
parking Rules and Regulations as Landlord may from time to time reasonably
adopt.
17.17 No Nuisance. Tenant shall conduct its business and control its agents,
employees, invitees and visitors in such a manner as not to create any nuisance,
or interfere with, annoy or disrupt any other tenant or Landlord in its
operation of the Building or Project.
17.18 Broker. Each of Tenant and Landlord warrant that it has had no
discussions, negotiations and/or other dealings with any real estate broker or
agent in connection with the negotiation of this Lease other than Cushman &
Wakefield ("Brokers"), and that it knows of no other real estate broker or agent
who is or may be entitled to any commission or finder's fee in connection with
this Lease. Landlord to pay Broker(s) a commission pursuant to separate
agreement. Each Tenant and Landlord agrees to indemnify the other and hold the
other harmless from and against any and all claims, demands, losses,
liabilities, lawsuits, judgments, costs and expenses (including without
limitation, attorneys' fees and costs) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of such party's
discussions, negotiations and/or dealings with any real estate broker or agent.
This Section 17.18 is not intended to benefit any third parties and shall not be
deemed to give any rights to brokers or finders. No commission(s) or finders
fee(s) shall be paid to Tenant, employee(s) of Tenant or any unlicensed
representative of Tenant.
17.19 Landlord's Right to Perform. Upon Tenant's failure to perform any
obligation of Tenant hereunder after notice from Landlord pursuant to Section
13.01 above, including without limitation, payment of Tenant's insurance
premiums, charges of contractors who have supplied materials or labor to the
Premises, etc., Landlord shall have the right to perform such obligation of
Tenant on behalf of Tenant and/or to make payment on behalf of Tenant to such
parties. Tenant shall reimburse Landlord the reasonable cost of Landlord's
performing such obligation on Tenant's behalf, including reimbursement of any
amounts that may be expended by Landlord, plus interest at the Default Rate, as
Additional Rent.
17.20 Assignment by Landlord. In the event of a sale, conveyance, or other
transfer by Landlord of the Building, the Property or the Project or in the
event of an assignment of this Lease by Landlord, the same shall operate to
release Landlord from any further liability upon any of the covenants or
conditions, express or implied, herein contained on the part of Landlord, and
from any and all further liability, obligations, costs and expenses, demands,
causes of action, claims or judgments arising out of this Lease from and after
the effective date of said release. In such event, Tenant agrees to look
solely to the successor in interest of transferor; provided, that such successor
or transferee has assumed all obligations under this Lease. If any Security
Deposit is given by Tenant to secure performance of Tenant's covenants
hereunder, Landlord may transfer such Security Deposit to any purchaser and
thereupon Landlord shall be discharged from any further liability in reference
thereto.
<PAGE>
17.21 Entire Agreement. This Lease sets forth all covenants, promises,
agreements, conditions and understandings between Landlord and Tenant concerning
the Building and the Project, and there are no covenants, promises, agreements,
conditions or understandings, either oral or written, between Landlord and
Tenant other than as are herein set forth. No subsequent alteration, amendment,
change or addition to the Lease shall be binding upon Landlord or Tenant unless
reduced to writing and signed by Landlord and Tenant.
17.22 Quiet Enjoyment. Subject to the provisions of this Lease and
conditioned upon the performance of all of the provisions to be performed by
Tenant hereunder, Landlord shall secure to Tenant during the Term hereof the
quiet and peaceful possession of the Premises and all rights and privileges
appertaining thereto.
17.23 Consents. Whenever the approval or consent of Landlord or Tenant is
required under the terms of this Lease, such consent shall not be unreasonably
withheld or delayed.
17.24 Exhibits. Exhibits A through I are attached to this Lease after the
signatures and by this reference incorporated herein.
roved screening.
17.25 Credit Enhancement. Simultaneously with execution of this Lease, Tenant
shall deliver to Landlord a site draft irrevocable letter of credit issued by a
bank acceptable to Landlord in its sole discretion, in the amount of $170,000.00
(which amount shall be increased if required by the provisions of Subsection
3.01(d)(2)(bb) above), in the form attached hereto as Exhibit I (the "LC"), as
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security for the full and faithful performance of every provision of this Lease
to be performed by Tenant. The LC shall be (i) unconditional and irrevocable,
(ii) permit partial draws by Landlord at any time upon notice by Landlord that
Tenant is in default under this Lease, and (iii) have a term of at least one
year, which shall be renewable each year throughout the Lease Term. If Tenant
defaults with respect to any provision of this Lease, including but not limited
to the provisions relating to the payment of Rent, the repair of damage to the
Premises caused by Tenant and/or cleaning the Premises upon termination of this
Lease, Landlord may draw on all or any part of the LC for the payment of any
Rent or any other sum in default and any and all other amounts to which Landlord
may be entitled under this Lease, including without limitation Section 13.02.
Upon any draw upon the LC by Landlord, Tenant shall, upon demand by Landlord,
restore the LC to its original amount (as may be reduced as contemplated below).
Tenant shall cause the LC to be renewed for each year of the Lease Term. If
Tenant shall fail to provide such LC upon execution of this Lease, or fails to
replace it with an approved LC not less than thirty (30) days prior to the
expiration date of any such LC, then the Tenant shall be considered to be in
default under the terms of this Lease and Landlord shall have the right to
exercise any of its available remedies pursuant to Section 13.02 of this Lease
and shall, in addition, have the right to draw against the full amount of the LC
and thereafter hold the same as security for Tenant's obligations under this
Lease for the entire Lease Term . Landlord shall be entitled to withdraw from
such sums the amount of any unpaid Base Rent, Additional Rent or other charges
not paid to Landlord when due. Landlord shall pay Tenant the remaining balance
thereof, if any, without
<PAGE>
any liability for interest thereon, within thirty (30) days after the expiration
or prior termination of the Lease Term, if and only if Tenant has fully
performed all of its obligations under the terms of this Lease.
17.26 Satellite Dish. Tenant shall have the right to place a satellite dish
on the roof of the Building, subject to approval of the City of Bothell (if
required) and Landlord's approval of the actual location of the same and the
providing by Tenant of Landlord-approved screening.
17.27 Conditions. Landlord's obligations under this Lease are conditioned
upon (a) the approval by Landlord's board of directors on or before the date ten
(10) business days after mutual execution of this Lease by the parties; and (b)
Landlord's ability to obtain all necessary approvals and permits for the
construction of the Building and the Premises pursuant to this Lease on or
before June 1, 1999. In the event the above conditions are not met or waived by
Landlord by the specified dates, this Lease shall terminate at the election of
Landlord, in which event neither party shall have any further rights or
obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date first
above written.
"Landlord" "Tenant"
S/I NORTHCREEK II, LLC, DATA CRITICALCORPORATION
A Washington limited liability company a Delaware corporation
By: /s/ - Dan Ivanoff___________ By: /s/ - Bob Benson
Its: Managing member__________ Its: CFO________________________
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
On this 16th day of December, 1998, before me personally appeared Robert
Benson, to me known to be the CFO of Data Critical Corp., the corporation that
executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that they were
authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above
written.
/s/ Nicolle Shewell____________________________________________________
Notary Public in and for the State of Washington,
residing at Redmond, WA________________________________________
My commission expires:2/00_____________________________
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
On this 28th day of December, 1998, before me personally appeared Dan Ivanoff,
to me known to be the Vice President of Schnitzer North Creek, the company that
executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said company, for the
uses and purposes therein mentioned, and on oath stated that they were
authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above
written.
/ s / Ashlee Anderson______________________________________
Notary Public in and for the State of Washington,
residing at 2353 130th Ave. NE, Bellevue, WA 98005_________
My commission expires: 10-31-02____________________________
<PAGE>
EXHIBIT A
LOT 20A
THAT CERTAIN PARCEL OF LAND SITUATED IN THE CITY OF BOTHELL, COUNTY OF KING,
STATE OF WASHINGTON, BEING THOSE PORTIONS OF LOTS 19 AND 20 OF KOLL CENTER NORTH
CREEK AS SHOWN ON A PLAT THEREOF FILED IN VOLUME 132 OF PLATS, PAGES 29 THROUGH
35, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHERLY TERMINUS OF THAT CERTAIN COURSE ON THE WESTERLY LINE
OF TRACT "F" OF SAID KOLL CENTER NORTH CREEK SHOWN AS "NORTH 18'45'36" WEST
254.21 FEET" ON SAID PLAT; THENCE ALONG SAID COURSE SOUTH 18'45'36" EAST 147.28
FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 70'39'25" WEST 66.03 FEET;
THENCE NORTH 19'20'35" WEST 129.50 FEET TO THE BEGINNING OF A CURVE CONCAVE
EASTERLY AND HAVING A RADIUS OF 440.50 FEET; THENCE ALONG SAID CURVE NORTHERLY
238.79 FEET THROUGH A CENTRAL ANGLE OF 31'03'34" TO A LINE PARALLEL WITH AND
41.89 FEET SOUTHERLY OF THE NORTHERLY LINE OF SAID LOT 19; THENCE NON-TANGENT
FROM SAID CURVE, ALONG SAID PARALLEL LINE NORTH 87'43'07" WEST 302.50 FEET TO A
LINE PARALLEL WITH AND 305.00 FEET EASTERLY OF THE EASTERLY MARGIN OF NORTH
CREEK PARKWAY AS SHOWN ON SAID PLAT; THENCE ALONG SAID PARALLEL LINE SOUTH
02'16'53" EAST 417.56 FEET TO A POINT ON A NON-TANGENT CURVE CONCAVE SOUTHERLY
AND HAVING A RADIUS OF 1055.00 FEET, A RADIAL LINE OF SAID CURVE FROM SAID POINT
BEARS SOUTH 15'24'17" EAST; THENCE ALONG SAID CURVE WESTERLY 56.21 FEET THROUGH
A CENTRAL ANGLE OF 03'03'09"; THENCE ALONG A RADIAL LINE OF SAID CURVE SOUTH
18'27'26" EAST 183.47 FEET TO THE SOUTHERLY LINE OF SAID LOT 20 AND A POINT ON A
NON-TANGENT CURVE CONCAVE SOUTHERLY AND HAVING A RADIUS OF 1200.00 FEET, A
RADIAL LINE OF SAID CURVE FROM SAID POINT BEARS SOUTH 12'23'38" WEST; THENCE
ALONG SAID SOUTHERLY LINE AND ALONG THE EASTERLY LINE OF SAID LOT 20 THROUGH THE
FOLLOWING COURSES: ALONG SAID CURVE EASTERLY 275.82 FEET THROUGH A CENTRAL ANGLE
OF 13'10'10"; THENCE SOUTH 89'13'28" EAST 100.00 FEET TO THE BEGINNING OF A
CURVE CONCAVE NORTHWESTERLY AND HAVING A RADIUS OF 100.00 FEET; THENCE ALONG
SAID CURVE NORTHEASTERLY AND NORTHERLY AND NORTHERLY 191.18 FEET THROUGH A
CENTRAL ANGLE OF 109'32'08"; THENCE NORTH 18'45'36" WEST 106.93 FEET TO THE TRUE
POINT OF BEGINNING.
<PAGE>
EXHIBIT B
PROJECT SITE PLAN
Graphic
Schnitzer North Creek
Technology Campus I
Bothell, WA
<PAGE>
EXHIBIT C
FLOOR PLAN
Graphic
Data Critical Space Plan/Northcreek - Building E
12/10/98
<PAGE>
EXHIBIT D
Data Critical
Work Schedule
<TABLE>
<CAPTION>
Work Activity Milestone
- ------------- ---------
<S> <C>
Execution of Letter of Intent 10/22/98
Space Programming Commences 10/11/98
Draft Lease Complete 11/2/98
Commence Building Shell Construction 9/16/98
Tenant Improvement Space Plan Complete (30% Documents) 11/30/98
30 % Document Pricing Complete 12/8/98
Lease Agreement Execution 12/11/98
Tenant Improvement Design Development Plan (60% Documents) 12/21/98
Submit for Tenant Improvement Permit 12/21/98
60% Document Pricing Complete 12/31/98
Tenant Improvement Bid Set (90% Documents) 1/12/99
Tenant Improvement Mechanical Plan 1/26/99
Tenant Improvement Electrical Plan 1/26/99
G-Max Pricing Complete 1/26/99
100% Interior For Construction Drawings Complete 2/1/99
Pull Tenant Improvement Permit 3/3/99
Commence Interior Improvements 3/3/99
Data Critical FF&E Set-Up 5/5/99
Complete Building Shell & Interior Improvements 5/28/99
Certificate of Occupancy or Other Approval to Occupy 6/1/99
Data Critical Occupancy & Lease Commencement 6/1/99
Punch List Completion 6/29/99
</TABLE>
<PAGE>
EXHIBIT E-1
LIST OF PLANS AND SPECIFICATIONS FOR BASE BUILDING "E"
SHELL AND SITEWORK IMPROVEMENTS
<TABLE>
<CAPTION>
SHEET # SHEET TITLE CONSULTANT DATE
---------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T1.1 General Information Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
T1.2 Zoning & Code Information Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
C0.1 Site Survey North P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C0.2 Site Survey Central P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C0.3 Site Survey South P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C1.1 Grading & Erosion Control Plan - North P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C1.2 Grading & Erosion Control Plan Central P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C1.3 Grading & Erosion Control Plan - South P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C1.4 Grading Plan Notes & Details P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C2.1 Storm Drainage Plan North P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C2.2 Storm Drainage Plan Central P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C2.3 Storm Drainage Plan South P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C2.4 Storm Drainage Notes & Details P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C2.5 Storm Drainage Details P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C3.1 Water & Sanitary Sewer Plan North P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C3.2 Water & Sanitary Sewer Plan Central P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C3.3 Water & Sanitary Sewer Plan South P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C3.4 Water Notes & Details P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C3.5 Sewer Notes & Details P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C4.1 Composite Utility Plan North P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C4.2 Composite Utility Plan Central P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C4.3 Composite Utility Plan South P.A.C.E 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C5.1 Horizontal Control Plan North P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C5.2 Horizontal Control Plan Central P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C5.3 Horizontal Control Plan South P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C5.4 Erosion Control Notes & Details P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C6.1 North Creek Parkway Improvements P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
C6.2 Improvement Notes & Details P.A.C.E. 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
L1.1 Landscape & Tree Retention Plan - Central Weisman Design Group 7/08/98
- -----------------------------------------------------------------------------------------------------------------------------
L1.3 Landscape Schedule & Details Weisman Design Group 6/02/98
- -----------------------------------------------------------------------------------------------------------------------------
L1.4 Site Furniture Layout Plan Weisman Design Group 6/02/98
- -----------------------------------------------------------------------------------------------------------------------------
L2.1 Irrigation Plan Central Weisman Design Group 7/08/98
- -----------------------------------------------------------------------------------------------------------------------------
L2.3 Irrigation Schedules & Details Weisman Design Group 6/02/98
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
A1.1 Architectural Site Plan Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A1.3 Enlarged Site Plan Building E Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A2.2 First & Second Floor Plans - Building E Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A2.7 Roof Plan Building E Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A2.12 Enlarged Floor Plan, Elevations & Wall Sections Entry "B" Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
A2.13 Enlarged Floor Plan, Elevations & Wall Sections Entry "C" Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A2.14 Enlarged Entry First & Second Floor Plans Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A2.15 Enlarged Typical Panel Floor Plans & Elevation, Wall Sections Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A2.16 Enlarged Core Plans & Interior Elevations Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A3.1 Schedules Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A4.2 Building E Exterior Elevations Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A7.1 Vertical Circulation Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A7.2 Vertical Circulation Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A8.1 Exterior Details Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A8.2 Exterior Details Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
A8.3 Exterior Details Synthesis Architects 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
S1.1 Structure General Notes DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S2.2.1 Foundation Plan Building E DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S2.2.2 2nd Floor Framing Plan Building E DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S2.2.3 Roof Framing Plan Building E DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S2.6.1 Loading Dock Foundation Plans Bldngs D,E,F,G,H DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S3.2.1 Structural Panel Elevations Building E DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S3.2.2 Structural Panel Elevations Building E DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.1.1 Foundation Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.1.2 Foundation Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.2.1 Floor Framing Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.3.1 Floor Framing Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.4.1 Tilt-Up Panel Structural Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.5.1 Brace Framing and Shearwall Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.5.2 Shearwall Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.6.1 Miscellaneous Structural Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
S4.6.2 Miscellaneous Structural Details DCI Engineers 7/02/98
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E-2
OUTLINE SPECIFICATIONS TO BASE BUILDING
SHELL AND DESIGN/BUILD MECHANICAL & ELECTRICAL SYSTEMS
North Creek Technology Campus Building E
Schnitzer North Creek,
Bothell, Washington
General Assumptions
- -------------------
. Building foot print: Pursuant to Exhibit E-1
. Gross building area: Pursuant to Exhibit E-1
. Total campus lot size: Pursuant to Exhibit E-1
. Concrete tilt-up with steel roof joist and steel deck.
. Steel and concrete mezzanine through out.
. Clear height 13'-4" feet to lowest point of mezzanine structure above
finished floor at the first floor.
. Clear height 10 feet to lowest point of roof structure above finish floor
at the second floor.
. Construction type: III -- One Hour
. Occupancy type: B/S1
Division 2 - Site Work
- ----------------------
2.20 Site Earthwork
. Pursuant to Exhibit E-1
2.25 Building Earthwork
. Pursuant to Exhibit E-1
2.30 Piling & Caissons
. Pursuant to Exhibit E-1
2.44 Site Improvements
. Pursuant to Exhibit E-1
2.70 Utilities
. Pursuant to Exhibit E-1
<PAGE>
Division 3 - Concrete
- ---------------------
3.10 Footings
. Pursuant to Exhibit E-1
3.20 Floor
. Pursuant to Exhibit E-1
3.70 Tilt-up Wall Panels
. Pursuant to Exhibit E-1
Division 5 - Metals
- -------------------
5.10 Structural Steel
. Pursuant to Exhibit E-1
5.20 Engineered Steel Joists
. Pursuant to Exhibit E-1
5.30 Steel Decking
. Pursuant to Exhibit E-1
5.50 Miscellaneous Steel
. Material finish to specifications below.
Division 6 - Wood & Plastics
- -----------------------------
6.20 Finish Carpentry
. Restroom vanity counter top and back splash in a choice of standard
plastic laminate finishes.
Division 7 - Thermal and Moisture Protection
- --------------------------------------------
7.58 Insulation
. Pursuant to Exhibit E-1
7.51 Roof Membrane
. Pursuant to the specification manual listed Exhibit E-1.
(Specification manual takes precedence over drawing
notes for this line item)
Division 8 - Doors/Frames/Hardware and Glazing
- ----------------------------------------------
<PAGE>
8.20 Wood Doors and Frames
. Pursuant to Exhibit E-1
8.41 Aluminum Window & Entry System
. Pursuant to Exhibit E-1
. Landlord shall allow Tenant, at Tenant sole cost and
expense, to install a storefront glazing system at the
overhead door location.
Division 9 - Finishes
- ---------------------
16.80 GWB & Metal Stud Framing
. All perimeter walls to be furred with 3 1/2" metal studs and insulated
with R-11 batt insulation.
. All core area walls to be framed and finish taped, ready for paint.
. All columns will be wrapped and finish taped to 10 feet above finish
floor.
16.80 Acoustical Treatment
. Provide and install 2' x 4' ceiling grid through the building.
. Provide and install 2' x 4', second look ceiling tiles in all core areas,
tile for future tenant areas to be stock on site for future installation
in a quantity equal to 1.1 times the ceiling area (less core areas).
16.80 Flooring
. Provide ceramic tile at all restroom floors and ceramic tile wainscot to
6' at all walls.
. Provide VCT in all utility closets.
. Elevator equipment room remain exposed, sealed, concrete.
. Provide stone tile flooring in the main entry to a maximum of 400 square
feet.
. Provide carpet at all remaining core areas not previously addressed.
9.90 Painting
. A two color paint scheme with one coat of concrete primer and one coat of
textured elastomeric paint over concrete tilt-up panels.
<PAGE>
. A two color paint scheme with two coat of laytex paint at all finished
core gypsum wall board.
Division 10 - Specialties
- -------------------------
10.10 Toilet Partitions
. Provide standard and handicap accessible toilet partitions, with urinal
screens in manufacture's standard plastic laminate colors.
10.20 Window Coverings
. Provide building standard window blinds at exterior windows located within
Tenant's premises.
10.40 Identifying Devices
. Interior and exterior identification placards and code required
signage.
10.50 Fire Extinguishers
. Provide fire extinguishers per local regulations. Each extinguisher shall
include a semi-recessed brushed stainless steel cabinet for mounting in
finished areas.
10.60 Restroom Mirrors
. Provide plate glass mirror for installation in the core restrooms.
10.70 Toilet Accessories
. Provide toilet accessories for installation in the core restrooms,
including: trash receptacles, soap dispensers, paper towel dispensers,
toilet paper dispensers.
Division 14 Vertical Transportation
- ------------------------------------
16.80 Hydraulic Elevator (for the entire building)
. Provide one pile supported elevator pit per manufacture's recommendation.
. Provide one holess hydraulic elevator, with manufactures standard cab
finishes.
<PAGE>
Division 15 - Mechanical
- ------------------------
15.40 Plumbing (for the entire building)
. Provide interior roof drains per plan.
. Provide one exterior hose bib located adjacent to main entry.
. Provide floor drains at all restrooms, riser room, and janitor
closets.
. Toilets to be wall hung, flush valve.
. Provide urinals, lavatories, and mop sinks as indicated on the plans.
. Provide drinking fountains in core areas as indicated on the plans.
. Provide two (2) each men and women handicap accessible shower rooms
accessed from core and shell restrooms.
15.50 Fire Protection (for the entire building)
. Fire sprinkler to be NFPA-13 approved ordinary hazard group one, with a
design density of .15 gpm/1500 square foot of building area.
15.80 HVAC (for the entire building)
. Provide and install a VAV heating and cooling system with service to all
cores, and main ducting to developer supplied and installed heating boxes
located in future tenant spaces.
. Two (2) ninety (90) ton Trane manufactured roof top HVAC units will
provide electric heating and cooling for the entire building.
. Sixty Two (62) VAV terminal boxes are supplied for the entire building.
. Exhaust fans and ducting, as required, for restroom and elevator machine
room.
. Circon controls monitoring and regulating the entire HVAC system.
Division 16 - Electrical
- ------------------------
16.10 Electrical Service (for the entire building)
. Main electrical service includes 2,000 amps of 480/277 volt, 3 phase power
via a main distribution panel located in a first floor electrical
equipment room
. One (1) 200 amp house panels @ 277/480 volt, 3 phase supporting common
area equipment.
. Disconnects, feeders, and cans to each floor to provide for Tenant
premises power.
. One (1) 45 KVA transformer supporting common area equipment.
. One (1) 100 amp house panel @ 120/208 volt, single phase supporting common
area equipment.
. Single meter service set-up.
16.20 Site (for the entire building)
. Exterior pole mounted lighting as indicated on plans.
. Two (2) 4" telephone conduits from existing utility vaults to the
building.
. One (1) 4" private communications conduit from existing utility vaults to
the building.
<PAGE>
16.80 Equipment Connections (for the entire building)
. Power and connections to all roof mounted HVAC equipment.
. Power and connections for one hydraulic elevator.
. Power and connections to all common area equipment.
16.80 Lighting (for the entire building)
. Finish lighting at all core and common areas.
. Stock future 2' x 4' parabolic troffer fixtures at the rate of one per one
hundred usable square feet within Tenant premises.
16.80 Fire Alarm (for the entire building)
. Automatic fire alarm monitoring system per City of Bothell code.
16.81 Security Alarm (for the entire building)
. Contacts at first floor perimeter doors tied to central monitoring
system.
Exclusions
. Special electrical/plumbing rough-ins and hookups to equipment, other than
those specifically included.
. Task lighting required for specific areas.
. Telephone wiring and accessories.
. Window blinds and/or coverings outside of Tenant premises.
. Industrial waste system.
<PAGE>
EXHIBIT F
LEASE CONFIRMATION
This Lease Confirmation is made ________________, 19____, by
__________________________________, a _______________________________
("Tenant"), who agree as follows:
1. Landlord and Tenant entered into a lease dated _______________, 19____, in
which Landlord leased to Tenant and Tenant leased from Landlord the premises
described in Section 2.01 of said Lease ("Premises"). All capitalized terms
herein are as defined in the Lease.
2. Pursuant to the Lease, Landlord and Tenant agreed to and do hereby confirm
the following matters as of the Commencement of the Term:
a. _____________________, 19____ is the Commencement Date of the Term of
the Lease;
b. _____________________, 19____ is the expiration date of the Term of
the Lease;
c. The initial Base Rent under the Lease, subject to adjustments as
provided in the Lease, is $________________________.
3. Tenant confirms that:
a. It has accepted possession of the Premises as provided in the
Lease;
b. The improvements required to be furnished by Landlord under the
Lease have been furnished (subject to any corrective work or
punch-list items of which Tenant has notified Landlord in
accordance with the Lease);
c. Landlord has fulfilled all its duties of an inducement nature;
<PAGE>
d. The Lease is in full force and effect and has not been modified,
altered, or amended, except as follows:
_________________________________________________________
_______________________________________________; and
e. There are no setoffs or credits against Rent, and no Security
Deposit or prepaid rent has been paid except as provided by the
Lease.
4. The provisions of this Lease Confirmation shall inure to the benefit, or
bind, as the case may require, the parties and their respective successors and
assigns, subject to the restrictions on assignment and subleasing contained in
the Lease.
Initials
Landlord: _________________
Tenant: ___________________
<PAGE>
EXHIBIT G
ESTOPPEL CERTIFICATE
_____________________
_____________________
_____________________
Re: Lease dated __________, 1997 ("Lease") by and between
_______________________________________________ ("Landlord"),
and _______________________________ ("Tenant")
Gentlemen:
Reference is made to the above-described Lease in which the undersigned is the
Tenant. We understand that you are accepting an assignment of Landlord's rights
under the Lease as _________________________________, and we hereby, as a
material inducement for you to consummate the transaction, represent that:
1. There are no modifications amendments, supplements, arrangements, side
letters or understandings, oral or written, of any sort, modifying, amending,
altering, supplementing or changing the terms of the Lease, except for those
attached to this Certificate.
2. The Lease is in full force and effect, and the Lease has been duly
executed and delivered by, and is a binding obligation of, the Tenant as set
forth therein.
3. The undersigned acknowledges (a) that rent on the Lease has been paid up to
and including _____________, 19_____, (b) that monthly rent during the
_________________ (_______) years of the term of the Lease is $______________
per month, and (c) that rent has not been paid for any period after
____________, 19____ and shall not, except for any Prepaid Rent as specified in
the Lease, be paid for a period in excess of one (1) month in advance.
4. To the current knowledge of the undersigned, the improvements on the
Building are free from defects in design, materials and workmanship and the
improvements meet all governmental requirements, including, but not limited to,
zoning and environmental requirements.
5. To the current knowledge of the undersigned, the Lease is not in default,
and Landlord has performed the obligations required to be preformed by Landlord
under the terms thereof through the date hereof.
6. The Lease shall be subordinate to a Deed of Trust on the Building and an
assignment of Landlord's interest in the Lease given by Landlord to
________________________________;
<PAGE>
provided, that notwithstanding such subordination, so long as Tenant is not in
default under any of the terms, covenants and conditions of this Lease, neither
the Lease nor any rights of Tenant thereunder shall be terminated or subject to
termination by any trustee's sale, any action to enforce the security, or by any
proceeding or action in foreclosure. In the event of a merger of Landlord and
Tenant in any manner, the interest of Tenant and Landlord shall not merge.
7. Tenant agrees not to modify, amend, terminate or otherwise change the
Lease without ten (10) days' prior written notice to you.
8. In the event of a default by Landlord under any of the terms or provisions
of the Lease, Tenant shall give you adequate notice and reasonable time to cure
each default.
Dated: _________________, 19_____.
Very truly yours,
"Tenant"
_________________________
_________________________
By: ____________________
Its: ____________________
<PAGE>
EXHIBIT H
RULES AND REGULATIONS
1. The sidewalks and entrances shall be used only as a means of ingress and
egress and shall remain unobstructed at all times. Exterior doors and windows
shall not be covered or obstructed on the outside.
2. Plumbing fixtures shall not be used for any purposes other than those for
which they were constructed, and no rubbish, newspapers, trash or other
substances of any kind shall be thrown into them. Walls, floors and ceiling
shall not be defaced in any way and no one shall be permitted to mark, drive
nails, screws or drill into, paint, or in any way mar any Building surface,
except that pictures, certificates, licenses and similar items normally used in
Tenant's business may be carefully attached to the walls by Tenant in a manner
to be prescribed by Landlord. Upon removal of such items by Tenant any damage
to the walls or other surfaces, except minor nail holes, shall be repaired by
Tenant.
3. Other than tenant identification signage approved by Landlord, no awning,
shade, sign, advertisement or notice shall be inscribed, painted, displayed or
affixed on, in or to any window, door or any other part of the outside or inside
of the Building or the Building. No window displays or other public displays
shall be permitted without the prior written consent of Landlord. No lettering
or signs other than the name of Tenant will be permitted on the Building
exterior except with the express permission of Landlord.
4. The cost of any special electrical circuits for items such as copying
machines, computers, microwaves, etc., shall be borne by Tenant.
5. The weight, size and position of all safes and other unusually heavy
objects used or placed in the Building shall be prescribed by Landlord and
shall, in all cases, stand on metal plates of such size as shall be prescribed
by Landlord. The repair of any damage done to the Building or property therein
by putting in or taking out or maintaining such safes or other unusually heavy
objects shall be paid for by Tenant.
6. No improper noise, vibrations or odors will be permitted in the Building,
nor shall any person be permitted to interfere in any way with tenants or those
having business with them. Landlord hereby acknowledges that Tenant's scope of
business includes parts fabrication and finished equipment testing. No person
will be permitted to bring or keep within the Building any animal or bird. No
person shall throw trash, refuse, cigarettes or other substances of any kind any
place within or out of the Building except in the refuse containers provided
therefor. It shall be Tenant's responsibility to exclude or expel from the
Building any person who, in the judgment of Landlord and/or Tenant, is
intoxicated or under the influence of liquor or drugs or who shall in any manner
do any act in violation of the rules and regulations of the Building.
<PAGE>
7. Tenant shall be deemed to have read these Rules and Regulations and to
have agreed to abide by them as a condition to its occupancy of the Building.
8. No deliveries shall be made which impede or interfere with other tenants or
the operation of the Building.
9. Except as is reasonably necessary for operation of Tenant's business,
Tenant shall not use any method of heating or air conditioning other than that
supplied by Landlord.
10. Tenant shall store all its trash and garbage within its Building or in
other facilities provided by Landlord. Tenant shall not place in any trash box
or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by
Landlord.
11. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and Tenant shall
cooperate to prevent such activities.
12. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Building closed.
13. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and guests.
14. All window coverings shall be Building standard blinds unless otherwise
approved in writing by Landlord.
<PAGE>
LEASE
S/I NORTHCREEK II, LLC
(Landlord)
and
DATA CRITICAL CORPORATION
(Tenant)
Dated: 12-21, 1998
<PAGE>
EXHIBIT 10.10
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is dated for
reference purposes the 30th day of March, 1999, and is by and between S/I
NORTHCREEK II, LLC a Washington limited liability company ("Landlord") and DATA
CRITICAL CORPORATION a Delaware corporation ("Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Lease, dated
December 21, 1998 (the "Lease"), for the lease of certain premises located at
19820 North Creek Parkway, Bothell, Washington. Unless otherwise defined in this
Amendment, capitalized terms used herein shall have the same meaning as they are
given in the Lease.
B. Landlord and Tenant desire to amend the Lease in certain respect,
all as set forth below.
NOW, THEREFORE, the parties agree as follows:
1. Additional Allowance For Tenant Improvements. Pursuant to
Subsection 3.01(d)(2)(bb) of the Lease, Tenant desires to have
Landlord fund an Additional Allowance in the amount of $169,910.00
toward the cost of the Tenant Improvements in excess of the Tenant
Improvement Allowance funded by Landlord pursuant to Subsection
3.01(d)(2)(aa) of the Lease. As a condition to Landlord's
agreement to fund such Additional Allowance, Tenant agrees that,
in addition to the Base Rent set forth in Section 1.01 of the
Lease, Tenant shall pay additional Base Rent in the amount of
$3,686.63 per month in order to reimburse Landlord in full for the
Additional Allowance, which additional Base Rent shall be owing
simultaneously with the Base Rent identified in Section 1.01 of
the Lease each month during the entire initial Term of the Lease.
In addition, simultaneously with execution of this Amendment,
Tenant shall cause to be issued in favor of Landlord a letter of
credit (the "Additional LC"), in addition to the Letter of Credit
provided by Tenant pursuant to Section 17.25 of the Lease in the
amount of $169,910.00, which Additional LC shall be in the same
form as the Letter of Credit issued in favor of Landlord pursuant
to Section 17.25 below, and which Additional LC shall further
secure all of Tenant's obligations under this Lease as
contemplated by said Section 17.25. Provided that Tenant has not
been in default under this Lease during the prior twelve (12)
month period, the amount of the Additional LC will be decreased
upon each annual renewal of the Additional LC by an amount equal
to the principal portion of the Additional Allowance which has
been amortized during the prior twelve (12) month period (based
upon amortization of the entire Additional Allowance over the
initial Term at the 11.47% effective amortization rate).
2. Ratification. Except as expressly set forth herein, the terms and
conditions of the Lease shall remain in full force and effect and
are hereby ratified.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
LANDLORD:
S/I NORTHCREEK 11, LLC
By: /s/ - Dan Ivanoff
Its: Managing Member
TENANT:
DATA CRITICAL CORPORATION
By: /s/ - Robert Benson
Its: Chief Financial Officer
<PAGE>
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgment is the person whose true
signature appears on this document.
On this 1st day of April, 1999, before me personally appeared DAN
IVANOFF, to me known to be the Managing Member of S/I NORTHCREEK II, LLC, the
company that executed the within and foregoing instrument, and acknowledged the
said instrument to be the free and voluntary act and deed of said company, for
the uses and purposes therein mentioned, and on oath stated that they were
authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year
first above written.
/s/ Pamela A. Elliott
Notary Public in and for the State of Washington
Residing at Bellevue
My commission expires: 8/11/01
<PAGE>
STATE OF )
)ss.
COUNTY OF )
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgment is the person whose true
signature appears on this document.
On this 30 day of March, 1999, before me personally appeared Robert
Benson, to me known to be the CFO of DATA CRITICAL CORPORATION, the corporation
that executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said company, for the
uses and purposes therein mentioned, and on oath stated that they were
authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year
first above written.
/s/ - Laurie Watkins
Notary Public in and for the State of WA
Residing at King County
My commission expires: 7/9/99
<PAGE>
EXHIBIT 10.11
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of
_______________, by and between Data Critical Corp., a Delaware corporation (the
"Company"), and (IndemniteeName) (the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in obtaining
liability insurance for directors, officers and key employees, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance. The Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting directors,
officers and key employees to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
Indemnitee does not regard the current protection available as adequate under
the present circumstances, and Indemnitee and agents of the Company may not be
willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. No Employment Rights. Nothing contained in this Agreement is intended
--------------------
to create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section l(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in
-2-
<PAGE>
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company and
shall be given in accordance with the provisions of Section 12(d) below. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
-3-
<PAGE>
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at Indemnitee's expense; and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred in the
investigation, defense, appeal or settlement of any civil or criminal action,
suit or proceeding, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion of such expenses,
judgments, fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise.
-4-
<PAGE>
For example, the Company and Indemnitee acknowledge that the Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
---
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from time
----------------------------------------
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
-5-
<PAGE>
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) Claims under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
-------
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
-----------------
shall include employee benefit plans; references to "fines" shall include any
-----
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
-------------------------------------
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
---
opposed to the best interests of the Company" as referred to in this Agreement.
- --------------------------------------------
11. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee
-6-
<PAGE>
with respect to such action, unless as a part of such action, the court of
competent jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
12. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) Notices. Any notice, demand or request required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of
-7-
<PAGE>
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company to effectively
bring suit to enforce such rights.
[Signature Page Follows]
-8-
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
DATA CRITICAL, CORP.
By: _______________________________________
Title: _______________________________________
Address: 2733 152nd Avenue NE
Redmond, WA 98052
AGREED TO AND ACCEPTED:
(IndemniteeName)
_______________________________
(Signature)
Address: (IndemniteeAddress1)
(IndemniteeAddress2)
-9-
<PAGE>
EXHIBIT 10.12
DATA CRITICAL CORPORATION
1999 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Option Plan are
--------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
---------
below) in which the Company owns a significant interest, directly or indirectly,
as determined in the discretion of the Committee, or which, together with the
Company, is under common control of a third person or entity.
(c) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under applicable U.S. state corporate laws,
U.S. federal and applicable state securities laws, the Code, any Stock Exchange
rules or regulations and the applicable laws of any other country or
jurisdiction where Options are granted under the Plan, as such laws, rules,
regulations and requirements shall be in place from time to time; provided,
however, that to the extent permitted under such laws, rules, regulations and
requirements, the rights of any participant under the Plan shall be determined
in accordance with the law of the State of California, without giving effect to
principles of conflict of law.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
<PAGE>
(g) "Committee" means one or more committees or subcommittees of the
---------
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
(h) "Common Stock" means the Common Stock of the Company.
------------
(i) "Company" means Data Critical Corporation, a Delaware corporation.
-------
(j) "Consultant" means any person, including an advisor, who renders
----------
services to the Company or any Parent, Subsidiary or Affiliate and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
(k) "Continuous Service" means the absence of any interruption or
------------------
termination of service as an Employee or Consultant to the Company or a Parent,
Subsidiary or Affiliate. Continuous Service shall not be considered interrupted
in the case of (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator, provided that such leave is for a period
of not more than 90 days, unless reemployment upon the expiration of such leave
is guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) transfers between locations of
the Company or between the Company, its Parent(s), Subsidiaries, Affiliates or
their respective successors. Unless otherwise determined by the Administrator
or the Company, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute a termination of Continuous
Service Status.
(l) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(m) "Director" means a member of the Board.
--------
(n) "Employee" means any person (including, if appropriate, any Named
--------
Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company, with the status of employment determined
based upon such minimum number of hours or periods worked as shall be determined
by the Administrator in its discretion, subject to any requirements of the Code.
The payment by the Company of a director's fee to a Director shall not be
sufficient to constitute "employment" of such Director by the Company.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(p) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
------
price for such stock (or the closing bid, if no sales were reported) as quoted
on such system or exchange on the date of determination (or if no trading or
bids
-2-
<PAGE>
occurred on the date of determination, on the last trading day prior to the date
of determination), as reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the date
of determination (or if no bids occurred on the date of determination, on the
last trading day prior to the date of determination); or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(q) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(r) "Listed Security" means any security of the Company that is listed
---------------
or approved for listing on a national securities exchange or designated or
approved for designation as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
(s) "Named Executive" means any individual who, on the last day of the
---------------
Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(t) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(u) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "Option" means a stock option granted pursuant to the Plan.
------
(w) "Option Agreement" means a written document, the form(s) of which
----------------
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a notice
of stock option grant and a form of exercise notice.
(x) "Option Exchange Program" means a program approved by the
-----------------------
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price.
-3-
<PAGE>
(y) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(z) "Optionee" means an Employee or Consultant who receives an Option.
--------
(aa) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(bb) "Participant" means any holder of one or more Options, or the
-----------
Shares issuable or issued upon exercise of such Options, under the Plan.
(cc) "Plan" means this 1999 Stock Option Plan.
----
(dd) "Reporting Person" means an Officer, Director or greater than 10%
----------------
stockholder of the Company within the meaning of Rule 16a-2 of the Exchange Act,
who is required to file reports pursuant to Rule 16a-3 of the Exchange Act.
(ee) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as amended from time to time, or any successor provision.
(ff) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 15 of the Plan.
(gg) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(hh) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
(ii) "Ten Percent Holder" means a person who owns stock representing
------------------
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 15 of
-------------------------
the Plan, the maximum aggregate number of shares that may be sold under the Plan
is 1,000,000 Shares of Common Stock, plus an annual increase on the first day
of each of the Company's fiscal years beginning in 2000, 2001, 2002, 2003 and
2004 equal to the lesser of (i) 250,000 Shares, (ii) two percent (2%) of the
Shares outstanding on the last day of the immediately preceding fiscal year, or
(iii) such lesser number of Shares as is determined by the Board. The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable for any reason without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall, unless the Plan
has been terminated, become available for future grant under the Plan. In
addition, any Shares of Common Stock that are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise or
purchase shall be treated as not issued and shall continue to be available under
the Plan. Notwithstanding any other provision
-4-
<PAGE>
of the Plan, Shares issued under the Plan and later repurchased by the Company
pursuant to any repurchase right that the Company may have shall not be
available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) General. The Plan shall be administered by the Board or a
-------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options to Employees and Consultants.
(b) Administration with respect to Reporting Persons. With respect to
------------------------------------------------
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit grants of Options to Reporting Persons
to qualify for the exemption set forth in Rule 16b-3 and to qualify grants of
Options to Named Executives as performance-based compensation under Section
162(m) of the Code, and otherwise so as to satisfy the Applicable Laws.
(c) Committee Composition. If a Committee has been appointed pursuant
---------------------
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
(d) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(p) of the Plan;
(ii) to select the Employees and Consultants to whom Options may
from time to time be granted;
(iii) to determine whether and to what extent Options are
granted;
(iv) to determine the number of Shares of Common Stock to be
covered by each such Option granted;
(v) to approve forms of agreement for use under the Plan;
-5-
<PAGE>
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option, Optioned Stock, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 10(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted and to
make any other amendments or adjustments to any Option that the Administrator
determines, in its discretion and under the authority granted to it under the
Plan, to be necessary or advisable, provided however that no amendment or
adjustment to an Option that would materially and adversely affect the rights of
any Optionee shall be made without the prior written consent of the Optionee;
(ix) to initiate an Option Exchange Program;
(x) to construe and interpret the terms of the Plan and awards
granted under the Plan; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to Participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(e) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Participants.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees, provided however that Employees of Affiliates shall not be eligible
to receive Incentive Stock Options. An Employee or Consultant who has been
granted an Option may, if he or she is otherwise eligible, be granted additional
Options.
(b) Type of Option. Each Option shall be designated in the Option
--------------
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options are exercisable for
the first time by an Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted,
-6-
<PAGE>
and the Fair Market Value of the Shares shall be determined as of the date of
grant of such Option. In the event any Option designated as an Incentive Stock
Option fails to meet the requirements set forth in this Plan for an Incentive
Stock Option or as required to qualify as an incentive stock option within the
meaning of Code Section 422, such Option shall not be void but instead shall be
deemed a Nonstatutory Stock Option.
(c) No Employment Rights. The Plan shall not confer upon any
--------------------
Participant any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
------------
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided however that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to a person who at the time of such grant is a
Ten Percent Holder, the term of such Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided
---------------------------------
in Section 12 below, the maximum number of Shares which may be subject to
Options granted to any one Employee under this Plan for any fiscal year of the
Company shall be 1,000,000.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator and set forth in the Option Agreement, but shall be subject to
the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant; and
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, is a Named Executive of the Company, the per share Exercise Price shall
be no less than
-7-
<PAGE>
100% of the Fair Market Value on the date of grant if such Option is intended to
qualify as performance-based compensation under Section 162(m) of the Code; and
(B) granted prior to the date on which the Common Stock becomes a
Listed Security to a person who is at the time of grant is a Ten Percent Holder,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant if required by the Applicable Laws and, if not so
required, shall be such price as is determined by the Administrator; and
(C) granted prior to the date on which the Common Stock becomes a
Listed Security to any person other than a Ten Percent Holder, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant if required by Applicable Law and, if not so required, shall
be such price as is determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a Corporate
Transaction.
(b) Permissible Consideration. The consideration to be paid for the
-------------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash; (2) check; (3) delivery of Optionee's promissory note with such
recourse, interest, security and redemption provisions as the Administrator
determines to be appropriate (subject to provisions of Applicable Law); (4)
cancellation of indebtedness; (5) surrender of other Shares that (x) in the case
of Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender (or such other period
as may be required to avoid a charge to the Company's earnings) or were not
acquired, directly or indirectly, from the Company, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which the Option is exercised; (6) authorization by the Optionee
for the Company to retain from the total number of Shares as to which the Option
is exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised; (7) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect exercise of the Option and prompt delivery
to the Company of the sale or loan proceeds required to pay the exercise price
and any applicable withholding taxes; (8) any combination of the foregoing
methods of payment; or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under the Applicable Laws. In
making its determination as to the type of consideration to accept, the
Administrator shall consider whether acceptance of such consideration may be
reasonably expected to benefit the Company, and the Administrator may refuse to
accept a particular form of consideration at the time of any Option exercise if,
in its sole discretion, acceptance of such form of consideration is not in the
best interests of the Company at such time.
10. Exercise of Option.
------------------
-8-
<PAGE>
(a) Vesting. Any Option granted hereunder shall be exercisable at
-------
such times and under such conditions as determined by the Administrator,
consistent with the terms of the Plan, and reflected in the Option Agreement,
including vesting requirements and/or performance criteria with respect to the
Company and/or the Optionee. The Administrator shall have the discretion to
determine whether and to what extent the vesting of Options shall be tolled
during any unpaid leave of absence; provided however that in the absence of such
determination, vesting of Options shall be tolled during any such leave.
(b) Procedure for Exercise. An Option may not be exercised for a
----------------------
fraction of a Share. An Option shall be deemed exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of
Shares that thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(c) Rights as a Stockholder. Until the issuance (as evidenced by the
-----------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 15 of the Plan.
(d) Termination of Status as an Employee or Consultant. In the event
--------------------------------------------------
of termination of an Optionee's Continuous Service Status, such Optionee may,
but only within three (3) months (or such other period of time, not less than
thirty (30) days, as is determined by the Administrator, with such determination
in the case of an Incentive Stock Option being made at the time of grant of the
Option) after the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or if the
Optionee does not exercise the Option to the extent so entitled within the time
specified above, the Option shall terminate and the Optioned Stock underlying
the unexercised portion of the Option shall revert to the Plan. Unless
otherwise determined by the Administrator or the Company, no termination shall
be deemed to occur and this Section 10(b) shall not apply if (i) the Optionee is
a Consultant who becomes an Employee, or (ii) the Optionee is an Employee who
becomes a Consultant.
(e) Disability of Optionee. Notwithstanding Section 10(b) above, in
----------------------
the event of termination of an Optionee's Continuous Service Status as a result
of his or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), such Optionee may, but only
-9-
<PAGE>
within twelve (12) months (or such other period of time as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
made at the time of grant of the Option) from the date of such termination (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of termination, or
if the Optionee does not exercise the Option to the extent so entitled within
the time specified above, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
(f) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Service Status since the date of grant of the
Option, or within 30 days following termination of the Optionee's Continuous
Service Status, the Option may be exercised at any time within twelve (12)
months following the date of death (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement) by such
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or, if earlier, the date of termination of the
Optionee's Continuous Service Status. To the extent that the Optionee was not
entitled to exercise the Option at the date of death or termination, as the case
may be, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan.
(g) Extension of Exercise Period. The Administrator shall have full
----------------------------
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Service
Status from the periods set forth in Sections 10(d), 10(e) and 10(f) above or in
the Option Agreement to such greater time as the Administrator shall deem
appropriate, provided that in no event shall such Option be exercisable later
than the date of expiration of the term of such Option as set forth in the
Option Agreement.
(h) Buy-Out Provisions. The Administrator may at any time offer to
------------------
buy out for a payment in cash or Shares an Option previously granted under the
Plan based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time such offer is made.
11. Taxes.
-----
(a) As a condition of the exercise of an Option granted under the
Plan, the Participant (or in the case of the Participant's death, the person
exercising the Option) shall make such arrangements as the Administrator may
require for the satisfaction of any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the exercise of
Option and the issuance of Shares. The Company shall not be required to issue
any Shares under the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or
-10-
<PAGE>
her compensation an amount sufficient to satisfy such tax obligations from the
next payroll payment otherwise payable after the date of an exercise of the
Option.
(c) This Section 11(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be deemed to
have elected to have the Company withhold from the Shares to be issued upon
exercise of the Option that number of Shares having a Fair Market Value
determined as of the applicable Tax Date (as defined below) equal to the amount
required to be withheld. For purposes of this Section 11, the Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined under the Applicable Laws (the "Tax
---
Date").
- -----
(d) At the discretion of the Administrator, a Participant may satisfy
his or her tax withholding obligations arising in connection with an Option by
one or some combination of the following methods: (i) cash payment; (ii) payroll
deduction out of the Optionee's current compensation; or (iii) if permitted by
the Administrator, in its discretion, a Participant may satisfy his or her tax
withholding obligations upon exercise of an Option by surrendering to the
Company Shares that (A) in the case of Shares previously acquired from the
Company, have been owned by the Participant for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value determined as of the
applicable Tax Date equal to the amount required to be withheld.
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 11(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 11(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option is exercised but such
Participant shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Non-Transferability of Options. Options may not be transferred or
------------------------------
disposed of in any manner other than by will or by the laws of descent or
distribution or pursuant to a domestic relations order (as defined by the Code
or the rules thereunder); provided that, after the date, if any, upon which the
Common Stock becomes a Listed Security, the Administrator may in its discretion
grant transferable Nonstatutory Stock Options pursuant to Option Agreements
specifying (i) the manner in which such Nonstatutory Stock Options are
transferable and (ii) that any such transfer shall be subject to the Applicable
Laws. The designation of a beneficiary by an
-11-
<PAGE>
Optionee will not constitute a transfer. An Option may be exercised, during the
lifetime of the holder of Option, only by such holder or a transferee permitted
by this Section 12.
13. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such later date as is determined by the Administrator;
provided however that in the case of an Incentive Stock Option, the grant date
shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
14 Adjustments Upon Changes in Capitalization, Corporate Transactions and
----------------------------------------------------------------------
Certain Other Transactions.
- --------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of Shares set forth in Sections 3 and 8
above, and the number of shares of Common Stock that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or that
have been returned to the Plan upon cancellation or expiration of an Option, as
well as the price per Share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination, recapitalization or reclassification
of the Common Stock (including any change in the number of Shares of Common
Stock effected in connection with a change of domicile of the Company), or any
other increase or decrease in the number of issued Shares of Common Stock
effected without receipt of consideration by the Company; provided however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the dissolution or
--------------------------
liquidation of the Company that is not a Corporate Transaction, each outstanding
Option shall terminate immediately upon the consummation of such dissolution or
liquidation, unless otherwise provided by the Administrator.
(c) Acceleration of Vesting Upon a Change of Control.
-------------------------------------------------
(i) In the event of a Change in Control, the vesting of each
outstanding Option shall automatically be accelerated so that fifty percent
(50%) of the unvested shares of Common Stock covered by such Option shall be
fully vested upon the consummation of the Change in Control; provided, however,
-------- -------
that the vesting of such Option shall only be
-12-
<PAGE>
accelerated to the extent that a maximum of fifty percent (50%) of the total
unvested shares of Common Stock covered by all options held by Optionee
(including options issued pursuant to the Company's 1994 Stock Option Plan and
shares of Common Stock issued upon exercise of options that are subject to a
Company right of first refusal) are accelerated and become fully vested as a
result of the Change in Control.
(ii) The vesting of each outstanding Option held by an Optionee shall be
accelerated completely so that one hundred percent (100%) of the shares of
Common Stock covered by such Option are fully vested and exercisable in the
event that (A) such Optionee is an Executive Officer (as defined below)
immediately prior to the consummation of a Change of Control and (B) within
twelve (12) months of the consummation of such Change of Control, such
Optionee's employment by the Company is either terminated by the Company other
than for Cause (as defined below) or terminated by the Optionee for Good Reason
(as defined below).
For purposes of this Section 14c)(ii), "Executive Officer" means any
officer of the Company designated as Vice President or any title senior thereto.
For purposes of this Section 14c)(ii), "Cause" means fraud,
misappropriation or embezzlement on the part of the Optionee which results in
material loss, damage or injury to the Company, the Optionee's conviction of a
felony involving moral turpitude, or the Optionee's gross neglect of duties.
For purposes of this Section 14c)(ii), "Good Reason" means a material
reduction in compensation or a relocation of the Optionee's principal worksite
to a location more than 50 miles from the Optionee's pre-Change of Control
worksite or a material reduction in responsibilities or authority as in effect
before the Change of Control.
(iii) The Administrator shall have the authority, in the
Administrator's sole discretion, to provide for the automatic acceleration of
any outstanding Option upon the occurrence of a Change in Control, but only to
the extent that such acceleration does not interfere with any "pooling of
interests" accounting treatment used in connection with the Change in Control.
(d) Corporate Transactions; Change of Control. In the event of a
-----------------------------------------
Corporate Transaction, including a Change of Control, the Administrator shall,
as to outstanding Options, either (i) provide that such Options shall be assumed
by the by the successor corporation or a Parent or Subsidiary of such successor
corporation (such entity, the "Successor Corporation") or that the Successor
---------------------
Corporation shall substitute with respect to such Options equivalent options;
(ii) provide upon notice to Optionees that all Options, to the extent then
exercisable or to be exercisable as a result of the Change of Control, must be
exercised on or before a specified date (which date shall be at least five (5)
days from the date of the notice), after which the Options shall terminate; or
(iii) terminate each Option in its entirety in exchange for a payment of cash,
securities and/or other property equal to the excess of the Fair Market Value of
the Shares with respect to which the Option is vested and exercisable
immediately prior to the consummation of the transaction over the aggregate
exercise price thereof. In the event of a Change of Control, all conditions and
restrictions with respect to shares of restricted stock shall
-13-
<PAGE>
lapse, except to the extent such conditions and restrictions are assigned to the
successor corporation (or its Parent) in connection with the Change of Control.
For purposes of this Section 14d), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction or a Change of Control, as the case
may be, each holder of an Option would be entitled to receive upon exercise of
the Option the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately prior
to such transaction, the holder of the number of Shares of Common Stock covered
by the Option at such time (after giving effect to any adjustments in the number
of Shares covered by the Option as provided for in this Section 14; provided
however that if the consideration received in the transaction is not solely
common stock of the Successor Corporation, the Administrator may, with the
consent of the Successor Corporation, provide for the consideration to be
received upon exercise of the Option to be solely common stock of the Successor
Corporation equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(e) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
15. Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
amend, alter, suspend, discontinue or terminate the Plan, but no amendment,
alteration, suspension, discontinuance or termination (other than an adjustment
made pursuant to Section 14 above) shall be made that would materially and
adversely affect the rights of any Optionee under any outstanding grant, without
his or her consent. Such consent shall be evidenced in writing signed by such
Optionee or holder and the Company. In addition, to the extent necessary and
desirable to comply with the Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such as
degree as required.
16. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by
Applicable Laws.
-14-
<PAGE>
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Agreements. Options shall be evidenced by Option Agreements in such
----------
form(s) as the Administrator shall from time to time approve.
19. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
20. Information and Documents to Optionees and Purchasers. Prior to the
-----------------------------------------------------
date upon which the Common Stock becomes a Listed Security and if required by
the Applicable Laws, the Company shall provide financial statements at least
annually to each Optionee and to each individual who acquired Shares pursuant to
the Plan, during the period such Optionee or purchaser has one or more Options
outstanding, and in the case of an individual who acquired Shares pursuant to
the Plan, during the period such individual owns such Shares. The Company shall
not be required to provide such information if the issuance of Options under the
Plan is limited to key employees whose duties in connection with the Company
assure their access to equivalent information.
-15-
<PAGE>
EXHIBIT 10.13
DATA CRITICAL CORPORATION
1999 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means Data Critical Corporation, a Delaware corporation.
-------
(f) "Continuous Status as a Director" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "Corporate Transaction" means a dissolution or liquidation of the
---------------------
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "Director" means a member of the Board.
--------
(i) "Employee" means any person, including any officer or Director,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
<PAGE>
(k) "Option" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(l) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(m) "Optionee" means an Outside Director who receives an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Directors' Stock Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 100,000 Shares of Common Stock (the "Pool"). The Shares may
----
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
-2-
<PAGE>
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director who, as of the effective date of this
Plan, has not previously been granted a stock option under any plan or
arrangement of the Company, shall be automatically granted an Option to purchase
15,000 Shares (the "First Option") on the effective date of this Plan.
------------
(iii) Each Outside Director who becomes an Outside Director after the
effective date of this Plan shall be automatically granted a First Option on the
date on which such person first becomes an Outside Director, whether through
election by the stockholders of the Company or appointment by the Board to fill
a vacancy.
(iv) Each Outside Director shall automatically be granted an Option
to purchase 5,000 Shares (the "Subsequent Option") on the date of each Annual
Meeting of the Company's stockholders immediately following which such Outside
Director is serving on the Board, provided that, on such date, he or she shall
have served on the Board for at least six (6) months prior to the date of such
Annual Meeting.
(v) Notwithstanding the provisions of subsections (ii), (iii) and
(iv) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(vi) Notwithstanding the provisions of subsections (ii), (iii) and
(iv) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vii) The terms of each option granted hereunder shall be as
follows:
(1) each option shall be exercisable only while the Outside Director
remains a Director of the Company, except as set forth in Section 9 below;
(2) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of each option, determined in accordance
with Section 8 hereof; and
(3) each option shall be fully vested and exercisable on the date of
grant.
-3-
<PAGE>
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating
-4-
<PAGE>
to the Company's initial public offering of securities. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 13 of
the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board; provided however that in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing sales price on such system or exchange on the date of
grant of the Option (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
--------
Street Journal, or if there is a public market for the Common Stock but the
- --------------
Common Stock is not traded on the Nasdaq National Market or listed on a stock
exchange, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant,
as reported in The Wall Street Journal (or, if not so reported, as otherwise
------------------------
reported by the National Association of Securities Dealers Automated Quotation
("Nasdaq") System).
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the
-5-
<PAGE>
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the number
of Shares so acquired shall be issued to the Optionee as soon as practicable
after exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee: (A)
-----------------
during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (B) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that an Optionee was not
entitled to exercise the Option at the date of death or termination or if he or
she does not exercise such Option (to the extent he or she was entitled to
exercise) within the time specified above, the
-6-
<PAGE>
Option shall terminate and the Shares underlying the unexercised portion of the
Option shall revert to the Plan.
10. Nontransferability of Options. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii),
(iii) and (iv) above, and the number of Shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per Share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company) or any
other increase or decrease in the number of issued Shares of Common Stock
effected without receipt of consideration by the Company; provided however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) Corporate Transactions; Change of Control. In the event of a
-----------------------------------------
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless the successor corporation does
not agree to assume the outstanding Options or to substitute equivalent options,
in which case the Options shall terminate upon the consummation of the
transaction; provided however that in the event of a Change of Control, each
optionee shall have the right to exercise all of his or her options to purchase
Shares, immediately prior to the consummation of the transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the
-7-
<PAGE>
occurrence of such transaction if the Optionee had been, immediately prior to
such transaction, the holder of the number of Shares of Common Stock covered by
the Option at such time (after giving effect to any adjustments in the number of
Shares covered by the Option as provided for in this Section 11); provided
however that if such consideration received in the transaction was not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon exercise of the Option to be solely common stock of the
successor corporation or its Parent equal to the Fair Market Value of the per
Share consideration received by holders of Common Stock in the transaction.
(c) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall
-8-
<PAGE>
be in place from time to time (the "Applicable Laws"). Such compliance shall be
---------------
determined by the Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company.
Such stockholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
-9-
<PAGE>
DATA CRITICAL CORPORATION
1999 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
"Optionee"
"OptioneeAddress1"
"OptioneeAddress2"
You have been granted an option to purchase Common Stock of Data Critical
Corporation (the "Company") as follows:
-------
Date of Grant "GrantDate"
Vesting Commencement Date "VestingStartDate"
Exercise Price per Share "ExercisePrice"
Total Number of Shares Granted "SharesGranted"
Total Exercise Price "TotalExercisePrice"
Expiration Date "ExpirDate"
Vesting Schedule This Option may be exercised, in whole
or in part, in accordance with the
following schedule:
Termination Period This Option may be exercised for 90
days after termination of Optionee's
Continuous Status as a Director, or
such longer period as may be applicable
upon death or Disability of Optionee as
provided in the Plan, but in no event
later than the Expiration Date as
provided above.
-10-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1999 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: DATA CRITICAL CORPORATION
- ---------------------------- By:
Signature -----------------------------------------
Title:
- ---------------------------- --------------------------------------
Print Name
-11-
<PAGE>
DATA CRITICAL CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
1. Grant of Option. The Board of Directors of the Company hereby grants
---------------
to the Optionee named in the Notice of Stock Option Grant attached as Part I of
this Agreement (the "Optionee"), an option (the "Option") to purchase a number
-------- ------
of Shares, as set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "Exercise
--------
Price"'), subject to the terms and conditions of the 1999 Directors' Stock
- -----
Option Plan (the "Plan"), which is incorporated herein by reference.
----
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and the applicable provisions of the Plan and this Nonstatutory Stock Option
Agreement. In the event of Optionee's death, disability or other termination of
Optionee's employment or consulting relationship, the exercisability of the
Option is governed by the applicable provisions of the Plan and this
Nonstatutory Stock Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
--------- ---------------
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
----------------
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
-12-
<PAGE>
(b) check;
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Nonstatutory Stock Option
Agreement.
6. Tax Consequences. Set forth below is a brief summary of certain
----------------
federal tax consequences relating to this Option under the law in effect as of
the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option. Since this Option does not qualify as an
---------------------
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal income tax liability upon exercise. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the fair market value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price.
(b) Disposition of Shares. If the Optionee holds the Option Shares
---------------------
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. The long-
term capital gain will be taxed for federal income tax purposes as a maximum
rate of 20 percent.
-13-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Nonstatutory Stock Option Agreement.
DATA CRITICAL CORPORATION
- ----------------------------- By:
"Optionee" ---------------------------------------
Title:
-------------------------------------
-14-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Nonstatutory Stock Option Agreement.
--------------------------------------
Spouse of Optionee
-15-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: Data Critical Corporation
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of Data Critical
Corporation Common Stock, under and pursuant to the Company's 1999 Directors'
Stock Option Plan and the Nonstatutory Stock Option Agreement dated
_______________, as follows:
Grant Number:
-----------------------------------
Date of Purchase:
-----------------------------------
Number of Shares:
-----------------------------------
Purchase Price:
-----------------------------------
Method of Payment of
Purchase Price:
-----------------------------------
Social Security No.:
-----------------------------------
The shares should be issued as follows:
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Signed:
-----------------------------------
Date:
-----------------------------------
-16-
<PAGE>
EXHIBIT 10.14
DATA CRITICAL CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of Data Critical Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means Data Critical Corporation, a Delaware corporation.
-------
(e) "Compensation" means total cash compensation received by an
------------
Employee from the Company or a Designated Subsidiary. By way of illustration,
but not limitation, Compensation includes regular compensation such as salary,
wages, overtime, shift differentials, bonuses, commissions and incentive
compensation, but excludes relocation, expense reimbursements, tuition or other
reimbursements and income realized as a result of participation in any stock
option, stock purchase, or similar plan of the Company or any Designated
Subsidiary.
(f) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Administrator,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company and its Designated Subsidiaries.
(g) "Contributions" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation, or any other
transaction or series of related transactions in
<PAGE>
which the Company's stockholders immediately prior thereto own less than 50% of
the voting stock of the Company (or its successor or parent) immediately
thereafter.
(i) "Designated Subsidiaries" means the Subsidiaries which have been
-----------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan; provided however that the Board shall only have the
discretion to designate Subsidiaries if the issuance of options to such
Subsidiary's Employees pursuant to the Plan would not cause the Company to incur
adverse accounting charges.
(j) "Employee" means any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Offering Date" means the first business day of each Offering
-------------
Period of the Plan.
(m) "Offering Period" means a period of twenty-four (24) months
---------------
commencing on February 1 and August 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Plan" means this Employee Stock Purchase Plan.
----
(p) "Purchase Date" means the last day of each Purchase Period of the
-------------
Plan.
(q) "Purchase Period" means a period of six (6) months within an
---------------
Offering Period, except for the Purchase Periods in the first Offering Period as
set forth in Section 4(b).
(r) "Purchase Price" means with respect to a Purchase Period an amount
--------------
equal to 85% of the Fair Market Value (as defined in Section 7(b) below) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the event (i) of any increase in the number of
Shares available for issuance under the Plan as a result of a stockholder-
approved amendment to the Plan, and (ii) all or a portion of such additional
Shares are to be issued with respect to one or more Offering Periods that are
underway at the time of such increase ("Additional Shares"), and (iii) the Fair
-----------------
Market Value of a Share of Common Stock on the date of such increase (the
"Approval Date Fair Market Value") is higher than the Fair Market Value on the
- --------------------------------
Offering Date for any such Offering Period, then in such instance the Purchase
Price with respect to Additional Shares shall be 85% of the Approval Date Fair
Market Value or the Fair Market Value of a Share of Common Stock on the Purchase
Date, whichever is lower.
-2-
<PAGE>
(s) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 19 of the Plan.
(t) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided however that eligible Employees
may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
-------------------------------------
(a) Offering Periods. The Plan shall be generally implemented by a
----------------
series of Offering Periods of twenty-four (24) months' duration, with new
Offering Periods (other than the first Offering Period) commencing on or about
February 1 and August 1 of each year (or at such other time or times as may be
determined by the Board of Directors). The first Offering Period shall commence
on the beginning of the effective date of the Registration Statement on Form S-1
for the initial public offering of the Company's Common Stock (the "IPO Date")
--------
and continue until July 31, 2001. The Plan shall continue until terminated in
accordance with Section 19 hereof. The Board of Directors of the Company shall
have the power to change the duration and/or the frequency of Offering Periods
with respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected.
(b) Purchase Periods. Each Offering Period shall generally consist of
----------------
four (4) consecutive purchase periods of six (6) months' duration. The last day
of each Purchase Period shall be the "Purchase Date" for such Purchase Period.
-------------
A Purchase Period commencing on February 1 shall end on the next July 31. A
Purchase Period commencing on August 1 shall end on the next January 31. The
first Purchase Period of the first Offering Period shall
-3-
<PAGE>
commence on the IPO Date and shall end on January 31, 2000. The Board of
Directors of the Company shall have the power to change the duration and/or
frequency of Purchase Periods with respect to future purchases without
stockholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Purchase Period to be affected.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
----------------------------------
(a) A participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than twenty percent (20%) (or such other percentage as the Board
may establish from time to time before an Offering Date) of such participant's
Compensation on each payday during the Offering Period. All payroll deductions
made by a participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during the Offering Period
may increase and on one occasion only during the Offering Period may decrease
the rate of his or her Contributions with respect to the Offering Period by
completing and filing with the Company a new subscription agreement authorizing
a change in the payroll deduction rate. The change in rate shall be effective
as of the beginning of the next calendar month following the date of filing of
the new subscription agreement, if the agreement is filed at least ten (10)
business days prior to such date and, if not, as of the beginning of the next
succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased during any Offering Period scheduled to end
during the current calendar year to 0%. Payroll deductions shall re-commence at
the rate provided in such participant's subscription agreement at the beginning
of the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10.
-4-
<PAGE>
7. Grant of Option.
---------------
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of Shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the applicable Purchase Price; provided however that the maximum number of
Shares an Employee may purchase during each Purchase Period shall be 2,500
Shares (subject to any adjustment pursuant to Section 19 below), and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given
date (the "Fair Market Value") shall be determined by the Board in its
-----------------
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
-----------------------
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the Shares purchased upon exercise of
his or her option. Any payroll deductions accumulated in a participant's
account which are not sufficient to purchase a full Share shall be retained in
the participant's account for the subsequent Purchase Period or Offering Period,
subject to earlier withdrawal by the participant as provided in Section 10
below. Any other amounts left over in a participant's account after a Purchase
Date shall be returned to the participant.
-5-
<PAGE>
10. Voluntary Withdrawal; Termination of Employment.
-----------------------------------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the Fair Market Value of the Shares on any
--------------------
Purchase Date of an Offering Period is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period. Participants shall automatically be
withdrawn as of July 31, 1999 from the Offering Period beginning on the IPO Date
and re-enrolled in the Offering Period beginning on August 1, 1999 if the Fair
Market Value of the Shares on the IPO Date is greater than the Fair Market Value
of the Shares on July 31, 1999, unless a participant notifies the Administrator
prior to July 31, 1999 that he or she does not wish to be withdrawn and re-
enrolled.
12. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
One Hundred Thousand (100,000) Shares, plus an automatic annual increase on the
first day of each of the Company's fiscal years beginning in 2000, 2001, 2002,
2003 and 2004 equal to the lesser of (i) One Hundred
-6-
<PAGE>
Fifty Thousand (150,000) Shares, (ii) One percent (1%) of the Shares outstanding
on the last day of the immediately preceding fiscal year or (iii) a lesser
amount determined by the Board. If the Board determines that, on a given
Purchase Date, the number of shares with respect to which options are to be
exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Offering Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Purchase Date, the Board may in its sole discretion provide (x) that the
Company shall make a pro rata allocation of the Shares of Common Stock available
for purchase on such Offering Date or Purchase Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Purchase Date, and continue all Offering Periods then in
effect, or (y) that the Company shall make a pro rata allocation of the shares
available for purchase on such Offering Date or Purchase Date, as applicable, in
as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Purchase Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20 below. The Company may make pro
rata allocation of the Shares available on the Offering Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional Shares for issuance under the Plan by the Company's
stockholders subsequent to such Offering Date.
(b) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of
-7-
<PAGE>
such participant's death, the Company shall deliver such Shares and/or cash to
the executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
17. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
--------
Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 13(a)(i) above, and the
price per Share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) Corporate Transactions. In the event of a dissolution or
----------------------
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate
-8-
<PAGE>
immediately prior to the consummation of such action, unless otherwise provided
by the Board. In the event of a Corporate Transaction, each option outstanding
under the Plan shall be assumed or an equivalent option shall be substituted by
the successor corporation or a parent or Subsidiary of such successor
corporation. In the event that the successor corporation refuses to assume or
substitute for outstanding options, each Purchase Period and Offering Period
then in progress shall be shortened and a new Purchase Date shall be set (the
"New Purchase Date"), as of which date any Purchase Period and Offering Period
-----------------
then in progress will terminate. The New Purchase Date shall be on or before the
date of consummation of the transaction and the Board shall notify each
participant in writing, at least ten (10) days prior to the New Purchase Date,
that the Purchase Date for his or her option has been changed to the New
Purchase Date and that his or her option will be exercised automatically on the
New Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this Section 19, an
option granted under the Plan shall be deemed to be assumed, without limitation,
if, at the time of issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled to
receive upon exercise of the option the same number and kind of shares of stock
or the same amount of property, cash or securities as such holder would have
been entitled to receive upon the occurrence of the transaction if the holder
had been, immediately prior to the transaction, the holder of the number of
Shares of Common Stock covered by the option at such time (after giving effect
to any adjustments in the number of Shares covered by the option as provided for
in this Section 19); provided however that if the consideration received in the
transaction is not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in Fair Market Value to the per Share
consideration received by holders of Common Stock in the transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
20. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 19, no such termination of the Plan may
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering Period and Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the stockholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan. Except as provided in Section 19 and in this
-9-
<PAGE>
Section 20, no amendment to the Plan shall make any change in any option
previously granted which adversely affects the rights of any participant. In
addition, to the extent necessary to comply with Rule 16b-3 under the Exchange
Act, or under Section 423 of the Code (or any successor rule or provision or any
applicable law or regulation), the Company shall obtain stockholder approval in
such a manner and to such a degree as so required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 20.
24. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof
-10-
<PAGE>
shall be subject to, such additional conditions and restrictions as may be
required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.
-11-
<PAGE>
DATA CRITICAL CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
NEW ELECTION ______
CHANGE OF ELECTION ______
1. I, ________________________, hereby elect to participate in the Data
Critical Corporation 1999 Employee Stock Purchase Plan (the "Plan") for the
----
Offering Period ______________, ____ to _______________, ____, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 20% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during any Offering Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "Data Critical Corporation 1999 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
-------------------------------------------
-------------------------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print)
------------------------------------------
(First) (Middle) (Last)
- ------------------------ ------------------------------------------
(Relationship) (Address)
------------------------------------------
8. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or within 1 year after the Purchase
Date, I will be treated for federal income tax purposes as having received
ordinary compensation income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares on the Purchase Date over
the price which I paid for the shares, regardless of whether I disposed of the
shares at a price less than their fair market value at the Purchase Date. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
------------------------------------------------------------------------
date of any such disposition, and I will make adequate provision for federal,
- -----------------------------------------------------------------------------
state or other tax withholding obligations, if any, which arise upon the
- ------------------------------------------------------------------------
disposition of the Common Stock. The Company may, but will not be obligated to,
- -------------------------------
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
-2-
<PAGE>
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE:
--------------------------------
SOCIAL SECURITY #:
------------------------
DATE:
------------------------------------
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
- -------------------------------------------
(Signature)
- -------------------------------------------
(Print name)
-3-
<PAGE>
DATA CRITICAL CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the Data Critical Corporation 1999 Employee Stock Purchase Plan (the "Plan") for
----
the Offering Period that began on _________ ___, _____. This withdrawal covers
all Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:
---------------------- --------------------------------------
Signature of Employee
--------------------------------------
Social Security Number
<PAGE>
EXHIBIT 10.15
DATA CRITICAL CORP.
1994 STOCK OPTION PLAN
Adopted: December 19, 1994
<PAGE>
DATA CRITICAL CORP.
1994 STOCK OPTION PLAN
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I General Provisions
1.1 Purpose ................................................ 1
1.2 General ................................................ 1
1.3 Administration of the Plan ............................. 1
1.4 Shares Subject to Plan ................................. 2
1.5 Participation in the Plan .............................. 2
1.6 Determination of Fair Market Value...................... 2
1.7 Grants of Options Under Stock
Option Agreement ....................................... 2
1.8 Amendment and Termination of the Plan .................. 2
1.9 Effective Date.......................................... 3
1.10 Securities Law Requirements............................. 3
1.11 Separate Certificates................................... 3
1.12 Payment for Stock....................................... 3
1.13 Stock Options and ISO Options
Granted Separately...................................... 4
1.14 Use of Proceeds......................................... 4
1.15 Non-Transferability of Options.......................... 4
1.16 Additional Documents on Death
of Participant.......................................... 4
1.17 Changes in Employment................................... 5
1.18 Shareholder Rights...................................... 5
1.19 Adjustments Upon Changes in
Capitalization.......................................... 5
1.20 Payment of Withholding Taxes............................ 5
1.21 Assumption of Outstanding Options....................... 5
1.22 Retirement and Disability............................... 6
ARTICLE II Stock Options................................................. 6
2.1 General Terms........................................... 6
2.2 Grant and Terms of Stock Options........................ 6
ARTICLE III ISO Options................................................... 8
3.1 General Terms........................................... 8
3.2 Grant and Terms of ISO Options.......................... 8
ARTICLE IV Acceleration of Options on Change
of Control.................................................... 10
ARTICLE V Options Not Qualifying as Incentive Stock
Options....................................................... 10
</TABLE>
<PAGE>
DATA CRITICAL CORP.
1994 STOCK OPTION PLAN
ARTICLE I
General Provisions
------------------
1.1 Purpose. The purpose of DATA CRITICAL CORP. 1994 STOCK OPTION PLAN
-------
shall be to attract, retain and motivate key management, directors or key
professional employees (the "Participants") of Data Critical Corp. (the
"Company") and subsidiaries by way of granting (i) nonqualified stock options
("Stock Options") and (ii) incentive stock options ("ISO Options"). For purposes
of this Plan, Stock options and ISO Options are sometimes collectively herein
called "Options." The ISO Options to be granted under the Plan are intended to
be qualified pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"); and, the Stock Options to be granted are intended to be
"nonqualified stock options" as described in Sections 83 and 421 of the Code.
Further, under the Plan, the terms "parent" and "subsidiary" shall have the same
meaning as set forth in Subsections (e), (f) and (g) of Section 424 of the Code
unless the context herein clearly indicates to the contrary.
1.2 General. The terms and provisions of this Article I shall be
applicable to Stock Options and ISO Options unless the context herein clearly
indicates to the contrary.
1.3 Administration of the Plan. The Plan shall be administered by the
----------------------------
Compensation and Stock Option Committee "Committee") appointed by the Board of
Directors ("Board") of the Company and consisting of not less than two members
from the Board. The members of the Committee shall serve at the pleasure of the
Board and such members shall be ineligible to participate under the Plan during
their service as members of the Committee. Committee membership shall be limited
to only those members of the Board who have not, during the year preceding their
appointment, been granted or awarded any "equity securities" (as such term is
defined in Rule 16a-1(d) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or any successor rule) pursuant to the Plan or
any other plan of the Company or any of its affiliates except for participation
in plans permitted by Rule 16a-3 (c) (2) (i) promulgated under the Exchange Act
(or any successor rule). The Committee shall have the power where consistent
with the general purpose and intent of the Plan to (i) modify the requirements
of the Plan to conform with the law or to meet special circumstances not
anticipated or covered in the Plan, (ii) suspend or discontinue the Plan, (iii)
establish policies and (iv) adopt rules and regulations and prescribe forms for
carrying out the purposes and provisions of the Plan including the form of any
"stock option agreements" ("Stock Option Agreements"). Unless otherwise provided
in the Plan, the Committee shall have the authority to interpret and construe
the Plan, and determine all questions arising under the Plan and
<PAGE>
any agreement made pursuant to the Plan. Any interpretation, decision or
determination made by the Committee shall be final, binding and conclusive. A
majority of the Committee shall constitute a quorum, and an act of the majority
of the members present at any meeting at which a quorum is present shall be the
act of the Committee.
1.4 Shares Subject to the Plan. Shares of stock ("Stock") covered by
----------------------------
Stock Options and ISO Options shall consist of One Hundred Seventy Nine Thousand
(179,000) shares of the voting common stock, par value $.01, of the Company.
Either authorized and unissued shares or treasury shares may be delivered
pursuant to the Plan. If any Option for shares of Stock granted to a Participant
lapses, or is otherwise terminated; the Committee may grant Stock Options or ISO
Options for such shares of Stock to other Participants.
1.5 Participation in the Plan. The Committee shall determine from time to
---------------------------
time those Participants who are to be granted Stock Options and ISO options and
the number of shares of Stock covered thereby. Provided, however, those
directors who are not key management employees of the Company, its parent or
subsidiaries of the Company shall only be eligible to be granted Stock Options
under this Plan.
1.6 Determination of Fair Market Value As used in the Plan, "fair market
-----------------------------
value" shall mean the average of the highest and lowest sales prices of the
common stock of the Company as reported by the appropriate stock exchange, or
other primary exchange upon which the stock is listed, as of the granting date,
exercise date, or other relevant date. If the common stock is not readily
tradable on an established securities market, all valuations of such common
stock with respect to activities carried on by the Plan shall be determined by
the Committee as of the relevant date, and the Committee shall utilize any
reasonable and prudent method in determining such fair market value, including,
without limitation, the obtaining of opinion of a completely independent and
well qualified appraiser who meets the requirements prescribed under 170 (a) (1)
of the Code.
1.7 Grants of Options under Stock Option Agreement. Each Stock Option or
------------------------------------------------
ISO Option granted under this Plan shall be evidenced by the minutes of a
meeting of the Committee or by the written consent of the Committee and by a
written Stock Option Agreement effective on the date of grant and executed by
the Company and the Participant. Each Option granted hereunder shall contain
such terms, restrictions and conditions as the Committee may determine, which
terms, restrictions and conditions may or may not be the same in each case.
1.8 Amendment and Termination of the Plan. The Plan shall terminate at
---------------------------------------
midnight, December 18, 2004, but prior thereto may be
-2-
<PAGE>
altered, changed, modified, amended or terminated by written amendment approved
by the Board. Provided, that no action of the Board may, without the approval of
the holders of a majority of the securities of the Company entitled to vote
thereon, increase the aggregate number of shares of Stock which may be purchased
under Stock Options or ISO Options granted under the Plan; amend or alter the
Option Price or the ISO Price, as applicable; materially increase the benefit
accruing to Participants under the Plan, materially modify the requirements as
to eligibility for participation in the Plan; or amend the Plan in any manner
which would impair the applicability of Rule 16b-3 as promulgated under the
Exchange Act (or any successor rule) to the Plan. Except as provided in this
Article I, no amendment, modification or termination of the Plan shall in any
manner adversely affect any Stock Option or ISO Option theretofore granted under
the Plan without the consent of the affected Participant.
1.9 Effective Date. The Plan has been approved by written consent of the
----------------
board of directors and the shareholders of the Company an December 19, 1994, and
is therefore effective as of December 19, 1994.
1.10 Securities Law Requirements. The Company shall have no obligation to
-----------------------------
issue any Stock hereunder unless the issuance of such shares would comply with
any applicable federal or state securities laws or any other applicable law or
regulations thereunder.
1.11 Separate Certificates. Separate certificates representing the common
-----------------------
stock of the Company to be delivered to a Participant upon the exercise of any
Stock Options or ISO Options will be issued to such Participant.
1.12 Payment for Stock. Payment for shares of Stock purchased under this
-------------------
Plan shall be made in full and in cash or by check, Stock of the Company or a
combination thereof, at the time of exercise of the Options as a condition
thereof, and no loan or advance shall be made by the Company for the purpose of
financing, in whole or in part, the purchase of Stock. In the event that common
stock of the Company is utilized as consideration for the purchase of Stock upon
the exercise of a Stock Option or an ISO Option, then, such Stock shall be
valued at the "fair market value" as defined in Section 1.6 of the Plan. In
addition to the foregoing procedure which may be available for the exercise of
any Stock Option or ISO Option, the Participant may deliver to the Company a
notice of exercise including an irrevocable instruction to the Company to
deliver the stock certificate issued in the name of the Participant representing
the shares subject to an Option to a broker authorized to trade in the Stock of
the Company. Upon receipt of such notice, the Company will acknowledge receipt
of the executed notice of exercise and forward this notice to the broker. Upon
receipt of the copy of the notice which has been acknowledged by the Company,
and without waiting for
-3-
<PAGE>
issuance of the actual stock certificate with respect to the exercise of the
Option, the broker may sell the Stock or any portion thereof. Upon receipt of
the notice to exercise from the Company, the broker will deliver directly to the
Company that portion of the sales proceeds to cover the Option Price and any
withholding taxes, if any. Further, the broker may also facilitate a loan to the
Participant upon receipt of the notice of exercise in advance of the issuance of
the actual stock certificate as an alternative means of financing and
facilitating the exercise of any Option. For all purposes of effecting the
exercise of an option, the date on which the Participant gives the notice of
exercise to the Company will be the date he becomes bound contractually to take
and pay for the shares of Stock underlying the Option. The Committee may also
adopt such other procedures which it desires for the payment of the purchase
price upon the exercise of a Stock Option or ISO Option which are not
inconsistent with the applicable provisions of the Code which relate to Stock
Options and ISO Options.
1.13 Stock Options and ISO Options Granted Separately. Since the
--------------------------------------------------
Committee is authorized to grant Stock Options and ISO Options to Participants,
the grants thereof and Stock Option Agreements relating thereto will be made
separately and totally independent of each other. Except as it relates to the
total number of shares of Stock which may be issued under the Plan, the grant or
exercise of a Stock Option shall in no manner affect the grant and exercise of
any ISO Options. Similarly, the grant and exercise of an ISO Option shall in no
manner affect the grant and exercise of any Stock Options.
1.14 Use of Proceeds. The proceeds received by the Company from the sale
-----------------
of Stock pursuant to the exercise of Options granted under the Plan shall be
added to the Company's general funds and used for general corporate purposes.
1.15 Non-Transferability of Options. Except as otherwise herein provided,
-------------------------------
any option granted shall not be transferable otherwise than by will or the laws
of descent and distribution, and the Option may be exercised, during the
lifetime of the Participant, only by him. More particularly (but without
limiting the generality of the foregoing), the Option shall not be assigned,
transferred (except as provided above), pledged or hypothecated in any way
whatsoever, shall not be assignable by operation of law and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof shall be null and void and without effect.
1.16 Additional Documents an Death of Participant. No transfer of an
---------------------------------------------
Option by the Participant by will or the laws of descent and distribution shall
be effective to bind the Company unless the Company shall have been furnished
with written notice and an authenticated copy
-4-
<PAGE>
of the will and/or such other evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the successor to
the Option of the terms and conditions of such Option.
1.17 Changes in Employment. So long as the Participant shall continue to
-----------------------
be an employee of the Company or its parent or one of its subsidiaries, any
Option granted to him shall not be affected by any change of duties or position.
Nothing in the Plan or in any Stock Option Agreement which relates to the Plan
shall confer upon any Participant any right to continue in the employ of the
Company or its parent or any of its subsidiaries, or interfere in any way with
the right of the Company or its parent or any of its subsidiaries to terminate
his employment at any time.
1.18 Shareholder Rights. No Participant shall have a right as a
------------------
shareholder with respect to any shares of Stock subject to an Option prior to
the purchase of such shares of stock by exercise of the Option.
1.19 Adjustments upon Changes in Capitalization. The aggregate number of
--------------------------------------------
shares of Stock under Stock Options and ISO Options granted under the Plan, the
option Price and the ISO Price and the total number of shares of Stock which may
be purchased by a Participant on exercise of a Stock option and an ISO Option
shall be appropriately adjusted or modified by the Committee to reflect any
recapitalization, stock split, merger, consolidation, reorganization,
combination, liquidation, stock dividend or similar transaction involving the
Company. Provided, any such adjustment shall be made in such a manner as to not
constitute a modification as defined in Section 424(h) of the Code.
1.20 Payment of Withholding Taxes. Except as provided in Section 1.12
-----------------------------
herein, no exercise of any option shall be permitted, nor shall any Stock be
issued to any Participant until the Company receives full payment for the Stock
purchased which shall include any required state and federal withholding taxes.
Further, upon the exercise of any Stock Option, the Participant may direct the
Company to retain from the shares of Stock to be issued upon exercise of the
Stock Option that number of initial shares of Stock (based on fair market value)
that would be necessary to satisfy the requirements for withholding any amounts
of taxes due upon the exercise of such Stock Option. In the event that the
Participant disposes of any Stock acquired by the exercise of an ISO Option
within the two-year period following grant, or within the one-year period
following exercise, of the ISO Option, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient to satisfy
all federal, state and local withholding tax requirements.
1.21 Assumption of Outstanding Options. To the extent permitted by the
-----------------------------------
then applicable provisions of the Code, any successor to the
-5-
<PAGE>
Company succeeding to, or assigned the business of, the Company as the result of
or in connection with a corporate merger, consolidation, combination,
reorganization, liquidation or other corporate transaction shall assume Options
outstanding under the Plan or issue new Options in place of outstanding Options
under the Plan with such assumption to be made on a fair and equivalent basis in
accordance with the applicable provisions of Section 424(a) of the Code;
provided, in no event will such assumption result in a modification of any
option as defined in Section 424 (h) of the Code.
1.22 Retirement and Disability. For the purpose of this Plan,
---------------------------
"Retirement" shall mean the voluntary termination of employment of a Participant
with the Company, its parent or any of its subsidiaries after attaining at least
55 years of age; and, "Disability" shall mean termination of employment of a
Participant after incurring a "disability" as defined in Section 22(e)(3) of the
Code.
ARTICLE 11
Stock Options
-------------
2.1 General Terms. With respect to Stock Options granted on or after the
---------------
effective date of the Plan, the following provisions of this Article II shall
apply. The Stock Options granted under this Article II are intended to be
"nonqualified stock options" as described in Sections 83 and 421 of the Code.
2.2 Grant and Terms for Stock Options. Stock Options shall be granted on
-----------------------------------
the following terms and conditions. 'Stock Options shall only be granted to key
management employees, directors or key professional employees of the Company,
its parent or any subsidiary of the Company. No Stock Option shall be
exercisable more than ten (10) years from the date of grant. Subject to such
limitations, the Committee shall have the discretion to fix the period ("Option
Period") during which Stock Options may be exercised. At all times during the
period commencing with the date a Stock Option is granted to a Participant and
ending on the earlier of the expiration of the Option Period applicable to such
Stock Option or the date which is three (3) months prior to the date the Stock
Option is exercised by such Participant, such Participant must be an employee or
a director of either (i) the Company, (ii) a parent or a subsidiary corporation
of the Company, or (iii) a corporation or parent or a subsidiary corporation of
such corporation issuing or assuming a Stock Option in a transaction to which
Section 424(a) of the Code applies. Provided, in the case of a Participant who
has incurred a Disability, the aforesaid three (3) month period shall mean a one
(1) year period. Provided further, in the event a Participant's employment or
director's position is terminated by reason of his death, his personal
representative may exercise any unexercised Stock Option granted to the
-6-
<PAGE>
Participant under the Plan at any time within one (1) year after the
Participant's death but in any event not after the expiration of the option
Period applicable to such Stock Option.
(a) Option Price. The option price ("Option Price") for shares of
-------------
Stock subject to any Stock Option shall be determined by the Committee, but in
no event shall such Option Price be less than 50% of the "fair market value" of
the Stock on the date of grant. Provided further, in-no event shall the Option
Price be less than the par value of the Stock.
(b) Acceleration of otherwise Unexercisable Stock Options on
--------------------------------------------------------
Retirement, Death, Disability or Other Special Circumstances. The Committee, in
- --------------------------------------------------------------
its sole discretion, may permit (i) a Participant who terminates employment due
to Retirement, (ii) a Participant who terminates employment due to a Disability,
(iii) the personal representative of a deceased Participant, or (iv) any other
Participant who terminates employment or his director's position upon the
occurrence of special circumstances (as determined by the Committee) to purchase
(within three (3) months of such date of termination of employment or one (1)
year in the case of a deceased Participant or a Participant suffering a
Disability) all or any part of the shares subject to any Stock option on the
date of the Participant's Retirement, Disability, death, or as the Committee
otherwise so determines, notwithstanding that such Stock Option may not yet be
exercisable on such date.
(c) Number of Stock Options Granted. Participants may be granted more
---------------------------------
than one Stock Option. In making any such determination, the Committee shall
obtain the advice and recommendation of the officers of the Company, its parent,
or a subsidiary of the Company, which have supervisory authority over such
Participants. The granting of a Stock option under the Plan shall not affect any
outstanding Stock Option previously granted to a Participant under the Plan (or
any other plans of the Company).
(d) Notice to Exercise Stock Option. Upon exercise of a Stock Option,
--------------------------------
a Participant shall give written notice to the Secretary or Personnel Manager of
the Company, or other officer designated by the Committee, at the Company's
principal office. No Stock shall be issued to any Participant until the Company
receives full payment for the Stock purchased under the Stock Option, including
any required state and federal withholding taxes; provided, however, nothing
herein shall be construed as requiring payment of withholding taxes at the time
of exercise if payment of taxes is deferred pursuant to any provision of the
Code, and actions are taken which are designed to reasonably insure payment of
withholding taxes when due.
-7-
<PAGE>
ARTICLE III
ISO Options
-----------
3.1 General Terms. With respect to ISO Options granted on or after the
-------------
effective date of the Plan the following g provisions in this Article III shall
apply to the exclusion of any inconsistent provision in any other Article in
this Plan since the ISO Options to be granted under the Plan are intended to
qualify as "incentive stock options" as defined in Section 422 of the Code.
3.2 Grant and Terms of ISO Options. ISO Options may be granted only to
--------------------------------
key management or key professional employees of the Company, its parent or any
subsidiary of the Company. No ISO Options shall be granted to any person who is
not eligible to receive "incentive stock options" as provided in Section 422 of
the Code. No ISO Options shall be granted to any key management or key
professional employee if, immediately before the grant of an ISO Option, such
employee owns more than 10% of the total combined voting power of all classes of
stock of the Company, its parent or its subsidiaries (as determined in
accordance with the stock attribution rules contained in Section 422 and Section
424 (d) of the Code). Provided, the preceding sentence shall not apply if, at
the time the ISO Option is granted, the ISO Price (as defined below) is at least
110% of the "fair market value', of the stock subject to the ISO Option, and
such ISO Option by its terms is exercisable no more than five (5) years from the
date such ISO option is granted.
(a) ISO Option Price. The option price for shares of Stock subject to
-----------------
an ISO Option ("ISO Price") shall be determined by the Committee, but in no
event shall such ISO Price be less than the greater of (a) the "fair market
value" of the Stock on the date of grant or (b) the par value of the Stock.
(b) Annual ISO Option Limitation. With respect to ISO Options granted,
------------------------------
in no event during any calendar year will the aggregate "fair market value"
(determined as of the time the ISO Option is granted) of the Stock for which the
Participant may first have the right to exercise under an ISO option granted
under all "incentive stock option" plans qualified under Section 422 of the Code
which are sponsored by the Company, its parent and its subsidiary corporations
exceed $100,000. For purposes of this Section 3. 2 (b), "incentive stock
options," as defined under Section 422 (and its predecessor Section 422A) of the
Code, granted prior to January 1, 1987, shall be disregarded when calculating
the foregoing $100,000 limitation.
(c) Terms of ISO Options. ISO Options shall be granted on the
----------------------
following terms and conditions: No ISO Option shall be exercisable more than ten
(10) years from the date of grant. Subject to such limitations, the Committee
shall have the discretion to fix the period
-8-
<PAGE>
(the "ISO Period") during which any ISO Option may be exercised. ISO Options
granted shall not be transferable except by will or by laws of descent and
distribution. At all times during the period commencing with the date an ISO
Option is granted to a Participant and ending on the earlier of the expiration
of the ISO Period applicable to such ISO Options or the date which is three (3)
months prior to the date the ISO Option is exercised by such Participant, such
Participant must be an employee of either (i) the Company, (ii) a parent or a
subsidiary corporation of the Company, or (iii) a corporation or a parent or a
subsidiary corporation of such corporation issuing or assuming an ISO option in
a transaction to which Section 424(a) of the Code applies. Provided, in the case
of a Participant who incurs a Disability, the aforesaid three (3) month period
shall mean a one (1) year period. Provided further, in the event a Participant's
employment is terminated by reason of his death, his personal representative may
exercise any unexercised ISO Option granted to the Participant under the Plan at
any time within one (1) year after the Participant's death but in any event not
after the expiration of the ISO Period applicable to such ISO Option.
(d) Acceleration of Otherwise Unexercisable ISO Options on Retirement,
------------------------------------------------------------------
Death, Disability or Other Special Circumstances. The Committee, in its sole
- --------------------------------------------------
discretion, may permit (i) a Participant who terminates employment due to
Retirement, (ii) a Participant who terminates employment due to a Disability,
(iii) the personal representative of a deceased Participant, or (iv) any other
Participant who terminates employment upon the occurrence of special
circumstances (as determined by the Committee) to purchase (within three (3)
months of such date of termination of employment or one (1) year in the case of
a deceased Participant or a Participant suffering a Disability) all or any part
of the shares subject to any ISO Option on the date of the Participant's
----
Retirement, Disability, death, or as the Committee otherwise so determines,
notwithstanding that all installments, if any, had not accrued on such date.
(e) Number of ISO Options Granted. Subject to the applicable
-------------------------------
limitations contained in the Plan with respect to ISO Options, Participants may
be granted more than one ISO Option. In making any such determination, the
Committee shall obtain the advice and recommendation of the officers of the
Company, its parent or a subsidiary of the Company which have supervisory
authority over such Participants. Further, the granting of an ISO Option under
the Plan shall not affect any outstanding ISO Option previously granted to a
Participant under the Plan.
(f) Notice to Exercise ISO Option. Upon exercise of an ISO Option, a
------------------------------
Participant shall give written notice to the Secretary of the Company, or other
officer designated by the Committee, at the Company's main office in Oklahoma
City, Oklahoma.
-9-
<PAGE>
No Stock shall be issued to any Participant until the Company receives full
payment for Stock purchased under the ISO Option.
ARTICLE IV
Acceleration of Options on Change of Control
-------------------------------------------
4.1 Acceleration of Options upon Change of Control. In the event that a
------------------------------------------------
Change of Control (as defined herein) has occurred with respect to the Company,
any and all ISO Options and Stock Options become automatically fully vested and
immediately exercisable with such acceleration to occur without the requirement
of any further act by either the Company or the Participant. For the purposes of
this Section 4.1, the term "Change of Control" shall mean approval by the,
stockholders of the Company of (A) a reorganization, merger or consolidation, in
each case with respect to which the stockholders of the Company will not,
immediately after consummation thereof, own more than 501; of the combined
voting power of the then outstanding voting securities of either (a) the
consolidated company or the surviving company in the reorganization or merger,
or (b) any company which prior to the consolidation, reorganization or merger
owned 50% or more of the combined voting power of its then outstanding voting
securities; provided, however, no Change of Control shall be deemed to have
occurred if members of the Incumbent Board will, immediately thereafter,
constitute at least a majority of the board of directors of the consolidated or
surviving company, or any company which owns, directly or indirectly, at least a
majority of the voting power of the consolidated or surviving company's
outstanding voting securities, and the Incumbent Board has determined, prior to
such shareholder approval, that a Change of Control shall not be deemed to
result from such transaction; or (B) a liquidation or dissolution of the Company
or the sale of all or substantially all of the assets of the Company.
ARTICLE V
Options Not Qualifying as Incentive Stock Options
-------------------------------------------------
With respect to all or any portion of any Option granted under the Plan not
qualifying as an "incentive stock option" under Section 422 of the Code, such
option shall be considered as a Stock Option granted under this Plan for all
purposes. Further, this Plan and any ISO Options granted hereunder shall be
deemed to have incorporated by reference all the provisions and requirements of
Section 422 of the Code (and the Treasury Regulations issued thereunder) which
are required to provide that all ISO Options granted hereunder shall be
"incentive stock options" described in Section 422 of the Code.
-10-
/nix/dcc 94 sop
<PAGE>
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
May 7, 1999
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